Ken Fisher’s started his fund back in 1979 with only $250. Since then, the fund’s assets under management have grown exponentially to $48 billion, and Fisher has become quite rich himself in the process, standing today as a billionaire worth around $2.8 billion. Without further ado, let’s take a closer look at Fisher’s top tech picks of Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Visa Inc (NYSE:V), Microsoft Corporation (NASDAQ:MSFT), and Comcast Corporation (NASDAQ:CMCSA).
First a little about our site. Insider Monkey tracks hedge fund sentiment. Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 102% over the last 37 months and outperformed the S&P 500 Index by 53 percentage points (see more details here).
#5 Comcast Corporation (NASDAQ:CMCSA)
Shares held (as of September 30): 12.24 million
Total Value (as of September 30): $696.31 million
Percent of Portfolio (as of September 30): 1.45%
It’s the age old question. Which is more important, distribution or content? As one of the world’s largest content and cable providers, Comcast Corporation (NASDAQ:CMCSA) has both. If more people leave cable in favor of internet technologies, Comcast Corporation can offset its declining cable revenue by realizing more from content licensing deals. At a forward P/E of 16.7, the company is reasonably priced. The company could pay a higher attractive dividend yield with its cash flow, however. Lansdowne Partners owned 23.81 million shares at the end of June.
#4 Microsoft Corporation (NASDAQ:MSFT)
Shares held (as of September 30): 17.98 million
Total Value (as of September 30): $795.63 million
Percent of Portfolio (as of September 30): 1.66%
Microsoft Corporation (NASDAQ:MSFT) is no longer the dominant tech company that it once was. The Department of Justice lawsuit a decade and half ago and Steve Jobs made sure of that. The good news is that Microsoft is still fantastically profitable, having made $22 billion in net income in 2014. Given that over a billion people around the world regularly use Microsoft Office and Windows, Microsoft products are still in demand, and the company is making solid inroads in future growth categories such as the cloud and virtual reality. With a dividend yield of 3% and forward P/E of 15.68, shares are cheap. The company also turned in a solid second quarter earnings report. Jeffrey Ubben‘s ValueAct Capital owned 75.27 million shares of Microsoft at the end of the second quarter.
#3 Visa Inc (NYSE:V)
Shares held (as of September 30): 14.63 million
Total Value (as of September 30): $1.02 billion
Percent of Portfolio (as of September 30): 2.12%
At a forward P/E of 25.7, Visa Inc (NYSE:V) isn’t cheap, but shares have done well with the stock up 18.19% year-to-date. The financial payments company is the leader in a duopoly, giving the company high margins and investors great visibility on future cash flows. Analysts expect good things from the company in the next five years, with an average next 5-year EPS growth rate of 18.1%, as the U.S. economy chugs ahead. The invention of the blockchain is a threat in the long run, but for now, it’s just hypothetical. Lansdowne Partners owned 13 million shares at the end of June.
#2 Apple Inc. (NASDAQ:AAPL)
Shares held (as of September 30): 11.12 million
Total Value (as of September 30): $1.23 billion
Percent of Portfolio (as of September 30): 2.56%
The market doesn’t like one-product companies because the profit from a single product is not as sustainable as the profit from a broad portfolio of products. While there is no question that the majority of Apple Inc. (NASDAQ:AAPL)’s profits come from the iPhone, the data show that iPhone profits are sustainable. Apple’s EPS has been steadily growing since Steve Jobs launched the iPhone in 2007. Apple’s strong ecosystem and luxury brand keep customers coming back each time. The smartphone may be more or less commoditized, but Apple’s profits haven’t. Meanwhile, virtual reality, smart cars, and artificial intelligence will offer more growth and diversification opportunities in the future. Carl Icahn‘s Icahn Capital LP, who thinks Apple should trade for $240 per share, owned 52.76 million shares at the end of June.
#1 Amazon.com, Inc. (NASDAQ:AMZN)
Shares held (as of September 30): 2.5 million
Total Value (as of September 30): $1.28 billion
Percent of Portfolio (as of September 30):
‘Your margin is my opportunity’. Amazon.com, Inc. (NASDAQ:AMZN) became a $280 billion company it is today by putting consumers first and forsaking margins for market share. Working in low margin sectors has made Amazon super efficient, and has made it almost unstoppable in its quest to become the everything store. With membership programs such as Amazon Prime, the company has the loyalty of a large percentage of American consumers who go to Amazon first to check on e-commerce goods. Amazon’s efficiency and its customers’ loyalty will allow the company to expand into many different adjacent sectors successfully. The market likes Amazon’s long term strategy, as shares are up 93% year-to-date. Andreas Halvorsen‘s Viking Global owned 2.28 million shares at the end of the second quarter.