The technology sector is an ever-shifting landscape, where new products and continuous innovation are the factors defining and shaping it . The tech sector has not delivered a great performance so far this year, as the NASDAQ-100 Technology Sector Index has dropped by more than 10% year-to-date. One of the main reasons that explains its underperformance is the strong American dollar. Numerous companies in the industry price their offerings in local currencies, whereas their expenses are in greenbacks. We have recently started tracking the overall concentration of a company’s stock owned by the 737 actively reporting hedge funds we observe. Therefore, in the following article we’ll be discussing five tech stocks that had the highest concentration of ownership among the funds we track. These tech stocks are: SunEdison Inc. (NYSE:SUNE), SunEdison Semiconductor Limited (NASDAQ:SEMI), Agilysys Inc. (NASDAQ:AGYS), Loral Space & Communications Inc. (NASDAQ:LORL), and Rosetta Stone Inc. (NYSE:RST).
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Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 60 percentage points since the end of August 2012, returning 118% (read the details here). This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.
Let’s start by looking at SunEdison Inc. (NYSE:SUNE), a stock with a lot of fans in our database, with ownership among the funds we track of 67.37%. The number of hedge funds with long positions in the global renewable energy company didn’t change by much during the second quarter, decreasing to 93 from 94. However, the value of these positions rose to $5.68 billion from $4.44 billion. Considering the fact that the shares of SunEdison have plummeted by 64% since the end of June and by 45% year-to-date, the aforementioned figure of $5.68 billion is now much smaller. One of the reasons why the stock dropped like a rock is related to the company’s plans to expand in emerging markets, which have been recently hit by currency devaluations and global growth fears. The recently-released financial report of SunEdison has also put downward pressure on the stock. David Einhorn’s Greenlight Capital is the largest shareholder with a position in SunEdison Inc. (NYSE:SUNE) within our database, holding a stake of 24.84 million shares at the end of June.
Moving on to SunEdison Semiconductor Limited (NASDAQ:SEMI), in which the hedge funds we observe own 56.90% of its shares; there are 24 hedge funds that own holdings in the company, up by 11 funds compared to the prior quarter. Nevertheless, the value of the overall holdings shrank to $409.13 million from $565.33 million, partly owning to the in the share price that occurred during the quarter. The current quarterly performance of the stock has been disastrous, as the stock has plunged by 44.29%. Citigroup recently released a research report on SEMI, indicating a “Neutral” rating on the stock and establishing a new price target of $14 per share, down from $18 per share. Despite the disappointing performance of the company, Seth Klarman’s Baupost Group still remained bullish on SunEdison Semiconductor Limited (NASDAQ:SEMI), with a stake of nearly 8.30 million shares as of June 30.
Agilysys Inc. (NASDAQ:AGYS) makes our list as well, with the hedge funds we track holding 55.90% of its outstanding stock on June 30. Unlike the performance of the previously-discussed companies, Agilysys Inc. (NASDAQ:AGYS) has been more stable over the last few months, though it has still lost over 23% year-to-date. Just one fund added Agilysys to its portfolio in the second quarter, lifting the number to ten. Still, the value of the stakes owned by funds decreased to $116.82 million from $121.57 million. The global provider of next-generation hospitality software solutions and services had a solid start to its current fiscal year. Specifically, Agilysys managed to generate year-over-year quarterly revenue growth of 16% during its fiscal first quarter of 2016, whereas its quarterly net loss narrowed to $0.01 per diluted share from $0.10 in the prior-year period. Michael Kaufman’s MAK Capital One held its position in Agilysys Inc. (NASDAQ:AGYS) unchanged during the quarter at 7.06 million shares.
Let’s now move on to Loral Space & Communications Inc. (NASDAQ:LORL), which has seen its share price drop by nearly 29% since the beginning of the year and had a concentration of ownership of 55.30% among the 737 hedge funds we track at the end of June. The number of hedge funds having positions in the satellite communications company declined to 28 from 31, as did the value of these positions, which came to $1.08 billion at the end of the quarter. Loral engages in satellite services operations through its ownership interest in Telesat Holdings Inc., which owns global fixed satellite services operator Telesat Canada. The company is expected to deliver growth in its operating income and cash flow in the upcoming quarters, given the relatively fixed cost nature of its business and the increasing demand for satellite services. Mark Rachesky’s MHR Fund Management holds an activist stake in Loral Space & Communications Inc. (NASDAQ:LORL) comprised of 8.13 million shares.
Finally, Rosetta Stone Inc. (NYSE:RST) lost some confidence from hedge funds, as the funds’ positions in the stock decreased to 11 from 12. Nevertheless, the value of the overall investments increased to $94.97 million from $88.24 million over the quarter, giving hedge funds a 55.10% stake in the company. As already mentioned, the tech sector is down this year and Rosetta Stone is no exception; the stock has dropped by 30% since the beginning of the year. Rosetta, a leader in technology-based learning solutions, recently posted its financial results for the second quarter, reporting revenues of $51.4 million, down by $5.9 million year-over-year. Meanwhile, the company’s net loss came to $0.38 per diluted share, compared to a loss of $0.74 a year ago. John W. Rogers’ Ariel Investment represents the largest shareholder in Rosetta Stone Inc. (NYSE:RST) within our database, holding a 4.22 million-share stake.
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