Tech Sector Latest Highlights; How To Trade These Four Stocks Based on Smart Money Sentiment

The tech sector is one of the most widely discussed and many investors managed to boost their performance by betting on successful tech companies like Apple Inc. (NASDAQ:AAPL), or Facebook Inc (NASDAQ:FB). Tech companies are always in the spotlight on the back of different developments and by the end of the last trading week, four companies were making headlines. Let’s take a closer look at these companies and see the sentiment of some of the best money managers toward them, which can be used as a predictor of their long-term performance.

We assess the smart money sentiment based tracking the activity of more than 700 of the best investors. These funds have obtained significant returns over the long run and their focus on the long-term horizon allows us to profit from piggybacking them. Our strategy involves imitating the top 15 small-cap stocks that these funds are collectively bullish on and it has returned 102% since August 2012, compared to 49% for the S&P 500 ETF (SPY) (see more details here).

Alibaba Group Holding Ltd (NYSE:BABA)‘s stock closed lower yesterday after short-seller Jim Chanos pitched the stock as a short bet at the Morgan Stanley Lyford Conference. The investor mentioned that Alibaba Group Holding Ltd (NYSE:BABA) might have “accounting concerns”, according to sources cited by CNBC. On the other hand, Chanos suggested going long JD.Com Inc (ADR) (NASDAQ:JD).

Among the funds from our database, Alibaba Group Holding Ltd (NYSE:BABA) is slightly more popular with 85 funds holding shares as of the end of June, versus 75 for JD.Com Inc (ADR) (NASDAQ:JD). However, while the number of funds long Alibaba declined by one during the second quarter, seven more funds held shares of JD.Com compared to the previous quarter. Moreover, the funds we track held around $4.77 billion worth of Alibaba Group Holding Ltd (NYSE:BABA)’s stock, or roughly 2.30% of the outstanding stock, while in JD.Com’s case, the aggregate value of the funds’ holdings amounted to over $11.81 billion, equal to 25.30% of the company. Stephen Mandel’s Lone Pine Capital mentioned JD.Com Inc (ADR) (NASDAQ:JD) as one of its top picks in the latest investor letter and named the company among the “disrupters” that it is bullish on, saying that the company will create value for its portfolio in the long run.

On the next page we will take a look at two other tech stocks: Tesla Motors Inc (NASDAQ:TSLA) and Netflix, Inc. (NASDAQ:NFLX).

Let’s move on to Tesla Motors Inc (NASDAQ:TSLA), whose founder and CEO Elon Musk showed up at the Baron Investment Conference, hosted by billionaire Ron Baron’s Baron Capital on Friday. Baron owns a sizeable stake in Tesla and Ron Baron interviewed Elon Musk, the two discussing Tesla Motors Inc (NASDAQ:TSLA)’s future, its Gigafactory in Nevada and the stock performance. Baron also went on CNBC’s “Squawk Box” yesterday, where he reaffirmed his stance on Tesla, saying that the stock might gain four times its current value in the next five years, as the company grows. However, Baron also said that at the current valuation, the stock is pretty expensive, a view that is shared by the funds from our database, most of whom are underweight Tesla Motors Inc (NASDAQ:TSLA). Only 26 funds from our database held stakes worth $1.39 billion, equal to 4.10% of the company at the end of June.

Finally, Netflix, Inc. (NASDAQ:NFLX) was in the news yesterday on the back of Time Warner Inc (NYSE:TWX) stating that it plans to delay the reruns of its content on Netflix, Inc. (NASDAQ:NFLX)’s platform. During the last earnings call on Thursday, CEO Jeff Bewkes said that Time Warner might keep the rights for its content for a longer period of time and delay the licensing. The news are not likely to affect Netflix, since the company has previously expressed its intention to focus more on its original content, most of which has been very well received by its viewers. What makes Netflix a success story is its focus on the long-term. During a recent interview at the Dealbook Conference in New York, billionaire Stan Druckenmiller said that he likes Netflix, Inc. (NASDAQ:NFLX), particularly because of CEO Reed Hastings long-term view of the company. A total of 50 funds from our database held shares of Netflix at the end of June, including Clifford Fox’s Columbus Circle Investors, which also reported holding around 1.0 million shares in its 13F filing for the third quarter.

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