10 Stocks to Buy According to Kevin McCarthy’s Breakline Capital

Published September 5, 2022 at 9:12 am EDT Updated September 7, 2026 at 11:36 am EDT

In this article, we discuss 10 stocks to buy according to Kevin McCarthy’s Breakline Capital.

Breakline Capital is a New York-based hedge fund that was founded in May 2017. Former Citadel portfolio manager Kevin McCarthy established the hedge fund. It employs a long/short stock strategy for its investments. Breakline Capital’s Q1 2022 portfolio included only technology stocks. The second quarter portfolio of Breakline Capital was dominated by tech firms, with sizeable portions of the finance and communications sectors added.

Photo by Adam Śmigielski on Unsplash

At the end of the second quarter of 2022, Breakline Capital’s 13F portfolio reached $87.05 million, an increase of about 33.62% from the preceding quarter. The hedge fund added 12 stocks to its portfolio and sold 9 equities. The hedge fund also boosted its stakes in 7 securities and decreased its hold on 9 stocks. The hedge fund invested in 23 stocks at the end of the second quarter of 2022. Some of the most outstanding securities in Kevin McCarthy’s Breakline Capital portfolio included Microsoft Corporation (NASDAQ:MSFT), Micron Technology, Inc. (NASDAQ:MU), and ServiceNow, Inc. (NYSE:NOW).

Our Methodology

We used Kevin McCarthy’s Breakline Capital portfolio as of Q2 2022 for this analysis, concentrating on the hedge fund’s top 10 positions. All hedge fund data is based on an elite group of 895 funds that filed 13Fs for the second quarter of 2022 with Insider Monkey.

Stocks to Buy According to Kevin McCarthy’s Breakline Capital

10. Applied Materials, Inc. (NASDAQ:AMAT)

Breakline Capital’s Stake Value: $3,312,000

Percentage of Breakline Capital’s 13F Portfolio: 3.8%

Number of Hedge Fund Holders: 67

Applied Materials, Inc. (NASDAQ:AMAT) ranks tenth on the list of stocks to buy according to Kevin McCarthy’s Breakline Capital. According to the 13F filings for the second quarter of 2022, Breakline Capital held 36,401 shares of Applied Materials, Inc., amounting to more than $3.31 million and representing 3.8% of the fund’s portfolio. In addition, the hedge fund increased its stake in the firm by 4%.

On August 21, BofA analyst Vivek Arya revised his price objective on Applied Materials, Inc. from $118 to $125 and maintained a ‘Buy’ rating on the stock. The business announced a beat and raise quarter with a solid outlook, the analyst stated in a research note, despite worries about a downturn. Applied Materials, Inc., a producer of semiconductor equipment, predicted sales of around $6.65 billion for the fiscal fourth quarter.

Out of the hedge funds tracked by Insider Monkey in the second quarter of 2022, 67 held stakes in Applied Materials, Inc., with a combined value of $3.69 billion. Of these 67 funds, David Blood and Al Gore’s Generation Investment Management is the most significant shareholder of Applied Materials, Inc., with 6.10 million shares worth $555.22 million.

In addition to Applied Materials, Inc., Microsoft Corporation, Micron Technology, Inc., and ServiceNow, Inc. are some other significant holdings of Kevin McCarthy’s Breakline Capital.

Vulcan Value Partners mentioned Applied Materials, Inc. in its Q4 2021 investor letter. Here is what the firm had to say:

“Applied Materials, another material contributor for the quarter, provides materials engineering solutions for semiconductor fabrication equipment and manufacturing tools for advanced displays. Similar to Lam Research, Applied Materials is executing well and continuing to experience the tailwinds from consolidation and growth within the industry.”

9. QUALCOMM Incorporated (NASDAQ:QCOM)

Breakline Capital’s Stake Value: $3,649,000

Percentage of Breakline Capital’s 13F Portfolio: 4.19%

Number of Hedge Fund Holders: 71

Based in San Diego, QUALCOMM Incorporated (NASDAQ:QCOM) develops and sells wireless technologies, semiconductor chips, IoT, PC computing, and 5G solutions. On September 2, Meta Platforms, Inc. (NASDAQ:META) struck a contract with QUALCOMM Incorporated to have the business create unique chipsets for its Quest VR devices.

