In this article, we discuss the 5 tech stocks hedge funds are buying instead of Microsoft. If you want to read our detailed analysis of these stocks, go directly to Hedge Funds are Selling Microsoft and Buying These 10 Tech Stocks Instead.
5. Salesforce.com, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 108
Number of Hedge Fund Holders in Q1: 91
Salesforce.com, Inc. (NYSE:CRM) is ranked fifth on our list of 10 tech stocks hedge funds are buying instead of Microsoft. The firm develops and markets enterprise cloud computing solutions. It is headquartered in California.
On September 24, investment advisory RBC Capital maintained an Outperform rating on Salesforce.com, Inc. (NYSE:CRM) stock and raised the price target to $325 from $310, noting that the firm was a market leader in the Software-as-a-Service (SaaS) market.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Salesforce.com, Inc. (NYSE:CRM) with 13.4 million shares worth more than $3.2 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Salesforce.com, Inc. (NYSE:CRM) was one of them. Here is what the fund said:
“We added to our software-as-a-service (SaaS) exposure with the initiation of SaaS leader salesforce.com, which develops software for customer relationship management (we added Workday, which enterprise resource planning applications, last quarter). Saleforce.com is well-positioned in the most attractive end markets in software and will benefit from secular drivers such as remote work and the digital transformation. Salesforce.com is a sustainability leader as well, with a commitment to carbon-neutral cloud, toward which it has set a goal of 100% renewable energy for global operations by fiscal year 2022. The company has a strong focus on equality, in terms of equal rights, pay, education and opportunity. As a data company it has been leading on workforce disclosures and seeks to have 50% of its U.S. workforce made up of underrepresented groups by 2024.”
4. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 135
Number of Hedge Fund Holders in Q1: 130
Uber Technologies, Inc. (NYSE:UBER) is a California-based company working on proprietary technology applications. It is placed fourth on our list of 10 tech stocks hedge funds are buying instead of Microsoft.
On September 22, investment advisory JPMorgan reiterated an Overweight rating on Uber Technologies, Inc. (NYSE:UBER) stock with a price target of $72, underlining that the update guidance from the firm “chips away” at stock drags.
Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Altimeter Capital Management is a leading shareholder in the firm with 24 million shares worth more than $1.2 billion.
RiverPark Advisors, LLC, in its Q4 2020 investor letter, mentioned Uber Technologies, Inc. (NYSE:UBER). Here is what the fund has to say in its letter:
“UBER was also a strong contributor, as shares rallied following the approval of California’s Proposition 22 by voters, allowing the company’s California-based drivers to remain independent contractors (rather than become more expensive employees). We believe this news is not just about the 10%-15% of Uber’s revenue tied to California, but the influence this will have on other states reassessing driver pay. UBER also reported strong third quarter results with Delivery Gross Bookings growing 135% year-over-year which nearly fully offset a reduction in Mobility Gross Bookings, which were down 50% year over year. Total Gross Bookings for the quarter were down only 10% year over year as compared with down 35% last quarter.
Despite the COVID disruption, UBER remains the undisputed global leader in ride sharing (44% of the Company’s third quarter revenue), with greater than 50% share in every major region in which it operates. The company is also a leader in food delivery (46% of revenue), where it is number one or two in the more than 25 countries in which it operates. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its more than 100 million users (by comparison, Amazon Prime has 130+ million members) and penetrate new markets of on-demand services, such as grocery delivery, truck brokerage and worker staffing for shift work. At its current $96 billion market capitalization, UBER trades at only 6x next year’s revenue from its two core businesses. Additionally, the company has substantial, seemingly unrecognized, value in its several nascent development businesses and another $12 billion in equity stakes in synergistic businesses around the world.”
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 138
Number of Hedge Fund Holders in Q1: 127
Apple Inc. (NASDAQ:AAPL) is a California-based technology firm that makes and sells mobile phones, software services, and computers. It is ranked third on our list of 10 tech stocks hedge funds are buying instead of Microsoft.
On September 22, investment advisory Tigress Financial maintained a Strong Buy rating on Apple Inc. (NASDAQ:AAPL) stock and raised the price target to $198 from $182, noting that strong product demand and new product introductions would drive revenue for the firm.
At the end of the second quarter of 2021, 138 hedge funds in the database of Insider Monkey held stakes worth $145 billion in Apple Inc. (NASDAQ:AAPL), up from 127 in the preceding quarter worth $131 billion.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
2. Facebook, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 266
Number of Hedge Fund Holders in Q1: 257
Facebook, Inc. (NASDAQ:FB) is placed second on our list of 10 tech stocks hedge funds are buying instead of Microsoft. The company operates as a technology firm and is headquartered in California.
On September 22, investment advisory BMO Capital maintained an Outperform rating on Facebook, Inc. (NASDAQ:FB) stock with a price target of $425. Daniel Salmon, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 266 hedge funds in the database of Insider Monkey held stakes worth $42 billion in Facebook, Inc. (NASDAQ:FB), up from 257 in the preceding quarter worth $40 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Facebook, Inc. (NASDAQ:FB) was one of them. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
Number of Hedge Fund Holders in Q1: 243
Amazon.com, Inc. (NASDAQ:AMZN) is ranked first on our list of 10 tech stocks hedge funds are buying instead of Microsoft. The firm operates as a technology conglomerate and is headquartered in Washington.
On September 14, investment advisory Evercore ISI maintained an Outperform rating on Amazon.com, Inc. (NASDAQ:AMZN) stock and raised the price target to $4,700 from $4,200, noting that the advisory had increased confidence in the long-term growth outlook of the firm.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN) with 3.8 million shares worth more than $13 billion.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
You can also take a peek at 10 Best Micro-Cap Stocks to Invest In and Top 10 Stocks to Buy According to Charles Pollnow’s Triple Frond Partners.
