In this article, we discuss 10 technology stocks to buy according to Kevin Mccarthy’s Breakline Capital.
Kevin McCarthy, a former portfolio manager at Citadel, founded Breakline Capital in May 2017, which is a New York-based hedge fund. The hedge fund has a 13F portfolio valued at approximately $74.15 million as of Q4 2021, down from $121.80 million the previous quarter. For its investments, the hedge fund uses a long/short equity strategy, focusing on equities in the technology, finance, and consumer discretionary sectors during the fourth quarter of 2021.
However, in this article, we will lay emphasis on the tech stocks in Kevin Mccarthy’s Breakline Capital portfolio.
Some of the large-cap tech stocks in the portfolio of Breakline Capital as of the fourth quarter of 2021 include Applied Materials, Inc. (NASDAQ:AMAT), NVIDIA Corporation (NASDAQ:NVDA), and Marvell Technology, Inc. (NASDAQ:MRVL).
Even though the hedge fund trimmed its stake in Applied Materials, Inc. (NASDAQ:AMAT) by 83% in the fourth quarter of 2021, it still owns 12,343 shares of the company, worth $1.94 million. Following the in-line performance, Citi analyst Atif Malik boosted his price objective on Applied Materials, Inc. (NASDAQ:AMAT) to $180 from $178 and reaffirmed a Buy rating on the stock on February 17.
The fund also has a significant stake in NVIDIA Corporation (NASDAQ:NVDA). In addition, on March 23, Citi analyst Atif Malik kept a Buy rating on NVIDIA Corporation (NASDAQ:NVDA) with a price target of $350.
Marvell Technology, Inc. (NASDAQ:MRVL) is another tech stock in Breakline Capital’s portfolio. Susquehanna analyst Christopher Rolland boosted his price objective on Marvell Technology, Inc. (NASDAQ:MRVL) from $100 to $105 on March 7 and maintained a Positive rating on the stock.
Our Methodology
Considering all these points, let’s start our list of 10 technology stocks to buy according to Kevin Mccarthy’s Breakline Capital. We compiled this list using information from Mccarthy’s 13F portfolio as of Q4 2021. Insider Monkey’s fourth quarter database of 924 prominent hedge funds was used for this investigation.
Technology Stocks to Buy According to Kevin Mccarthy’s Breakline Capital
10. QUALCOMM Incorporated (NASDAQ:QCOM)
Breakline Capital’s Stake Value: $2,937,000
Percentage of Breakline Capital’s 13F Portfolio: 3.96%
Number of Hedge Fund Holders: 75
QUALCOMM Incorporated (NASDAQ:QCOM) creates and sells the core technology and products that are utilized in wireless devices. At the end of the fourth quarter of 2021, 75 hedge funds in the database of Insider Monkey held stakes worth $4.80 billion in QUALCOMM Incorporated (NASDAQ:QCOM), up from 70 the preceding quarter worth $3.52 billion.
On February 4, Baird analyst Tristan Gerra boosted his price objective on QUALCOMM Incorporated (NASDAQ:QCOM) from $200 to $250 and maintained an Outperform rating. The various growth layer prospects in non-handsets, according to Gerra, were impressive.
QUALCOMM Incorporated (NASDAQ:QCOM) announced the formation of a new fund on March 22 that would invest up to $100 million in firms focused on core technologies, XR, and data enabling the metaverse. On the other hand, Kevin Mccarthy disclosed a decreased stake in QUALCOMM Incorporated (NASDAQ:QCOM) by 52%. This leaves the investment value at $2.94 million and 16,058 shares.
Similar to Applied Materials, Inc. (NASDAQ:AMAT), NVIDIA Corporation (NASDAQ:NVDA), and Marvell Technology, Inc. (NASDAQ:MRVL), QUALCOMM Incorporated (NASDAQ:QCOM) is a notable tech stock in Kevin Mccarthy’s Q4 portfolio.
In its Q1 2021 investor letter, Alger, emphasised a few stocks and QUALCOMM Incorporated (NASDAQ:QCOM) was one of them. Here is what the fund said:
“Long position Qualcomm Inc. were among the top detractors from performance. QUALCOMM Incorporated (NASDAQ:QCOM) 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 rollout. 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 Incorporated (NASDAQ:QCOM) 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 Incorporated (NASDAQ:QCOM) hasn’t been able to fully exploit the demand as it is capacity constrained. Expectations were high for QUALCOMM Incorporated (NASDAQ:QCOM) 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.”
