Tech stocks had a great performance in 2017, with many analysts and investors praising them with aiding the rally and record highs registered by the S&P 500 and NASDAQ Indexes. The so-called FAANG stocks (Facebook Inc (NASDAQ:FB), Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOGL)-owned Google) soared by over 47% last year and were solely responsible for 5.2 percentage points of the 24% gain registered by the S&P 500.
Moreover, after strong gains last year, the consensus on the Street is that tech stocks are still on fire and are poised for a double-digit growth this year, although there are some opinions that due to high valuations, many big investors will exit these stocks, which in turn might create a correction, as the one that we have witnessed earlier this year.
Nevetheless, technology is constantly developing and there are always new trends, such as Artificial Intelligence, Virtual/Augmented Reality, or Blockchain. Therefore, the tech sector will always be in the investors’ crosshairs. Even big and well-established tech companies that offer more safety are looking into new ways to diversify their businesses and tap into new markets for growth.
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When it comes to picking which tech stocks to invest in, there are many different opinions regarding the company size, industry, valuation, or other factors. At Insider Monkey, we are looking at where smart money prefers to invest its capital and we track over 600 hedge funds to get an idea about the collective sentiment among hedge funds towards various stocks. We use this data to identify the best stocks in the small-cap space, which we then use in our small-cap strategy, which has outperformed the broader market by over 20 percentage points in the last four years. But we also can look at what stocks hedge funds like or dislike outside small-caps. One particular group of investors that we will focus on in this article are billionaires.
Billionaire investors are an interesting group to follow. On the one hand, these are people that have earned their fortunes through generating substantial returns for their clients and we can assume that they have the skills and expertise to build a more complex picture of a company than retail investors. However, billionaires also manage large amounts of capital, which means that they can’t be as flexible as smaller funds and they often have to trade higher returns for a smaller level of risk.
We can’t get the reasoning behind a billionaire’s investment in a particular stock, but focusing on their collective sentiment, we can identify their favorite stocks. For this article, we have compiled a list of five technology stocks that saw the largest number of billionaire investors holding long positions in as of the end of 2017.
Amazon.com, Inc. (NASDAQ:AMZN) saw 18 billionaires’ funds long its stock at the end of 2017, unchanged over the quarter. However, the total value of these funds’ equity portfolio soared by 44% to $7.67 billion. A part of this increase was due to the 25% growth registered by Amazon.com, Inc. (NASDAQ:AMZN), but the other is due to some heavy buying among billionaire investors. For example, Stephen Mandel‘s Lone Pine Capital acquired a $2.1 billion position in the tech behemoth during the last three months of 2017. Other funds managed by billionaires bullish on Amazon.com, Inc. (NASDAQ:AMZN) include Ken Fisher’s Fisher Asset Management and Chase Coleman’s Tiger Global Management.
Amazon.com, Inc. (NASDAQ:AMZN) is one of few tech giants that are on path to hit a $1.0 trillion market cap by the beginning of the next decade and in 2018 the company may hit certain milestones that will bring it closer to that valuation. The company has become a leader in online commerce and is one of the top cloud services providers. 2018 may see more growth, as Amazon.com, Inc. (NASDAQ:AMZN) is moving into new geographical markets, like Brazil and Australia, and is entering into new industries like shipping and grocery delivery at a fast pace.
The number of billionaires from our database long Alphabet Inc (NASDAQ:GOOGL)‘s class A stock inched up by one to 19 during the fourth quarter and these funds collectively held $6.55 billion worth of stock at the end of September. Alphabet Inc (NASDAQ:GOOGL) is one of the best tech stocks to hold for the long run. The company’s main division, Google is an absolute leader in advertising, which makes up for the bulk of Alphabet’s revenues and is likely to keep the same robust growth going forward as advertising money are moving away from TV and towards online space. Moreover, after corporate tax was cut last year, Alphabet Inc (NASDAQ:GOOGL) is likely to repatriate some $60 billion in cash, which it will use at least in part for buybacks.
Alphabet also has its “Other Bets” division, which includes many projects, such as self-driving cars, Internet of Things, healthcare, etc. The “Other Bets” division represents a tiny part of Alphabet Inc (NASDAQ:GOOGL)’s operations, yet it is likely that it is developing technologies that will act as major disruptors in the not-so-distant future.
Alibaba Group Holding Ltd (NYSE:BABA) is the only company among billionaires’ favorite tech stocks that saw a decline in popularity during the fourth quarter, as the number of funds long the stock fell to 21 from 23, while the total value of their holdings slid by 12.75% to $7.79 billion. Alibaba’s has been on a spending spree in the last couple of years. It expanded its presence in online retail through the acquisition of Taobao and Tmall in 2016 and ventured into the brick-and-mortar space by first taking a stake in Intime, a Hong-Kong-based department store and mall operator and taking control of the company last year. Alibaba Group Holding Ltd (NYSE:BABA)’s operations span beyond eCommerce and retail, as the company is involved in a whole range of industries, including cloud computing, AI, Internet, logistics, etc. This makes Alibaba Group Holding Ltd (NYSE:BABA) one of the most exciting companies to invest in.
Microsoft Corporation (NASDAQ:MSFT) is the second most-popular stock (both tech and overall) among billionaire investors tracked by Insider Monkey. Heading into 2018, there were 26 billionaires long Microsoft Corporation (NASDAQ:MSFT), up by one over the quarter. After a strong fiscal second-quarter report, which showed EPS and revenue above the consensus estimates and 98% revenue growth registered by Azure cloud platform, a number of analysts raised their price targets on the stock. Argus increased its target to $107 from $95 with a ‘Buy’ rating, citing the company’s large commercial user base and positioning to grow commercial revenue. Canaccord boosted its price target on Microsoft Corporation (NASDAQ:MSFT) to $105 from $94, with analyst Richard Davis pointing out four major growth drivers of the company, Office 365, Xbox, Customer Relationship Management, and Azure).
Facebook Inc (NASDAQ:FB) remained the favorite stock among billionaire investors, with 27 funds holding shares of the social media giant at the end of 2017, unchanged over the quarter. For a while, Facebook Inc (NASDAQ:FB) has been warning investors about a potential slowdown in revenue and there are signs that show that these concerns can materialize. Even though Facebook Inc (NASDAQ:FB)’s fourth-quarter numbers topped estimates, despite worries about fake news, the company also showed a Daily Active User growth of 2.18%, compared to 3.8% in the third quarter. It is the slowest growth in daily users ever reported by the company. Moreover, Facebook Inc (NASDAQ:FB) registered a 27% annual increase in revenue per user, which totaled $6.18 last quarter, but the company is also running out of space in the News Feed to put more ads. However, while the company’s core News Feed growth slows down, Facebook Inc (NASDAQ:FB) still has Instagram, Messenger, and Whatsapp to tap into and these platforms are likely to drive Facebook’s revenue growth in the near future.