In this article, we discuss the 10 tech stocks that hedge funds are buying despite rising interest rates. If you want to read about some tech stocks that hedge funds like, go directly to 5 Tech Stocks Hedge Funds are Buying Despite Rising Interest Rates.
The stock market in the United States has been reeling from the twin pressures created by four-decade high inflation numbers and a slowdown in the economy that has shrunk the GDP for two consecutive quarters. The tech sector has been one of the worst-hit in this chaos as investors pull money from risky firms into more value-oriented businesses. Recent statements from Jerome Powell, the chairman of the Federal Reserve, regarding a plan to continue with rate hikes in a bid to stem the rate of rising prices has increased the pressure on tech stocks.
Some of the prominent names affected by this crisis include Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG). The benchmark indexes, like the S&P 500 and the tech-heavy NASDAQ Composite, are all trading lower compared to their 2021 highs. The former is down more than 17% year-to-date while the latter is down over 25%. Even the Dow Jones Industrial Average is down by nearly 13% year-to-date, an indicator that technology has permeated into every aspect of human society.
On August 29, Fed chief Powell told central bankers at the Jackson Hole Economic Symposium in Wyoming that he would act forcefully to control inflation though it would result in some pain for households and businesses. Investors across Wall Street have voiced concern over this decision of the Fed, bemoaning that aggressive rate hikes would falter economic growth and lead to a recession. These recession fears have created mouth-watering valuations in the tech sector that even hedge funds are taking advantage of.
Our Methodology
The companies that operate in the tech sector and witnessed an increase of at least 10 in the number of hedge fund holders in the second quarter of 2022, compared to data for the first quarter of the year, were selected for the list. The business fundamentals of these firms and the latest updates related to them are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Tech Stocks Hedge Funds are Buying Despite Rising Interest Rates
10. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders in Q2 2022: 68
Number of Hedge Fund Holders in Q1 2022: 47
Warner Bros. Discovery, Inc. (NASDAQ:WBD) operates as a media firm. The firm provides content across various distribution platforms in approximately 50 languages across the globe. As streaming takes over TV viewing, the company is pivoting to the digital realm as well. The firm has grabbed the attention of investors in recent months as its cash flows increase. This is because the cash flows of competitors like Netflix, which are also expensive in relation to the share price, have declined.
On August 23, Citi analyst Jason Bazinet maintained a Buy rating on Warner Bros. Discovery, Inc. (NASDAQ:WBD) stock and lowered the price target to $21 from $29, noting the firm offered a direct-to-consumer pivot to investors.
At the end of the second quarter of 2022, 68 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in Warner Bros. Discovery, Inc. (NASDAQ:WBD), up from 47 in the previous quarter worth $790 million.
In addition to Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Warner Bros. Discovery, Inc. (NASDAQ:WBD) is one of the growth stocks that elite investors are monitoring.
In its Q2 2022 investor letter, Smead Capital Management, an asset management firm, highlighted a few stocks and Warner Bros. Discovery, Inc. (NASDAQ:WBD) was one of them. Here is what the fund said:
“Leading the downside were stocks we own tied to any economic optimism. Warner Bros. Discovery, Inc. (NASDAQ:WBD) suffered selling from AT&T (T) shareholders disposing of it upon distribution of the shares in the merger. We have been too optimistic about how long it would take for these uninterested parties to sell. Macerich (MAC) suffered from fears of what a recession and higher interest rates would do to their business, disregarding the recovery in the Class “A” mall space since 2020.”
9. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders in Q2 2022: 55
Number of Hedge Fund Holders in Q1 2022: 43
NXP Semiconductors N.V. (NASDAQ:NXPI) makes and sells various products related to semiconductors. On July 25, the company posted earnings for the second quarter of 2022, reporting earnings per share of $2.53, beating market estimates by $0.10. The revenue over the period was $3.3 billion, up over 27% compared to the revenue over the same period last year and beating analyst estimates by $40 million. The firm said it expected third quarter revenue to be in the range of $3.3 billion to 3.5 billion versus consensus estimates of $3.3 billion.
On July 27, investment advisory Mizuho maintained a Neutral rating on NXP Semiconductors N.V. (NASDAQ:NXPI) stock and lowered the price target to $200 from $205. Analyst Vijay Rakesh issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in NXP Semiconductors N.V. (NASDAQ:NXPI), with 925,679 shares worth more than $137 million.
In its Q1 2022 investor letter, Sound Shore Management, an asset management firm, highlighted a few stocks and NXP Semiconductors N.V. (NASDAQ:NXPI) was one of them. Here is what the fund said:
“Similarly, analog chip supplier NXP Semiconductors N.V. (NASDAQ:NXPI) declined even though the company reported above consensus revenue growth. A leading chip maker for infrastructure and automotive applications, we view NXP Semiconductors N.V. (NASDAQ:NXPI) as a “new industrial,” uniquely positioned to benefit from increased chip content per application/vehicle. This includes electric and autonomous vehicles and more broadly, connectivity and the internet of things. We added the stock to the portfolio during the volatile fourth quarter of 2018 at just 10 times earnings. Today, NXP is still valued at a very reasonable 14 times earnings.”
