In a previous article, we presented the five most popular stocks among hedge funds by the end of 2013’s third quarter. In this article, we will dig a little deeper, and find the 10 tech stocks that “hedgies” like the most.
Why do we do this? To help you pick stocks that can outperform the market. Our research has revealed the 15 most-popular small-cap stocks among hedge funds have outperformed the market by a yearly average of 18 percent. Our model portfolio (check out the details here), which adjusts to this strategy, has outperformed the S&P 500 by 29 percentage points in its first year, providing a return of 47.6 percent.
However, the most popular stocks are usually large-cap companies. These have also, historically, outperformed the market, but margins were quite narrower. Still, tracking hedge fund picks will help you get good returns while making safe investments.
Apple Inc. (NASDAQ:AAPL) was the hedge funds´ pet during 2011 and 2012. However, 2013´s second quarter saw the tech behemoth replaced by none other than Google Inc (NASDAQ:GOOG). But, Google didn’t last long on the throne either, and the leader was replaced during Q3 by General Motors Company (NYSE:GM).
Although Google Inc is no longer the funds´ top pick, it is still the most popular among tech stocks. One hundred thirty-nine of the hedge funds that we track held long-term stakes at the big G by the end of Q3. The biggest institutional bull: Lansdowne Partners, which holds about 1.01 million shares, valued at roughly $1.07 billion. Nonetheless, investment gurus don’t seem to love Google like they used to. During the third quarter, 20 funds sold out their positions in the company. In fact, its largest bull by the end of Q2, Stephen Mandel’s Lone Pine Capital, trimmed its holdings by about 57 percent.
The second-most popular tech stock among hedge funds is now Apple Inc. (NASDAQ:AAPL). Over the third quarter, it bounced back after it had taken a hit during Q2. Hedge fund positions amount to 132, up 7 percent in relation to the previous period. David Einhorn´s Greenlight Capital increased its position in the company, and now holds approximately $1 billion in stock.
Guess who comes after Apple Inc. and Google? Yes, it´s Microsoft Corporation (NASDAQ:MSFT). One hundred and four hedge funds disclosed a position in the company by the end of Q3. This means that the period saw nine new bulls arrive. The big bull is Jeffrey Ubben’s ValueAct Capital, which declared holding 66,865,530 shares, 9 million more than the previous quarter.
You might also figure who could come in fourth in the tech world: Facebook Inc (NASDAQ:FB). The social media king saw the biggest increase in hedge-fund positions among the companies on our list. Forty-eight hedge funds bought into Facebook during Q2, doubling the number of bullish funds to 96. One transaction that should be highlighted is Philippe Laffont´s: his fund, Coatue Management, purchased 9.24 million shares of the company, which became it its fourth-largest position.
Trailing Facebook, we can find Visa Inc (NYSE:V), which registers 90 hedge fund positions as of the end of Q3. The stock didn’t witness much activity during the quarter: actually, by the end of Q2, 91 funds held stakes in Visa. Ken Fisher´s Fisher Asset Management is one of the most bullish about Visa and has slightly incremented its stake over the quarter: it now holds about 3.45 million shares. On the other hand, John H. Scully´s Spo Advisory Corporation is no longer the biggest bettor: during Q3 it sold about 1.2 million shares, and now holds just 2.5 million of them.
Coming in sixth is QUALCOMM, Inc. (NASDAQ:QCOM), which lost four hedge funds during Q3. Currently, 85 “hedgies” are betting on the company´s performance. However, Stephen Mandel increased its stake by about 4 million shares, and now holds more than 13 million.
Priceline.com Inc (NASDAQ:PCLN) (seventh) and Micron Technology, Inc. (NASDAQ:MU) (ninth) also did well during Q3. Priceline.com´s hedge fund bulls augmented from 76 to 83, while Micron´s rose from 69 to 74.
On the opposite, eBay Inc (NASDAQ:EBAY), which ranked eighth on our list, and Cisco Systems, Inc. (NASDAQ:CSCO), 10th, both lost institutional support. Five funds left eBay, which is now left with 76 “hedgies” backing it up, and three funds abandoned Cisco (and 73 kept their stakes).
Disclosure: Javier Hasse holds no position in any stocks mentioned