Editor’s Note: Related tickers: Cisco Systems, Inc. (NASDAQ:CSCO), Seagate Technology PLC (NASDAQ:STX), NVIDIA Corporation (NASDAQ:NVDA), Activision Blizzard, Inc. (NASDAQ:ATVI), Apple Inc. (NASDAQ:AAPL)
We track quarterly 13F filings from hundreds of hedge funds and other notable investors, including Joel Greenblatt; the former manager of Gotham Capital, Greenblatt has since become better known as the author of investing books (including You Can Be A Stock Market Genius) and the founder of the Value Investors Club. While our primary use of 13Fs is in our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year), we can also review top managers’ picks in a number of areas. Read on for our thoughts on Greenblatt’s five largest tech picks as of the end of March and compare them to previous filings.
According to the 13F, Greenblatt owned over 770,000 shares of Cisco Systems, Inc. (NASDAQ:CSCO) at the beginning of April. The third quarter of Cisco Systems, Inc. (NASDAQ:CSCO)’s fiscal year ended in April; the company’s revenue rose 5% compared to the same period in the previous fiscal year, with net income coming in 15% higher. With the stock actually looking somewhat cheap- its trailing and forward earnings multiples are 14 and 12 respectively- it looks like a potential value play to us. Billionaire Ken Fisher’s Fisher Asset Management reported a position of over 36 million shares in Cisco Systems, Inc. (NASDAQ:CSCO) on its own 13F (find Fisher’s favorite stocks).
NVIDIA Corporation (NASDAQ:NVDA) was another of the investor’s tech picks, with the filing disclosing ownership of 1.2 million shares of the manufacturer of graphics chips. We’re also concerned that NVIDIA Corporation (NASDAQ:NVDA) could be at risk from changes in the computing industry, as consumers shift from PCs to tablets and smartphones. While bottom-line performance has actually been quite strong, analysts are projecting lower EPS in 2014 than on a trailing basis with the forward P/E being 18. Renaissance Technologies, whose founder Jim Simons is now a billionaire, owned 1.7 million shares at the end of Q1 (see Renaissance’s stock picks).
Greenblatt seems fairly confident that the decline of the PC has been overstated: another of his tech picks was PC and video game company Activision Blizzard, Inc. (NASDAQ:ATVI). The stock trades at 14 times earnings, whether we consider trailing results or analyst consensus for 2014, though we’d note that in the electronic game industry earnings tend to be volatile on a year-to-year (and certainly a quarter-to-quarter) basis thanks to irregular schedules for releases of games, particularly for the hit games which have the largest effect on financials. Millennium Management, managed by billionaire Israel Englander and his team, increased its stake in Activision Blizzard, Inc. (NASDAQ:ATVI) to a total of 3.6 million shares.
The filing showed Apple Inc. (NASDAQ:AAPL) as Greenblatt’s fifth largest tech pick at about 32,000 shares, after an 18% increase since the beginning of the year. Apple Inc. (NASDAQ:AAPL) regained its place as the most popular stock among hedge funds during the first quarter of 2013 (check out the full top ten list from our database). While earnings were down 18% in its fiscal Q3 (which ended in March) versus a year earlier, we’re interested in at least watching the stock for further developments. Markets are pricing in continued declines in net income, with a trailing P/E of 11 despite Apple Inc. (NASDAQ:AAPL)’s large cash hoard.
Disclosure: I own no shares of any stocks mentioned in this article.