9. Palo Alto Networks, Inc. (NASDAQ:PANW)
Breakline Capital’s Stake Value: $3,166,000
Percentage of Breakline Capital’s 13F Portfolio: 4.26%
Number of Hedge Fund Holders: 73
Palo Alto Networks, Inc. (NASDAQ:PANW) is a corporation that monitors the network for businesses, service providers, and government organisations. In the fourth quarter, Breakline Capital raised its position in Palo Alto Networks, Inc. (NASDAQ:PANW) by 42% to 5,686 shares, accounting for just over 4.26% of the overall portfolio.
73 out of the 924 hedge funds held stakes in Palo Alto Networks, Inc. (NASDAQ:PANW) in the fourth quarter of 2021, worth $6.48 billion, compared to the same number of funds in the previous quarter, holding stakes in Palo Alto Networks, Inc. (NASDAQ:PANW) valued at $5.90 billion.
As part of a more prominent research note revising values in the Infrastructure and Security software sectors, Truist analyst Joel Fishbein boosted his price target on Palo Alto Networks, Inc. (NASDAQ:PANW) to $675 from $600 and reaffirmed a Buy rating on the shares on March 24.
8. Jabil Inc. (NYSE:JBL)
Breakline Capital’s Stake Value: $3,409,000
Percentage of Breakline Capital’s 13F Portfolio: 4.59%
Number of Hedge Fund Holders: 26
Jabil Inc. (NYSE:JBL) offers electronic manufacturing services and solutions worldwide, including repair, electronics design, production, and product management. On March 16, Jabil Inc. (NYSE:JBL) reported earnings for FQ2 2022, posting earnings per share of $1.68, exceeding estimates by $0.21. The quarterly revenue was up 10.61% from the prior-year quarter, amounting to $7.55 billion.
In a research note, Citi analyst Jim Suva informed investors that Jabil Inc. (NYSE:JBL) posted sales that beat the market by 2% and earnings that outperformed the market by 14%. Therefore, the analyst maintained a Buy recommendation on Jabil Inc. (NYSE:JBL), with a price objective of $90 on March 17.
Breakline Capital has a $3.41 million investment in Jabil Inc. (NYSE:JBL) as of Q4 2021, consisting of 48,460 shares. Hedge fund sentiment has slightly fallen for Jabil Inc. (NYSE:JBL). Long hedge fund positions fell to 26 at the end of the fourth quarter, compared to 27 at the end of the previous quarter.
7. Micron Technology, Inc. (NASDAQ:MU)
Breakline Capital’s Stake Value: $3,619,000
Percentage of Breakline Capital’s 13F Portfolio: 4.88%
Number of Hedge Fund Holders: 83
Micron Technology, Inc. (NASDAQ:MU) is a computer memory and data storage company in the United States. Its products include dynamic random-access memory, flash memory, and USB flash drives. Breakline Capital added Micron Technology, Inc. (NASDAQ:MU) to its portfolio in the fourth quarter by buying 38,850 shares.
In the fourth quarter, fund managers increased their holdings in Micron Technology, Inc. (NASDAQ:MU). As of the end of the fourth quarter, 83 hedge funds in Insider Monkey’s database held stakes in Micron Technology, Inc. (NASDAQ:MU), an increase compared to 63 funds in the preceding quarter.
Micron Technology, Inc. (NASDAQ:MU) was upgraded to Outperform from Underperform by Bernstein analyst Mark Li on March 16, with a price objective of $94, up from $58. He pointed out that worldwide memory valuations had dropped, resulting in a good risk/reward ratio.
In its Q3 2021 investor letter, Hazelton Capital Partners mentioned Micron Technology, Inc. (NASDAQ:MU). Here is what the fund said:
“It’s hard to explain how shares of Micron Technology, manufacture of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.
Currently Micron Technology trades at just 8x 2022 estimate earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve.”
6. salesforce.com, inc. (NYSE:CRM)
Breakline Capital’s Stake Value: $4,933,000
Percentage of Breakline Capital’s 13F Portfolio: 6.65%
Number of Hedge Fund Holders: 110
salesforce.com, inc. (NYSE:CRM) is a software corporation that links businesses and customers all over the world. At the end of the fourth quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes in salesforce.com, inc. (NYSE:CRM), down from 119 in the preceding quarter.
