Google Inc (NASDAQ:GOOG) is the new darling of hedge funds. According to a report from Tobias Levkovich, analyst at Citigroup the search engine giant ranked number one in the list of stocks owned by the top 50 largest hedge funds and mutual funds during the fourth quarter of 2012. Google replaced Apple Inc. (NASDAQ:AAPL) as the favorite stock holding of the biggest investors in terms of the size of assets under management.
During the quarter, 16 of the 50 largest hedge funds own Google stock while 10 of the biggest hedge funds held Apple, and its rank dropped to number 4. American International Group Inc (NYSE:AIG) and News Corp (NASDAQ:NWSA) ranked third and fourth, respectively.
Data from Nasdaq showed that the top five stockholders of the company include Jupiter Asset Management (22,182,000 shares), FMR Llc. (17, 513, 069 shares), Vanguard Group (11, 833,058 shares), State Street Corp. (10, 608, 679), and T. Rowe Price Associates (9, 457, 496 shares).
Some of the most prominent hedge fund managers that bought or increased stock holdings in Google based on the 13f filings with the Securities and Exchange Commission include: (See table below)
Why are investors more bullish on Google than Apple? Sameet Sinha, analyst at B Riley & Co said that the search engine giant is the only technology company benefiting from all the growth areas of the internet. Google generates revenue from display advertising, local, mobile, video, social, search among others.
Online advertising dominance
A report from eMarketer estimated that the digital ad spending in the United States in 2012 was approximately $37 billion, and Google Inc (NASDAQ:GOOG) accounts 41.3% of the total ad revenues. The firm projected that advertisers will spend a total of around $20 billion on Google by 2014. The search engine giant will continue to retain more than 43% market share of the U.S. advertising market until 2014.
In terms of mobile advertising revenue, eMarketer reported that Google dominates with 57% market share. Google is the king of mobile search with 93.3% market share of the $1.99 billion total ad revenue in the U.S. The firm estimated that Google’s mobile ad revenue this year would be around $3.98 billion and projected to increase around $6.32 billion in 2014.
On the other hand, Apple had a good performance only in devices. Right now, it is uncertain if the iPhone maker would be able to develop another winning device. Perhaps, it’s one of the main reasons why investors have a bearish position on Apple. According to reports, Apple Inc. (NASDAQ:AAPL) is developing an iWatch that would function like an iPhone and other TV related products. Jefferies technology analyst, Peter Misek speculated that Apple might launch its iTV by September this year.
Apple only accounts 3.1% market share in U.S. mobile revenue at $212.9 million this year. Its revenue is projected to increase at $376 million in 2014, which is far behind the Google Inc (NASDAQ:GOOG)’s estimated revenue in the future.
Smartphone leadership
In terms of leadership in the smartphone market, Apple Inc. (NASDAQ:AAPL) remained the number one manufacturer in the United States with 37.8% while Google’s Android operating system remained in the top spot with 52.3%, based on the latest survey of comScore.
Globally, smartphone makers using Android operating system shipped 159.8 million devices in the 4Q of 2012, up from 85 million units while Apple’s iOS shipped 47.8 million, up from 37 million during the same period a year earlier, according to International Data Corporation (IDC). Android smartphone shipments grew by 88% and 29.2% for the iOS devices year-over-year.
Stock performance
Over the past year, Google’s stock generated outstanding returns at 38.53%. The company outperformed the S&P 500’s total returns at 15.75%. Apple Inc. (NASDAQ:AAPL)’s stock performance was a negative 19.64%. Google Inc (NASDAQ:GOOG)’s stock price is trading around $831 per share, up from its lowest level at $556 per share over the 52-week range. Apple’s stock is trading around $431 per share, down from its highest peak at $705 per share, but slightly higher from its lowest level at $419 per share over the past 52 weeks.
Many analysts and investors believe that the search engine giant has more opportunities to grow given its leadership in key areas of the internet business.
Meanwhile, American International Group Inc (NYSE:AIG), another stock favorite performed well, and its returns jumped by more than 40% over the past year. Bruce Berkowitz of Fairholme Funds is bullish on AIG. He is confident that his profit from the stock will increase four times. He argued that American International Group Inc (NYSE:AIG) is a global leader in the insurance industry with powerful franchises, valuable assets, and it is exceptionally cheap compared with peers at 0.56 price/book value. The stock price of the insurance giant climbed from its lowest level of approximately $27 to more than $39 per share within the 52-week range.
The article Google Is the New ‘Darling’ of Hedge Funds originally appeared on Fool.com and is written by Marivic Cabural.
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