In this article, we discuss 10 stocks to buy according to Kevin McCarthy’s Breakline Capital. If you want to skip our detailed analysis of McCarthy’s history, investment philosophy, and hedge fund performance, go directly to 5 Stocks to Buy According to Kevin McCarthy’s Breakline Capital.
Kevin McCarthy, an ex-portfolio manager at Citadel, founded Breakline Capital, a hedge fund based in New York in May 2017. In the first quarter of 2022, the hedge fund used a long/short equity strategy to invest entirely in technology stocks. In addition, large-cap equities make up the vast bulk of Breakline Capital’s holdings. As of Q1 2022, the hedge fund’s 13F portfolio was worth $65.15 million, down from $74.15 million the previous quarter. Mr. Mccarthy presently has 20 stocks in his portfolio.
Some of the large-cap stocks in the portfolio of Breakline Capital as of the first quarter of 2022 include Advanced Micro Devices, Inc. (NASDAQ:AMD), Salesforce, Inc. (NYSE:CRM), and QUALCOMM Incorporated (NASDAQ:QCOM).
Breakline Capital added Advanced Micro Devices, Inc. (NASDAQ:AMD) to its portfolio in the first quarter by buying 13,529 shares. On June 10, Oppenheimer analyst Rick Schafer maintained a Perform rating on Advanced Micro Devices, Inc. (NASDAQ:AMD) following the company’s good analyst day.
Another notable stock in Kevin McCarthy’s portfolio is Salesforce, Inc. (NYSE:CRM). The investor owns a $2.17 million stake in the company. Loop Capital analyst Yun Kim maintained a Hold rating on Salesforce, Inc. (NYSE:CRM) on June 2 and lowered his price target to $175 from $225. According to Kim, Salesforce still faces conventional integration risks due to the Slack acquisition.
Breakline Capital also owns 12,706 shares of QUALCOMM Incorporated (NASDAQ:QCOM). Ivan Feinseth, a Tigress Financial analyst, boosted his price objective on QUALCOMM Incorporated (NASDAQ:QCOM) to $238 from $195 on May 5 and maintained his Buy rating on the stock.
Our Methodology
With this background in mind, let’s start our list of 10 stocks to buy according to Kevin McCarthy’s Breakline Capital. For this list, we collected data from McCarthy’s 13F portfolio as of Q1 2022.
Stocks to Buy According to Kevin McCarthy’s Breakline Capital
10. Palo Alto Networks, Inc. (NASDAQ:PANW)
Breakline Capital’s Stake Value: $2,990,000
Percentage of Breakline Capital’s Portfolio: 4.58%
Number of Hedge Fund Holders: 87
Palo Alto Networks, Inc. (NASDAQ:PANW) is a network security company that provides solutions to businesses, service providers, and government agencies. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is Palo Alto Networks, Inc. (NASDAQ:PANW)’s largest shareholder, with shares worth $471.16 million.
Wedbush analyst Daniel Ives maintained an Outperform rating on Palo Alto Networks, Inc. (NASDAQ:PANW) on May 20 but lowered his price objective to $580 from $660. Palo Alto Networks, according to Ives, exceeded expectations across the board in the April quarter and upgraded its outlook, demonstrating that the company’s cloud-driven approach is more strongly connecting with cybersecurity clients.
Palo Alto Networks, Inc. (NASDAQ:PANW) is a favorite among hedge fund managers. According to Insider Monkey’s database, 87 hedge funds reported owning stakes in Palo Alto Networks, Inc. (NASDAQ:PANW) in Q1 2022, showing an increase from 73 hedge funds holding stakes in the company in the previous quarter.
Still, Breakline Capital cut its stake in Palo Alto Networks, Inc. (NASDAQ:PANW). The hedge fund reduced its Palo Alto Networks, Inc. (NASDAQ:PANW) exposure by 16%, or 883 shares, in Q1. Breakline Capital’s remaining stake of 4,803 shares was worth $2.99 million and accounted for 4.58% of its total portfolio value. The hedge fund first bought Palo Alto Networks, Inc. (NASDAQ:PANW) in the third quarter of 2020.