8. Roper Technologies, Inc. (NYSE:ROP)
Number of Hedge Fund Holders in Q2 2022: 48
Number of Hedge Fund Holders in Q1 2022: 38
Roper Technologies, Inc. (NYSE:ROP) provides software, engineered products, and related solutions. On August 9, the company announced that Aderant, a subsidiary of the firm, would be purchasing viGlobal. The latter is one of the top tier law firms and is a provider of people management software in the professional services market. The purchase is part of a larger plan by the firm to expand a product suite that aims to help law firms run better businesses across the board.
On July 26, Cowen analyst Joseph Giordanao maintained an Outperform rating on Roper Technologies, Inc. (NYSE:ROP) stock and lowered the price target to $500 from $545, citing the recent divestments as well as the compression of market multiples.
At the end of the second quarter of 2022, 48 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Roper Technologies, Inc. (NYSE:ROP), up from 38 in the previous quarter worth $2 billion.
In its Q2 2022 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and Roper Technologies, Inc. (NYSE:ROP) was one of them. Here is what the fund said:
“Consistent with that approach, portfolio activity among our long holdings tilted toward purchases. We added to almost half our holdings by varying degrees, and we were pleased to initiate new positions in Roper Technologies, Inc. (NYSE:ROP) at attractive prices. Originally an industrial equipment manufacturer, Roper has successfully evolved into a provider of software and technology services. (Investors can find an in-depth discussion of our Roper Technologies investment thesis in colleague Barton Hooper’s November 2021 “Analyst Corner” feature.) The business generate significant free cash flow, possess strong competitive positions, and have excellent management teams with demonstrated acquisition records.”
7. NCR Corporation (NYSE:NCR)
Number of Hedge Fund Holders in Q2 2022: 47
Number of Hedge Fund Holders in Q1 2022: 36
NCR Corporation (NYSE:NCR) provides software and related services. On July 27, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $0.71, beating market estimates by $0.11. The revenue over the period was $2 billion, up 19% compared to the revenue over the same period last year and beating estimates by $20 million. Michael Hayford, the CEO of the firm, said during the earnings call that the firm had done an excellent job executing in a difficult macro environment.
NCR Corporation (NYSE:NCR) stock has gained recently on the back of reports that Veritas Capital, a privater equity firm, is considering a takeover of the company. Per reports, several large banks are said to have committed financing for an acquisition.
Among the hedge funds being tracked by Insider Monkey, California-based investment firm Engaged Capital is a leading shareholder in NCR Corporation (NYSE:NCR), with 4.4 million shares worth more than $138 million.
6. Lumen Technologies, Inc. (NYSE:LUMN)
Number of Hedge Fund Holders in Q2 2022: 42
Number of Hedge Fund Holders in Q1 2022: 30
Lumen Technologies, Inc. (NYSE:LUMN) operates as a technology and communications firm. On August 16, the company announced that it was launching a new on-demand edge solution. The solution would give businesses that use Lumen tech access to on-demand compute, storage, and secure networking to run their applications. Earlier in August, the firm missed market estimates on earnings per share by $0.11 in earnings for the second quarter of 2022 as profits slid 31% due to macro uncertainty.
On August 5, JPMorgan analyst Philip Cusick reinstated coverage of Lumen Technologies, Inc. (NYSE:LUMN) stock with an Underweight rating and a price target of $10, forecasting continued revenue and EBITDA declines in 2023 for the firm.
At the end of the second quarter of 2022, 42 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Lumen Technologies, Inc. (NYSE:LUMN), compared to 30 in the preceding quarter worth $904 million.
Along with Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Lumen Technologies, Inc. (NYSE:LUMN) is one of the growth stocks that elite investors are buying.
In its Q1 2022 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and Lumen Technologies, Inc. (NYSE:LUMN) was one of them. Here is what the fund said:
“Lumen – Lumen Technologies, Inc. (NYSE:LUMN) reported weak organic revenue growth and guided more weakness for 2022. We expect revenue growth to kick back in towards the end of 2022, and the huge FCF coupon helped offset value decline from the weaker guidance. The other factor weighing on the stock price was largest shareholder Temasek’s partial sale of its 10% position in the quarter, creating uncertainty and a share price overhang. We have a 13D filed and continue to urge the company to take steps to address the significant price-to-value gap, including continued share buybacks.”
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Disclosure. None. 10 Tech Stocks Hedge Funds are Buying Despite Rising Interest Rates is originally published on Insider Monkey.
