After they saw the value of their holdings plummet quite significantly during the third quarter, the last quarter of 2015 came as a respite for most equity investors. During that period, most stocks rebounded and managed to recoup some of the losses they incurred during the third quarter. However, there was one particular sector whose stocks not only bounced back, but some of which even went on to create new highs during the fourth quarter. That sector was the technology sector. The relative outperformance of the tech sector can be gauged from the fact that while the S&P 500 was up by 6.4% during the fourth quarter, the S&P North American Technology Sector Index returned 10%. Hence, it’s not a coincidence that smart money lapped up tech stocks in droves during the fourth quarter, with five of the ten most popular stocks among the more than 730 hedge funds that we track being from that sector. Read further to know tech stocks made the cut.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas (see the details here).
#5 Apple Inc. (NASDAQ:AAPL)
Investors with Long Positions (as of December 31): 133
Aggregate Value of Investors’ Holdings (as of December 31): $17.72 Billion
While its ownership among the funds covered by us remaining unchanged during the fourth quarter, Apple Inc. (NASDAQ:AAPL) nonetheless slipped from being the most popular tech all the way down to the fifth-most popular as of the end of December. However, amid a 4.5% decline that the stock suffered during that period, the aggregate value of investors’ holdings in the company did increase marginally, by $312 million, so there was some definite some buying of shares on weakness. Apple Inc. (NASDAQ:AAPL)’s stock has lost almost 9.5% this year however, much to the chagrin of some investors, who can’t understand the market’s hesitation in the face of its low valuation. Citing the downturn in its core business, the low valuation at which it currently trades at (a P/E below 10), and the good dividend yield it provides (up to 2.22%), several analysts and investors feel that Apple Inc. has now transformed from a growth stock into a value stock. Billionaire David Einhorn‘s Greenlight Capital reduced its stake in the company by 45% to 6.28 million shares during the fourth quarter.
Follow Apple Inc. (NASDAQ:AAPL)
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#T3 Amazon.com, Inc. (NASDAQ:AMZN)
Investors with Long Positions (as of December 31): 140
Aggregate Value of Investors’ Holdings (as of December 31): $17.3 Billion
Amazon.com, Inc. (NASDAQ:AMZN) proved its naysayers wrong in 2015 by posting its first quarterly profits and was rewarded handsomely by investors. The number of hedge funds covered by us with ownership in the company increased by 28 during the fourth quarter, with the aggregate value of their holdings experiencing a 28.36% jump to $17.3 billion. Though the stock has declined by over 18% this year, mostly due to the worse-than-expected fourth quarter numbers that it reported recently, investors are still optimistic about the stock. Amazon’s Web Services segment is growing at a record pace, with a 69% year-over-year increase in net sales in the fourth quarter, while Amazon.com, Inc. (NASDAQ:AMZN) is also working towards increasing its margins in its core business by reducing its dependency on other logistics and infrastructure companies. The bullish sentiment among hedge funds is shared by analysts as well; the 45 prominent analysts and brokerages that cover the stock currently have an average rating of ‘Buy’ on it with an average price target of $746.30, which represents potential upside of 35.3% from the stock’s current trading price. Michael Sidhom‘s Immersion Capital initiated a stake in the company during the fourth quarter, purchasing 236,256 shares.
