Stock pickers at top hedge funds have never been so bullish on tech as they are right now, a recent Wall Street Journal article assured. According to Mark Connors, global head of prime services risk advisory at Credit Suisse, information technology holdings among long/short hedge-fund managers are at an all-time high; about 34% of their net bullish positions are placed in tech companies from the S&P 500, he assured. And, while he did not specify which firms were feeling the most bullishness, he did add that internet software and services companies were among the most liked.
However, the WSJ article continued, “tech doesn’t yet look crowded and vulnerable to a swift reversal.” Having said that, let’s take a look into these companies and what the funds in our database think about their tech bets.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
Alphabet Inc (NASDAQ:GOOGL)
– Number of Hedge Funds Long The Stock As Of June 30: 135
– Value of Hedge Funds’ Combined Holdings As Of June 30: $11.55 billion
Alphabet Inc (NASDAQ:GOOGL) saw 135 funds from our database holding class A shares and 126 funds holding shares of class C stock at the end of June, including Harris Associates, which declared holding 631,571 Class A (GOOGL) shares and 2.18 million Class C (GOOG) shares, as of the end of June. Also bullish was Ken Fisher’s Fisher Asset Management, which held 995,319 Class A shares and 455,315 Class C shares by the end of the second quarter. Alphabet Inc (NASDAQ:GOOGL) had a volatile first half of 2016, ultimately losing more than 9.5%. Over the second half, however, shares have recuperated by more 17%, taking year-to-date returns to over 6%. The tech behemoth has recently unveiled its new Pixel phones, Daydream View headsets, Google Wifi, Chromecast Ultra and the Google Home AI assistant, all of which will allow it to compete more directly with Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN).
Facebook Inc (NASDAQ:FB)
– Number of Hedge Funds Long The Stock As Of June 30: 148
– Value of Hedge Funds’ Combined Holdings As Of June 30: $15.24 billion
Next up is Facebook Inc (NASDAQ:FB) another very popular tech stock among the funds in our database, with 148 investors holding shares as of the end of June. Among its supporters were Andreas Halvorsen’s Viking Global, which held 20.14 million shares worth $2.3 billion and Stephen Mandel’s Lone Pine Capital with 10.94 million shares held at the end of the second quarter. Facebook Inc (NASDAQ:FB) has had a great year, with its stock up by 24% since January. A couple of days ago, Credit Suisse analyst Stephen Ju reaffirmed its price target on Facebook’s stock and boosted the price target to $170 from $154, pointing out that the stock is trading at 25 times and 20 times his forward 2017 and 2018 earnings, respectively. The analyst also mentioned the company’s “vastly superior” return on investment that advertisers obtain from Facebook in comparison with other platforms and he considers that consensus models don’t include the gains from Instagram, Messenger, and WhatApp.