Breakline Capital owned 19,411 salesforce.com, inc. (NYSE:CRM) shares during the fourth quarter of 2021. This amounted to a $4.93 million stake, representing 6.65% of its portfolio. The hedge fund reduced its stake in salesforce.com, inc. (NYSE:CRM) by 27% in the fourth quarter of 2021.
Canaccord analyst David Hynes decreased his price objective on salesforce.com, inc. (NYSE:CRM) from $315 to $260 on March 2 and kept a Buy recommendation on the stock. According to the analyst, the stock was inexpensive, and it had the potential to become a software industry mainstay.
salesforce.com, inc. (NYSE:CRM), like Applied Materials, Inc. (NASDAQ:AMAT), NVIDIA Corporation (NASDAQ:NVDA), and Marvell Technology, Inc. (NASDAQ:MRVL), is a notable technology stock on the radar of Kevin Mccarthy.
Polen Capital, in its fourth quarter 2021 investor letter mentioned salesforce.com, inc. (NYSE:CRM). Here is what the fund said:
“Salesforce reported solid revenue growth, including accelerated growth in the company’s largest and most mature product, Sales Cloud. However, shares underperformed due to unexpected weakness in the company’s MuleSoft application integration business that we believe is attributable to temporary missteps in the company’s selling efforts. The company also provided slightly weak guidance for billed but not earned business growth. In our experience, this metric can be influenced by timing issues and is often not fully representative of underlying demand for the company’s offerings.”
5. NXP Semiconductors N.V. (NASDAQ:NXPI)
Breakline Capital’s Stake Value: $5,816,000
Percentage of Breakline Capital’s 13F Portfolio: 7.84%
Number of Hedge Fund Holders: 44
NXP Semiconductors N.V. (NASDAQ:NXPI) is a holding company specializing in semiconductor solutions. By the end of the fourth quarter of 2021, Insider Monkey identified 44 hedge funds that had stakes in NXP Semiconductors N.V. (NASDAQ:NXPI). These holdings were worth a total of $907.09 million. Ken Fisher of Fisher Asset Management is the lead stakeholder in NXP Semiconductors N.V. (NASDAQ:NXPI). The fund owns 897,844 shares worth $204.51 million.
After NXP Semiconductors N.V. (NASDAQ:NXPI)’s Q4 earnings beat, Truist analyst William Stein boosted his price target to $265 from $250 and reiterated a Buy rating on the stock. In a research note to investors, the analyst observed that the business had a near-perfect quarter and its Q1 forecast was even better.
In the fourth quarter, Mccarthy cut his position in NXP Semiconductors N.V. (NASDAQ:NXPI) by 6,586 shares, reducing his total stake by 21%. Mccarthy first invested in NXP Semiconductors N.V. (NASDAQ:NXPI) in the fourth quarter of 2018. Kevin Mccarthy’s Breakline Capital still holds 25,533 shares of NXP Semiconductors N.V. (NASDAQ:NXPI), worth more than $5.82 million.
ClearBridge Investments in its Q3 2021 investor letter, mentioned NXP Semiconductors N.V. (NASDAQ:NXPI). Here is what the fund has to say:
“Over the last year, we have sought to improve the up capture of the portfolio by expanding exposure to the select bucket of companies growing revenues and earnings at meaningfully above-average rates and targeting large total addressable markets. Newer names in the select bucket like NXP Semiconductors N.V. (NASDAQ:NXPI) have been strong contributors to relative performance over this period. We believe that owning a broader group of IT and Internet companies with different drivers to the businesses helps manage some of the risk in this relatively more expensive subsector.”
4. Analog Devices, Inc. (NASDAQ:ADI)
Breakline Capital’s Stake Value: $6,221,000
Percentage of Breakline Capital’s 13F Portfolio: 8.38%
Number of Hedge Fund Holders: 72
Analog Devices, Inc. (NASDAQ:ADI) is a high-performance semiconductor firm that designs, develops, manufactures, and markets integrated circuits worldwide. Analog Devices, Inc. (NASDAQ:ADI) said on March 4 that it will invest EUR 100 million in ADI Catalyst, a 100,000-square-foot custom-built communication and collaboration centre at its Limerick, Ireland, headquarters over the next three years.
