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.
Breakline Capital is a New York-based hedge fund that was founded in May 2017. Former Citadel portfolio manager Kevin McCarthy established the hedge fund. It employs a long/short stock strategy for its investments. Breakline Capital’s Q1 2022 portfolio included only technology stocks. The second quarter portfolio of Breakline Capital was dominated by tech firms, with sizeable portions of the finance and communications sectors added.
Photo by Adam Śmigielski on Unsplash
At the end of the second quarter of 2022, Breakline Capital’s 13F portfolio reached $87.05 million, an increase of about 33.62% from the preceding quarter. The hedge fund added 12 stocks to its portfolio and sold 9 equities. The hedge fund also boosted its stakes in 7 securities and decreased its hold on 9 stocks. The hedge fund invested in 23 stocks at the end of the second quarter of 2022. Some of the most outstanding securities in Kevin McCarthy’s Breakline Capital portfolio included Microsoft Corporation (NASDAQ:MSFT), Micron Technology, Inc. (NASDAQ:MU), and ServiceNow, Inc. (NYSE:NOW).
Our Methodology
We used Kevin McCarthy’s Breakline Capital portfolio as of Q2 2022 for this analysis, concentrating on the hedge fund’s top 10 positions. All hedge fund data is based on an elite group of 895 funds that filed 13Fs for the second quarter of 2022 with Insider Monkey.
Stocks to Buy According to Kevin McCarthy’s Breakline Capital
10. Applied Materials, Inc. (NASDAQ:AMAT)
Breakline Capital’s Stake Value: $3,312,000
Percentage of Breakline Capital’s 13F Portfolio: 3.8%
Number of Hedge Fund Holders: 67
Applied Materials, Inc. (NASDAQ:AMAT) ranks tenth on the list of stocks to buy according to Kevin McCarthy’s Breakline Capital. According to the 13F filings for the second quarter of 2022, Breakline Capital held 36,401 shares of Applied Materials, Inc. (NASDAQ:AMAT), amounting to more than $3.31 million and representing 3.8% of the fund’s portfolio. In addition, the hedge fund increased its stake in the firm by 4%.
On August 21, BofA analyst Vivek Arya revised his price objective on Applied Materials, Inc. (NASDAQ:AMAT) from $118 to $125 and maintained a ‘Buy’ rating on the stock. The business announced a beat and raise quarter with a solid outlook, the analyst stated in a research note, despite worries about a downturn. Applied Materials, Inc. (NASDAQ:AMAT), a producer of semiconductor equipment, predicted sales of around $6.65 billion for the fiscal fourth quarter.
Out of the hedge funds tracked by Insider Monkey in the second quarter of 2022, 67 held stakes in Applied Materials, Inc. (NASDAQ:AMAT), with a combined value of $3.69 billion. Of these 67 funds, David Blood and Al Gore’s Generation Investment Management is the most significant shareholder of Applied Materials, Inc. (NASDAQ:AMAT), with 6.10 million shares worth $555.22 million.
In addition to Applied Materials, Inc. (NASDAQ:AMAT), Microsoft Corporation (NASDAQ:MSFT), Micron Technology, Inc. (NASDAQ:MU), and ServiceNow, Inc. (NYSE:NOW) are some other significant holdings of Kevin McCarthy’s Breakline Capital.
Vulcan Value Partners mentioned Applied Materials, Inc. (NASDAQ:AMAT) in its Q4 2021 investor letter. Here is what the firm had to say:
“Applied Materials, another material contributor for the quarter, provides materials engineering solutions for semiconductor fabrication equipment and manufacturing tools for advanced displays. Similar to Lam Research, Applied Materials is executing well and continuing to experience the tailwinds from consolidation and growth within the industry.”
9. QUALCOMM Incorporated (NASDAQ:QCOM)
Breakline Capital’s Stake Value: $3,649,000
Percentage of Breakline Capital’s 13F Portfolio: 4.19%
Number of Hedge Fund Holders: 71
Based in San Diego, QUALCOMM Incorporated (NASDAQ:QCOM) develops and sells wireless technologies, semiconductor chips, IoT, PC computing, and 5G solutions. On September 2, Meta Platforms, Inc. (NASDAQ:META) struck a contract with QUALCOMM Incorporated (NASDAQ:QCOM) to have the business create unique chipsets for its Quest VR devices.
Kevin McCarthy’s Breakline Capital has kept a stake in QUALCOMM Incorporated (NASDAQ:QCOM) since Q4 2018. The hedge fund’s $3.65 million investment equals 4.19% of the total portfolio. Following in-line/slightly better-than-expected June-quarter earnings and a disappointing September-quarter forecast, Wells Fargo analyst Gary Mobley increased his price objective on QUALCOMM Incorporated (NASDAQ:QCOM) to $150 from $135 on July 28 and retained an ‘Equal Weight’ rating on the shares.
