While we here at 24/7 Wall St. have always maintained that original thought among portfolio managers at hedge funds is probably not their best quality, one thing is for sure: They find big winners, and they ride them until there is nothing left. That is one of the big reasons that mega-cap technology still dominates the top hedge fund holdings again this year.
A recent Goldman Sachs report noted that the huge earnings miss by Facebook helped speed up what was already a shift from technology to health care. Despite the change in weighting, technology companies are still the top holdings that matter most to hedge funds.
According to Goldman Sachs, these are the five top holdings at hedge funds the firm covers, in order of which is owned the most.
The huge social media leader has been volatile since the disclosure of user data being compromised, and quarterly earnings were miserable on all metrics. Facebook Inc. (NASDAQ: FB) is the largest social network with over 2.0 billion monthly active users and over 1.4 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.
Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.
The Wall Street consensus price target for the stock is $211.03. The shares closed trading on Wednesday at $173.64 apiece.
Amazon
This absolute leader in online retail and a dominant player in the cloud storage business remains the top pick at Stifel. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers.
The company serves developers and enterprises through Amazon Web Services, which provides computing, storage, database, analytics, applications and deployment services that enable virtually various businesses. AWS is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market.
The posted consensus target was last seen at $2,100.02. The stock closed Wednesday’s trading at $1,904.90 per share.
Microsoft
This is a top old-school technology stock has posted all-time highs this year and has a massive $138.6 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers, who have added the software giant to their holdings at an increasingly faster pace all of this year and last.
Many Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is its cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service, while others maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in the recent earnings report which was outstanding.
Microsoft shareholders currently receive a 1.59% dividend. The consensus price objective for the stock $121.64, and the shares closed most recently at $107.06.
Alphabet
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The posted consensus price target estimate of $1,375.58 compares with the most recent closing share price of $1,221.75.
24/7 Wall St.NXP Semiconductors
This company recently almost merged with Qualcomm, but the deal fell through. The NXP Semiconductors N.V. (NASDAQ: NXPI) merger with Freescale Semiconductor in 2016 was widely applauded on Wall Street, and it made NXP the fourth largest semiconductor company in the industry.
It is also important to note that the combined company has become the number one supplier in auto semiconductors, number one supplier in global microcontrollers, as well as a dominant supplier in mobile payments.
NXP is getting its chips into high-growth areas such as contactless mobile payments, the Internet of Things, mobile-phone charging, increased cellular data consumption and LED lighting. The two business segments that cover these products have grown substantially over the past few years, and many on Wall Street feel the company is extremely cheap at current levels.
The consensus price target is set at $107, while the stock closed trading at $91.22 a share on Wednesday.
While the dominance of the tech sector at hedge funds has dropped, investors looking to add these stocks to their holdings may want to look for a fall correction for better entry points.
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