In this article, we will take a look at the 10 best virtual reality stocks to buy.
Game developers often steal all the attention in conversations around virtual reality but there is more to the new technology than use as just an entertainment product. Virtual reality gear is also important for remote assistance, training, mental health, education, and even fashion. The COVID-19 pandemic has accelerated advances within the industry that was already valued at over $17 billion in 2020. This figure is expected to balloon close to $200 billion by the middle of this decade as the VR industry grows at a compound annual growth rate of a scary 48%.
There is no doubt that there is a lot of money in VR offerings cloaked in gaming experiences, but innovative uses for the VR gear have finally grabbed the attention of big technology companies around the world. Facebook, Inc. (NASDAQ: FB) has started experimentation work on a VR product that will track hand movements by picking up signals from the nervous system and use that data to allow people to move about in virtual spaces. Facebook, Inc. (NASDAQ: FB) is working on this and other VR projects through Oculus, a firm it purchased back in 2014.
Apple Inc. (NASDAQ: AAPL) is reportedly working on a VR headset that will be significantly lighter than its competitors and will use ultra high-end displays, eye-tracking technology, and more than a dozen cameras to track hand movements and capture footage for display on the VR product. Apple Inc. (NASDAQ: AAPL) does not plan to ship the product for another year, but is planning to make another VR product to follow the headset into the market. There are also rumours that Apple Inc. (NASDAQ: AAPL) is facing hardware-related delays in the final production of the headsets.
Microsoft Corporation (NASDAQ: MSFT) has set up a mixed reality and artificial intelligence lab in Zurich that is exploring the use of new technology for a variety of purposes. For example, Microsoft Corporation (NASDAQ: MSFT) aims to use VR to improve robotic interactions through the use of cloud-based services, and is developing new headsets that offer what the firm calls computer vision to customers, an information system designed to make multitasking easier and faster for the average individual. We talk more about Microsoft Corporation (NASDAQ: MSFT)’s foray into VR later in the article.
The use of virtual reality in everyday products like automobiles and electronic devices has enabled it to make the experience of playing games or watching movies very exciting. This sector of the industry is expected to drive the growth of virtual reality moving forward. The COVID-19 pandemic has also changed how businesses operate, leading to a rise in remote working, a trend expected to outlast the virus crisis. This will lead to increased interest in remotely managed professional training programs made easier through VR products. However, since the technology is still evolving, investors need to be careful of downsides as well.
SFIO CRACHO/Shutterstock.com
New technology is not accepted easily by either the market or the populace. The fintech world is a prime example. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of 10 best virtual reality stocks to buy.
Best Virtual Reality Stocks to Buy
10. NVIDIA Corporation (NASDAQ: NVDA)
Number of Hedge Fund Holders: 88
NVIDIA Corporation (NASDAQ: NVDA) is a Santa Carla based technology firm. It was founded in 1993 and is placed tenth on our list of 10 best virtual reality to buy. The company is one of the leading hardware brands whose products power virtual reality devices around the world. The general processing units, drivers, and software development kits made by the firm are at the forefront of virtual reality breakthroughs, and the company also has a virtual reality technologies division that offers gamers, developers, and professionals with virtual reality solutions.
Invest advisories Goldman Sachs and Raymond James are bullish on NVIDIA Corporation (NASDAQ: NVDA) stock as a global chip shortage drives up the prices of products the tech firm makes for use in an array of electronic devices, including computers used for cryptocurrency mining and virtual reality gear.
At the end of the fourth quarter of 2020, 88 hedge funds in the database of Insider Monkey held stakes worth $8.6 billion in NVIDIA Corporation (NASDAQ: NVDA), up from 82 the preceding quarter worth $7.6 billion.
9. Alibaba Group Holding Limited (NYSE: BABA)
Number of Hedge Fund Holders: 156
Alibaba Group Holding Limited (NYSE: BABA) is a Hangzhou-based multinational technology firm. It is one of the largest technology firms in the world and has significant stakes in the virtual reality business. Since it operates a large retail business, the group has tapped virtual reality gear to introduce 3D online shopping experiences for consumers who want the premium outgoing feel from the comfort of their homes. It has also invested heavily in research on VR and believes the technology is on track to become as common as television.
