This article presents an overview of the Hedge Fund Manager Charles Paquelet’s Top 5 Tech Stock Picks. For a detailed overview of such stocks, read our article, Hedge Fund Manager Charles Paquelet’s Top 10 Tech Stock Picks.
5. Meta Platforms Inc (NASDAQ:META)
Skylands Capital’s Stake Value: $5,466,824
Charles Paquelet’s hedge fund owns a $5.5 million stake in social media giant Meta Platforms Inc (NASDAQ:META). The stock has gained about 172% over the past one year.
As of the end of the third quarter of 2023, 234 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Meta Platforms Inc (NASDAQ:META). The biggest stakeholder of Meta Platforms Inc (NASDAQ:META) during this period was Catherine D. Wood’s ARK Investment Management which owns an $110 million stake in Meta Platforms Inc (NASDAQ:META).
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its 2023 annual investor letter:
“Meta Platforms, Inc. (NASDAQ:META) has become our largest position in the fund, up +268% in just 14 months, aging very well from our November 2022 note. We gave a re-cap of this extraordinary move in our last letter in November and we encourage you to review. Our investment in Meta makes a great case to study. We first invested in the stock in 2018 and we just recently doubled our money on this investment in 2023. It took exactly 5 years and provided a very decent return of 15% per annum, however it hasn’t exactly been a smooth ride. Please take a look at the chart below:
As you can see, we first started buying the stock in April of 2018 at $150 and then added in December of 2018 when the price dropped to $135, adding further to our position when the stock eventually rose to mid-200s. In the first two years there was zero return from our investment. Covid took the stock to new highs of $372, and subsequently, in 2022, the stock dropped to new lows of $89 — a price not seen since 2015. When we wrote our note on Meta last year, we were sitting on a negative return for a 4 year time period. This can be pretty demoralizing and discouraging to investors. However, it is very crucial to be able to adopt the mentality of a business owner and to focus solely on the fundamentals of the business itself rather than the narrative around the stock. It’s interesting (and it happens very often in the world of investing) that you can have 3-4 years of zero to negative returns and then the stock can quickly skyrocket in just 6-12 months, paying handsomely for the wait. Staying invested when the stock experiences this kind of volatility can be emotionally difficult and there could be a lot of pressure to sell throughout the journey. However, if our investment thesis has not changed, management is executing well and the business continues to grow and make more money over time, we can afford to wait.”
4. ON Semiconductor Corp (NASDAQ:ON)
Skylands Capital’s Stake Value: $7,291,463
Charles Paquelet’s Skylands Capital cut its stake in semiconductor company ON Semiconductor Corp (NASDAQ:ON) by about 11% in the third quarter. The hedge fund still owns a $7.3 million stake in ON Semiconductor Corp (NASDAQ:ON).
As of the end of the third quarter of 2023, 53 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in ON Semiconductor Corp (NASDAQ:ON). The most notable stake in ON Semiconductor Corp (NASDAQ:ON) is owned by D E Shaw which owns a $205 million stake in ON Semiconductor Corp (NASDAQ:ON).
ClearBridge Sustainability Leaders Strategy made the following comment about ON Semiconductor Corporation (NASDAQ:ON) in its Q2 2023 investor letter:
“To fund our purchase of Lam Research, we exited ON Semiconductor Corporation (NASDAQ:ON), preferring Lam at this point in the semiconductor cycle, and as we are also cautious on automotive demand, a key end market for ON Semiconductor.”
3. T-Mobile Us Inc (NASDAQ:TMUS)
Skylands Capital’s Stake Value: $16,238,798
T-Mobile Us Inc (NASDAQ:TMUS) ranks third in our list of the best tech stocks to buy according to hedge fund manager Charles Paquelet’s Skylands Capital. The hedge fund had a $16.23 million stake in T-Mobile Us Inc (NASDAQ:TMUS).
A total of 79 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in T-Mobile Us Inc (NASDAQ:TMUS). The biggest stakeholder of T-Mobile Us Inc (NASDAQ:TMUS) during this period was Warren Buffett’s Berkshire Hathaway which owns a $734 million stake.
ClearBridge Dividend Strategy made the following comment about T-Mobile US, Inc. (NASDAQ:TMUS) in its Q3 2023 investor letter:
“During the quarter we initiated positions in two new names: T-Mobile US, Inc. (NASDAQ:TMUS) and Gilead Sciences. T-Mobile is the best-in-class player in the wireless space, delivering the strongest growth with the lowest cost structure and the best consumer proposition. T-Mobile’s strength is rooted in its advantaged competitive position. Its superior spectrum holdings enable it to provide better wireless service at meaningfully lower cost. T-Mobile’s annual capital expenditures run about $10 billion, on the order of half the amount its peers must spend. Due to its lower cost structure, T-Mobile can undercut its competitors on price while still generating compelling profitability and returns.
