In this article, we will take a detailed look at the Hedge Fund Manager Charles Paquelet’s Top 10 Tech Stock Picks. For a quick overview of such stocks, read our article Hedge Fund Manager Charles Paquelet’s Top 5 Tech Stock Picks.
Charles Paquelet is an American hedge fund manager who founded Skylands Capital in 2004. Paquelet came to limelight during his tenure at Strong Capital Management, Inc. which he joined in 1989. Paquelet has a Bachelor of Science degree from Case Western Reserve University’s Weatherhead School of Business and also has a Master of Business Administration program with a specialization in finance. In August 1996, Charles Paquelet was named co-manager of the fund Strong Discovery. The Strong fund was going through losses when Paquelet was tasked with this responsibility. A few months earlier the fund had started cutting its exposure to US stocks based on its bearish outlook for the economy. But when its thesis proved wrong, the fund scrambled to buy small-cap stocks, which later plunged, leaving the fund’s returns deeply in the red. A 1997 report by the New York Times talked in detail about the Strong fund’s strategy to mitigate losses and the arrival of Paquelet at the helm. The report gives some idea of Paquelet’s strategy at that time to make a comeback:
”Our investment approach is built on kicking tires and building relationships with management,” Paquelet said according to the NYTimes report.
In 2000, Richard Strong, the founder of Strong Capital Management, started giving up control of the fund to Charles Paquelet. In 2004, Strong Financial Corp. sold one of its portfolios to Charles Paquelet who established a new investment firm called Skylands Capital. The fund had $661 million under managed securities as of the end of the third quarter of 2023. You will see some of the top names like Apple Inc (NASDAQ:AAPL), Alphabet Inc Class C (NASDAQ:GOOG) and Visa Inc (NYSE:V) in the fund’s portfolio as well as spot under-the-radar small-cap names which could explode in the future.
Charles Paquelet’s Investment Philosophy
Skylands Capital’s investing philosophy revolves around the idea of economic cycles. The fund believes the human mind thinks linearly and has a tendency to “extrapolate” recent trends, while economies, markets and companies usually go through cycles which are defined by interest rates, commodity prices, regulatory changes, taxes, competitive behavior and many other factors. Skylands Capital believes this disparity between the reality of financial markets and the thinking process of the human mind could create long-term investing opportunities for investors who “can anticipate change before it is obvious.”
Value or Growth?
Charles Paquelet does not believe in adhering just to value or growth. Instead his fund looks to invest in growing companies trading at attractive valuations.
“It is a false choice to invest in either growth or value. The optimal investment is a structurally advantaged growing business that can be purchased at a value price. There are two sides to investing – what you get and what you pay. Both are important,” the fund’s website says.
Methodology
For this article we scanned Skylands Capital’s Q3’2023 portfolio and picked its top ten technology stock picks. Why do we pay attention to what hedge funds are doing? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
10. Electronic Arts Inc (NASDAQ:EA)
Skylands Capital’s Stake Value: $1,318,380
Skylands Capital bought a new stake in entertainment and games company Electronic Arts Inc (NASDAQ:EA) in the third quarter of 2023. The hedge fund’s stake in Electronic Arts Inc (NASDAQ:EA) was valued at $1.3 million as of the end of September 2023.
In December, Jefferies said it believes the gaming industry will see a slowdown in 2024 as gamers become more selective and prudent with their purchases. Jefferies said at the time that even though Electronic Arts Inc (NASDAQ:EA) was expected to post 2025 guidance below expectations, its upcoming games like Battlefield, Sims, Skate and new Star Wars titles will “re-accelerate topline and drive margin expansion.”
As of the end of the third quarter of 2023, 43 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Electronic Arts Inc (NASDAQ:EA).
9. Vontier Corp (NYSE:VNT)
Skylands Capital’s Stake Value: $1,406,860
Industrial technology company Vontier Corp (NYSE:VNT) ranks ninth in our list of hedge fund manager Charles Paquelet’s top tech stock picks. Skylands Capital owns a $1.41 million stake in Vontier Corp (NYSE:VNT). Over the past one year the stock has gained about 50% in value.
Insider Monkey’s database of 910 funds shows that 23 hedge funds had stakes in Vontier Corp (NYSE:VNT). The most notable hedge fund stakeholder of Vontier Corp (NYSE:VNT) during this period was Chuck Royce’s Royce & Associates which owns a $49 million stake in Vontier Corp (NYSE:VNT).
Like Vontier, hedge funds are also investing in Apple Inc (NASDAQ:AAPL), Alphabet Inc Class C (NASDAQ:GOOG) and Visa Inc (NYSE:V).
8. Iridium Communications Inc (NASDAQ:IRDM)
Skylands Capital’s Stake Value: $2,433,715
Satellite technology company Iridium Communications Inc (NASDAQ:IRDM) ranks eighth in our list of hedge fund manager Charles Paquelet’s top tech stock picks. Skylands Capital, as of the end of the third quarter of 2023, owns a $2.4 million stake in Iridium Communications Inc (NASDAQ:IRDM). Iridium Communications Inc (NASDAQ:IRDM) is a new stock pick of the hedge fund.