On April 12, investment bank HSBC maintained a Buy rating on Alibaba Group Holding Limited (NYSE: BABA) stock with a price target of $300 and said that even though the company was facing regulatory probes in China, the bank expected it come through them with minimum damage, citing a recent ruling in this regard as an example.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in the firm with 13.9 million shares worth more than $3.1 billion.
Our calculations show that Alibaba Group Holding Limited (NYSE: BABA) ranks 7th in our list of the 30 Most Popular Stocks Among Hedge Funds.
Davis International Fund, in their Q4 2020 investor letter, mentioned Alibaba Group Holding Limited (NYSE: BABA). Here is what Davis International Fund has to say about Alibaba Group Holding Limited in their Q4 2020 investor letter:
“The current focus of the Chinese government is on e-commerce and consumer finance, impacting companies such as e-commerce leader Alibaba, resulting in the delay of the ANT Group IPO. Our expectation is that while a company like Alibaba will have to eliminate business practices such as exclusive supplier arrangements, it will maintain its leading position in the thriving Chinese e-commerce sector due to its brand, scale, network effects and ability to innovate.”
8. Unity Software Inc. (NYSE: U)
Number of Hedge Fund Holders: 32
Unity Software Inc. (NYSE: U) is a San Francisco-based video game and software development company. It was founded in 2004 and is placed eighth on our list of 10 best virtual stocks to buy. The firm has a separate unit dedicated to software services for virtual reality gear. The company claims that its software is used more than any other platform to power virtual reality games globally, specially in battle-related gaming. The firm has a high-def render pipeline, an interaction toolkit, and a spatial audio and particle system for virtual reality solutions.
Unity Software Inc. (NYSE: U) earned a Buy rating from investment bank Goldman Sachs on March 15 with a price target of $126. The bank projected long-term growth for Unity based on the low prices it offered for game development. The bank also noted that the firm was in the initial stages of expanding into non-gaming businesses.
At the end of the fourth quarter of 2020, 32 hedge funds in the database of Insider Monkey held stakes worth $11 billion in Unity Software Inc. (NYSE: U), down from 35 in the preceding quarter worth $6.7 billion.
7. Alphabet Inc. (NASDAQ: GOOG)
Number of Hedge Fund Holders: 157
Alphabet Inc. (NASDAQ: GOOG) is a California-based multinational technology company. It is ranked seventh on our list of 10 best virtual reality stocks to buy. The company has integrated virtual reality into many of the products it owns, like Google Lens and Google Maps, as well as a host of other internet-based offerings. Google is investing in virtual reality software to power more experiences, like taking virtual tours of museums and tourist destinations from the comfort of the home through the use of Google’s platforms.
Alphabet Inc. stock rose more than 4% on April 28 as it reported quarterly earnings that had jumped compared to the previous year because of digital advertising revenue. Investment bank Barclays boosted the price target on the company to $3,000 from $2,500, while another advisory, Evercore, raised its target to $2,825, terming Google a ‘COVID-winner’.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in the firm with 2.9 million shares worth more than $5.1 billion.
Our calculations show that Alphabet Inc. (NASDAQ: GOOG) ranks 6th in our list of the 30 Most Popular Stocks Among Hedge Funds.
1 Main Capital, in their Q1 2021 investor letter, mentioned Alphabet Inc. (NASDAQ: GOOG). Here is what 1 Main Capital has to say about Alphabet Inc. in their Q1 2021 investor letter:
“Alphabet Inc (GOOG), one of the largest and most talked about companies on earth, currently presents an incredibly attractive opportunity, especially relative to its risk. While some may be skeptical that an emerging fund such as ours could have any edge at all in owning GOOG, that is precisely our edge.
In other words, our ability to own GOOG without having to manufacture a variant view is one of the many competitive advantages we have compared to some larger, more institutionalized peers who may find it difficult to tell LPs that a vanilla company like GOOG is one of their favorite investments.
We are proudly running a relatively unconstrained strategy, and appreciative of our LP base that gives us the flexibility to look for the best risk / reward wherever it may lie. We also feel comfortable admitting that sometimes the most obvious bargains do hide in plain sight. In fact, despite nearly doubling since we first wrote it up in our Q2’18 letter, GOOG is just as exciting at current levels as it was back then.
Since pretty much everyone knows what GOOG does in its core business, there is no need to re-hash it here. However, I find it wild that we can own the most dominant advertising business on earth for less than 23x next year’s earnings (21x ex-cash). Typically, dominant, mature, global businesses that grow revenues in-line with GDP trade at higher multiples than this. Thus, given the relatively reasonable current multiple, I do not see much risk of long-term multiple compression here.
