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Zweig-DiMenna Associates Reduces Stake In Top Tech Holdings In Q2

Zweig-DiMenna Associates is a Connecticut-based long/short equity fund established by Joseph ‘Joe’ DiMenna in 1984, in partnership with his mentor, famous stock investor and financial analyst Martin Edward Zweig. Prior to founding Zweig-DiMenna Associates, DiMenna worked at Zweig Cos., which he joined in 1977 while still a student at Fairfield University’s Dolan School of Business. Zweig-Dimenna recently filed its 13F disclosing its equity positions as of June 30. According to the filing, Zweig-DiMenna Associates’ U.S. public equity portfolio was worth $1.81 billion at the end of June, significantly lower than the $2.39 billion that it was worth at the end of March. The filing revealed that at the end of June, Zweig-DiMenna Associates was most bullish on consumer discretionary and information technology stocks, which accounted for 27% and 20% of the fund’s equity portfolio respectively. In this article we are going to look to the fund’s largest tech holdings, which are Facebook Inc (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), and Alibaba Group Holding Ltd (NYSE:BABA).

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At Insider Monkey, we pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123% since then and outperformed the S&P 500 Index by around 65 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

Joe Dimenna
Joe Dimenna
ZWEIG DIMENNA PARTNERS

Zweig-DiMenna Associates reduced its holdings in its top tech pick Facebook Inc (NASDAQ:FB) by 13% during the second quarter. At the end of June the fund owned 433,858 shares of the company, worth $37.21 million. Shares of the social networking giant have witnessed a consistent rise since mid-2013 and are up by more than 18% year-to-date. On July 29, the company reported better-than-expected second quarter earnings. EPS for the quarter came in at $0.50 on revenue of $4.04 billion, while Wall Street was expecting the company to report EPS of $0.47 on revenue of $3.99 billion. According to a study released by consulting firm Deloitte recently, Facebook contributed $29 billion to the global economy and supported around 660,000 jobs globally during 2014. According to recent reports, the company is also testing a new marketplace feature on its platform in the Sydney, Australia and Auckland, New Zealand markets, which will allow users to buy and sell products from fellow users. Apart from Zweig-DiMenna Associates, Donald Chiboucis‘ Columbus Circle Investors was another hedge fund that reduced its holding (by 9%) during the second quarter. At the end of June, Columbus Circle Investors owned 3.19 million shares of the company.

Proceeding to Zweig-DiMenna Associates second-most valuable tech holding, Apple Inc.(NASDAQ:AAPL). The fund sold 70,287 shares of the company during the April-June period to bring its total holding down to 223,750 shares worth $28.06 million as of June 30. Shares of the world’s largest company by market cap have slumped heavily since it reported its latest quarterly earnings on July 21. However, they spiked up by 3.64% on August 10 on rumors that Apple Inc.(NASDAQ:AAPL) might be planning an event in September where it will release new devices, possibly new generations of the Apple TV and iPads. Another reason for that spike could be that Oppenheimer analyst Andrew Uerkwitz reiterated his ‘Outperform’ rating on the stock, with a price target of $155. In his report, Uerkwitz brushed off concerns that the slowdown in the Chinese economy might have a significant impact on sales of Apple Inc.(NASDAQ:AAPL) devices in the country.  We at Insider Monkey continue to be long-term bearish on the stock, primarily because regardless of the launch of new devices and platforms, Apple for all practical purposes is still a single product company and will face significant competition in the smartphone space in the coming years. A hedge fund that increased its stake in Apple Inc.(NASDAQ:AAPL) during the second quarter was Ken Fisher‘s Fisher Asset Management, which owned over 11 million shares of the company as of June 30.

Alibaba Group Holding Ltd (NYSE:BABA) represented the third-largest tech holding of Zweig-DiMenna Associates at the end of June. The fund sold 26% of its shares of the company during the second quarter to bring its total holding down to 303,873 shares worth $25 million. The company is scheduled to report its fiscal 2015 first quarter earnings on August 12. Analysts expect the company to report EPS of $0.58 on revenue of $3.38 billion, which signifies a 44% and 30% year-over-year increase respectively. On August 10 , the online retailing giant announced that it will be investing $4.5 billion in Chinese brick-and-mortar electronics retailer Suning, acquiring about a 20% stake in the company. According to analysts, this deal will strengthen Alibaba Group Holding Ltd (NYSE:BABA)’s on-ground presence and will help it to compete against rival JD.com, which leads in the consumer electronics retail space. Fisher Asset Management also bought shares of Alibaba Group Holding Ltd (NYSE:BABA) during the second quarter, purchasing over 1.3 million of them.

Disclosure: None

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