Navellier & Associates’ Top Tech Stock Picks

Louis G. Navellier, the author of the bestseller “The Little Book That Makes You Rich”, established Navellier & Associates in 1980.  The fund, which focuses on growth investments, has expanded by leaps and bounds in the past three decades, and now has a $1.06 billion equity portfolio. Since Navellier & Associates recently filed its 13F, let’s take a closer look at his top tech picks, which include Avago Technologies Ltd (NASDAQ:AVGO), Electronic Arts Inc. (NASDAQ:EA), Facebook Inc (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), and Intel Corporation (NASDAQ:INTC).

But why are we interested in the hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually managed to beat the market. In our backtests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 36 month period beginning from September 2012 (see more details here).

# 5 Intel Corporation (NASDAQ:INTC)

Shares held (as of September 30): 142,460
Total Value (as of September 30): $4.29 million
Percent of Portfolio (as of September 30): 0.43%

Because of Intel Corporation (NASDAQ:INTC)’s dominant position in PC CPU’s, Intel Corporation has economies of scale that affords its fat margins and substantial cash flow to enter adjacent markets. Although Intel hasn’t captured much market share in mobile and is losing around $4 billion a year in that sector, the company is succeeding in the Internet of Things and the cloud segments. The latter two’s growth has largely offset Intel’s declining PC business. At 14.27 times forward earnings, Intel’s shares look attractive. They also pay a nice 2.87% dividend too. First Eagle Investment Management owned 28.48 million shares of Intel at the end of June.

#4 Microsoft Corporation (NASDAQ:MSFT)

Shares held (as of September 30): 120,994
Total Value (as of September 30): $5.36 million
Percent of Portfolio (as of September 30): 0.54%

Under Satya Nadella, Microsoft Corporation (NASDAQ:MSFT) is doing things differently. It is providing Windows 10 upgrades for free, playing nice with former competitors Apple and Salesforce, and is cool again with its upcoming Hololens product. Although the personal computer market is declining and Microsoft’s mobile market share is next to nothing, Microsoft still dominates the enterprise segment and has a strong position in the cloud too. With a dividend yield of 3.01% and forward P/E of 15.6, shares are cheap. Jeffrey Ubben‘s ValueAct Capital owned 75.27 million shares at the end of the second quarter.

#3 Facebook Inc (NASDAQ:FB)

Shares held (as of September 30): 256,112
Total Value (as of September 30): $23.02 million
Percent of Portfolio (as of September 30): 2.32%

Because Facebook Inc (NASDAQ:FB) so thoroughly dominates the social media layer, which is important to so many different things, Facebook is only scratching the beginning of its potential. An authentic internet identity is an essential base layer on which many billion dollar applications can be built. Internet search can be improved, virtual reality can be more meaningful, and entertainment can be more fun if social features are added. As the API provider, Facebook can sit back and collect 30% without doing much work. The untapped potential means Facebook’s fast EPS growth can continue for a long time yet.

#2 Electronic Arts Inc. (NASDAQ:EA)

Shares held (as of September 30): 367,176
Total Value (as of September 30): $24.88 million
Percent of Portfolio (as of September 30): 2.50%

Electronic Arts Inc. (NASDAQ:EA) is more than just the Madden franchise, it has many other successful game titles as well, including FIFA and Need for Speed. Although the company hasn’t really caught on to mobile (having made $524 million in mobile revenue for fiscal year 2015), virtual reality offers potential new growth opportunities. Shares have done very well in 2015, advancing by 53.76% year-to-date. Even with the rally, Electronic Arts trades at a reasonable 21.44 times forward earnings. Other shareholders of EA at the end of June include Philippe Laffont‘s Coatue Management and Joel Greenblatt’s Gotham Asset Management.

#1 Avago Technologies Ltd (NASDAQ:AVGO)

Shares held (as of September 30): 251,490
Total Value (as of September 30): $31.44 million
Percent of Portfolio (as of September 30): 3.17%

Avago Technologies Ltd (NASDAQ:AVGO)’s aggressive M&A strategy has certainly paid off for its shareholders, as the stock is up 20.25% year-to-date. Management’s good execution and strong cost controls ensure Avago achieves the synergies promised and then some. The company has recently added Broadcom to its portfolio in a $37 billion deal that should yield $750 million of projected annual cost synergies within 18 months and be immediately accretive to earnings per share and free cash flow. With forward P/E of 12.6, shares aren’t expensive, although given the rising interest rates and the spate of other M&A deals in the industry, Avago Technologies may not have much more time to make more acquisitions that can move the bottom line and add to growth.