Kevin McCarthy’s Breakline Capital has kept a stake in QUALCOMM Incorporated since Q4 2018. The hedge fund’s $3.65 million investment equals 4.19% of the total portfolio. Following in-line/slightly better-than-expected June-quarter earnings and a disappointing September-quarter forecast, Wells Fargo analyst Gary Mobley increased his price objective on QUALCOMM Incorporated to $150 from $135 on July 28 and retained an ‘Equal Weight’ rating on the shares.

Investors were recently seen selling QUALCOMM Incorporated shares. At the close of the second quarter, 71 hedge funds were bullish on the company shares, compared to 73 in the previous quarter. The combined worth of Q2 hedge fund holdings stood at $2.81 billion. Panayotis Takis Sparaggis’s Alkeon Capital Management owned a $541.15 million stake in QUALCOMM Incorporated at the end of the second quarter, making it the company’s largest shareholder.

8. Palo Alto Networks, Inc. (NASDAQ:PANW)

Breakline Capital’s Stake Value: $4,504,000

Percentage of Breakline Capital’s 13F Portfolio: 5.17%

Number of Hedge Fund Holders: 90

Palo Alto Networks, Inc. (NASDAQ:PANW) specializes in network security. The firm caters to approximately 80,000 business clients. Additionally, 90 hedge funds reported bullish bets on Palo Alto Networks, Inc. at the end of the second quarter, with combined stakes worth $3.73 billion.

Following the FQ4 results, Wedbush analyst Dan Ives increased his price target on Palo Alto Networks, Inc. to $620 from $580 on August 23. He also retained an ‘Outperform’ rating. The analyst said the company’s cloud approach is working, noting that forecast exceeded expectations in part due to robust billings.

According to the 13F filings for the second quarter of 2022, Breakline Capital held 9,118 shares of Palo Alto Networks, Inc., amounting to more than $4.50 million and representing 5.17% of the fund’s portfolio value. With about 733,482 shares valued at $362.30 million, Generation Investment Management is the biggest shareholder of Palo Alto Networks, Inc..

7. Cognizant Technology Solutions Corporation (NASDAQ:CTSH)

Breakline Capital’s Stake Value: $4,724,000

Percentage of Breakline Capital’s 13F Portfolio: 5.42%

Number of Hedge Fund Holders: 36

In the age of big data, Cognizant Technology Solutions Corporation (NASDAQ:CTSH), a provider of professional services, aids customers in becoming data-enabled and data-driven. On August 17, HSBC analyst Yogesh Aggarwal downgraded Cognizant Technology Solutions Corporation from ‘Buy’ to ‘Hold’ and decreased his price objective from $90 to $79. According to Aggarwal, the company’s performance was behind its competitors, and the most recent reduction in growth expectations was unexpected.

In the second quarter of 2022, 36 hedge funds were bullish on Cognizant Technology Solutions Corporation, up from 32 in the preceding quarter. Richard S. Pzena’s Pzena Investment Management is a significant stakeholder of Cognizant Technology Solutions Corporation, with 13.77 million shares worth over $929.21 million.

Cognizant Technology Solutions Corporation is one of the newest acquisitions of Breakline Capital, being added to the fund’s portfolio in Q2. The hedge fund purchased nearly $4.72 million in Cognizant Technology Solutions Corporation shares, representing 5.42% of its 13F portfolio’s exposure.

6. KLA Corporation (NASDAQ:KLAC)

Breakline Capital’s Stake Value: $4,876,000

Percentage of Breakline Capital’s 13F Portfolio: 5.6%

Number of Hedge Fund Holders: 43

KLA Corporation (NASDAQ:KLAC) is a global provider of process control, process-enabling, and yield management solutions to semiconductors and electronics industries. On July 29, Deutsche Bank analyst Sidney Ho upped his price objective on KLA Corporation from $385 to $400 and reiterated a ‘Buy’ recommendation on the stock.

Breakline Capital loaded up on KLA Corporation in the second quarter, increasing its position in the company by 84%. The hedge fund owns 15,281 shares of KLA Corporation, worth $4.88 million. Alongside Microsoft Corporation, Micron Technology, Inc., and ServiceNow, Inc., KLA Corporation is one of the most prominent stocks in Kevin McCarthy’s portfolio.

With combined stakes worth $1.35 billion, 43 hedge funds were long KLA Corporation at the end of the second quarter of 2022. This showed negative sentiment from the previous quarter, when 52 hedge funds had a $1.88 billion stake in KLA Corporation. Alkeon Capital Management is the most significant shareholder of KLA Corporation as of June 30, with a massive $558.37 million stake.