In addition to Advanced Micro Devices, Inc. (NASDAQ:AMD), Salesforce, Inc. (NYSE:CRM), and QUALCOMM Incorporated (NASDAQ:QCOM), Palo Alto Networks, Inc. (NASDAQ:PANW) is a notable stock to buy according to Kevin McCarthy’s Breakline Capital.
9. KLA Corporation (NASDAQ:KLAC)
Breakline Capital’s Stake Value: $3,046,000
Percentage of Breakline Capital’s Portfolio: 4.67%
Number of Hedge Fund Holders: 52
KLA Corporation (NASDAQ:KLAC) provides semiconductor and related nanoelectronics companies with process control and yield management solutions. Breakline Capital trimmed its stake in KLA Corporation (NASDAQ:KLAC) by 51% to 8,320 shares in the first quarter of 2022. Still, the stock has made it to the list of 10 stocks to buy according to Kevin McCarthy’s Breakline Capital.
On May 26, Piper Sandler analyst Weston Twigg reiterated a Neutral rating on KLA Corporation (NASDAQ:KLAC) but trimmed his price target to $352 from $385. Due to supply chain concerns, the analyst cut his semiconductor capital prediction, adding that the quantity of semiconductor equipment that can be delivered in the near future is limited.
The number of hedge funds tracked by Insider Monkey holding stakes in KLA Corporation (NASDAQ:KLAC) increased to 52 in Q1 2022, compared to 49 in the previous quarter. These stakes hold a consolidated value of over $1.88 billion. Alkeon Capital Management, with 1.62 million shares, is the biggest stakeholder of KLA Corporation (NASDAQ:KLAC).
Here is what Vltava Fund has to say about KLA Corporation (NASDAQ:KLAC) in its Q1 2022 investor letter:
“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stock of KLA Corporation (KLAC).
KLA Corporation develops leading-edge equipment and services that enable innovation throughout the electronics industry. It specialises in process management and control in semiconductor manufacturing and the related nanoelectronics industries. During manufacturing processes, products must be inspected for defects and correct critical dimensions in order to identify and eliminate possible sources of problems. As customers continue to enforce Moore’s Law, smaller chips must meet more precise specifications, which in turn increases the need for advanced inspection and diagnostic tools. This is a key step within the entire manufacturing process and one in which the company has built a very strong, and in places dominant, global position. We have been watching and waiting for an opportunity to acquire this stock for some time already, and this year’s drop in its price finally prompted us to buy.”
8. Hewlett Packard Enterprise Company (NYSE:HPE)
Breakline Capital’s Stake Value: $3,362,000
Percentage of Breakline Capital’s Portfolio: 5.16%
Number of Hedge Fund Holders: 43
Kevin McCarthy initiated a new stake in Hewlett Packard Enterprise Company (NYSE:HPE) in the first quarter of 2022 by purchasing 201,176 shares worth $3.36 million. Pzena Investment Management is the biggest stakeholder of Hewlett Packard Enterprise Company (NYSE:HPE), with 37.58 million shares worth $627.96 million.
On June 2, Barclays analyst Tim Long maintained an Overweight rating on Hewlett Packard Enterprise Company (NYSE:HPE) while lowering his price objective to $19 from $20. Due to the delayed HPC revenue acceptance, Long informed investors in a research note that the company failed Q2 sales and profit estimates.
On June 1, Hewlett Packard Enterprise Company (NYSE:HPE) posted earnings for the first quarter, reporting earnings per share of $0.44, missing market estimates by $0.01. In addition, revenue for the quarter was $6.7 billion, below the analysts’ forecast by $100 million.
By the end of March 2022, 43 hedge funds held stakes in Hewlett Packard Enterprise Company (NYSE:HPE), up significantly from 35 in the preceding quarter. These stakes have a collective value of over $1.06 billion.
7. Marvell Technology, Inc. (NASDAQ:MRVL)
Breakline Capital’s Stake Value: $4,014,000
Percentage of Breakline Capital’s Portfolio: 6.16%
Number of Hedge Fund Holders: 63
Marvell Technology, Inc. (NASDAQ:MRVL) is a company that makes semiconductors for data infrastructure. Marvell Technology Group (NASDAQ:MRVL) declared a $0.06 per share quarterly dividend on June 2, consistent with the previous quarter. As of June 11, the forward yield was 0.39%.
