In this article, we discuss Palantir Technologies (PLTR) and 9 other tech stocks that hedge funds are selling. To take a look at some more tech stocks that hedge funds have been offloading in the past few months, go directly to Hedge Funds Are Selling Palantir Technologies (PLTR) and 5 Other Tech Stocks.
The technology sector was already in turmoil amid inflation and rising interest rates when the Russian invasion of Ukraine triggered a mass sell-off that has pushed the market into crisis territory. Sectors that were most affected by the overall situation include software, ecommerce, fintech, and consumer devices. Some of the tech stocks that hedge funds have been selling recently include Meta Platforms, Inc. (NASDAQ:FB), PayPal Holdings, Inc. (NASDAQ:PYPL), and Alibaba Group Holding Limited (NYSE:BABA), among others discussed in detail below.
Tech Market Selloff Creates Investment Opportunity
The NASDAQ Composite, a growth-heavy index, has dropped to lows not seen since the pandemic panic of March 2020. The sanctions on Russian businesses in the wake of the Ukraine war have pushed inflation to over new highs since Moscow is a key supplier of oil, fertilizers, and precious metals. This inflation has increased the pressure on the Federal Reserve to raise interest rates to tame the situation, further worsening the growth market. Snowflake CEO Frank Slootman has described the situation as “real foul for good reasons”.
Even in the bear market, some bulls have pushed forth the case for a bounceback. Byron Deeter, a partner at Bessemer Venture Partners, told news platform CNBC in March that the macro trends for the sector remained “intact” despite the recent sell-off and had created an “across the board” sale in the tech world. CNBC estimates that there are a number of tech stocks valued at over $1 billion that have shed over 75% in value from their 52-week highs amid the crisis.
Palantir Losing Value Amid Crisis
Palantir Technologies Inc. (NYSE:PLTR) has been one of the stocks most affected by the unflooding crisis. According to an analysis of the hedge fund sentiment around the stock by Insider Monkey, not only has the number of hedge funds with bullish positions in the firm dropped by 2 between October and December 2021, but the value of the stake that hedge funds hold in the firm has slumped by over $400 million during the period.
Cathie Wood of ARK Investment Management, one of the most famous tech bulls on Wall Street, has dumped over 11 million shares of Palantir Technologies Inc. (NYSE:PLTR) in the past few weeks. Wood discloses her trading activity on a daily basis. In total, ARK has sold over 30 million shares of Palantir recently. Even though the Russian invasion of Ukraine has helped the stock climb higher, it is still way below all-time highs and is trading at near IPO prices.
An earnings miss by Palantir Technologies Inc. (NYSE:PLTR) in the fourth quarter of 2021 has complicated matters for the company further. The firm missed market expectations on earnings per share by $0.02 over the period and guided revenue below market estimates for the first quarter of 2022. Slowing government business and speculative SPAC-related investments have cast a dark shadow over the stock as well.
Our Methodology
The companies that operate in the technology sector were selected and sorted based on the number of hedge funds bullish on each firm. The list was further refined and only features companies in which the number of hedge funds with stakes has reduced by ten or more at the end of the fourth quarter, compared to filings for the third. An exception is made for Palantir Technologies Inc. (NYSE:PLTR), since it registered an alarming drop in share price over the past few months.
Data from around 900 elite hedge funds tracked by Insider Monkey during the fourth quarter of 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Photo by Austin Distel on Unsplash
Hedge Funds Are Selling Palantir Technologies (PLTR) and Other Tech Stocks
10. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders in Q4 2021: 43
Number of Hedge Fund Holders in Q3 2021: 57
Roku, Inc. (NASDAQ:ROKU) owns and runs a TV streaming platform. Hedge funds have been shedding the stock from their portfolios in recent months. At the end of the fourth quarter of 2021, 43 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in Roku, Inc. (NASDAQ:ROKU), compared to 57 in the preceding quarter worth $2.8 billion.
On February 19, Morgan Stanley analyst Benjamin Swinburne maintained an Underweight rating on Roku, Inc. (NASDAQ:ROKU) stock and lowered the price target to $115 from $190, noting that earnings results and outlook confirm the thesis that the addressable market for the firm is limited when compared to market expectations in this regard.