In its Q1 2022 investor letter, Vltava Fund mentioned KLA Corporation. Here is what the firm had to say:

“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stock of KLA Corporation (KLAC).

KLA Corporation develops leading-edge equipment and services that enable innovation throughout the electronics industry. It specialises in process management and control in semiconductor manufacturing and the related nano-electronics industries. During manufacturing processes, products must be inspected for defects and correct critical dimensions in order to identify and eliminate possible sources of problems. As customers continue to enforce Moore’s Law, smaller chips must meet more precise specifications, which in turn increases the need for advanced inspection and diagnostic tools. This is a key step within the entire manufacturing process and one in which the company has built a very strong, and in places dominant, global position. We have been watching and waiting for an opportunity to acquire this stock for some time already, and this year’s drop in its price finally prompted us to buy.”

5. Fox Corporation (NASDAQ:FOX)

Breakline Capital’s Stake Value: $4,912,000
Percentage of Breakline Capital’s 13F Portfolio: 5.64%
Number of Hedge Fund Holders: 31

Fox Corporation (NASDAQ:FOX) produces and distributes news, sports, and entertainment content under its recognizable domestic brands, including FOX News Media, FOX Sports, FOX Entertainment, and FOX Television Stations.

Fox Corporation announced a semi-annual dividend of $0.25 per share on August 12, a 4.2% increase from the previous distribution of $0.24. Yacktman Asset Management is Fox Corporation’s largest shareholder, with shares worth $256.48 million.

In the second quarter of 2022, Breakline Capital purchased 152,745 shares of Fox Corporation, worth $4.91 million. That represented 5.64% of the hedge fund’s total portfolio. Out of the hedge funds tracked by Insider Monkey, 31 reported having ownership stakes in Fox Corporation as of the end of the second quarter of 2022, down from 38 a quarter earlier. The aggregate value of these funds’ Q2 holdings stood at $610.52 million.

4. Dell Technologies Inc. (NYSE:DELL)

Breakline Capital’s Stake Value: $6,451,000
Percentage of Breakline Capital’s 13F Portfolio: 7.41%
Number of Hedge Fund Holders: 49

Dell Technologies Inc. (NYSE:DELL) provides information technology services. With a stake valued at more than $172.25 million, Millennium Management is a prominent stakeholder of Dell Technologies Inc..

On August 26, Evercore ISI analyst Amit Daryanani maintained an ‘Outperform’ rating on Dell Technologies Inc. while lowering his price objective from $63 to $58. Despite the firm outperforming expectations for the June quarter, Dell executives claimed they saw signs of weakening as they moved into the year’s second half, according to a message to investors from Daryanani.

Dell Technologies Inc. declared on August 27 that it had stopped all activities in Russia after closing its offices in the middle of August. The company has decided to move out of the country, joining the growing number of businesses doing so.

In the second quarter, Breakline Capital reduced its stake in Dell Technologies Inc. by 21%, and its position is now worth about $6.45 million. Dell Technologies Inc. has featured on the hedge fund’s portfolio since the second quarter of 2019.

Fund managers reduced their Dell Technologies Inc. holdings in the second quarter of 2022. 49 hedge funds reported ownership of Dell Technologies Inc. positions as of the end of the second quarter of 2022, compared to 59 hedge funds as of the end of the first quarter of 2022.

3. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Breakline Capital’s Stake Value: $6,739,000
Percentage of Breakline Capital’s 13F Portfolio: 7.74%
Number of Hedge Fund Holders: 87

Advanced Micro Devices, Inc. (NASDAQ:AMD) is a multinational semiconductor company. On August 30, Advanced Micro Devices, Inc. revealed its new “Zen 4” architecture-based Ryzen 7000 series desktop CPUs, which would enhance functioning for content creators and gamers.

On August 3, Northland analyst Gus Richard increased his price target on Advanced Micro Devices, Inc. to $105 from $95 and reiterated an ‘Outperform’ rating on the stock following the release of the company’s non-GAAP earnings, which marginally exceeded his estimate. The company also maintained its revenue and gross margin forecasts for calendar 2022.

Securities filings reveal that Breakline Capital boosted its stake in Advanced Micro Devices, Inc. by 552% during the second quarter of 2022. The fund thus owns 88,127 shares of Advanced Micro Devices, Inc., worth over $6.74 million and representing 7.74% of the value of its 13F portfolio.

