In this article, we discuss the top 10 tech stocks to buy according to billionaire Philippe Laffont. To skip the detailed history and analysis of Coatue Management’s portfolio, go directly to 5 Tech Stocks to Buy According to Billionaire Philippe Laffont.
Phillipe Laffont, a famous venture capital investor, started Coatue Management in 1999. He started working as an analyst for McKinsey and Company after receiving his Master’s in Computer Science from the Massachusetts Institute of Technology. Laffont is a major tech investor and his latest portfolio shows an overwhelming inclination towards the technology sector.
Phillipe Laffont believes in long-term investments and firmly believes in tech stocks. Nearly 64% of his hedge fund portfolio is comprised of tech stocks, followed by consumer goods at slightly over 13.5%. Talking at the Forbes and Shook Research Top Advisors Summit in Las Vegas in February 2018, the billionaire said:
“I truly believe that in every portfolio you need to ask yourself what is going to be more relevant 5 to 10 years versus today[…]The most interesting trend is that technology, which used to be mostly software and semiconductors and obscure things, it’s coming everywhere, it’s the future of cars and the future of transportation and every sector.”
For the current year, the technology sector has been doing remarkably well. The companies entering the new generative AI space have been seen to do better than others. Meta Platforms, Inc. (NASDAQ:META) is up over 100% year to date and Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc. (NASDAQ:GOOG) stocks have also fared well and are up 31.00% and 35.61% YTD, respectively. In an investor note, Wedbush analyst Dan Ives said:
“While the tech skeptics will continue to lay their cards on valuations, Fed narrative, next shoe to drop thesis (debt ceiling the latest fear), and fire in a crowded theater rinse and repeat thinking: we believe overall the set-up is for the tech sector to be up another 10%-12% the rest of the year.”
Phillipe Laffont’s Q1 Bets
In the last decade, Coatue Management has gained over 191.3% and has returned 18.58% in the last 12 months. In the first quarter of 2023, the hedge fund had $15.043 billion in managed 13F securities compared to $8.9 billion in the previous quarter. Over 64% of its value was concentrated in the top 10 stocks. The fund added 23 new stocks to its portfolio and increased holdings in 36 stocks. The most notable increase in holdings was made in QuantumScape Corporation (NYSE:QS), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and The Walt Disney Company (NYSE:DIS) at 5700%, 3255%, and 1908%, respectively. In addition to that, Phillipe Laffont sold out of 21 stocks, including Broadcom Inc. (NASDAQ:AVGO) and Bath & Body Works, Inc. (NYSE:BBWI).
The top three stocks in Coatue Management’s portfolio in the first quarter were Meta Platforms, Inc. (NASDAQ:META), NVIDIA Corporation (NASDAQ:NVDA), and Tesla, Inc. (NASDAQ:TSLA).
Our Methodology
For this article, we picked the top 10 technology sector stocks from Coatue Management’s first quarter 2023 13F portfolio. We listed them in the ascending order of their value in the hedge fund’s portfolio.
10 Tech Stocks to Buy According to Billionaire Philippe Laffont
10. Lam Research Corporation (NASDAQ:LRCX)
Coatue Management’s Stake: $438.699 million
Lam Research Corporation (NASDAQ:LRCX) is a semiconductor company that supplies wafer fabrication equipment. The company is currently trading at a PE ratio of 15.5x which is quite low compared to the semiconductor industry average of nearly 21x.
Coatue Management was bullish on Lam Research Corporation (NASDAQ:LRCX) in the first quarter and increased its holdings in the company by 73%. The company covered 2.91% of the hedge fund’s portfolio with 827,547 shares at a combined value of $438.699 million.
9. Alphabet Inc. (NASDAQ:GOOGL)
Coatue Management’s Stake: $518.99 million
Alphabet Inc. (NASDAQ:GOOGL) is the parent company of Google and its GOOGL ticker symbol represents the Class A shares of the company. The Class A shareholders have voting rights while the Class C shareholders do not.
On March 23, Jefferies analysts led by Brent Thill reiterated a Buy rating on Alphabet Inc. (NASDAQ:GOOGL)’s shares and raised the price target for the company to $150 from $130. The analyst is quite positive about the company’s AI prospects and believes that Alphabet Inc. (NASDAQ:GOOGL) is one of the companies with the least AI-related risk.
Coatue Management increased its stake in Alphabet Inc. (NASDAQ:GOOGL) by a whopping 1287% to over 5 million shares worth almost $519 million, representing 3.45% of its portfolio.
8. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Coatue Management’s Stake: $548.898 million
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest pure-play semiconductor foundry and was the first Taiwanese company to be listed on the NYSE.