Yet, GOOG’s core advertising business, which drives all its profitability, actually grows much faster than global GDP. This is a business that has powerful secular tailwinds at its back, as advertising budgets continue to shift towards digital formats away from traditional ones. I expect this trend will continue for a long time and that current shareholders stand to benefit from the attractive growth.
Even better, GOOG’s earnings are not only growing faster than the average company, but they are also being weighed down significantly by its cloud business and various other bets. It is highly likely that these current drags on profitability will at some point generate significant earnings and be worth hundreds of billions of dollars.
Additionally, the company’s balance sheet is pristine. GOOG is sitting on over $100 billion of net cash. Many investors may argue that this is not a new dynamic. After all, the company has been building cash for a long time. However, the combination of GOOG’s new CEO (who effectively took the reins to start 2020) and well-regarded CFO (since 2015) are slowly instilling more focus and financial discipline on the company. Costs are being watched carefully, especially within other bets, and the pace of capital return has increased significantly of late. In fact, the pace of buybacks has more than tripled to greater than $30
billion in 2020, up from less than $10 billion in 2018. I expect this upward trend of buybacks to continue.Looking out to 2025, it is not difficult to imagine a core Google Services segment that generates close to $100 billion of annual net income, after corporate costs. If we add to that cloud, other bets and interim cash generation we could be looking at a company worth $3 trillion by the end of 2024, which would make GOOG more than a double from current levels. Not bad for a boring, well known mega-cap.”
6. Lumentum Holdings Inc. (NASDAQ: LITE)
Number of Hedge Fund Holders: 39
Lumentum Holdings Inc. (NASDAQ: LITE) is a San Jose-based telecommunications firm that has significant stakes in the technology sector. The company is the prime partner of China-based Huawei Technologies, and as signs of a thaw in a trade war between the US and China become more apparent, there is much to encourage Lumentum for the rest of the fiscal year. Huawei, which has investments in virtual reality, has largely resumed business with US companies and is set to make a strong comeback after a difficult two years.
On March 26, investment bank Raymond James rated Lumentum Holdings Inc. (NASDAQ: LITE) a Strong Buy after the deal the company was making for the purchase of telecom equipment maker Coherent fell through. The bank said it also based the upgrade on the 3D sensing telecom tech being developed by Lumentum Holdings Inc. (NASDAQ: LITE).
At the end of the fourth quarter of 2020, 39 hedge funds in the database of Insider Monkey held stakes worth $545 million in the firm, down from 40 in the previous quarter worth $501 million.
5. QUALCOMM Incorporated (NASDAQ: QCOM)
Number of Hedge Fund Holders: 85
QUALCOMM Incorporated (NASDAQ: QCOM) is a San Diego-based semiconductor manufacturing company. It was founded in 1985 and is placed fifth on our list of 10 best virtual reality stocks to buy. The company provides the chipsets used to power mobile devices that make use of these chipsets to run software for virtual reality applications. On April 29, the firm announced that it was partnering with VictoyXR to bring virtual reality headsets for use in an education program at a local college.
QUALCOMM Incorporated (NASDAQ: QCOM) recently announced fiscal quarter two revenue of close to $8 billion, an increase of 52% compared to the same period last year. It also posted earnings-per-share that beat market estimates by $0.23.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in the firm with 4 million shares worth more than $609 million.
Alger Spectra Fund, in their Q1 2021 investor letter, mentioned QUALCOMM Incorporated (NASDAQ: QCOM). Here is what Alger Spectra Fund has to say about QUALCOMM Incorporated in their Q1 2021 investor letter:
“Long position Qualcomm Inc. were among the top detractors from performance. Qualcomm is a leading semiconductor company with strong positions in telecommunications end markets that position the company as a primary beneficiary of the innovative 5G network standard roll out. Qualcomm is acknowledged as having the best technology specs for 5G chip sets as evidenced by signing up all 75 major OEMs including Apple. Additionally, beyond handsets, Qualcomm has meaningful growth drivers, including the Internet of Things, automobiles, industrials and gaming that provide the company with potential for generating increased earnings.