87 hedge funds tracked by Insider Monkey reported having bullish bets on Advanced Micro Devices, Inc. as of the end of the second quarter of 2022, with an aggregate stake value of $4.84 billion. Fisher Asset Management, with a position worth $1.92 billion, stood as the most significant shareholder of Advanced Micro Devices, Inc..

Here is what Carillon Tower Advisers had to say about Advanced Micro Devices, Inc. in its fourth-quarter 2021 investor letter:

“Advanced Micro Devices, Inc. supplies semiconductor chips for central processing units (CPUs) and graphic processing units (GPUs). The firm has been gaining share against its primary competitor in the datacenter server CPU space, as this rival has been unable to match the design and manufacturing capabilities of AMD and its partners. Investors are also looking forward to the closing of the previously announced merger with a semiconductor manufacturer that is another one of the portfolio’s holdings. The merger will increase AMD’s capabilities in the Field Programmable Gate Array (FPGA) chip space, and the combined company should possess the potential to win additional market share in the datacenter chip market.”

2. Visa Inc. (NYSE:V)

Breakline Capital’s Stake Value: $7,335,000
Percentage of Breakline Capital’s 13F Portfolio: 8.42%
Number of Hedge Fund Holders: 166

Visa Inc. (NYSE:V) is one of the companies in the payments sector. As of June 30, the company’s credit and debit cards were being used in more than 3.9 billion transactions in over 200 nations. Even though Visa Inc. ceased operations in Russia in March 2022, Visa reported on August 30 that its U.S. payments volume increased 11% year on year in August. In addition, Visa Inc. has increased its dividend every year since it went public in 2008, which is appealing to income seekers. Its most recent quarterly dividend was $0.375 per share.

On August 16, Daiwa analyst Kazuya Nishimura cut his price objective on Visa Inc. from $230 to $225 and downgraded the stock from ‘Outperform’ to ‘Neutral.’ Visa continued to grow positively as cross-border travel increased. Still, Nishimura argued there are fewer prospects for profitability to exceed market expectations now that border barriers have been virtually lifted, except some regions of Asia.

Visa Inc. is getting the attention of the smart money, as 166 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the second quarter, up from 159 funds a quarter earlier. Breakline Capital also bought about 37,255 shares of Visa Inc. in the second quarter of 2022.

Among the hedge funds being tracked by Insider Monkey, TCI Fund Management is a leading shareholder in Visa Inc., with 19.92 million shares worth more than $3.92 billion.

In its Q2 2022 investor letter, Mayar Capital, an asset management firm, mentioned Visa Inc. and discussed its stance on the company. Here is what the fund said:

“Visa and Mastercardhave both been beneficiaries of the move away from cash over the course of the pandemic with the consequence that forward- looking opportunities for further penetration of card payments are lower than a couple of years ago. Moreover, cross-border payments – which were badly impacted by lockdowns – strongly recovered in 2021 and for both businesses are at or near to pre-COVID levels.”

1. International Business Machines Corporation (NYSE:IBM)

Breakline Capital’s Stake Value: $9,869,000
Percentage of Breakline Capital’s 13F Portfolio: 11.33%
Number of Hedge Fund Holders: 40

International Business Machines Corporation (NYSE:IBM) offers global integrated solutions and services. On August 31, International Business Machines Corporation and VMware, Inc. (NYSE:VMW) announced an extended collaboration to assist global clients and partners in improving mission-critical operations and enhancing time-to-value in hybrid cloud environments.

International Business Machines Corporation tops the list of stocks to buy according to Kevin McCarthy’s Breakline Capital, with the hedge fund holding 69,902 shares worth $9.87 million, representing 11.33% of the total 13F securities.

On August 16, Credit Suisse analyst Shannon Cross initiated coverage of International Business Machines Corporation, assigning the stock an “Outperform” rating and raised the price target from $156 to $163 as part of a wider research note on IT Hardware. She noted that historically, the group has outperformed during recessionary periods due to their strong balance sheets and cash flow.

According to Insider Monkey’s Q2 database, 40 hedge funds were long International Business Machines Corporation, compared to 43 funds in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital reported a prominent stake in International Business Machines Corporation in the second quarter of 2022, with 2.64 million shares worth $372.68 million.

St. James Investment Company, an investment management firm, mentioned International Business Machines Corporation in its fourth-quarter 2021 investor letter. Here is what the fund said:

“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available…. (Click here to see the full text).”

You can also take a peek at 10 Stocks to Buy According to Mark McMeans’ Brasada Capital Management and 10 Stocks to Buy According to Cheyne Capital.

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