Just like Meta Platforms, Inc. (NASDAQ:FB), PayPal Holdings, Inc. (NASDAQ:PYPL), and Alibaba Group Holding Limited (NYSE:BABA), Roku, Inc. (NASDAQ:ROKU) is one of the stocks that elite investors are monitoring amid rising inflation.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Roku, Inc. (NASDAQ:ROKU) was one of them. Here is what the fund said:
“For two years running, Roku, Inc. (NASDAQ:ROKU) has now been either the largest or second largest driver of performance in portfolios. When we purchased Roku, obviously we never expected such a phenomenal outcome, so quickly—these things can only be chalked up to luck. However, we do think luck is the residue of design and Roku, Inc. (NASDAQ:ROKU) had all the hallmarks ex ante as the kind of position that could do something wildly spectacular. One of the first signs in seeing Roku’s potential was the sharp contrast between our modeled expectations for the top line of the business and where the consensus expectations were. This was the Shopify setup all over again. By this time, we had added an additional tool to our analytical framework, and this helped further enforce our conviction that not only was it we who were right about where things should go, but also that the very existence of this gap could be a potent source of fuel behind the stock as the world came around to our expectation. Specifically, we had become increasingly comfortable building lifetime value analyses of companies, and notably, when we bought Roku, Inc. (NASDAQ:ROKU), we were quite confident that with only modest annual increases in average revenue per user (ARPU), and a 5-year average customer lifespan, we were buying the company for its existing customer base and nothing more. In other words, the growth at Roku, Inc. (NASDAQ:ROKU) was entirely free at the prevailing prices we bought into.”
9. Anaplan, Inc. (NYSE:PLAN)
Number of Hedge Fund Holders in Q4 2021: 47
Number of Hedge Fund Holders in Q3 2021: 61
Anaplan, Inc. (NYSE:PLAN) owns and runs a cloud-based connecting platform. On March 3, Needham analyst Scott Berg lowered the price target on the stock to $65 from $95 but kept a Buy rating, underlining that the reduced target reflected the “approximate 18% compression in software multiples” since the last reports by the firm.
Hedge funds have also been offloading Anaplan, Inc. (NYSE:PLAN) stock. At the end of the fourth quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Anaplan, Inc. (NYSE:PLAN), compared to 61 in the preceding quarter worth $2.8 billion.
Here is what Alger has to say about Anaplan, Inc. (NYSE:PLAN) in its Q1 2021 investor letter:
“Anaplan, Inc. (NYSE:PLAN) was among the top detractors from performance. Anaplan, Inc. (NYSE:PLAN) is a leading provider of cloud-based business planning software. Anaplan’s software platform aims to solve the most complex planning needs of large global enterprises across various business lines. Unlike traditional business planning software, which is often rigid, siloed and opaque, Anaplan’s platform is designed to enable broader enterprise participation and better workforce collaboration during the business planning process. Through better planning, large enterprises can more effectively allocate resources to cut costs and generate revenue. Today Anaplan, Inc. (NYSE:PLAN) has over 1,600 customers across a variety of end markets and business use cases.
Anaplan, Inc. (NYSE:PLAN) shares underperformed in the first quarter as part of a broader sector rotation as high-growth software stocks fell out of favor relative to more cyclically exposed investment opportunities. We believe Anaplan’s focus on growth over near-term profit generation negatively impacts the company’s stock in a rising interest rate environment.
Fundamentally, Anaplan, Inc. (NYSE:PLAN) had strong fourth quarter earnings result, with the company seeing an acceleration of billings growth and a strong demand pipeline as companies realize the need for a more flexible digital planning solution.”
8. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders in Q4 2021: 33
Number of Hedge Fund Holders in Q3 2021: 35
Palantir Technologies Inc. (NYSE:PLTR) develops software products for the intelligence industry. On February 18, Deutsche Bank analyst Brad Zelnick maintained a Hold rating on the shares and lowered the price target to $15 from $18, noting that there was “investor concern” around the organic trends and growth plans of the company.
Hedge funds have also been bearish on Palantir Technologies Inc. (NYSE:PLTR) stock. At the end of the fourth quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Palantir Technologies Inc. (NYSE: PLTR), compared to 35 in the preceding quarter worth $1.6 billion.
