Below we’ll sift through the list of Billionaire Stephen Mandel’s 5 Must-Buy Tech Stocks. For our methodology and a more comprehensive list of his highest conviction tech stock picks, please see Billionaire Stephen Mandel’s 10 Must-Buy Tech Stocks.
5. Meta Platforms, Inc. (NASDAQ:META)
Value of Lone Pine Capital‘s 13F Position: $814 million
Number of Hedge Fund Shareholders: 204
Stephen Mandel’s Lone Pine Capital took advantage of the extreme Q1 weakness in Meta Platforms, Inc. (NASDAQ:META)‘s shares to buy 3.66 million of them. Iconic investor Michael Burry of The Big Short fame was also buying META shares in Q1 as recession fears mount. Meta Platforms remains one of the undisputed most popular stocks among hedge funds, but there has been a 26% drop in hedge fund ownership of the company over the past year.
Meta Platforms, Inc. (NASDAQ:META)’s shares have been crushed this year partly due to the social media’s giant disastrous metaverse initiatives, which lost billions of dollars in Q1. Ultimately, it may all be for nothing, as a recent report from research firm IDC says the company’s strategy of selling its Oculus VR headsets at a loss is unsustainable in the long run and will force the company to eventually scale back its investments in mixed-reality, which will open the door for competitors like Apple Inc. (NASDAQ:AAPL) to swoop in and take over the market.
In its Q4 2021 investor letter, Boyar Value Group noted the significant amount of insider selling that billionaires like Meta Platforms, Inc. (NASDAQ:META)’s CEO Mark Zuckerberg were undertaking last year, presciently suggesting it could be a warning that the market had topped out:
“Corporate executives can have many different reasons for selling shares (anticipation of tax law changes, philanthropy, diversification, and much more), but the sheer number of billionaire founders who sold shares in 2021 should raise eyebrows and might well be signaling a market top. Bloomberg’s Ben Steverman and Scott Carpenter report not only that Mark Zuckerberg of Meta Platforms, Inc. (NASDAQ:META) (formerly known as Facebook) sold shares in his company almost every day last year but also that the founders of Google sold ~$3.5 billion worth of stock (the first time either Sergey Brin or Larry Page has sold shares since 2017).”
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Value of Lone Pine Capital‘s 13F Position: $832 million
Number of Hedge Fund Shareholders: 83
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) represents the largest tech position added to Lone Pine Capital’s 13F portfolio during Q1. The fund bought 7.98 million shares of the company in Q1, joining a growing cadre of hedge funds that are long TSM, as ownership of the stock among hedge funds hit a new high in the first quarter.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) shares have lost 41% in 2022 amid fears about the state of the broader chip market. TSM rebounded somewhat on July 7 thanks to Samsung’s strong quarterly results, which were buoyed by a strong showing from its own chip business, which surpassed Intel Corporation (NASDAQ:INTC)’s to become the global leader last year.
TSM also came into the limelight in early June when it was reported that a prominent Chinese economist was urging authorities to seize TSMC should China be hit with punishing sanctions as Russia has been. The economist noted TSMC’s expansion into the U.S, where it plans to build six fabs, and declared that “We must not let all the goals of the transfer be achieved.”
The Baron New Asia Fund is extremely bullish on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), as it predicted future revenue growth above the company’s own estimates while discussing the stock in its Q1 2022 investor letter:
“Semiconductor giant Taiwan Semiconductor Manufacturing Company Ltd. detracted in the first quarter due to rising geopolitical tensions, macroeconomic uncertainties, and concerns over softening demand for consumer electronics. We retain conviction that Taiwan Semi’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, and IoT, will allow the company to deliver above its 15% to 20% revenue growth target over the next several years.”
3. ServiceNow Inc (NYSE:NOW)
Value of Lone Pine Capital‘s 13F Position: $1.1 billion
Number of Hedge Fund Shareholders: 90
Lone Pine Capital pared down its stake in ServiceNow Inc (NYSE:NOW) by 2% during Q1, with the fund owning 1.98 million shares at the end of March. Hedge fund ownership of NOW peaked in the first quarter of 2021 and has dipped by 13% since. A fellow Tiger Cub, Andreas Halvorsen of Viking Global, raised the size of his NOW holding by 98% during Q1 to 440,450 shares.
