Five Tech Stocks That Billionaires Are Betting On This Year

The tech sector has always been in the spotlight as, over the years, many companies generated strong returns as the sector is undergoing a constant progress. However, among thousands of tech companies, only a few have earned the trust of investors and are worth looking into. At Insider Monkey, we track around 700 hedge funds and other institutional investors as part of our small-cap strategy (see more details here) and by looking into the stocks that these investors are collectively bullish on, we can get an idea about their long-term potential. However, among these funds around 40 are funds that were launched by people, who managed to become billionaires due to their excellent acumen and high level of expertise. In this article, we are going to take a look at five tech stocks that the billionaires on our list were bullish on heading into the current quarter.

Amazon.com, Inc. (NASDAQ:AMZN) witnessed an increase in popularity among the billionaires we follow, as the number of investors long the stock inched up to 17 from 15 during the fourth quarter. Moreover, these billionaires’ funds amassed $8.71 billion worth of stock at the end of 2015. More specifically, billionaires Chase Coleman‘s Tiger Global Management and Andreas Halvorsen’s Viking Global ranked as the top two shareholders of Amazon in our database, according to the last round of 13F filings.

Amazon.com, Inc. (NASDAQ:AMZN) last year surprised investors when it posted a profit for the second quarter, while the Street was expecting a loss. However, for the last quarter, it missed the estimates by reporting EPS of $1.00, versus expectations of $1.56. However, the company showed that its Web Services segment is growing rapidly with AWS sales amounting to $2.41 billion last quarter, up by 69% on the year. Investors are currently looking for Amazon.com, Inc. (NASDAQ:AMZN) to continue expanding its margins and, in its future earnings releases, the eyes will be on the margins and the AWS segment.

During the fourth quarter, the number of billionaires bullish on Apple Inc. (NASDAQ:AAPL) declined to 17 from 18, while the aggregate value of their holdings remained almost unchanged at $10.56 billion. Billionaire Carl Icahn‘s Icahn Capital cut its stake in the tech behemoth by 14% on the quarter to 45.76 million shares, while Chase Coleman’s fund initiated a new position containing 10.60 million shares.

Apple Inc. (NASDAQ:AAPL)’s stock has declined by slightly more than 7% since the beginning of the year, being dragged by both a broader market sell-off and investors concerns about the future of the company’s iPhone sales. iPhone sales growth remained flat last quarter, which was the slowest rate since the launch of the product in 2007. The company still registered record revenue and profits, but investors are worried that the revenue might be lower this year, since the iPhone sales account for around two-thirds of Apple Inc. (NASDAQ:AAPL)’s revenue. Nevertheless, Apple pays a good dividend of $0.52 per share and has enough cash on its balance sheet to increase its capital return program and to invest in R&D to attract more buyers. However, the company’s future also depends on the macroeconomic factors, particularly in China, which represents Apple’s second-largest market.

Alphabet Inc (NASDAQ:GOOGL)‘s both classes of stock ranked among billionaires’ most popular tech stocks. A total of 18 billionaires reported holding both Class A and Class C stocks, while the aggregate value of positions in the class A stock amounted to $5.64 billion and total value of class C positions stood at $5.32 billion at the end of December. Among the billionaires bullish on Alphabet are Andreas Halvorsen, Ken Fisher, and Ken Griffin.

Alphabet Inc (NASDAQ:GOOGL)’s class A and Class C shares have gained around 28% and 26% over the last 52 weeks, respectively. Alphabet’s market cap managed to briefly surpass Apple’s earlier this year as the company posted solid results for the last quarter. The company is still generating the largest revenue from search and online advertising, but with the transition of users to mobile, the long-term horizon of these segments seems uncertain. Nevertheless, what makes Alphabet a good bet is its diversification in other industries, such as Internet of Things (Nest), automotive (driverless cars) and robotics (Boston Dynamics). The last segment has been in the spotlight recently, as Boston Dynamics has presented a new humanoid Atlas robot. Even though, Boston Dynamics and other segments might not have a positive impact on Alphabet Inc (NASDAQ:GOOGL)’s top line any time soon, they represent excellent hedging for its core business.

Microsoft Corporation (NASDAQ:MSFT) also saw an increase in the number of billionaires long the stock as 20 funds reported long positions with a total value of $8.03 billion as of the end of December, compared to 18 funds holding $7.47 billion worth of stock a quarter earlier. Billionaire Jeff Ubben’s ValueAct Capital is one of the largest shareholders of Microsoft, owning 56.62 million shares as of the end of 2015.

Microsoft Corporation (NASDAQ:MSFT)’s stock has appreciated by some 17% over the past year and is currently trading at 16.2 times forward earnings, which is almost in line with the average for the S&P 500 companies. Investors are pleased to see the successes the company has achieved under CEO Satya Nadella, who decided to stick to the company’s core business and adjusted the company’s strengths to the current environment. Large shareholders, such as Barry Rosenstien’s JANA Partners, praise Microsoft for its decision to transition the familiar Office software to a subscription-based model. In addition, the company is registering growth in the cloud segment, while remaining committed to the PC market with its Windows 10 operating system being Microsoft Corporation (NASDAQ:MSFT)’s one of the best-developed and most popular among users.

Finally, the leader in this list is Facebook Inc (NASDAQ:FB), in which 21 funds led by billionaires reported long positions worth $3.60 billion, in aggregate. During the fourth quarter, the number of billionaires long the stock went up by three. Billionaire Stephen Mandel‘s Lone Pine Capital holds 9.79 million shares of Facebook, which makes it the largest shareholder among the funds we track.

Facebook Inc (NASDAQ:FB) has been one of the fastest-growing companies in the last several years, which explains its huge popularity among smart money investors. Its shares have increased threefold in the last three years and, at a forward P/E of 29.0, it seems undervalued. However, investors have high expectations for the stock and if the company maintains its pace in the mobile segment and overall user growth, the stock should be able to justify its valuation. Similar to some other tech giants, Facebook has also hedged itself against the commodization of its core business by acquiring Oculus VR. Since VR headsets are gaining momentum, Facebook Inc (NASDAQ:FB)’s bet on the company may result in a big payout sooner than it probably was expected by the company.

Disclosure: none