By the end of Q1 2022, 63 hedge funds in Insider Monkey’s database held stakes in Marvell Technology, Inc. (NASDAQ:MRVL), valued at over $2.40 billion. In the previous quarter, 60 hedge funds held stakes in the company, worth over $2.54 billion.
On May 27, BMO Capital analyst Ambrish Srivastava retained his Outperform rating on Marvell Technology, Inc. (NASDAQ:MRVL) but decreased his price objective to $82 from $98, citing a higher discount rate as the reason for the lower price target.
Breakline Capital increased its stake in Marvell Technology, Inc. (NASDAQ:MRVL) by 137% in the first quarter, ending the period with shares worth $4.01 million. The hedge fund first initiated a stake in Marvell Technology, Inc. (NASDAQ:MRVL) in the second quarter of 2021.
ClearBridge Investments, in its Q4 2021 investor letter, mentioned Marvell Technology, Inc. (NASDAQ:MRVL). Here is what the fund said:
“The ClearBridge Mid Cap Growth Strategy continued to deliver strong absolute and relative returns as our focus on de-risking investments prior to purchase and managing position sizes has made a difference through recent market turbulence. Marvell Technology, a leader in semiconductor manufacturing, is in the second-largest position in the Strategy but just one of three stocks with a weighting of over 3% in a diversified growth portfolio of over 70 names. With a wide range of exposure to fast-growing IT subsectors, including 5G telecommunications, data centers, cloud computing, and electric vehicles, Marvell’s ability to secure a crucial supplier position at the nexus of these technologies leaves it well-positioned to participate in their long-term growth. Strength in companies like Marvell offset weakness in higher multiple growth names that were dragged down by negative sentiment or short-term execution issues.”
6. Analog Devices, Inc. (NASDAQ:ADI)
Breakline Capital’s Stake Value: $4,086,000
Percentage of Breakline Capital’s Portfolio: 6.27%
Number of Hedge Fund Holders: 67
Analog Devices, Inc. (NASDAQ:ADI) is a semiconductor company that designs, develops, produces, and sells integrated circuits worldwide. According to Insider Monkey’s database, 67 hedge funds reported owning stakes in Analog Devices, Inc. (NASDAQ:ADI) in the first quarter of 2022, showing a decline from 72 hedge funds holding stakes in the company in the previous quarter.
On June 3, Citi analyst Christopher Danely ranked Analog Devices, Inc. (NASDAQ:ADI) as the top semiconductor stock, predicting that the industry will decline another 30% due to a sluggish economy and excess inventories. According to Danely, the firm was obliged to lower forecasts owing to an expected downside from decreased PC and handset demand and a weakening economy.
Kevin McCarthy reversed course on Analog Devices, Inc. (NASDAQ:ADI) in the first quarter, cutting his stake in the company by 31%. Breakline Capital held 24,734 shares of Analog Devices, Inc. (NASDAQ:ADI) worth over $4.09 million in the first quarter of 2022, representing 6.27% of the portfolio.
Just like Advanced Micro Devices, Inc. (NASDAQ:AMD), Salesforce, Inc. (NYSE:CRM), and QUALCOMM Incorporated (NASDAQ:QCOM), Analog Devices, Inc. (NASDAQ:ADI) is gaining the interest of Kevin McCarthy’s Breakline Capital.
In its third-quarter 2021 investor letter, Madison Funds mentioned Analog Devices, Inc. (NASDAQ:ADI). Here is what the fund said:
“At its 2017 investor day, Analog Device’s VP of Automotive, Mark Gill, described how the company’s content on well-equipped electric vehicles was $600 per car compared to $250 per car for the traditional 2017 internal combustion engine car. Since then, Analog has highlighted the success of its EV battery management systems (BMS) product nearly every quarter. The BMS product is hardware and software that manages the power into and out of the battery systems. It’s the brains of the operation. Analog says it’s on its fifth generation BMS product, that it has the no. 1 market share in high voltage products, and that it is on 5 of the top 10 selling EVs. While we think that the BMS product is just 1 to 1.5% of Analog’s product mix, we think that it could add nearly a point of revenue growth per year to the company’s top-line given the expected ramp in EV production. This is a material amount of growth atop an already nicely growing company revenue line.”
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Disclosure: None. 10 Stocks to Buy According to Kevin McCarthy’s Breakline Capital is originally published on Insider Monkey.