This combination — superior service at lower prices — has enabled T-Mobile to outgrow its competition. In the three years since completing its merger with Sprint, T-Mobile has grown its post-paid subscriber base by about 22%. Over the same period, AT&T’s has grown by about 14%, while Verizon’s by less than 5%.
Given the high fixed-cost nature of the wireless business, these steady increases in revenue growth have led to outsize increases in profits and free cash flow. Free cash flow in 2023 is expected to come in around $13.5 billion, up from less than $8 billion last year. In 2024 free cash flow is expected to grow by over 20% to approximately $17 billion — providing a 10% yield based on today’s stock price.
We have long admired T-Mobile, but until recently the stock did not pay a dividend. The company announced its inaugural dividend in September, and we bought the stock shortly thereafter. The initial yield is about 2% and it is expected to grow about 10% per year.”
2. Alphabet Inc Class C (NASDAQ:GOOG)
Skylands Capital’s Stake Value: $18,425,088
Skylands Capital owns an $18.4 million stake in Alphabet Inc Class C (NASDAQ:GOOG) as of the end of the third quarter of 2023.
A total of 221 hedge funds tracked by Insider Monkey had stakes in Alphabet Inc Class C (NASDAQ:GOOG) as of the end of the third quarter of 2023.
Ensemble Capital Management stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its fourth quarter 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) (8.52% weight in the Fund): Google’s earnings report in October showed its core advertising business accelerating to double digit growth as the digital advertising recession of 2022 and early 2023 fades away. However, the company’s Cloud division, which is expected to generate growth from selling access to artificial intelligence services, saw its growth rate slow modestly. Juxtaposed with Microsoft’s Cloud business seeing growth pick up slightly, investors sold off Google’s stock on the report. While the stock recovered to new highs by the end of the year, the earnings report set back caused the stock to trail behind the S&P 500 with a gain of 6.8% for the quarter.”
1. Apple Inc (NASDAQ:AAPL)
Skylands Capital’s Stake Value: $38,054,847
Charles Paquelet owns a $38 million stake in Apple Inc (NASDAQ:AAPL) as of the end of the third quarter. Skylands Capital first bought a stake in Apple Inc (NASDAQ:AAPL) in the last quarter of 2013. Over the years the fund has cut its stake in Apple Inc (NASDAQ:AAPL). In Q3’2023, Skylands Capital decreased its hold in Apple Inc (NASDAQ:AAPL) by 13%.
Polen Focus Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its fourth quarter 2023 investor letter:
“Apple Inc. (NASDAQ:AAPL) and NVIDIA alone drove over 1,100 basis points of the Russell 1000 Growth Index’s 42% return, so not owning them was a meaningful headwind to our relative return in 2023. While on a total attribution basis, Apple was not a top three detractor to our full-year return, given its extremely large weighting in the Index, we feel it’s worth sharing our thoughts.
The company’s share price appreciated nearly 50% in a year when its revenue declined and earnings per share was relatively flat with the previous year.
For 2024, consensus expectations are for low-single-digit revenue growth and only slightly faster EPS growth. These pedestrian growth rates are not surprising for a company with nearly $400 billion in annual revenue. What is more surprising is that Apple shares trade at nearly 30x forward earnings, a large premium to the market and many faster-growing, competitively advantaged businesses.
While we continue to think Apple is a wonderful business, it is also a slow growing one with risks that we do not see as insignificant. Apple’s entire supply chain is based in China and much of its incremental revenue growth also comes from China, so if there is a U.S.-China issue that makes it more difficult for U.S.-based companies that have access to large amounts of local data to operate in China, Apple’s business would likely face more challenges than many others. In addition, much of Apple’s services growth and margin expansion has come from direct payments from Google to be the default search provider on iOS devices. This practice is currently the subject of a lawsuit between Google and the U.S. Justice Department. If this practice is deemed unlawful, it could take away a large and highly profitable revenue stream from Apple’s already slow growth engine. While we closely cover Apple, we continue to believe we have better investment opportunities. Apple’s current P/E is above our Portfolio’s weighted average, yet its long-term earnings growth rate is likely to be lower than even our slowest growing holding, according to our research.”
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