Hedge funds were quite bullish on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in the first quarter of 2023. The number of hedge fund holders of the company increased from 86 in Q4 2022 to 102 in Q1 2023. Coatue Management also initiated its position in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in the same quarter with 5.9 million shares worth $548.898 million.
Wedgewood Partners made the following comment about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2023 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) contributed to performance as revenues grew +27% (in USD) from the year ago quarter. Despite this strength, the Company’s customers have seen near-term weakness in demand due to Covid-19 normalization as well as the launch timing of new products. However, the Company is well-positioned to continue a long-term growth trajectory because its leading-edge capacity is being absorbed by high-performance computing applications, particularly at nontraditional integrated circuit (IC) design houses, such as Apple, Alphabet and Amazon, which have become IC-design powerhouses over the past decade. Importantly, the Company’s aggressive investment in leading-edge equipment, tight development with fabless IC designers, and embrace of open development libraries, should continue to foster a superior competitive position and attractive long-term growth.”
7. Amazon.com, Inc. (NASDAQ:AMZN)
Coatue Management’s Stake: $571.172 million
Amazon.com, Inc. (NASDAQ:AMZN) is an American tech conglomerate and is one of the world’s most valuable companies. It is one of the American Big Five technology companies. The company stock is up by 36% year to date at the time of writing.
In the first quarter of 2022, Amazon.com, Inc. (NASDAQ:AMZN) stock was held by 243 hedge funds, valued at $25.76 billion, and Harris Associates was the most prominent stakeholder in the quarter with 22.869 million shares worth $2.36 billion. Amazon.com, Inc. (NASDAQ:AMZN) represented 3.79% of Coatue Management’s portfolio with nearly 5.53 million shares worth $571.172 million.
Polen Capital made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2023 investor letter:
“We raised our position in Amazon.com, Inc. (NASDAQ:AMZN). During 2022, Amazon’s business experienced revenue deceleration from pre-pandemic levels combined with higher expenses resulting from inflation pressures as well as costs in their fulfillment segment. The fulfillment costs were set in motion during the pandemic when demand overwhelmed their network. More recently, AWS – along with Azure and GCP – experienced a deceleration in growth as customers globally feel pressure to optimize their usage in this tough macroeconomic environment. We don’t expect this deceleration to persist for the long-term given the secular trend of companies transitioning to the cloud.
For long-term investors, we believe this combination provides an opportunity and that Amazon is now poised to re-accelerate revenue growth, of which we are already seeing signs, while expanding margins and free cash flow. With respect to margins, given the fast growth in AWS and advertising, the latter generating almost $40 Billion in sales and growing at greater than 30% recently, the resulting mix-shift could result in operating margins of 10% or higher over time. This level would represent a 5x increase over 2022 levels. In sum, we are capitalizing on what we believe is arguably one of the most competitively advantaged business in the world, which is growing well, poised to accelerate that growth and expand margins, and is trading at an attractive price.”
6. Adobe Inc. (NASDAQ:ADBE)
Coatue Management’s Stake: $601.24 million
Adobe Inc. (NASDAQ:ADBE) is an American computer software company headquartered in California. The company has been covered by 23 Wall Street analysts and 10 of them maintain a Buy or Overweight rating while 13 analysts are keeping a Hold rating on the company stock.
Polen Capital made the following comment about Adobe Inc. (NASDAQ:ADBE) in its Q1 2023 investor letter:
“One area we are watching regarding Alphabet and Adobe Inc. (NASDAQ:ADBE) is AI systems and their capabilities, including generative AI. Interestingly, both Adobe and Alphabet could see benefits or threats from the emergence of generative AI and large language models (LLMs). Both companies already use generative AI to the benefit of their users in anticipating how content creators edit their work (Adobe) and in how search results are anticipated and generated (Google). At the same time, breakthrough technologies like AI can open the door to additional competition and/or impact a company’s profitability levels. We now see AI systems others are developing, including LLMs and generative AI offerings, that could be more competitive in the future. While we think it remains early days for ChatGPT and the capabilities of these types of LLMs and generative AI programs like DALL-E, the technology seems to be progressing at a fast rate and will at least require a strong response from incumbents.
As of now, we believe Alphabet and Adobe are leaders in their own right in these areas and have a clear path to improving their existing offerings with AI advancements, which would allow them to be net beneficiaries of AI. There are also significant barriers to building leading AI offerings in these areas. As a result, our position sizes in Adobe and Alphabet remain sizeable. For Adobe, the status of its pending $20 billion-plus Figma acquisition is also uncertain. There is a good chance, in our view, that it will be blocked by regulators, which would mean the future opportunity to expand its offerings to the developer community (beyond designers) may not occur.”
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Disclosure. None. 10 Tech Stocks to Buy According to Billionaire Philippe Laffont is originally published on Insider Monkey.
