Hedge Funds Were Right About MicroStrategy Incorporated (MSTR) and 4 Other Tech Stocks

4. Block, Inc. (NYSE:SQ) 

Number of Hedge Fund Holders in Q1 2022: 84    

Number of Hedge Fund Holders in Q4 2021: 96 

Block, Inc. (NYSE:SQ) provides payments services. In early June, the company announced that it was working with tech giant Apple to bring the Tap to Pay feature to Block sellers later this year. An early access program is already underway in this regard. The announcement led to a 7% jump in the share price of the firm. The announcement also indicated that the company plans on becoming a partner rather than a competitor of Apple. 

On May 23, Deutsche Bank analyst Bryan Keane maintained a Buy rating on Block, Inc. (NYSE:SQ) stock and lowered the price target to $155 from $180, citing “lower peer group valuations” for the target drop. 

At the end of the first quarter of 2022, 84 hedge funds in the database of Insider Monkey held stakes worth $6.1 billion in Block, Inc. (NYSE:SQ), compared to 96 in the preceding quarter worth $5.9 billion. 

In its Q1 2022 investor letter, Farrer Wealth Advisors, an asset management firm, highlighted a few stocks and Block, Inc. (NYSE:SQ) was one of them. Here is what the fund said:

“Block, Inc. (NYSE:SQ) (formerly Square): We ‘adopted’ Block’s stock after the company bought Afterpay, which we were investors in. We had been trimming the Afterpay position throughout 2021 and trimmed again after the acquisition, so the position was quite small. We held onto that small portion, as we did think the acquisition made sense and were excited to see the two companies integrate and for Block to create a closed loop network between merchants and consumers. However, the market punished most highly valued tech stocks over the last months, and we saw the position move against us by over 50%. We are firm believers that when a stock goes against you by 50%+, you need to do something about it. Either trim/sell and reinvest or buy more. In the case of Block, Inc. (NYSE:SQ), the original reason for holding was to see how the acquisition and integration with Afterpay panned out. The market did not give us the time to see this play out, thus we were not comfortable adding more to the position. Further for the stock to recover to our purchase price, we felt the company’s valuation would need to command a future exit multiple that the market would be unlikely to pay in this environment. Given this, we exited the remainder of the position.”