In this article, we discuss the 10 tech stocks to buy before the market rally begins. If you want to read about some more tech stocks to buy before the market rally begins, go directly to 5 Tech Stocks to Buy Before Market Rally Begins.
The brief rally in technology stocks over the past few weeks has helped boost investor confidence in the growth sector that has been hammered in the past year or so due to rising inflation and soaring interest rates. The rally has even invited optimism around the resilience of the industry to a recessionary environment. Gains in tech stocks like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) have helped the NASDAQ Composite post a 16% rise in the past month.
Jon Guinness, the co-manager of the Fidelity International American Fund, recently told news platform Financial Times, that the spending on the tech sector will remain “healthy” even as companies cancel or postpone projects. Guinness touted the importance of the tech industry to a variety of sectors to make his point, claiming that electric vehicles were “computers on wheels” and “cloud computing was a development of real substance” as more firms adopted it, underling that the “tectonic shifts driving tech adoption” were still constant.
Wedbush analyst Dan Ives, one of the biggest tech bulls in the finance world, has also backed tech stocks to rally even amid a slowing economy, noting that “the fourth Industrial Revolution tech trends are not going away due to a slower near-term period of growth over the next 6 to 9 months”. Even amid the bulls, some are cautioning for a more balanced approach. Sam Stovall, the chief investment strategist at CFRA Research, has termed the recent rally as a “bear market bounce rather than the start of a new bull market”.
Our Methodology
The companies that operate in the tech sector and have upcoming growth catalysts were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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Tech Stocks to Buy Before Market Rally Begins
10. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders: 19
Robinhood Markets, Inc. (NASDAQ:HOOD) owns and runs a financial services platform. The firm appears to have the potential to gain in the second half of 2022 as it has announced that it will shift the core growth strategy to cater to the needs of the most active users from the previously announced plan to gain as many users as possible. The acquisition of a more than 7% stake in Robinhood Markets, Inc. (NASDAQ:HOOD) by Sam Bankman-Fried, who owns FTX, has also helped boost the positive sentiment around the stock.
On August 12, Deutsche Bank analyst Brian Bedell maintained a Hold rating on Robinhood Markets, Inc. (NASDAQ:HOOD) stock and raised the price target to $10 from $9, noting that alternative asset managers were best positioned for upside in the second half of 2022.
At the end of the first quarter of 2022, 19 hedge funds in the database of Insider Monkey held stakes worth $947 million in Robinhood Markets, Inc. (NASDAQ:HOOD), compared to 34 in the previous quarter worth $1.5 billion.
Just like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Robinhood Markets, Inc. (NASDAQ:HOOD) is one of the tech stocks that hedge funds are monitoring ahead of a possible market rally in late 2022.
In its Q4 2021 investor letter, Claret Asset Management, an asset management firm, highlighted a few stocks and Robinhood Markets, Inc. (NASDAQ:HOOD) was one of them. Here is what the fund said:
“Robinhood Markets, Inc. (NASDAQ:HOOD) went public at $38 a share at the end of July of this year. After a oneday decline of 8%, it proceeded to rise to a peak of $85 in a matter of 4 days before settling down around $40 in September. Then, we found out that Robinhood Markets, Inc. (NASDAQ:HOOD) does not appear to understand the margin rules that apply to their client’s trades… and got fined by the Securities Exchange Commission. As of today, Robinhood Markets, Inc. (NASDAQ:HOOD) is trading below $20, at 57 times earnings, approximately half of its IPO price. Caveat emptor… Buyer beware.”
9. DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 27
DraftKings Inc. (NASDAQ:DKNG) is a digital entertainment and gaming firm. On August 5, the company posted earnings for the second quarter of 2022, reporting a revenue of more than $465 million, up over 56% compared to the revenue over the same period last year and beating analyst expectations by $28 million. The firm also announced that Monthly Unique Payers increased to 1.5 million average monthly B2C customers. This represents an increase of 30% compared to the second quarter of 2021.
On August 8, Morgan Stanley analyst Ed Young maintained an Overweight rating on DraftKings Inc. (NASDAQ:DKNG) stock and lowered the price target to $30 from $31, noting that the management of the firm was focused on narrowing losses and there was increased confidence on execution after strong earnings results in the second quarter.
At the end of the first quarter of 2022, 27 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in DraftKings Inc. (NASDAQ:DKNG), compared to 34 the preceding quarter worth $1.3 billion.
In its Q3 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and DraftKings Inc. (NASDAQ:DKNG) was one of them. Here is what the fund said:
“Shares of DraftKings Inc. (NASDAQ:DKNG) fell in the quarter, as stocks of online gaming companies were under pressure. Sports betting and i-gaming are rolling out with great fanfare and success across the country; however, investors seem concerned about competition and margins. Most participants are spending heavily on marketing and promotions, which is cutting into margins. We see this as worthy investment in customer acquisition at a moment in time when revenues are just building. We continue to believe that online sports betting and gaming will be enormous industries, that DraftKings Inc. (NASDAQ:DKNG) will be a leading player. We think the business will have high margins as it matures. We believe we are underwriting the business conservatively and see much upside in the long term.”
8. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 33
UiPath Inc. (NYSE:PATH) provides robotic process automation services. On August 8, the company announced that it would be partnering with business solutions firm Accelirate. The partnership will give the solutions firm a chance to enhance the go-to-market UiPath managed services practice. This practice has several advantages compared to peers, like lower total cost of ownership and turnkey automation that simplifies the implementation strategy of a business. UiPath has also recently purchased a natural language processing company.
On July 7, Canaccord analyst Kingsley Crane assumed coverage of UiPath Inc. (NYSE:PATH) stock with a Buy rating and a price target of $25, expressing confidence in the ability of the firm to leverage automation in a broad set of use cases.
At the end of the first quarter of 2022, 33 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in UiPath Inc. (NYSE:PATH), compared to 28 in the preceding quarter worth $2.5 billion.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and UiPath Inc. (NYSE:PATH) was one of them. Here is what the fund said:
“We participated in the IPO of UiPath, a developer of software for robotic process automation that uses AI, natural language processing and design to streamline complex processes across a variety of technology environments. The company is an industry leader with a superior solution for leveraging software to optimize workloads. Organizations around the world are beginning to understand the power of automation, with momentum picking up toward fully automating business processes, a $60 billion market today that could grow to $200 billion or more by 2030. UiPath has a unique pricing model, broad partner ecosystem and thoughtful management team supporting one of the strongest growth profiles in technology. Risks we are watching include a partial cloud transition ahead and increased competition from larger software platforms over time.”
7. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 54
Snap Inc. (NYSE:SNAP) is a camera company headquartered in California. In mid-July, the company announced that the popular Snap application would soon be launching for personal computers after years of being a mobile-only platform. The app, which will be named Snapchat for Web, will be accessible through the Chrome browser of Google and will let users engage with a variety of different functions. This will allow the firm to tap into new audience and gain ad-revenue in the latter half of 2022.
On July 22, MKM Partners analyst Rohit Kulkarni maintained a Buy rating on Snap Inc. (NYSE:SNAP) stock and lowered the price target to $17 from $26, noting that the forward-looking visibility of the firm remains challenging.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Snap Inc. (NYSE:SNAP), with 18 million shares worth more than $664 million.
In its Q4 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Snap Inc. (NYSE:SNAP) was one of them. Here is what the fund said:
“Snap Inc. (NYSE:SNAP) is the leading social network among teens and young adults in North America and a growing number of overseas markets, including Western Europe and India. Shares fell this quarter on a greater-than anticipated impact from Apple’s new privacy changes for iOS mobile devices. These changes made it more difficult for Snapchat to measure the effectiveness of ads shown on its platform. We believe this is a near-term, industry-wide issue for which Snap Inc. (NYSE:SNAP) is already developing a solution. Longer term, we continue to view Snap Inc. (NYSE:SNAP) favorably as the company sustains its rapid pace of product innovation and expands its premium partnerships with advertisers.”
6. Match Group, Inc. (NASDAQ:MTCH)
Number of Hedge Fund Holders: 55
Match Group, Inc. (NASDAQ:MTCH) is a Texas-based firm that provides dating products. On July 13, the company announced that it would be expanding a partnership with background check service Garbo. The move is part of a larger plan of the firm to increase safety features around the applications it owns. This increase has been approved as the firm estimates that the users on the dating applications are pushing for more in-person meetings and are thus more interested in safety features offered by the applications.
On August 4, Cowen analyst John Blackledge maintained an Outperform rating on Match Group, Inc. (NASDAQ:MTCH) stock and lowered the price target to $100 from $128, noting that Tinder revenue growth was slowing amid macro headwinds.
At the end of the first quarter of 2022, 55 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in Match Group, Inc. (NASDAQ:MTCH), compared to 53 in the preceding quarter worth $2.4 billion.
Alongside Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Match Group, Inc. (NASDAQ:MTCH) is one of the stocks on the radar of elite investors as the tech market begins to recover after a tumble in the first half of 2022.
In its Q4 2021 investor letter, Arch Capital Management, an asset management firm, highlighted a few stocks and Match Group, Inc. (NASDAQ:MTCH) was one of them. Here is what the fund said:
“We are long Match Group, Inc. (NASDAQ:MTCH stock because it is the dominant player in online dating, giving it immense and growing power over the population of single people worldwide. This may seem like a callous way to describe the business, but it is the proper way to look at it from an investment lens.
For those that are unaware, Match Group, Inc. (NASDAQ:MTCH owns every popular online dating property outside of Bumble, Badoo, and Grindr. Its apps and services include Tinder, Hinge, Match.com. BLK, Chispa, and many others…
In conjunction with this letter, we have published a report on Match Group. You can find it here: https://www.archcapitalfund.com/letters”
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Disclosure. None. 10 Tech Stocks to Buy Before Market Rally Begins is originally published on Insider Monkey.