Investors were recently seen selling QUALCOMM Incorporated (NASDAQ:QCOM) shares. At the close of the second quarter, 71 hedge funds were bullish on the company shares, compared to 73 in the previous quarter. The combined worth of Q2 hedge fund holdings stood at $2.81 billion. Panayotis Takis Sparaggis’s Alkeon Capital Management owned a $541.15 million stake in QUALCOMM Incorporated (NASDAQ:QCOM) at the end of the second quarter, making it the company’s largest shareholder.
8. Palo Alto Networks, Inc. (NASDAQ:PANW)
Breakline Capital’s Stake Value: $4,504,000
Percentage of Breakline Capital’s 13F Portfolio: 5.17%
Number of Hedge Fund Holders: 90
Palo Alto Networks, Inc. (NASDAQ:PANW) specializes in network security. The firm caters to approximately 80,000 business clients. Additionally, 90 hedge funds reported bullish bets on Palo Alto Networks, Inc. (NASDAQ:PANW) at the end of the second quarter, with combined stakes worth $3.73 billion.
Following the FQ4 results, Wedbush analyst Dan Ives increased his price target on Palo Alto Networks, Inc. (NASDAQ:PANW) to $620 from $580 on August 23. He also retained an ‘Outperform’ rating. The analyst said the company’s cloud approach is working, noting that forecast exceeded expectations in part due to robust billings.
According to the 13F filings for the second quarter of 2022, Breakline Capital held 9,118 shares of Palo Alto Networks, Inc. (NASDAQ:PANW), amounting to more than $4.50 million and representing 5.17% of the fund’s portfolio value. With about 733,482 shares valued at $362.30 million, Generation Investment Management is the biggest shareholder of Palo Alto Networks, Inc. (NASDAQ:PANW).
7. Cognizant Technology Solutions Corporation (NASDAQ:CTSH)
Breakline Capital’s Stake Value: $4,724,000
Percentage of Breakline Capital’s 13F Portfolio: 5.42%
Number of Hedge Fund Holders: 36
In the age of big data, Cognizant Technology Solutions Corporation (NASDAQ:CTSH), a provider of professional services, aids customers in becoming data-enabled and data-driven. On August 17, HSBC analyst Yogesh Aggarwal downgraded Cognizant Technology Solutions Corporation (NASDAQ:CTSH) from ‘Buy’ to ‘Hold’ and decreased his price objective from $90 to $79. According to Aggarwal, the company’s performance was behind its competitors, and the most recent reduction in growth expectations was unexpected.
In the second quarter of 2022, 36 hedge funds were bullish on Cognizant Technology Solutions Corporation (NASDAQ:CTSH), up from 32 in the preceding quarter. Richard S. Pzena’s Pzena Investment Management is a significant stakeholder of Cognizant Technology Solutions Corporation (NASDAQ:CTSH), with 13.77 million shares worth over $929.21 million.
Cognizant Technology Solutions Corporation (NASDAQ:CTSH) is one of the newest acquisitions of Breakline Capital, being added to the fund’s portfolio in Q2. The hedge fund purchased nearly $4.72 million in Cognizant Technology Solutions Corporation (NASDAQ:CTSH) shares, representing 5.42% of its 13F portfolio’s exposure.
6. KLA Corporation (NASDAQ:KLAC)
Breakline Capital’s Stake Value: $4,876,000
Percentage of Breakline Capital’s 13F Portfolio: 5.6%
Number of Hedge Fund Holders: 43
KLA Corporation (NASDAQ:KLAC) is a global provider of process control, process-enabling, and yield management solutions to semiconductors and electronics industries. On July 29, Deutsche Bank analyst Sidney Ho upped his price objective on KLA Corporation (NASDAQ:KLAC) from $385 to $400 and reiterated a ‘Buy’ recommendation on the stock.
Breakline Capital loaded up on KLA Corporation (NASDAQ:KLAC) in the second quarter, increasing its position in the company by 84%. The hedge fund owns 15,281 shares of KLA Corporation (NASDAQ:KLAC), worth $4.88 million. Alongside Microsoft Corporation (NASDAQ:MSFT), Micron Technology, Inc. (NASDAQ:MU), and ServiceNow, Inc. (NYSE:NOW), KLA Corporation (NASDAQ:KLAC) is one of the most prominent stocks in Kevin McCarthy’s portfolio.
With combined stakes worth $1.35 billion, 43 hedge funds were long KLA Corporation (NASDAQ:KLAC) at the end of the second quarter of 2022. This showed negative sentiment from the previous quarter, when 52 hedge funds had a $1.88 billion stake in KLA Corporation (NASDAQ:KLAC). Alkeon Capital Management is the most significant shareholder of KLA Corporation (NASDAQ:KLAC) as of June 30, with a massive $558.37 million stake.
In its Q1 2022 investor letter, Vltava Fund mentioned KLA Corporation (NASDAQ:KLAC). Here is what the firm had to say:
“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 nano-electronics 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.”
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Disclosure: None. 10 Stocks to Buy According to Kevin McCarthy’s Breakline Capital is originally published on Insider Monkey.