In November, Iridium Communications Inc (NASDAQ:IRDM) CEO Matthew J Desch bought 28,000 shares of Iridium Communications Inc (NASDAQ:IRDM) at $37.01 per share.
Baron Growth Fund made the following comment about Iridium Communications Inc. (NASDAQ:IRDM) in its Q3 2023 investor letter:
“Iridium Communications Inc. (NASDAQ:IRDM) is a leading mobile voice and data communications services vendor offering global coverage via satellite. Shares fell on second quarter earnings, growth modestly slower than expected. Investors were also concerned by a potential slowdown in Iridium’s voice and data segment following several years during which the segment benefited from price increases and competition displacements. We attribute the earnings miss to a one-time write off of a spare satellite. This will not impact the company’s long-term prospects. We also remain excited about the potential benefit from Iridium’s recent partnership with Qualcomm to allow satellite connectivity on its new Snapdragon chips. While Iridium has suggested the realization of the direct-to-device opportunity might take longer than some investors had hoped, we believe the collaboration will yield substantial revenue for the company over time. We also remain excited about the company’s capital allocation program, which should benefit shareholders in the years ahead.”
7. Amazon.com Inc (NASDAQ:AMZN)
Skylands Capital’s Stake Value: $2,612,316
Amazon.com Inc (NASDAQ:AMZN) is one of the top tech stock picks of hedge fund manager Charles Paquelet since his hedge fund Skylands Capital has a $2.6 million stake in the ecommerce retailer which is also a part of the Magnificent Seven group of stocks that have gained a lot amid the AI boom.
UBS recently published a list of quality stocks it believes could outperform in 2024. Amazon.com Inc (NASDAQ:AMZN) was part of the list. UBS said in its note that these Buy-rated stocks are in “30% top for quality, have positive earnings momentum, are not crowded — have a crowding data score better than 0.1 — and have reasonable value without overly high beta.”
Amazon.com Inc (NASDAQ:AMZN) is also among the most popular technology stocks among the elite hedge funds tracked by Insider Monkey. As of the end of the third quarter of 2023, 286 hedge funds had stakes in Amazon.com Inc (NASDAQ:AMZN).
Polen Focus Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its fourth quarter 2023 investor letter:
“For the full year, the top relative and absolute contributors were Amazon.com, Inc. (NASDAQ:AMZN), Salesforce, and ServiceNow. Amazon shares appreciated 88% in 2023, driven primarily by rapidly expanding operating profit margins and free cash flow growth. After the pandemic, Amazon experienced a period of inefficiency and overinvestment in its distribution and logistics infrastructure. Amazon is now leveraging these investments as growth returned to its e-commerce business in 2023 after a highly unusual 2022. At the same time, Amazon’s rapidly growing and high-margin advertising business is contributing strongly to the entire company’s operating profit growth. The AWS (Amazon Web Services) cloud infrastructure and services business continued to slow in 2023 as customers anticipating a more difficult economic environment looked to save money on their cloud spend, but these cloud spending optimizations began to stabilize in the second half of 2023. We now expect customer interest in generative AI will begin to contribute to growth.”
6. SS&C Technologies Holdings Inc (NASDAQ:SSNC)
Skylands Capital’s Stake Value: $4,148,033
SaaS company SS&C Technologies Holdings Inc (NASDAQ:SSNC) ranks sixth in our list of the best tech stocks to buy according to Charles Paquelet. Skylands Capital had a $4.1 million stake in SS&C Technologies Holdings Inc (NASDAQ:SSNC) as of the end of the third quarter of 2023.
Earlier this month, Citi published its Thematic Equity Strategy report in which it named its top picks in major themes. SS&C was its top stock pick in the fintech theme.
As of the end of the third quarter of 2023, 43 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in SS&C Technologies Holdings Inc (NASDAQ:SSNC). The biggest stakeholder of SS&C Technologies Holdings Inc (NASDAQ:SSNC) during this period was Richard S. Pzena’s Pzena Investment Management which owns a $748 million stake in SS&C Technologies Holdings Inc (NASDAQ:SSNC).
In addition to SSNC, Skylands Capital is also invested in Apple Inc (NASDAQ:AAPL), Alphabet Inc Class C (NASDAQ:GOOG) and Visa Inc (NYSE:V).
Diamond Hill Long-Short Fund made the following comment about SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) in its Q3 2023 investor letter:
“Our bottom contributors in Q3 were all from our long book, including HCA Healthcare and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). SS&C Technologies, a provider of software and services to investment firms, brokerages and other financial institutions, has faced slower organic growth in recent quarters as its business units have produced inconsistent results. Further, rising costs have crimped margins — issues we believe will eventually stabilize but which we are monitoring closely. However, we believe the market is overly pessimistic about the company’s ability to improve its organic growth rate and its margins and are maintaining our position.”
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Disclosure. None. Hedge Fund Manager Charles Paquelet’s Top 10 Tech Stock Picks was initially published on Insider Monkey.
