Google Inc (GOOG), Broadcom Corporation (BRCM): To Call This Fund a ‘Tech Bull’ Would Be Saying it Lightly

Related tickers: Google Inc (NASDAQ:GOOG), Broadcom Corporation (NASDAQ:BRCM)

Empire Capital Management, run by Scott Fine and Peter Richards, invests heavily in the technology sector, with more than three-quarters of the entire value of the fund’s equity portfolio in tech stocks. This strategy seems to be paying off nicely for the duo’s 13F-reportable assets, as it has grown in value by roughly 15% since the third quarter of 2012. In addition, all of the top five holdings in Empire’s equity portfolio are from the technology sector.

At Insider Monkey, we track 450 of the world’s most elite hedge fund managers and our research has shown that over time, their picks routinely outperform.  For more than a decade in our back tests, our strategy beat the market by 18 percentage points a year; see the details here.

Furthermore, it’s also crucial to look at each of the funds we track individually, and by using the latest round of fourth quarter 13F data from the SEC, we can determine how these funds were preparing for 2013. Let’s take the top five holdings of Empire Capital Management.

In proverbial “first place” is Sonus Networks, Inc. (NASDAQ:SONS) at 38.5 million shares. The communication and service provider of VoIP and Unified Communication had a very strong start to the year following an industry report that stated Sonus Session Border Controller (SBC) Solutions grew five times faster than the market average. As a result, Sonus SBC revenues grew 80% for the year versus an industry average of only 13.5%. But after rising to a ten-month high of $2.84, the stock has been trading sideways in the $2.60-to-$2.40 range, and it looks like it could come under additional pressure to trade back to $2.20 a pop.

Google Inc (GOOG)

At number two is Google Inc (NASDAQ:GOOG), a new addition to the Empire equity portfolio, with 77,911 shares—a $55 million value. Google Inc (NASDAQ:GOOG) has been very active lately, following the release of the Samsung Galaxy and Facebook Inc (NASDAQ:FB)’s Home, both of which use Google Inc (NASDAQ:GOOG)’s Android as their operating system. But despite what should be considered very bullish news for Google, the stock came under intense profit-taking pressure at the end of last week, exacerbated by broader market pressure following a disappointing jobs report. Analysts warn that the Facebook app on smart-farms could eventually supersede Google Inc (NASDAQ:GOOG) apps, and that Facebook may ultimately launch its own proprietary OS, much like Apple Inc. (NASDAQ:AAPL)’s for the iPhone.

Third on the list is Broadcom Corporation (NASDAQ:BRCM). The stock got a boost earlier this year following the company’s announcement that it would begin to challenge Qualcomm and Samsung’s dominance in the mobile phone chip market.  Combined, the two hold 95% of the Long-Term Evolution chip market, while Broadcom Corporation (NASDAQ:BRCM) holds dominance in the Wi-Fi and Bluetooth chip market.   Since adding Broadcom Corporation (NASDAQ:BRCM) to the Empire portfolio in the first quarter of 2012, Fine and Richards have added to the position by 290%.

Fourth in these top five picks sits Bazaarvoice Inc (NASDAQ:BV). Bazaarvoice Inc (NASDAQ:BV) enables consumers to share, review and recommend businesses through an online “social” environment. The company recently announced first quarter earnings, which showed a 65% increase in revenue, but a 92% increase in R&D expenses, and a 42% increase in COGS (resulted in a deterioration in net income).  The stock is being further pressured by a particular announcement at the start of the year, in which the Department of Justice filed an anti-trust lawsuit against Bazaarvoice following its acquisition of PowerReviews. As a result, Bazaarvoice Inc (NASDAQ:BV) is trading near its four-week low of $6.98 per share.

Finally, there is Citrix Systems, Inc. (NASDAQ:CTXS). Empire decreased their position in the software provider by 20% since adding it to the equity portfolio during the second quarter of 2012. The stock recently lost 11% of its value since mid-March, partially in sympathy with disappointing earnings from F5 Networks, Inc. (NASDAQ:FFIV) and Radware. As for their own earnings, Citrix Systems, Inc. (NASDAQ:CTXS) reported a 17% gain in revenue, but with a 35% increase in COGS, the company’s bottom line deteriorated 1.1% from levels reached in the last quarter of FY2011. Citrix Systems, Inc. (NASDAQ:CTXS) is currently priced at 4 times its book value, against a sector average of 3.5x. Needless to say, it’s revenue growth that Citrix bulls are keying on—a sentiment that’s at least understandable.

Even though tech stocks have come under some pressure the past week due to profit-taking, tepid earnings and “buy the rumor, sell the fact” trading, the overall sector continues to dominate as innovation, aggressive marketing and long-term growth projections makes technology stocks the darling of fund managers. Empire Capital Management has taken this strategy to the extreme by concentrating nearly its entire equity portfolio in the sector and the tactic has, so far, proven to be worth paying attention to.

Sonus, Google Inc (NASDAQ:GOOG), and Broadcom Corporation (NASDAQ:BRCM) are each intriguing plays in their own regard, and Bazaarvoice and Citrix are two stocks that don’t sit in many other managers’ “fab fives.” For a longer look at the other stocks in Empire’s equity portfolio, continue reading here, at Insider Monkey.

Disclosure: none