We track hedge fund activity in our database of 13F filings, the most recent round of which disclosed many of each fund’s long equity positions in U.S. stocks as of the end of December. Even though this information is a bit out of date, there are still multiple ways for investors to use it. First, we have shown that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year (learn more about our small cap strategy). Second, we can still treat a fund’s top picks in different areas as free ideas which can be researched further if they look to be good values. Here are our brief thoughts on the five largest tech holdings of billionaire Kerr Neilson’s Platinum Asset Management as of the end of December (or see the full list of stocks Platinum reported owning):
The second largest position in the fund’s portfolio was Microsoft Corporation (NASDAQ:MSFT), with Platinum reporting a position of over 13 million shares. Microsoft’s most recent quarter showed little change on either top or bottom line compared to the same period in the previous fiscal year. Analyst expectations imply a forward price-to-earnings multiple of 9, but we would worry that this figure includes a temporary earnings boost from Windows and Office sales. Fellow billionaire Ken Fisher’s Fisher Asset Management owned almost 18 million shares at the end of the fourth quarter (find Fisher’s favorite stocks).
Platinum was also buying Google Inc (NASDAQ:GOOG) and closed 2012 with a total of about 370,000 shares according to the 13F. Google Inc (NASDAQ:GOOG) had been the third most popular stock among hedge funds in the fourth quarter of 2012, according to our database of 13F filings (AIG replaced Apple as the new #1). With the stock price close to $800, Google Inc (NASDAQ:GOOG) is being valued at 15 times consensus earnings for 2014. Those expectations include both earnings growth from the advertising business and from improved efficiencies at Motorola Mobility Holdings, as well as growth of the tablet and smartphone business.
Cisco Systems, Inc. (NASDAQ:CSCO) was another of Neilson’s top picks with the filing disclosing ownership of almost 13 million shares- a small increase from three months earlier. Cisco carries trailing and forward P/Es of 12 and 10, respectively, and in its most recent quarter the company experienced growth in both revenue and earnings compared to the same period in the previous year. As such it is a candidate for value status. Yacktman Asset Management, managed by Donald Yacktman, had over $1 billion invested in Cisco as of the beginning of January (check out Yacktman’s stock picks).
According to the 13F, Platinum added shares of $3.2 billion market cap Chinese advertising and Web services company Sina Corp (NASDAQ:SINA) and at 4.8 million shares the company was the fund’s fifth largest holding by market value. Sina’s share price is down 26% in the last year, and in the fourth quarter of 2012 earnings were down strongly versus a year earlier (sales were up, but only slightly). With the forward earnings multiple being 31, we’d worry that the stock is overvalued. Tiger Cub Robert Karr’s Joho Capital was the next largest shareholder of Sina which we track in our database of filings.
Neilson and his team initiated a position of 1.3 million shares in Baidu.com, Inc. (NASDAQ:BIDU) between October and December. Baidu has been reporting high growth rates of both revenue and earnings, but the market has turned skeptical with the price down 40% in the last year and now the stock trading at only 18 times trailing earnings. We would guess that investors are worried about Chinese macro and the pattern of accounting fraud at several Chinese companies in the past few years. Tiger Global Management owned 2.2 million shares of Baidu according to its own 13F (research more stocks Tiger Global owns).
Disclosure: I own no shares of any stocks mentioned in this article.
