Over the past half-decade, technology stocks have provided the biggest bang for Mr. Market’s buck, and it’s the only sector to appreciate more than 11 percentage points during this time period. While returns haven’t been quite as dominant in recent months, there are still plenty of opportunities in this space if you know where to look.
At Insider Monkey, we’ve proven that one of the best ways to parse down the marketplace is to look at what top-tier hedge funds and insiders are buying. Gauging this so-called “smart sentiment” is important, as our research has proven that both phenomena beat the market quite handily over the long run (see how to use this strategy yourself).
Furthermore, the Billionaire Hedge Fund Index—a result of our recent collaboration with MarketWatch—returned 24.3% last year vs. 16% for the S&P 500 ETF [s:SPY]. The index tracks close to 40 billionaire hedge fund managers, and proves that the cream of the crop still has splendid investment chops.
Without further ado, let’s take a look at the top companies in the technology sector that hedgies and insiders are bullish on.
According to hedge funds’ latest round of 13F filings with the SEC, Apple Inc. (NASDAQ:AAPL) takes the top spot on this list; the stock has bullish interest from more than 36% of the managers we track. Apple Inc. (NASDAQ:AAPL), which is also the top holding of the Billionaire Hedge Fund Index, has seen one insider—Director Robert Iger—buying up stock in the past three months. Clearly, shares of Apple Inc. (NASDAQ:AAPL) are cheap no matter how you slice the metrics, but it appears that greater value-creation is needed to pull more income-seeking investors into the fold.
EMC Corporation (NYSE:EMC) is No. 2, and about 15% of the hedge funds we track hold long positions. The diversified IT company has seen one insider snatching up shares over the past three months, though EMC’s market cap has shrunk by 2.7% since the start of 2013. Wall Street’s average price target on EMC still indicates that an upside of about 20% is expected from current levels, and steady margin improvement should continue to be a key strength over the long run.
Aside from Apple Inc. (NASDAQ:AAPL) and EMC, did Adobe Systems Incorporated (NASDAQ:ADBE) make the cut?
Tripadvisor Inc (NASDAQ:TRIP), meanwhile, sits at the third spot on our list, with heavy interest from notable money managers like Stephen Mandel, Christian Leone and Steven Cohen (check out Cohen’s top stock picks). Liberty Interactive (NASDAQ:LINTA), which is classified as a Large Shareholder by the SEC and therefore technically an “insider,” purchased nearly $300 million worth of Tripadvisor’s stock last December and now holds a controlling interest in the company. Shares of the online travel site have already risen 20.6% since this transaction.
Next up we have Salesforce.com, Inc. (NYSE:CRM), which is a favorite of Ken Griffin, Jim Simons and George Soros (see Soros’ top stock picks), among other hedge fund managers. Since Director Alan Hassenfeld bought shares of the enterprise solutions company in mid-December, its stock price has risen 2.3%. Salesforce has beaten the Street’s top and bottom line estimates in the first three quarters of its 2013 fiscal year; we’ll be waiting for its Q4 results later this month. The company is also seeking shareholders’ approval of a 4-for-1 split, which is generally viewed as a bullish move.
Adobe Systems Incorporated (NASDAQ:ADBE) is fifth on our list, and about 8% of the hedge funds we track hold interest. Some of the biggest supporters of this software company include D.E. Shaw and Bill Miller (see Miller and Legg Mason Capital’s full holdings), and shares are up 1.1% since Director Amy Banse bought close to $200,000 worth of the stock last month. Sentiment surrounding the application software sub-industry is mixed, but with a book value that’s at a 35% discount to its peer average, it’s difficult to ignore Adobe.
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Disclosure: I have no positions in any of the stocks mentioned above