While Qualcomm was a notable positive contributor to the portfolio’s absolute and relative returns in 2020, during the first quarter, the share price declined and the position detracted from performance. Market demand for chips has been strong; however, Qualcomm hasn’t been able to fully exploit the demand as it is capacity constrained. Expectations were high for Qualcomm and while the quarter generally exceeded consensus estimates and forward estimates did rise, the street was anticipating a stronger positive surprise. We believe the production capacity constraints should abate in the second half of this year.”
4. Microsoft Corporation (NASDAQ: MSFT)
Number of Hedge Fund Holders: 258
Microsoft Corporation (NASDAQ: MSFT) is a Washington-based technology firm founded in 1975. It ranks fourth on our list of 10 best virtual reality stocks to buy. It is one of the largest technology firms in the world and invests heavily in the virtual reality sector. The firm offers several VR-related products, including VR headsets for video games and entertainment purposes, as well as Microsoft HoloLens, a mixed reality technology that helps businesses incorporate virtual reality into their activities.
Microsoft Corporation (NASDAQ: MSFT) announced on April 29 that it was reducing the share of games offered by independent platforms on its store from 30% to 12%, a move that analysts predict is based on increased regulatory scrutiny on the high fees that tech firms collect from developers to keep apps on these stores.
At the end of the fourth quarter of 2020, 258 hedge funds in the database of Insider Monkey held stakes worth $52 billion in the firm, up from 234 in the preceding quarter worth $42 billion.
3. Apple Inc. (NASDAQ: AAPL)
Number of Hedge Fund Holders: 146
Apple Inc. (NASDAQ: AAPL) is a California-based technology firm. The company primarily makes and sells hand-held electronic devices, laptops, and computers but also has virtual reality projects in the pipeline. Earlier this year, media reports indicate that Apple was developing a VR headset that would be a precursor to more ambitious virtual reality glasses it eventually plans to produce. The company has also integrated virtual reality into the devices it makes, like VR-related software that can be used on phones for a variety of applications.
Apple Inc. (NASDAQ: AAPL) was upgraded to Neutral from Sell by investment bank Goldman Sachs after the technology firm reported strong sales for the new iPhone models through the pandemic. However, the bank cautioned that the demand for new Apple products would be difficult for the firm to sustain in the long term.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in the firm with 62.8 million shares worth more than $7.6 billion.
2. Sony Group Corporation (NYSE: SONY)
Number of Hedge Fund Holders: 28
Sony Group Corporation (NYSE: SONY) is a Tokyo-based multinational technology firm that primarily makes and sells electronics. The firm is famous for being a leader in selling video game hardware like the PlayStation and plans to compliment these sales with virtual reality gear as it prepares for the next generation of video game enthusiasts. Earlier this year, it was reported that the firm was working on a VR headset that would ship with units of the PlayStation Five to give advanced gaming experiences to customers.
The firm was founded in 1946 and is placed second on our list of 10 best virtual reality stocks to buy. Sony Group Corporation (NYSE: SONY) was given a Buy rating by investment advisory Oppenheimer on April 29 with a price target of $135. On April 19, investment bank Goldman Sachs also maintained a Buy rating on Sony stock.
At the end of the fourth quarter of 2020, 28 hedge funds in the database of Insider Monkey held stakes worth $593 million in the firm, up from 26 in the preceding quarter worth $369 million.
1. Facebook, Inc. (NASDAQ: FB)
Number of Hedge Fund Holders: 242
Facebook, Inc. (NASDAQ: FB) is a Menlo Park-based technology firm that owns and operates several social networking platforms. It also has stakes in the virtual reality sector. The firm has set up a virtual reality research lab to power innovation and develop new applications for the technology. The company believes that virtual reality advances help make social connections better and eventually plans to introduce VR-based tech into social platforms it operates like Facebook, Instagram, and WhatsApp.
Facebook, Inc. (NASDAQ: FB) stock soared more than 7% on April 29 to all-time highs after the firm released a strong quarterly earnings report. The company is also exploring the offering of new tools to creators that will enable them to market their skills for commercial use.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in the firm with 4.7 million shares worth more than $1.3 billion.
You can also take a peek at 10 Best Travel Stocks to Buy Right Now, and 10 Best Automotive Stocks to Invest in Now.
Follow Insider Monkey on Twitter
Suggested articles:
- Top 10 High Growth Stocks To Buy in 2021
- 10 Best Rebound Stocks to Buy Now
- Top 10 Undervalued Tech Stocks
Disclosure: None. 10 Best Virtual Reality Stocks to Buy is originally published on Insider Monkey.