On February 17, Deutsche Bank analyst Ross Seymore cut his price target on Analog Devices, Inc. (NASDAQ:ADI) from $200 to $185 and maintained a Hold rating. In a research note to investors, Seymore stated that Analog Devices, Inc. (NASDAQ:ADI) had another solid quarter as demand rose sharply.
In Q4 2021, 72 hedge funds monitored by Insider Monkey were long Analog Devices, Inc. (NASDAQ:ADI), with stakes equalling $4.71 billion. Unio Capital is one of the prominent stakeholders of Analog Devices, Inc. (NASDAQ:ADI), owning 43,047 shares worth $804.76 million. In the fourth quarter, Breakline Capital increased its stake in Analog Devices, Inc. (NASDAQ:ADI) by 27%, and the hedge fund’s position in the company is now worth about $6.22 million.
In its third-quarter 2021 investor letter, Madison Funds mentioned Analog Devices, Inc. (NASDAQ:ADI). Here is what the fund said:
“At its 2017 investor day, Analog Device’s VP of Automotive, Mark Gill, described how the company’s content on well-equipped electric vehicles was $600 per car compared to $250 per car for the traditional 2017 internal combustion engine car. Since then, Analog has highlighted the success of its EV battery management systems (BMS) product nearly every quarter. The BMS product is hardware and software that manages the power into and out of the battery systems. It’s the brains of the operation. Analog says it’s on its fifth generation BMS product, that it has the no. 1 market share in high voltage products, and that it is on 5 of the top 10 selling EVs. While we think that the BMS product is just 1 to 1.5% of Analog’s product mix, we think that it could add nearly a point of revenue growth per year to the company’s top-line given the expected ramp in EV production. This is a material amount of growth atop an already nicely growing company revenue line.”
3. KLA Corporation (NASDAQ:KLAC)
Breakline Capital’s Stake Value: $7,210,000
Percentage of Breakline Capital’s 13F Portfolio: 9.72%
Number of Hedge Fund Holders: 49
KLA Corporation (NASDAQ:KLAC) provides semiconductor and related nano-electronics companies with process control and yield management solutions. A total of 49 hedge funds were bullish on KLA Corporation (NASDAQ:KLAC) in Q4 2021, up from 44 funds in the previous quarter. Alkeon Capital Management is the leading shareholder of KLA Corporation (NASDAQ:KLAC), with 1.69 million shares worth $726.43 million.
On March 18, KeyBanc analyst Steve Barger decreased his price objective on KLA Corporation (NASDAQ:KLAC) from $480 to $440 and maintained an Overweight rating on the stock. In a research note to investors, Barger adopted a cautious stance on the firm’s industrial and semi-cap equipment coverage, noting persistent uncertainty surrounding Russia’s invasion of Ukraine, further inflationary rises in commodities and energy costs, and COVID-related disruptions in Asia.
Breakline Capital also strengthened its position in KLA Corporation (NASDAQ:KLAC) by buying 3,725 additional shares. This makes their stake in KLA Corporation (NASDAQ:KLAC) total 16,764 shares worth $7.21 million.
Palm Capital mentioned KLA Corporation (NASDAQ:KLAC) in its Q2 2021 investor letter. Here is what the fund said:
“A final example of our thinking is in the semiconductor industry. Because of the extreme complexity and significant costs in the manufacturing process, the industry has become highly specialized. It has fragmented into three types of companies – the designers of chips, the manufacturers, and those that make equipment for the manufacturers.
Revenue for designers is somewhat stable because of patents. And even when patents expire, designs are not easily copied, and customers don’t easily switch because this would typically involve a redesign of their product and the risk that the new design does not work as well. However, revenue is still dependent on the length of the lifecycle of end products they are used for, how long it takes for those products to be replaced with new technology and the success of designers’ R&D into new designs. So, while near term revenue and profit margins are typically stable, medium to long term revenue and profits are uncertain. And the large customers in this industry such as Apple, Google and Amazon are all beginning to design their own chips, raising this uncertainty…
…On the other hand, revenue and profits for the companies that design and manufacture equipment for the manufacturers are steadier. An example of a company we like in this space is KLA. KLA provides tools and solutions to help manufacturers monitor and improve their highly complex manufacturing process and reduce costs. These are critical services to the manufacturers. Their tools are found in every major manufacturer globally. And the uniqueness of these tools is evidenced by KLA’s market share which is more than four times its nearest competitor. Regardless of which design is successful in the future or which manufacturer manages to take the lead, KLA’s tools will almost certainly still be needed. Its revenues and profits are less affected by technological change and therefore less uncertain than that of the designers and manufacturers.”
