Amazon.com, Inc. (NASDAQ:AMZN) is one of the faster growing tech stocks of Fisher’s 13F portfolio. Sales should be up 28% in 2013 after an expected advance of 29% in 2012. Driving this robust sales growth and the expected 33% annual long-term earnings growth, will be market share gains from brick-and-mortar retailers and international expansion. Helping to boost its core e-commerce business will be Amazon’s Kindle tablet, which has managed to see robust consumer acceptance, doubling tablet market share in 3Q from 5% (2Q) to 10% according to IDC. Trading at over 140x forward earnings, Amazon is not one of the value plays in the tech industry, but is still a reasonable growth investment.
Microsoft Corporation (NASDAQ:MSFT) is another top tech pick of Fisher’s, but expects somewhat more modest growth, including 8.5% sales growth in FY2013 and 7% in FY2014. Microsoft has a diverse product portfolio driving its growth, which includes Windows 8 and Windows Live. This tech giant is also continuing to seek growth via acquisitions with two recent purchases being StorSimple and PhoneFactor.
Now, it’s clear that Microsoft is looking to rebrand itself with the release of higher growth products, and shares could provide a solid ‘growth at a reasonable price opportunity’ (GARP) as new versions of Windows, Microsoft Office, and its Surface tablet hit the markets. Microsoft trades at one of the lowest P/E ratios (15x) and the lowest forward P/E (8.5x) of Fisher’s top five tech picks.
Last but certainly not least, Google Inc (NASDAQ:GOOG) should see revenues up 38% by the end of this year and 16% in 2013. The weakness in Google’s shares of late includes the integration risk related to its 2012 Motorola acquisition. Although the revenue capabilities of the acquisition remain uncertain, Google’s core business growth remains strong; it set a record for U.S. search engine market share in October, at 66.9% according to comScore.
Motorola will become a greater part of Google’s future growth as it manages to utilize the acquired patent portfolio to protect its Android franchise. Google trades at the upper end of the P/E range for our five stocks at 22x earnings and might be less of a GARP opportunity with a 13.5% expected long-term EPS growth rate. Ken Fisher held over $540 million worth of the stock at the end of last quarter, good for 1.5% of his 13F portfolio. Since the start of the year, Fisher has upped his stake in Google by approximately 3%, in terms of total shares owned.
To recap: we believe that Fisher has found some value opportunities in what is normally a high-growth industry. Fisher’s five tech stocks include a span of various industries, from various technology products to services. Cisco is a large and relatively ‘unsexy’ tech stock that is sometimes underappreciated, and it appears this is still the case given its low P/E. Apple Inc. (NASDAQ:AAPL) has seen unwarranted pressure – down almost 20% over the last three months – that has made it a an even greater value play. Amazon’s stellar growth rate does not make up for the fact that it trades well out of line on a valuation basis. Microsoft and Google are Fisher’s two search providers, with various other segments that can boost revenues higher.
Four of Fisher’s top tech bets are also on our list of tech stocks loved by hedge funds (see our entire Top Ten here).
