In this article, we discuss MicroStrategy Incorporated (MSTR) and 9 other tech stocks that hedge funds were right about. If you want to read about some more tech stocks that hedge funds were right about, go directly to Hedge Funds were Right About MicroStrategy Incorporated (MSTR) and 4 Other Tech Stocks.
On April 7, Michael Saylor, the CEO of analytics firm MicroStrategy Incorporated (NASDAQ:MSTR), spoke at the Bitcoin 2022 conference and affirmed his bullish stance on the coin, saying that the momentum is clearly behind bitcoin” and that the coin had a “bright future” ahead. He added that people were going to realize that the Lightning network on the Bitcoin blockchain was “going to change the world”. Cathie Wood of ARK Investment Management, another Bitcoin bull, also echoed the comments of Saylor.
Saylor has reorganized MicroStrategy Incorporated (NASDAQ:MSTR) around Bitcoin in the past few years, buying 129,918 bitcoins via sales of junk bonds and convertible notes since August 2020. This holding has been pummeled in the past few weeks as crypto prices register their worst crash on record amid soaring inflation and recession fears. The price of Bitcoin has dropped to around $21,000, a sharp fall from the all-time high of $67,000 registered in November 2021.
MicroStrategy Incorporated (NASDAQ:MSTR) Faces Losses Worth $1 Billion
The crash has also sent the shares of MicroStrategy Incorporated (NASDAQ:MSTR) tumbling, with the stock down nearly 70% year-to-date. This decline has spread to other tech sectors as well, with giants like Meta Platforms, Inc. (NASDAQ:META), PayPal Holdings, Inc. (NASDAQ:PYPL), and Tesla, Inc. (NASDAQ:TSLA) also caught in the crosshairs of inflation. However, MicroStrategy seems to be one of the worst-affected tech stocks. News platform CoinDesk reports that the company is planning to cut their losses and sell some Bitcoin.
According to the report, MicroStrategy Incorporated (NASDAQ:MSTR) has transferred more than 2,000 Bitcoin worth $48 million to a new wallet for the first time ever, indicating that it will likely sell these in the coming weeks. The firm has spent nearly $4 billion on accumulating Bitcoin, starting out with $12,000 per coin in August 2020. As of May 19 this year, the average price of the coin for the stash was more than $30,000 per coin. The firm faces losses of $1 billion as the price of the coin falls.
MicroStrategy Incorporated (NASDAQ:MSTR) CEO Saylor has dismissed talks of a margin call, noting that the price of the coin would have to fall to $3,562 before the company would run out of enough of the crypto to pledge for a term loan. Wall Street is also turning bearish on the stock as Saylor affirms that he will never sell Bitcoin. Chicago-based investment firm Citadel Investment Group is the largest shareholder in MicroStrategy Incorporated (NASDAQ:MSTR). It owns PUT options on 286,000 shares of the firm worth around $139 million.
By MicroStrategy – MicroStrategy, CC BY 4.0, https://commons.wikimedia.org/w/index.php?curid=64257908
Our Methodology
Famous tech stocks that were dumped by hedge funds in the first quarter of this year were picked for this article. Technology firms that registered a decline of 10 or more in the number of hedge funds with stakes in them at the end of the first quarter of 2022, compared to the end of the fourth quarter of 2021, were preferred for the list.
10. MicroStrategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Holders in Q1 2022: 14
Number of Hedge Fund Holders in Q4 2021: 16
MicroStrategy Incorporated (NASDAQ:MSTR) provides analytics software and services. Hedge funds made prescient moves in the first quarter of 2022 and cut their stakes heavily in the company. Our data shows that at the end of the first quarter of 2022, 14 hedge funds in the database of Insider Monkey held stakes in the company, compared to 16 in the previous quarter.
Most importantly, several important hedge funds slashed their stakes significantly in the company in the first quarter. For example, Citadel Investment Group of billionaire Ken Griffin decreased its position in the company by 75% in the first quarter. Matthew Hulsizer’s PEAK6 Capital Management also cut its stake in MicroStrategy Incorporated (NASDAQ:MSTR) by 56% in the period. Two Sigma Advisors of John Overdeck and David Siegel dumped 80% of its stakes in MicroStrategy Incorporated (NASDAQ:MSTR) entering the second quarter.
The stock has suffered in recent weeks amid a larger drop in the prices of Bitcoin, the most popular coin, around which the company has reorganized business in recent years. Per reports from news platform CoinDesk, the bitcoin stash of the firm is taking a hit worth $1 billion from the recent crash in the price of the coin.
On June 16, Jefferies analyst Brent Thill maintained a Hold rating on MicroStrategy Incorporated (NASDAQ: MSTR) stock and lowered the price target to $180 from $215, noting that a Bitcoin selloff had increased concerns around the firm but it did not face liquidity risk.
Just like Meta Platforms, Inc. (NASDAQ:META), PayPal Holdings, Inc. (NASDAQ:PYPL), and Tesla, Inc. (NASDAQ:TSLA), MicroStrategy Incorporated (NASDAQ: MSTR) is one of the tech stocks that hedge funds are dumping.
9. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders in Q1 2022: 63
Number of Hedge Fund Holders in Q4 2021: 74
MercadoLibre, Inc. (NASDAQ:MELI) operates online commerce platforms. On May 5, the company posted earnings for the first quarter of 2022, reporting earnings per share of $1.30, beating market estimates by $0.19. The revenue over the period was $2.25 billion, beating analyst expectations $210 million. The gross merchandise volume over the period was $7.7 billion, up 31.6% year-over-year.
