In this article, we discuss the 5 best tech stocks to buy now according to Totem Point Management. If you want to read our comprehensive analysis of Totem Point Management’s history, investment philosophy, and hedge fund performance, go directly to 10 Best Tech Stocks to Buy Now According to Totem Point Management.
5. Alphabet Inc. (NASDAQ:GOOG)
Totem Point Management’s Stake Value: $11,967,000
Percentage of Totem Point Management’s 13F Portfolio: 7.79%
Number of Hedge Fund Holders: 156
The class C shares of Alphabet Inc. (NASDAQ:GOOG) are first up on the second part of our list of Totem Point Management’s top tech stock picks. The fund owned 4,490 of them after trimming its position by 16% during the third quarter. Alphabet is the most popular stock among the hedge funds tracked by Insider Monkey, with 356 funds owning either one or both of the tech giant’s class of shares.
It’s hard to imagine Alphabet Inc. (NASDAQ:GOOG) being considered under-appreciated given its aforementioned popularity among top money managers, but that’s precisely what Weitz Investment Management called the company in its Q4 2021 investor letter. The fund noted that both Alphabet and Meta Platforms, Inc. (NASDAQ: FB) have had their valuations impacted due to regulatory scrutiny. While the fund considers the threat of punitive action against the companies to be a very real one, it can’t foresee any action taken against them to be so damaging as to characterize their five-year outlooks as anything but well above-average.
Alphabet Inc. (NASDAQ:GOOG) beat revenue expectations in Q4 by a healthy $3 billion, growing sales by a hefty 32% year-over-year to $75.3 billion, which resulted from strong online consumer activity and advertiser spending. Google Cloud also continued to outperform the company’s top-line growth, growing revenue by 45% during the quarter to $4.5 billion.
Weitz Investment Management, an investment management firm, published its “Value Fund” fourth quarter 2021 investor letter and mentioned Alphabet Inc. (NASDAQ:GOOG). Here‘s what the fund said:
“A couple of other platform companies deserve a mention as well. Meta Platforms and Alphabet have both been under regulatory scrutiny that has affected their valuations. The threats of punitive action are real, but we have tried to be imaginative about how onerous any fines, rule changes or forced divestitures might be, and we believe that the fiveyear outlook for each is well above average under almost any scenario. So, we include these two in the list of the under-appreciated.”
4. Marvell Technology Group Ltd. (NASDAQ:MRVL)
Totem Point Management’s Stake Value: $12,243,000
Percentage of Totem Point Management’s 13F Portfolio: 7.97%
Number of Hedge Fund Holders: 45
Totem Point cut the size of its Marvell Technology Group Ltd. (NASDAQ:MRVL) position by 23% during Q3, to 202,994 shares, though it remained the fund’s favorite chipmaker among a slew of other chipmakers found in its 13F portfolio.
One of the 5 Best Stocks to Buy for 2022 According to Analysts, Marvell Technology Group Ltd. (NASDAQ:MRVL) was given price hikes by several prominent analysts following its Q3 results. The company ranked as Needham’s top semiconductor stock pick, with the firm predicting 30% organic revenue growth for the company in the calendar year 2022, outpacing all of its large-cap peers thanks in part to its focus on the fastest-growing markets. Marvell Technology Group Ltd. (NASDAQ:MRVL) also ranks as a top semiconductor stock pick by JPMorgan, which believes the market is discounting the industry’s strong fundamentals as well as its tight supply chain dynamics.
3. Microsoft Corporation (NASDAQ:MSFT)
Totem Point Management’s Stake Value: $12,978,000
Percentage of Totem Point Management’s 13F Portfolio: 8.45%
Number of Hedge Fund Holders: 250
Totem Point was trimming many of its positions during Q3, ostensibly so it could reinvest that money in its one big purchase of the quarter, Microsoft Corporation (NASDAQ:MSFT), in which the fund initiated a new position of 46,036 shares valued at $12.98 billion as of September 30. A net total of 13 hedge funds tracked by Insider Monkey added MSFT to their 13F portfolios in Q3 following two quarters of declining hedge fund ownership.
Microsoft Corporation (NASDAQ:MSFT) has greatly outperformed the market over the past five years, gaining over 350%. Despite that, there is undoubtedly room for sustained share price appreciation given its impressive revenue and earnings growth, the former hitting 20% in Q2 of the company’s fiscal 2022 year, while operating profit grew by 24%.
Microsoft Corporation (NASDAQ:MSFT)’s intelligent cloud services have grown to become the company’s biggest segment and its sales growth continues to outpace Microsoft’s overall revenue growth. With Microsoft’s margins also expanding, the company is poised to continue growing earnings by leaps and bounds for as long as it can maintain 20%+ revenue growth, which could be for several years yet.
