Influential Hedge Funds’ Most Interesting Moves in the Tech Space

The first quarter of 2016 was an extremely volatile period for US stocks, especially for those that belong to the technology sector. To understand the kind of wild swings that tech stocks underwent during that period, all one needs is to take look at the chart of The S&P North American Technology Sector Index during the first three months of 2016. While in the initial half of the quarter the index plummeted heavily, losing over 15% of its value, it swiftly changed its course during the second half, recouping all the losses it made earlier and ending the quarter with marginal gains. This sudden spurt in volatility came as a surprise to most hedge funds, a number of whom started selling their holdings in droves. There were also a few funds that took advantage of this volatility by accumulating stocks of their liking. Since there were a lot of interesting moves made by leading hedge funds in a number of tech stocks during the January-March period and we can’t discuss each of them, in this post, we will focus on the five major moves that hedge funds made during that period.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

LinkedIn Corp (NYSE:LNKD)

Let’s start with LinkedIn Corp (NYSE:LNKD), which lost almost half of its market-capitalization during the first quarter after providing weaker than expected guidance for fiscal 2016. Jim Simons‘ Renaissance Technologies, which held 360,000 shares of the company at the end of 2015, sold its entire stake in LinkedIn Corp (NYSE:LNKD) during the first quarter. Despite the better than expected first quarter numbers the company released recently, shares of the professional social network are finding it hard to climb up after the first quarter beating and currently trade down 43.57% year-to-date. On May 18, the company announced that it is working towards safeguarding the 117 million user accounts, which were compromised during a 2012 hack attack and whose passwords a hacker has been trying to sell on the dark web’s illegal marketplace – The Real Deal. Hedge funds that boosted their stake in the company during the first quarter included Ricky Sandler‘s Eminence Capital, which upped its holding by 240% to 1.2 million shares.

eBay Inc (NASDAQ:EBAY)

The continuous underperformance of eBay Inc (NASDAQ:EBAY)’s stock since the separation of  PayPal Holdings Inc (NASDAQ:PYPL) might have prompted billionaire Dan Loeb‘s Third Point LLC to sell its entire stake of 4 million shares of the company during the first quarter. Another hedge fund that brought down its holding in the company to zero during the first quarter was Jeffrey Tannenbaum‘s Fir Tree. These funds are not alone in having a negative outlook for eBay Inc (NASDAQ:EBAY), some analysts share the same view on the company as most of the businesses it runs, with the exception of StubHub, have failed to grow at a pace that they were projected to. However, there are also many analysts who feel that the stock has limited downside from current levels largely because it is trading at a trailing P/E of only 14.4, much lower than the multiples at which other e-commerce stocks trade.

Facebook Inc (NASDAQ:FB)

The stellar rise of Facebook Inc (NASDAQ:FB) over the last two years has made it a favorite among hedge funds and billionaire investors. Billionaire David Tepper’s Appaloosa Management LP is among the latest hedge funds to have added the stock to its portfolio. During the first quarter, Appaloosa bought nearly 1.63 million shares of Facebook Inc (NASDAQ:FB) worth $185.75 million, as of March 31. For its most recent quarter, led by the continuing growth of its mobile business, the company again managed to beat analysts’ expectation by reporting EPS of $0.77 on revenue of $5.38 billion versus projections of EPS of $0.62 on revenue of $5.25 billion. To continue growing its top-line, the company recently announced that it will start selling video advertising for other companies for a cut of the revenues. On May 16, analysts at Credit Agricole reiterated their ‘Buy’ rating and $161 price target on the stock. Having initiated its stake during the first quarter itself by buying 20.133 million shares of the company, billionaire Andreas Halvorsen‘s Viking Global became the largest shareholder of Facebook among hedge funds covered by us.

Apple Inc. (NASDAQ:AAPL)

While billionaire Warren Buffett and Leon Cooperman through Berkshire Hathaway and Omega Advisors initiated a stake in Apple Inc. (NASDAQ:AAPL) during the first quarter, there were several hedge funds that sold off their entire positions in the company during that period. Funds that belonged to the latter group included Renaissance Technologies, which unloaded 4.46 million shares, and Appaloosa Management LP, which liquidated its stake of 1.26 million shares. Though Apple Inc. (NASDAQ:AAPL)’s stock ended first quarter with marginal gains, the weaker than expected quarterly numbers released by the company in April has caused its stock to plummet heavily since then. As a result, it is currently trading down 12.34% year-to-date. The EPS of $1.90 and revenue of $50.60 billion it reported for the first quarter missed analysts’ projection by $0.10 and $1.37 billion, respectively. The iPhone maker recently invested $1 billion in Chinese ride sharing company Didi, which analysts believe is a sign that the company is finally thinking about deploying the excessive amount of cash on its balance sheet to spur future growth. At the end of March, Berkshire Hathaway held 9.8 million shares of Apple Inc.

Alphabet Inc (NASDAQ:GOOGL)

Alphabet Inc (NASDAQ:GOOGL) emerged as one of the favorite large cap stocks for leading hedge funds in the first quarter. While Renaissance Technologies initiated a stake in the company by purchasing 163,999 class A shares during that period, Third Point did that by buying 700,000 class A shares. Like Apple Inc.’s stock, shares of Alphabet Inc (NASDAQ:GOOGL) have also seen heavy declines since the company reported its first quarter numbers. Nevertheless, at this point analysts are relatively more bullish on Alphabet Inc than Apple Inc. with some of them even forecasting that the former will overtake the mantle of world’s largest company (in terms of market capitalization) from the latter soon. At the company’s recently concluded annual I/O event, Alphabet launched several new products including Google Assistant, a “conversational” assistant service that will compete with Apple’s Siri and Amazon’s Alexa, and Allo, an internet messaging app that will support Google Assistant and other third-party chatbots.

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