Hedge Funds’ Top Tech Bets: Did They Get Them Right in Q1?

#2 Facebook Inc. (NASDAQ:FB)

– Investors with Long Positions (as of December 31): 146

– Aggregate Value of Investors’ Holdings (as of December 31): $10.80 Billion

– Q1 Return: 9.0%

There were 146 money managers in our database with long positions in Facebook Inc. (NASDAQ:FB) at the end of December, up from 128 at the end of the third quarter. The aggregate value of those funds’ positions rose to $10.80 billion from $8.96 billion quarter-over-quarter. Facebook’s market capitalization has gained 36% in the past 52 weeks, benefiting from smart acquisitions, including that of the popular photo-sharing mobile application Instagram. The photo-sharing app, purchased for around $1 billion in cash and stock, did not introduce advertising to businesses until September 2015, which makes investors believe that Instagram will be a promising growth business for its parent company. It is estimated that Instagram’s mobile ad revenue accounted for 3.7% of Facebook’s total ad sales in 2015. Nonetheless, the photo-sharing application is projected to generate $2.81 billion in ad revenue by 2017, which would constitute 10.6% of the company’s ad sales. Credit Suisse analysts are even more bullish on the underlying potential of Instagram, recently saying that the app will be a $5.3 billion business by 2017. The social network may also experience a massive revenue boost from its Oculus virtual reality technology and content platform. The highly-successful monetization efforts of Instagram may offer Facebook plenty of time to develop monetization opportunities for its WhatsApp and Facebook Messenger platforms. Philippe Laffont’s Coatue Management owns 6.61 million shares of Facebook Inc. (NASDAQ:FB) as of the end of 2015.

#1 Alphabet Inc. (NASDAQ:GOOG)

– Investors with Long Positions (as of December 31): 154

– Aggregate Value of Investors’ Holdings (as of December 31): $15.10 Billion

– Q1 Return: -1.9%

Alphabet Inc. (NASDAQ:GOOG) was the second-most popular company among the hedge funds tracked by Insider Monkey as of the end of December, and the most popular tech stock, with 154 funds owning Alphabet’s Class A shares and 142 money managers owning its Class C shares. Those figures both represented large increases quarter-over-quarter, from 129 and 119 hedge funds in its Class A and C shares, respectively. It is widely known that Alphabet’s core business involves selling online advertising space, but the much-loved tech giant also has a promising portfolio of high-potential projects such as Fiber, Calico, Nest, and X, to name just a few. Alphabet’s top-line results have been growing at a steady pace for the past several years, as have the company’s bottom-line figures. Alphabet’s revenue for 2015 totaled $74.99 billion, up from $66.00 billion in 2014. Net income reached $16.35 billion in 2015, up from $14.14 billion in 2014. Alphabet’s Class A shares have gained 40% in the past year and it’s hard to believe that they will stop advancing in the years ahead, especially considering the potential of the company’s Other Bets segment. Alphabet’s Class A shares are currently trading at around 19.0-times expected earnings, versus the forward P/E multiple of 16.0 for the Information Technology sector. Andreas Halvorsen’s Viking Global owns 1.85 million Class A shares of Alphabet Inc. (NASDAQ:GOOG), as well as 1.15 million Class C shares of the company, as of the end of December.

Disclosure: None