Alger, an investment management firm, published its “Alger Spectra Fund” fourth quarter 2021 investor letter and mentioned Microsoft Corporation (NASDAQ:MSFT). Here‘s what the fund said:
“Class A shares of the Alger Spectra Fund underperformed the Russell 3000 Growth Index during the fourth quarter of 2021. Microsoft Corp. was among the top contributors to performance. Microsoft is a Positive Dynamic Change beneficiary of corporate America’s transformative digitization. Microsoft’s CEO believes technology spending as a percent of GDP is likely to jump from about 5% today to 10% in a few years and that Microsoft will continue to take market share Microsoft’s enterprise cloud product, Azure, is rapidly growing and accruing market share. Microsoft reported that Azure grew 50% inthe past quarter. This high unit volume growth is a primary driver of the company’s higher share price, but strong operating execution has enabled margin expansion that has also helped to increase forward earnings estimates. We believe Microsoft’s subscription-based software offerings and cloud computing services have a durable growth profile because they enhance customers’ growth initiatives and help them to diminish costs. Additionally, investors appreciate Microsoft’s strong free cash flow generation and its return of cash to shareholders in the form of dividends and share repurchases.”
2. Bill.com Holdings, Inc. (NYSE:BILL)
Totem Point Management’s Stake Value: $14,880,000
Percentage of Totem Point Management’s 13F Portfolio: 9.68%
Number of Hedge Fund Holders: 65
Bill.com Holdings, Inc. (NYSE:BILL) ranks second on the list, as Totem Point owns 55,742 BILL shares as of September 30 valued at $14.88 million. Despite unloading 34% of its holding during Q3, Bill.com now accounts for 9.69% of the value of Totem Point’s 13F portfolio compared to 7.84% a quarter earlier thanks to shares gaining a hefty 45% during Q3.
Bill.com Holdings, Inc. (NYSE:BILL)’s shares hit a recent rough patch, however, tumbling by nearly 25% in January as growth stocks were widely sold off by investors. Shares have taken a sharp turn back up in February after the company’s cloud-based business finance software propelled it to enormous 190% revenue growth during the company’s latest quarter, outpacing the already impressive 150% growth from a quarter earlier. After dropping to as low as 35x, its price-to-sales ratio has rebounded to once again sit above 50x.
As with many growth stocks, Bill.com Holdings, Inc. (NYSE:BILL) is not yet profitable, which is likely to leave its shares at the mercy of similar market dynamics to what they experienced in January as overall economic growth slows and interest rates rise.
Alger, an investment management firm, published its “Alger Mid Cap Focus Fund” fourth quarter 2021 investor letter and mentioned Bill.com Holdings, Inc. (NYSE:BILL). Here‘s what the fund said:
“Bill.com Holdings, Inc., was among the top detractors from performance. Bill.com provides cloud-based software solutions that simplify, digitize, and automate complex back-office financial operations for small and medium size businesses. Its software helps customers to generate and process invoices, streamline approvals, send and receive payments, synchronizing data with their accounting system and manage their cash.”
1. NortonLifeLock Inc. (NASDAQ:NLOK)
Totem Point Management’s Stake Value: $15,253,000
Percentage of Totem Point Management’s 13F Portfolio: 9.93%
Number of Hedge Fund Holders: 34
NortonLifeLock Inc. (NASDAQ:NLOK) remained Totem Point’s top stock pick for the seventh straight quarter despite the fund selling off 11% of its NLOK holding during the third quarter. That left it with 602,881 shares worth $15.25 million at the end of Q3. While Totem Point has tremendous conviction in NortonLifeLock, overall hedge fund ownership has declined by 29% since the end of Q1 2019.
NortonLifeLock Inc. (NASDAQ:NLOK), which was formerly known as Symantec, supplies cybersecurity and infrastructure software to 80 million users in more than 150 countries. During Q3 of the company’s 2022 fiscal year, Norton grew revenue and bookings by 12% and 11% respectively, while earnings further outpaced both, coming in at 16%. The company’s Norton 360 platform hit 14 million customers during the quarter, up by more than 1 million since May 2021, while retention rates remained above 85%.
NortonLifeLock Inc. (NASDAQ:NLOK) announced last week that it now anticipates closing its pending merger with antivirus application developer Avast later this month, well ahead of the previously anticipated closing of mid-2022. The deal will add a sizable 435 million customers under Norton’s umbrella of cybersecurity services.
You can also take a peek at 10 Best Healthcare Dividend Stocks and Top 15 Dividend Stocks With Upside Potential.