2. Microsoft Corporation (NASDAQ:MSFT)
Breakline Capital’s Stake Value: $7,496,000
Percentage of Breakline Capital’s 13F Portfolio: 10.1%
Number of Hedge Fund Holders: 262
Microsoft Corporation (NASDAQ:MSFT) is a tech mammoth developing and supporting software, services, devices, and solutions. Morgan Stanley analyst Keith Weiss kept an Overweight rating on Microsoft Corporation (NASDAQ:MSFT) shares with a $372 price target on February 8.
The hedge fund of Kevin Mccarthy entered the fourth quarter of 2021 with 22,289 shares of Microsoft Corporation (NASDAQ:MSFT) in its portfolio worth around $7.50 million. Microsoft Corporation (NASDAQ:MSFT) has featured on Mccarthy’s portfolio since the fourth quarter of 2017.
Out of the 924 elite hedge funds tracked by Insider Monkey in the fourth quarter of 2021, 262 hedge funds were bullish on the Microsoft Corporation (NASDAQ:MSFT) shares, with total stakes worth $75.66 billion. This shows hedge fund sentiment increased for Microsoft Corporation (NASDAQ:MSFT) in the fourth quarter over the previous quarter, where 250 hedge funds held stakes in the company.
Baron Funds, in its fourth quarter 2021 investor letter mentioned Microsoft Corporation (NASDAQ:MSFT). Here is what the fund has to say:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter, following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft’s results continued to be strong across the board, with total revenue growing 20% in constant currency, beating Street estimates by 3%; an acceleration in Commercial Cloud revenue to 34% constant-currency growth; operating margins expanding to just under 45%; earnings growth of 23%; and free cash flow growth of 30%. We believe the company is positioned to deliver 13% to 15% organic growth over the next three years, underpinned by total addressable market expansion and continued market share gains across its disruptive cloud product portfolio.”
1. Dell Technologies Inc. (NYSE:DELL)
Breakline Capital’s Stake Value: $9,808,000
Percentage of Breakline Capital’s 13F Portfolio: 13.22%
Number of Hedge Fund Holders: 62
Dell Technologies Inc. (NYSE:DELL) provides information technology hardware, software, and service solutions via its subsidiaries. Due to the recent market fall, Evercore ISI analyst Amit Daryanani upgraded Dell Technologies Inc. (NYSE:DELL) to Outperform from In-Line with a $60 price target on April 8.
Breakline Capital holds 174,620 shares in Dell Technologies Inc. (NYSE:DELL), worth $9.81 million. This represents 13.22% of its portfolio. The hedge fund’s stake in Dell Technologies Inc. (NYSE:DELL) increased by 84% in the fourth quarter of 2021.
In the fourth quarter of 2021, 62 hedge funds were bullish on Dell Technologies Inc. (NYSE:DELL), up from 60 funds in the quarter earlier. Paul Singer’s Elliott Management is one of the most significant Dell Technologies Inc. (NYSE:DELL) stakeholders, with over 9.48 million shares worth $532.71 million.
Third Point Management mentioned Dell Technologies Inc. (NYSE:DELL) in its third quarter 2021 investor letter. Here is what the fund said:
“Michael Dell has created substantial value for shareholders since re-listing the company several years ago. Earlier this year, Dell Technologies announced that it would be spinning its $50 billion stake in VMWare, which we believe will unlock the underappreciated value of the Dell server and PC businesses. Dell’s best attribute has been strong free cash flow generation, which the company has used to de-lever and create significant latent value for equity holders. Looking ahead, we believe this core Dell business, which still trades at a discount to its hardware peer group, should instead command a premium multiple thanks to its leading market share, profitability, and impressive execution. There are few large cap companies which possess a nearly 10% FCF yield, 2.5% dividend yield and 1.5x leverage ratio; Dell is one of them.”
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Disclosure: None. 10 Technology Stocks to Buy According to Kevin Mccarthy’s Breakline Capital is originally published on Insider Monkey.
