5 Tech Giants Loved By Hedge Funds

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 |  Includes: AAPL, CSCO, GOOG, IBM, MSFT, QCOM
by: Bidness Etc

Apple (AAPL), Google (GOOG), Microsoft (MSFT), Qualcomm (QCOM), and Cisco (CSCO) are the most popular tech stocks among hedge funds, according to a recent report by Morgan Stanley's Adam Parker. We have analyzed each of these stocks to find out what makes them favorites among hedge funds.

APPLE

TOP FIVE HEDGE FUND HOLDERS

CITADEL, DE SHAW, DISCOVERY CAPITAL, COATUE MANAGEMENT, GREENLIGHT CAPITAL

YTD Performance

43%

GOOGLE

TOP FIVE HEDGE FUND HOLDERS

LONE PINE CAPITAL, VIKING GLOBAL INVESTORS, TIGER GLOBAL, COATUE MANAGEMENT, SCOUT MANAGEMENT

YTD Performance

-12%

MICROSOFT

TOP FIVE HEDGE FUND HOLDERS

CI INVESTMENTS, FIRST EAGLE INVESTMENT MANAGEMENT, GOODMAN & CO., DISCOVERY CAPITAL

YTD Performance

11%

QUALCOMM

TOP FIVE HEDGE FUND HOLDERS

LONE PINE CAPITAL, COLUMBUS CIRCLE INVESTORS, DISCOVERY CAPITAL, MAVERICK CAPITAL, COATUE MANAGEMENT

YTD Performance

-2%

CISCO

TOP FIVE HEDGE FUND HOLDERS

FIRST EAGLE INVESTMENT MANAGEMENT, VIKING GLOBAL INVESTORS, CI INVESTMENTS, RUFFER LLP, ADAGE CAPITAL PARTNERS

YTD Performance

-11%

Click to enlarge

AAPL

We are reiterating our buy recommendation for Apple, which we first put forward in our earlier articles, 'Qineqt s new MacBook launch review' and 'Qineqt s winners/losers smartphone industry review'. We believe that Apple will be able to further expand its foothold in the smartphone, tablet, and PC industries, as it geographically expands its distribution network of products. In our opinion, Apple will continue to dominate the Tech Industry through its innovative offerings. Plus, Apple's strong brand equity among consumers will keep its products popular in the market. We believe that at 11x forward earnings, the stock is still cheap and offers significant upside potential considering the future growth prospects.

GOOG

In our previous Google review, we recommended to buy Google because we believed that it was trading at a discount and should trade above $650 with a forward earnings multiple above 15x. We based our recommendation on Google's geographic expansion into new markets, a shift of companies in emerging economies towards internet advertising, a consumer shift towards mobile devices, and a growth in the global Internet Advertising Industry. Today, we again reiterate our buy recommendation for Google. In our opinion, Google has the best mobile monetization model at this time in the industry, and carries a lot of growth potential from emerging economies.

MSFT

Previously, we discussed that Microsoft's entries into Enterprise Social Networking and the Tablet Market will prove beneficial in the long term. Plus, Windows Phone 8 is a game changer for MSFT, which will reinvigorate the Windows Phone ecosystem, and has the potential to take Apple's iOS and Google's Android head on. Plus, the strong foothold in Windows and Office ecosystems has secured the company's future, and these segments will continue to post stable revenues. We reiterate our buy rating for Microsoft because we believe that the market has not priced in future expected growth from the Windows Phone 8 ecosystem, and the new tablet computer 'Surface'.

QCOM

In our previous theses on Qualcomm, we discussed the strong growth that Qualcomm is expected to enjoy in the future from increasing worldwide penetration of smart devices (smartphones and tablets). The company has a strong traction on the smart devices market, with its snapdragon microprocessor being widely used in smartphones and tablets around the world. Plus, with upcoming support for efficient ARM processors in Windows 8, Qualcomm is strongly positioned to take advantage of the growth in ARM-based computers in the future. ARM processors are characterized as more energy efficient compared to Intel processors. Therefore, we are bullish on the future expected growth of QCOM, and recommend buying it.

CSCO

In our recent investment thesis on Cisco, we suggested a long position in Cisco because we believe that with rising worldwide penetration of smart wireless devices, the demand for Cisco's wireless products will be high in future. Furthermore, Cisco's leadership in switching, video conferencing, and WLAN markets will enable it to take the most advantage of high future growth in these markets. Moreover, a strong enterprise wide sales network will allow Cisco to continue posting a stable stream of earnings. Lastly, attractive valuation compared to International Business Machines (IBM), Juniper Networks and HPQ suggests a long position in Cisco.

 

AAPL

GOOG

MSFT

QCOM

CSCO

Price

604.43

571.19

29.3

54.37

16.38

Market Cap (intraday)

565.18B

186.21B

246.15B

93.21B

87.75B

Forward P/E (fye Sep 24, 2013)

11.15

11.36

9.54

13.13

8.58

PEG Ratio (5 yr expected)

0.59

0.75

1.24

0.95

1.04

Operating Margin (TTM)

35.69%

32.11%

38.44%

32.35%

22.69%

Total Cash Per Share/Price Per Share

5%

26%

24%

16%

55%

Total Debt/Equity (mrq)

N/A

12.49

19.15

3.69

31.86

Current Ratio (mrq)

1.58

5.84

2.94

3.45

3.58

Earnings Growth Past 5 Years (per annum)

73.11%

23.38%

10.79%

14.13%

4.68%

Expected Earnings Growth Next 5 Years (per annum)

21.84%

17.59%

8.83%

15.26%

8.52%

Click to enlarge

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.