5 Gems from Peconic Partners’ Strong Technology Portfolio

William Harnisch‘s New York-based Peconic Partners was founded in 2000 and is focused on delivering long-term returns to investors. At the end of September the market value of the firm’s public equity portfolio stood at $611.99 million, with the technology sector comprising about 18% of that value. The firm’s portfolio is highly concentrated, with its top ten holdings representing 84.47% of the value of its portfolio. In this article, we’ll take a look at Peconic’s top technology picks, which includes two of those conviction top ten stocks.

In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Insider Monkey looks at only the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge, not because they are not good at picking stocks on the long side of their portfolios. Hedge funds did in fact manage to outperform the market on the long side of their portfolios. In fact, the 15 most popular small-cap stocks among hedge funds has returned 102% since the end of August 2012, beating the S&P 500 Index by 53 percentage points (see the details here).

William Harnisch
William Harnisch
Peconic Partners LLC

#5 NXP Semiconductors NV (NASDAQ:NXPI)

 – Shares held (as of September 30): 18,500

 – Total Value (as of September 30): $1.61 million

During the September quarter, Peconic slashed its holding in the $21.89 billion semiconductor company by 73%. NXP Semiconductors NV (NASDAQ:NXPI)’s stock has appreciated by nearly 16% this year, and Peconic may feel its valuation is now becoming stretched, with it sporting a price-to-book ratio of over 37, well above many of its industry peers. FBR Capital nonetheless reiterated its ‘Outperform’ rating on the company last month, though it did revise its price target to $105 from $115. Among the over 700 hedge funds that we track at Insider Monkey, Eric W. Mandelblatt‘s Soroban Capital Partners is the largest stockholder of NXP Semiconductors NV (NASDAQ:NXPI), owning about 5.05 million shares.

#4 LogMeIn Inc (NASDAQ:LOGM)

 – Shares held (as of September 30): 50,000

 – Total Value (as of September 30): $3.41 million

The $1.74 billion provider of cloud-based service offerings has seen its stock surge by more than 40% this year. Peconic continues to be bullish on the company, upping its stake in it by 25% during the third trimester. However, the general sentiment among the funds that we track was slightly bearish during this period. 22 funds had investments worth $177.57 million in the company at the end of September, down from 25 firms at the end of June, though their aggregate investments were up from $162.63 million, partly due to stock price appreciation. Eric Bannasch tops the list of those 22 shareholders, as his firm Cadian Capital held about 561,400 shares of LogMeIn Inc (NASDAQ:LOGM) valued at $38.26 million at the end of September.

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#3 Ciena Corporation (NYSE:CIEN)

 – Shares held (as of September 30): 531,300

 – Total Value (as of September 30): $11 million

After being slashed by 36% during the July-to-September period, Peconic’s position in Ciena Corporation (NYSE:CIEN) represented 1.8% of the fund’s portfolio. Although still up by 3.27% on a year-to-date basis, Ciena’s stock has crumbled by 16% on Wednesday, owing to the soft guidance provided by the company’s management. Revenue for the first quarter of fiscal year 2016 are expected to be in the $555 million-to-$590 million range, as opposed to expectations of $637 million. However, the company managed to beat both the top and bottom line estimates in its financial results for the fourth quarter of fiscal year 2015. Israel Englander’s Millennium Management is the largest stockholder of Ciena Corporation (NYSE:CIEN) within our database as it owns about 1.89 million shares of the company.

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#2 Infinera Corp. (NASDAQ:INFN)

 – Shares held (as of September 30): 1.55 million

 – Total Value (as of September 30): $30.34 million

The $3.01 billion company engaged in transport networking systems has seen its stock surge by a staggering 40.7% this year. Peconic has remained bullish on the company since it initiated a position in it during the first quarter of this year, having boosted the stake by 13% in the third quarter. Infinera Corp. (NASDAQ:INFN) also beat both the top and bottom line estimates in its latest financial results, for the third quarter, and provided revenue guidance of $253 million-to-$263 million, which was above the $250 million mark anticipated by analysts. Fourth quarter EPS is expected to fall in the $0.19-to-$0.23 range, compared to the $0.19 estimate. Donald Chiboucis‘ Columbus Circle Investors held about 2.55 million shares of Infinera Corp. (NASDAQ:INFN) at the end of the third quarter.

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#1 Mobileye NV (NYSE:MBLY),

 – Shares held (as of September 30): 808,430

 – Total Value (as of September 30): $36.77 million

Peconic significantly hiked its stake in Mobileye NV (NYSE:MBLY), by 70% during the third trimester. The stock price of the $9.25 billion software development company has appreciated by a meagre 0.7% over the last 12 months, while the software industry has posted average gains of 10.3% during this period. The company was recently initiated at Evercore ISI with a ‘Buy’ rating and a price target of $68, which suggests immense upside of 58%. Stephen Mandel‘s Lone Pine Capital held about 6.39 million shares of Mobileye NV (NYSE:MBLY) on September 30.

Disclosure: None