Deal making and M&A activity in the technology sector is often perceived as irrational and unreasonable by the masses. At the end of the day, which other industry would see a five-year-old startup with revenues of $10 million cost as much as $22 billion? Facebook Inc (NASDAQ:FB) has acquired WhatsApp for this enormous amount of money back in February 2014, but this is what drives growth in the tech sector. It’s commonly known that technology has been driving other industries to greater innovation and growth, and in that way, continually shapes the world. Turning our attention to the U.S technology sector, the NASDAQ-100-Technology Sector Index is down by 8% year-to-date, largely due to the recent broader market correction. Nevertheless, a massive group of bright minds reside within the tech industry, not unlike the bright minds that populate the list of billionaire investors we track at Insider Monkey. Therefore, in the following article we will take a glance at how the billionaires we follow feel about tech stocks.
We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated ten percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks have beaten the market by over 60 percentage points (118% return vs. S&P 500’s 57.6% gain) over the last 36 months (see the details here).
Alibaba Group Holding Ltd (NYSE:BABA)
Billionaires with Long Positions (as of June 30): 15
Aggregate Value of Investors’ Holdings (as of June 30): $2.03 Billion
Alibaba Group Holding Ltd (NYSE:BABA) was in one more billionaire’s portfolio at the end of the second quarter than at the start, while the value of the billionaires’ stakes in the company decreased from $2.86 billion over the same period. Alibaba has had a tough post-IPO run, with its shares losing nearly 39% year-to-date. Furthermore, Alibaba has seen analysts lowering their price targets on its stock after the company acknowledged that China’s economic slowdown puts a bit of downward pressure on its financials. However, the magnitude of user spending is what affects the company most, and user engagement on Alibaba’s platform still remains strong. Rob Citrone’s Discovery Capital Management is the largest billionaire equity holder of Alibaba within our database, holding 6.52 million shares.
Google Inc (NASDAQ:GOOG, GOOGL)
Billionaires with Long Positions (as of June 30): 15
Aggregate Value of Investors’ Holdings (as of June 30): $3.40 Billion
Google Inc (NASDAQ:GOOG) is another popular tech stock among the billionaires tracked by Insider Monkey. The number of billionaires invested in Google’s Class A shares totaled 15 at the end of the recent quarter, down from 17 reported in the prior one. However, the value of the investments in that class of shares increased from $2.66 billion during that time span. Similarly, there are 14 billionaires with positions in the company’s Class C shares, three less than in the prior quarter. In the meantime, the value of these positions increased to $2.90 billion from $2.47 billion. Just recently, Google made its Android Pay, a mobile payments system, available at more than one million locations throughout the United States. Therefore, the tech company is set to compete with Apple Pay in the mobile payments market, which is estimated will be worth $1 trillion by 2017. Andreas Halvorsen’s Viking Global holds 2.74 million Class A shares and 1.15 million Class C shares of Google as of June 30.
Apple Inc. (NASDAQ:AAPL)
Billionaires with Long Positions (as of June 30): 15
Aggregate Value of Investors’ Holdings (as of June 30): $12.16 Billion
There was one less billionaire tracked by our team that had a stake in Apple Inc. (NASDAQ:AAPL), the world’s largest company by market capitalization, at the end of the most recent quarter. Similarly, the value of the stakes held by the billionaires decreased from $13.05 billion over the quarter. The shares of Apple have been riding a downtrend over the past few months, as investors have started to ramp up questions about the company’s growth potential as talk of it being the first $1 trillion company began to surface. China’s economic pullback has also put some downward pressure on the company’s stock performance, given that China has been a major catalyst of Apple’s growth recently. The stock has lost more than 12% over the past three months, but is still up by nearly 2% year-to-date. Apple’s recently-launched new products do not seem to alleviate the concerns around the tech giant’s future outlook. Icahn Capital LP, founded by activist investor Carl Icahn, owns 52.76 million shares of Apple Inc. (NASDAQ:AAPL) as of the end of June.
Facebook Inc (NASDAQ:FB)
Billionaires with Long Positions (as of June 30): 16
Aggregate Value of Investors’ Holdings (as of June 30): $2.95 Billion
The number of billionaires invested in Facebook Inc (NASDAQ:FB) stood at 16 at the end of the second quarter, one more than in the previous quarter. By the same token, the value of their investments rose from the $2.43 billion figure reported at the end of the first quarter. Cantor Fitzgerald’s analyst, Youssef Squali, considers Facebook a “top pick in the Internet space”. Just recently, Facebook revealed that 1 billion people had used its service in a single day, while the above-mentioned WhatsApp recently reached 900 million monthly active users. More importantly, the company announced that Instagram ads are available to more types of businesses on a self-serve basis, with those ads expected to generate more than $1 billion in revenues over the next year. From the massive pool of hedge funds and other investors tracked by Insider Monkey, Stephen Mandel’s Lone Pine Capital is the largest equity holder of Facebook Inc (NASDAQ:FB), with 9.76 million shares.
eBay Inc (NASDAQ:EBAY)
Billionaires with Long Positions (as of June 30): 21
Aggregate Value of Investors’ Holdings (as of June 30): $6.98 Billion
eBay Inc (NASDAQ:EBAY) is by far the most popular tech stock among the billionaires observed by our team, with 21 billionaires holding stakes in the company at the end of the most recent quarter, compared with 17 reported a quarter ago. Nevertheless, the value of the stakes dropped from $7.29 billion. The shares of eBay have had a great run this year, if not considering the recent pullback triggered by the broader market downturn. Nonetheless, they have still managed to return over 10% year-to-date. Cantor Fitzgerald’s Squali downgraded the stock to ‘Hold’ from ‘Buy’ and established a price target of $27. The analyst suggested that the downgrade was based on “the slow-growth nature of the remaining assets”, after the company spun off PayPal Holdings Inc. (NASDAQ:PYPL) earlier this year. Icahn Capital LP holds 109.94 million shares of eBay as of June 30.
Disclosure: None
