McKinley Capital Management’s Top Tech Stock Picks Includes 2 FANG Stocks

McKinley Capital Management LLC is an Alaska-based investment management firm founded by Robert B. Gillam in 1990. The investment firm specializes in global and international growth equity strategies, so retail investors may find the fund’s equity portfolio to be relatively informative considering the outperformance of growth stocks compared to their value counterparts in recent years. The Alaska-based specialist in systematic growth style investing had an equity portfolio valued at $2.07 billion at the end of March, down from $2.16 billion on December 31. Given that McKinley’s top-10 equity positions were dominated by big names in the technology industry, the following article will discuss the fund’s top-5 tech stocks as of the end of the March quarter.

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#5. Alibaba Group Holding Ltd (NYSE:BABA)

 – Number of shares held by McKinley (as of March 31): 618,620

 – Value of McKinley’s holding (as of March 31): $48.89 Million

McKinley Capital Management was exceptionally bullish on Alibaba Group Holding Ltd (NYSE:BABA) during the first quarter of 2016, as the firm boosted its Alibaba stake by 598,006 American Depositary Shares (ADSs) in the quarter, to 618,620 ADSs. The upped stake was valued at $48.89 million on March 31 and accounted for nearly 2.4% of McKinley’s equity portfolio. The world’s largest online and mobile commerce company has seen its market value gain 31% in the past three months, though it remains down by nearly 2% year-to-date. Soon after the e-commerce giant released its financial results for the fourth quarter and full 2016 fiscal year, analysts at Merrill Lynch reiterated their ‘Buy’ rating on the company’s stock and lifted their price target on it to $99 from $96. Merrill Lynch believes “there should be room for marketing revenue to grow” at Alibaba, as the company has “leading investment in R&D to facilitate cross-selling and targeted advertising”. Ken Fisher’s Fisher Asset Management has 3.08 million ADSs of Alibaba Group Holding Ltd (NYSE:BABA) in its portfolio as of March 31.

#4. Microsoft Corporation (NASDAQ:MSFT)

 – Number of shares held by McKinley (as of March 31): 914,066

 – Value of McKinley’s holding (as of March 31): $50.48 Million

The growth-oriented investment firm was also bullish on Microsoft Corporation (NASDAQ:MSFT) in the March quarter, during which its upped its stake in the company by 24% to 914,066 shares worth $50.48 million. The software maker plans to discontinue its Windows 10 free upgrade offer at the end of July, so existing users of Windows 7 and Windows 8.1 still have a chance to upgrade to Windows 10 for free. Microsoft is reportedly set to charge $119 for the home version of the software and $199 for its Pro iteration once the free upgrade period expires. According to fresh reports, there are around 300 million Windows 10 users at the moment, so the 1.00 billion mark that it hopes to reach by 2018 seems overly ambitious. Microsoft shares are down by 8% since the start of 2016. Donald Yacktman’s Yacktman Asset Management owns 12.54 million shares of Microsoft Corporation (NASDAQ:MSFT) as of March 31.

Three more tech stocks, including two of the vaunted FANG growth stocks, are discussed on the next page.

#3. Facebook Inc. (NASDAQ:FB)

 – Number of shares held by McKinley (as of March 31): 449,117

 – Value of McKinley’s holding (as of March 31): $51.24 Million

The Alaska-based asset manager trimmed its position in Facebook Inc. (NASDAQ:FB) by 10% during the first three months of 2016, ending the first quarter with 449,117 shares valued at $51.24 million. Facebook generated $5.38 billion in revenue during the first quarter of 2016, up from $3.54 billion recorded for the first quarter of 2015. The increase was mainly driven by higher advertising revenue, primarily due to higher revenue from News Feed ads on mobile devices. The growth rate of Facebook’s advertising revenue depends largely on user growth and engagement, and Facebook has been successful in driving up both metrics. Facebook’s mobile daily active users (DAUs) increased to 989 million on average during March 2016, up from 798 million during March 2015. The company says its global users spend an average of 50 minutes each day using the Facebook, Instagram and Messenger platforms. Facebook’s market capitalization has gained 15% since the start of 2016. A total of 2.80 million Facebook Inc. (NASDAQ:FB) shares were owned by Columbus Circle Investors, managed by Clifford G. Fox, at the end of March.

#2. Apple Inc. (NASDAQ:AAPL)

 – Number of shares held by McKinley (as of March 31): 601,354

 – Value of McKinley’s holding (as of March 31): $65.54 Million

McKinley Capital Management owns 601,354 shares of Apple Inc. (NASDAQ:AAPL) as of the end of the March quarter, 27,758 shares less than it did at the end of 2015. The iPhone maker has seen its shares decline by 11% in value year-to-date, mainly owing to the disappointing results embedded in its most recent earnings report. Apple shipped 51.2 million iPhones during the first three months of 2016, down from 61 million shipped in the same period of the previous year. The question most investors are currently asking themselves is whether Apple’s upcoming iPhone 7 will be able to reverse the company’s first year-over-year iPhone sales drop. Towards that end, Apple is looking to help reverse the course of declining iPhone sales by switching focus to the world’s second-largest smartphone market, India, where its market share is miniscule. Of course, whether its high-priced offerings will be able to gain much traction in the country, which does not yet have the same level of wealth that China does (where Apple has made great strides). David Harding’s Winton Capital Management reported owning 1.09 million shares of Apple Inc. (NASDAQ:AAPL) as of March 31.

#1. Alphabet Inc. (NASDAQ:GOOG)

 – Number of shares held by McKinley (as of March 31): 94,604 Class C Shares

 – Value of McKinley’s holding (as of March 31): $70.48 Million

Alphabet Inc. (NASDAQ:GOOG) was the largest holding in McKinley’s equity portfolio at the end of March, being comprised of 94,604 Class C shares of the company worth $70.48 million. After launching its YouTube Red membership service last year, the first paid subscription service of Alphabet’s YouTube, the company is allegedly planning on adding a separate subscription service called “Unplugged” that is said to offer a package of cable TV channels. This initiative may enable Alphabet to pull yet more viewers away from the traditional cable TV market, which is perceived as being too expensive and immobile. As a result, YouTube’s potential project may unlock a flourishing revenue stream for Alphabet in the future. Alphabet’s Class C shares are down by 4% year-to-date, but have gained 36% in the past 12 months. Fisher Asset Management owns 476,265 Class C shares of Alphabet Inc. (NASDAQ:GOOG) as of the end of the March quarter.

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