On June 9, Citi analyst Joao Pedro Soare maintained a Buy rating on MercadoLibre, Inc. (NASDAQ:MELI) stock and lowered the price target to $1,150 from $1,500, noting that delinquency rates will increase and may pressure the earnings of the firm.
At the end of the first quarter of 2022, 63 hedge funds in the database of Insider Monkey held stakes worth $3.1 billion in MercadoLibre, Inc. (NASDAQ:MELI), compared to 74 in the previous quarter worth $3.9 billion.
ClearBridge Investments, in its Q1 2022 investor letter, mentioned MercadoLibre, Inc. (NASDAQ:MELI). Here is what the fund has to say in its letter:
“Most of our selling over the last several quarters has occurred among emerging growth companies, where we have reduced our exposure to under 5% to better manage risk. Latin America e-commerce platform MercadoLibre, Inc. (NASDAQ:MELI) has also experienced an unwind of COVID-19-induced demand while high inflation and high interest rates in Brazil create new headwinds for consumer purchasing power, which will likely mean slower sales of high-ticket items on the company’s platform and led to the sale of the position.”
8. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders in Q1 2022: 68
Number of Hedge Fund Holders in Q4 2021: 83
Twitter, Inc. (NYSE:TWTR) owns and runs a social networking platform. On June 16, Elon Musk, the prospective buyer of the company, held a staff meeting in which he outlined his vision for the firm, saying that he was targeting 1 billion users for the platform and said that there should be “freedom of speech and freedom of reach” on the platform. Musk is pushing for a $44 billion takeover of the social networking firm.
On June 2, Piper Sandler analyst Thomas Champion maintained a Neutral rating on Twitter, Inc. (NYSE:TWTR) stock and raised the price target to $54.20 from $51.50, noting that “digital advertising spend looks to be normalizing” after two years.
At the end of the first quarter of 2022, 68 hedge funds in the database of Insider Monkey held stakes worth $2 billion in Twitter, Inc. (NYSE:TWTR), compared to 83 in the preceding quarter worth $3 billion.
ClearBridge Investments, in its Q4 2021 investor letter, mentioned Twitter, Inc. (NYSE:TWTR). Here is what the fund has to say in its letter:
“Weakness among our holdings in the communication services sector was the other detractor to performance. Twitter, Inc. (NYSE:TWTR) shares sold off following weaker than expected third-quarter results, but under new leadership, we see the potential for improved execution and performance as live events and entertainment return to pre-pandemic levels.”
7. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders in Q1 2022: 72
Number of Hedge Fund Holders in Q4 2021: 86
Shopify Inc. (NYSE:SHOP) provides a commerce platform and related services. On June 7, the shareholders of the company approved a broad series of reforms, including a 10-for-1 stock split and enhanced voting powers for CEO Tobi Lutke providing that he remains at the firm. The holdings of Lutke will be classified as “founder shares” and are not transferable. Shareholder advisory groups like Glass Lewis and Institutional Shareholder Services had opposed the new measures.
On May 23, Jefferies analyst Samad Samana maintained a Buy rating on Shopify Inc. (NYSE:SHOP) stock and lowered the price target to $475 from $550, noting that stiffening economic headwinds and the looming risk of recession were affecting software stocks.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Shopify Inc. (NYSE:SHOP) with 1 million shares worth more than $699 million.
In its Q1 2022 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE:SHOP) was one of them. Here is what the fund said:
“We added to the Portfolio’s position in e-commerce company Shopify Inc. (NYSE:SHOP) in the first quarter after a sharp share-price decline. This brought the Portfolio’s weighting in the company to 2%. We believe Shopify Inc. (NYSE:SHOP) provides a uniquely positioned platform, and we like the company’s strategy of continuing to invest in its business in an effort to strengthen its competitive advantages. The market’s affinity for businesses like Shopify may have changed, which created an opportunity for us to build our position in the company at what we believed to be compelling valuations.”
6. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders in Q1 2022: 77
Number of Hedge Fund Holders in Q4 2021: 108
Sea Limited (NYSE:SE) is a diversified tech firm. The stock has lost value in recent weeks on the back of disappointing video games sales. In May, video game sales fell to a more than two-year low, dropping down nearly 19% to $3.68 billion from $4.522 billion in May 2021, according to NPD Group. This is the lowest total since the start of the pandemic that had resulted in a massive increase in game sales because of stay-at-home guidelines.
On May 18, Daiwa analyst John Choi maintained a Buy rating on Sea Limited (NYSE:SE) stock and lowered the price target to $150 from $300, noting that there were negative surprises in the first quarter earnings report of the company.
At the end of the first quarter of 2022, 77 hedge funds in the database of Insider Monkey held stakes worth $5 billion in Sea Limited (NYSE:SE), compared to 108 the preceding quarter worth $10 billion.
In addition to Meta Platforms, Inc. (NASDAQ:META), PayPal Holdings, Inc. (NASDAQ:PYPL), and Tesla, Inc. (NASDAQ:TSLA), Sea Limited (NYSE:SE) is one of the tech stocks that elite investors are selling.
In its Q1 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Sea Limited (NYSE:SE) was one of them. Here is what the fund said:
“Sea Limited (NYSE:SE), a global digital gaming and e-commerce company, detracted from performance for the period held. Similar to other online consumer businesses, Sea Limited (NYSE:SE) faced significant multiple compression in the quarter, exacerbated by a slowdown in user growth at its key Free Fire digital game and mounting investments in its e-commerce operation, particularly in new markets like Brazil. We exited our position as we lost confidence in the long- term unit economics in some of Sea’s new markets and were concerned by the simultaneous slowdown in revenue growth and increase in underlying cash burn.”
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