A provider of cloud-based IT automation tools, ServiceNow Inc (NYSE:NOW) has an impressive collection of customers, which includes 80% of Fortune 500 companies. ServiceNow grew its revenue by 31% to $5.9 billion in fiscal year 2021. The company is expected to grow its subscription revenue and non-GAAP EPS by another 26% and 24% respectively in FY22. The company also raised its FY24 and FY26 subscription revenue projections this year, pushing each of them $1 billion higher to $11 billion and $16 billion respectively.
Stifel analyst Brad Reback believes ServiceNow Inc (NYSE:NOW)’s updated projections are “very achievable” and that the company is capable of sustaining 20%+ revenue growth over the longer-term, along with significant margin expansion. He has a ‘Buy’ rating and $550 price target on the stock.
2. Workday, Inc. (NYSE:WDAY)
Value of Lone Pine Capital‘s 13F Position: $1.23 billion
Number of Hedge Fund Shareholders: 87
Workday, Inc. (NYSE:WDAY) was Stephen Mandel’s top tech stock pick at the end of 2021, but he trimmed his stake in Q1 by 12% to 5.12 million shares. Hedge funds love what Workday is doing, as their ownership stakes in the company have doubled over the last three years. The company was also ranked as one of the 30 Most Popular Stocks Among Hedge Funds in Q1.
Workday, Inc. (NYSE:WDAY) is yet another cloud-based software company that Stephen Mandel loves, and one whose shares have been hit hard this year, losing 45% of their value. Workday grew its subscription revenue by 23% in its fiscal Q1 and believes that it can maintain 20% growth over the longer-term as customers adopt more of its products.
The market seemed to take issue with Workday, Inc. (NYSE:WDAY) noting that some of its deals had to be pushed back to Q2, which could then cause a chain reaction that would delay projected Q2 deals from being completed until later in the year. The company did add several notable new customers in Q1, including Barclays, Callaway Golf and West Tennessee Healthcare. Management also noted that changing SEC disclosure regulations in regards to ESG standards are making its platform, which tracks and supports company’s ESG initiatives, a priority in boardrooms.
1. Microsoft Corporation (NASDAQ:MSFT)
Value of Lone Pine Capital‘s 13F Position: $1.54 billion
Number of Hedge Fund Shareholders: 262
Closing out the list of Stephen Mandel’s must-buy tech stocks is Microsoft Corporation (NASDAQ:MSFT), which ranks as the billionaire’s top stock pick after he raised his stake in the company by 7% during Q1 to just under 5 million shares. Microsoft easily topped the list of 15 Dow Stocks Listed and Ranked By 2022 Hedge Fund Bullishness Index, being owned by 262 funds on March 31.
Not even Microsoft Corporation (NASDAQ:MSFT) has been immune from the tech selloff, as its shares have slumped by 20% this year. Microsoft has elevated itself above the other FAANG stocks in several metrics over the last few years, including its outstanding 37.6% profit margins, which not even Meta (is it MAANG stocks now?) comes close to.
Microsoft is also growing its top and bottom lines at impressive rates, with the former projected to grow by 18.5% this year, while the latter is projected for 15% growth this year and next. Given that projected EPS growth, MSFT shares currently trade at about a 24x forward P/E, the cheapest they’ve been since 2018 and well below their 5-year average of 28x.
The Carillon Clarivest Capital Appreciation Fund is bullish on Microsoft Corporation (NASDAQ:MSFT)’s cloud services, having this to say about the company in its Q1 2022 investor letter:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Microsoft (NASDAQ:MSFT) reported positive results driven by personal computing strength, but analysts were especially positive on its growth outlook for its Azure cloud-computing services.”
For more on the latest investment ideas and how the biggest hedge fund managers in the world are trading them, check out 10 EV Stocks to Buy as Tesla’s (TSLA) Market Share Declines and 10 Cheap Coal Stocks to Buy Today.
Disclosure: None.