In its Q4 2020 investor letter, Guardian Fund, an asset management firm, highlighted a few stocks and Palantir Technologies Inc. (NYSE:PLTR) was one of them. Here is what the fund said:
“In October, we bought a stake in Palantir Technologies Inc. (NYSE:PLTR). Earlier, in June, our concentrated Tech Fund, which has a mandate to also buy shares in the secondary market, bought shares of Palantir from insiders, before the direct listing. At the price we bought, the equity had much more upside than downside. Palantir Technologies Inc. (NYSE:PLTR) is operating a software platform that functions as the digital infrastructure for data-driven operations and decision making. The software helps to structure and capture context in data of large corporations. Governments are increasingly realizing that they have to deal with serious data challenges and cyber risk. As most governments cannot attract the most talented software engineers, they need private enterprises such as Palantir to help them build solid infrastructure. Foundry, Palantir’s software for enterprises, is used by companies to make safer cars and airplanes or to accelerate cancer research. The speed to bring new clients on board is improving and revenues will grow faster than expenses. Palantir Technologies Inc. (NYSE:PLTR) has a long runway of growth ahead.”
7. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders in Q4 2021: 55
Number of Hedge Fund Holders in Q3 2021: 78
Snap Inc. (NYSE:SNAP) is a California-based camera company. JPMorgan analyst Doug Anmuth recently named the company among a basket of tech stocks most likely to witness a “disruption in revenue” due to the Russian invasion of Ukraine and the sanctions placed on Moscow by the West in retaliation.
Despite a broader market sell-off, 55 elite hedge funds continue to hold large stakes in Snap Inc. (NYSE:SNAP) as of Q4 2021. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Snap Inc. (NYSE:SNAP), with 33 million shares worth more than $1.5 billion.
In its Q2 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Snap Inc. (NYSE:SNAP) was one of them. Here is what the fund said:
“Snap Inc. (NYSE:SNAP) shares were a top contributor for the quarter as well, also driven by strong first quarter results. The company reported accelerating revenue growth of 66% for the period (up from 62% fourth quarter growth), driven by user growth of 22%, and a 36% expansion in average revenue per user (ARPU). Snap Inc. (NYSE:SNAP) also guided to stronger-than-expected and accelerating 81%-85% revenue growth for second quarter 2021. Adjusted EBITDA improved by $79 million year over year for a break-even margin, up 1,800 basis points, and free cash flow improved dramatically, turning positive for the period to $126 million. Snap also continued to roll-out products that should help drive further expansion in user growth and ARPU, including Spotlight, a TikTok-like experience, with more than 125 million Snapchatters using it during March, and original programming starring Ryan Reynolds.
With TTM of $2.8 billion in revenue and an ARPU that is about 1/2 that of Twitter and 1/3 that of Facebook, we believe Snap Inc. (NYSE:SNAP) has a long runway for both revenue growth and expanded profitability as it improves its platform functionality, grows its audience, and continues to advance its monetization.”
6. Five9, Inc. (NASDAQ:FIVN)
Number of Hedge Fund Holders in Q4 2021: 56
Number of Hedge Fund Holders in Q3 2021: 76
Five9, Inc. (NASDAQ:FIVN) provides cloud software for contact centers. The hedge fund sentiment around the stock is largely negative. At the end of the fourth quarter of 2021, 56 hedge funds in the database of Insider Monkey held stakes worth $2.5 billion in Five9, Inc. (NASDAQ:FIVN), compared to 76 in the preceding quarter worth $3.5 billion.
On January 28, Bank of America analyst Michael Funk reinstated coverage of Five9, Inc. (NASDAQ:FIVN) stock with an Underperform rating and a price target of $100, noting that there was pressure on the firm amid the increased competition in the software market in recent months and the valuation of the firm was also above a six-year average.
Alongside Meta Platforms, Inc. (NASDAQ:FB), PayPal Holdings, Inc. (NASDAQ:PYPL), and Alibaba Group Holding Limited (NYSE:BABA), Five9, Inc. (NASDAQ:FIVN) is one of the stocks that institutional investors are keeping their eye on amid rising interest rates.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Five9, Inc. (NASDAQ:FIVN) was one of them. Here is what the fund said:
“Five9, Inc. (NASDAQ:FIVN) is a cloud-based contact center as a service software provider that is replacing aging on-premise legacy solutions that dominate the installed base. Companies are being forced to modernize and cloud penetration is still low; Five9, Inc. (NASDAQ:FIVN) is positioned to benefit and should see further growth driven by its cross-selling add-on modules and an AI product that generates high revenue.”
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Disclosure. None. Hedge Funds Are Selling Palantir Technologies (PLTR) and 9 Other Tech Stocks is originally published on Insider Monkey.
