Billionaire D.E. Shaw filed his 13F with the SEC in mid-November, revealing a renewed interest in tech. D.E. Shaw trades using systematic and computer driven methods and now has around $26 billion in invested capital. Shaw also makes a habit of hiring from the math and physics area, opposed to the financial sector. Below are five of Shaw’s favorite tech stocks – they range from search to e-commerce (check out D.E. Shaw’s full equity portfolio).
International Business Machines Corp. (NYSE:IBM) is Shaw’s fifth largest 13F holding and is expected to see revenues down 3% this year. Hardware sales have been weak for the tech company, but new product introductions should help drive growth, namely software sales. Part of what is boosting the company has been growth in emerging markets. IBM also trades on the cheap end of the tech industry at 14x earnings, compared to Oracle (16x) and SAP (25x), which are more expensive. Billionaire Warren Buffett is IBM’s top fund owner with nearly 20% of his 13F portfolio invested in the tech stock (check out Warren Buffett’s top picks).
Yahoo! Inc. (NASDAQ:YHOO), meanwhile, is quite the turnaround story, with revenues expected to be up 3% annually through 2014. Demand for display advertising has put pressure on the company, but its well-known global brand and 700 million users should help it to better penetrate the mobile market. Yahoo’s search partnership with Microsoft – where Microsoft powers Yahoo’s search results – has allowed the company to focus on other tech initiatives. The stock trades well below its peers on a P/E basis at 6x earnings, compared to Google (22x) and Microsoft (14x). Interestingly, David Einhorn added Yahoo to his portfolio last quarter (check out David Einhorn’s big bets).
Cisco Systems, Inc. (NASDAQ:CSCO) is a mammoth communications equipment company that saw a 7% sales increase in FY2012, and is expected to advance another 7% in 2013. These strong sales increases should be driven by the company’s entry into the cloud computing market, in addition to development of new products for data centers. The other secular long-term driver for Cisco is a continued rise in bandwidth usage. The tech company also recently boosted its dividend by 75%; it now yields 2.9%. Cisco trades at only 13x earnings, below both Ericsson (16x) and Motorola Solutions (24x). Jim Simons’ hedge fund took a new stake in this tech giant last quarter (see Jim Simons’ top picks).
What are picks No. 4 and 5?