Hedge fund trades have just been made public for the last quarter with the release of 13F forms filed with the SEC. TipRanks tracks hedge fund transactions on more than 5,000 stocks, enabling us to monitor a couple of things when it comes to recent stock picks. Namely …
1) See what the best performing fund managers are up to.
2) Assess the overall hedge fund sentiment on any particular stock.
It should be noted that fund managers are only required to submit these 13F forms to the SEC 45 days after the end of the last quarter. That means by the time the information on these stock picks is made public, it is no longer necessarily current. For example, the quarter ended on June 30 which means the forms became public on August 14.
Nonetheless these trades still give a valuable insight into the direction top fund managers believe the market is heading. We can find stocks that are getting more attention from the ‘smart money’ i.e. hedge fund managers with huge resources and highly developed strategies for finding compelling investment opportunities.
So here are three tech stocks with particularly bullish hedge fund sentiment, based on a mixture of the percentage increase in holdings and the actual dollar amount of that change:
1 Alibaba (BABA)
Chinese e-commerce giant Alibaba Group (NYSE:BABA) is a top pick for best-performing fund managers. Based on the activity of 31 hedge fund managers the stock has a Very Positive hedge fund confidence signal on TipRanks. Since the last quarter funds upped their BABA holdings by an aggregate of 6.35%.
Big name fund managers that have taken the plunge with BABA include activist investor Daniel Loeb and David Tepper. Loeb- manager of the $11.28 billion Third Point LLC fund- now has a new position in BABA worth $634 million. Loeb says Alibaba is “among the best business models in the internet sector.”
And with shares up 10% this quarter, it’s not just fund managers that love BABA. Alibaba is due to report its quarterly results on August 17. Going into the print the stock has a ‘Strong Buy’ consensus with 15 back-to-back buy ratings from analysts in the last three months. Meanwhile the $168 average analyst price target comes in 6.5% above the current share price.
Top RBC Capital analyst Mark Mahaney is forecasting revenue of RMB 45.8 billion and Adjusted EPS of 6.15 RMB. He gives this bullish analysis of BABA’s prospects:
“Fundamental trends remain impressive – particularly premium growth rates (46% Y/Y) in Core Commerce as brands/ merchants ramp advertising spending on BABA’s massive platform. Further, the Cloud Computing segment continues to demonstrate increasing scale (nearly 1MM customers) and hyper-growth (103% Y/Y) while approaching breakeven. BABA continues demonstrating high levels of profitability. These trends are impressive and appear sustainable. We continue to view BABA as a Premium-Growth/Premium-Profit Asset.”
Mahaney reiterates a Buy rating on Alibaba shares with a price target of $160, which represents a slight upside potential from current levels.
2 Twilio (TWLO)
Communications software maker Twilio Inc (NYSE:TWLO) has the backing of the smart money. We can see that in the last quarter funds ramped up their TWLO shares by an aggregate of 20.42%. In fact 38 funds created new positions and 64 funds added new positions. The $11 billion Coatue Management fund run by Philippe Laffont is one of these funds. Laffont increased the Twilio holding by an impressive 329% to just over $50 million.
Share in Twilio recently soared by nearly 11% after the company reported very strong second-quarter earnings. Furthermore, Twilio increased its 2017 sales outlook to $371.0-375.0 million, beating the Street estimate of $359.8 million. Following the earnings beat, Oppenheimer analyst Ittai Kidron reiterated his buy rating with a price target of $38 ($7 above the current share price of $31). He says:
“Metrics indicate that, ex-Uber, Twilio continues to experience impressive growth in new customers, size of new customers, and existing customer usage. With improving customer diversity, a new platform approach (Engagement Cloud), and unchanged competitive environment, we believe Twilio has multiple growth divers ahead. We maintain our long-term bullish view on Twilio as the transition to cloud-based A2P communication continues given its market-leading position.”
Out of the 10 analysts polled in the past 3 months, 9 rate Twilio stock a Buy, while only 1 rates the stock a Hold. With a return potential of 23%, the stock’s consensus target price stands at $38.14.
3 NXP Semiconductors (NXPI)
Dutch global semiconductor manufacturer NXP Semiconductors (NASDAQ:NXPI) had a strong quarter on the fund front. We can see that Soroban Capital initiated a brand-new position in the stock worth $1.8 billion. Earlier in August, activist investor Paul Singer called the stock “significantly undervalued.”
Qualcomm currently has a $38 billion bid pending for NXPI- which has a Hold analyst consensus rating. Five-star Morgan Stanley analyst Craig Hettenbach reiterated his hold rating but raised his price target on NXPI to $117.50 from $110 on August 7. He says NXPI shareholders “have the upper hand” in getting a higher takeout price from Qualcomm, and a higher bid would be “inconsequential” to Qualcomm’s balance sheet.
A bad quarter for…
Snapchat- Perhaps unsurprisingly, hedge funds turned bearish on disappearing photo app Snapchat (NASDAQ:SNAP). Appaloosa Management sold 100,000 shares of the social media company last quarter, as did Third Point and Jana Partners. Shares slid in the last three months from $21 to $13 on fears of Facebook competition from its fast-growing photo app Instagram.
Facebook- Meanwhile, Andreas Halvorsen of Viking Global Investors dropped 9.6 million shares of Facebook (NASDAQ:FB) or about 61% of the fund’s FB holding. In fact, funds in general showed a much more bearish attitude to the social media giant in the last quarter- with overall fund ownership of FB stock down by $487 million according to Bloomberg.
TipRanks doesn’t just rank hedge fund managers. We also give investors the latest insight into the activity of 4,600 analysts, 6,000 financial bloggers and even 38,000 corporate insiders.