The Release of New Products Supports Smart Money’s Confidence in Google

Google Inc (NASDAQ:GOOG) is fresh off its latest Nexus announcement where, for the first time, it simultaneously unveiled two new Nexus phone models, and the market is reacting favorably to the news. The development supports hedge funds’ long love for Google as the company continues its expansion in the smartphone space.

We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 118%, outperforming the S&P 500 ETF (SPY) by over 60 percentage points (see more details here).

Shares of Google Inc (NASDAQ:GOOG) are up 1.50% after the bell on the back of the announcement of the new Nexus phones and other updates for products including Android, Chromecast, Chromecast Audio, Project Fi, and Google Play Music. The two new phones unveiled by Google at the event include the Google Nexus 6P, made by Huawei, and the Google Nexus 5X, made by LG Electronics. Both will run on the new Android 6.0 operating system called “Marshmallow”, and the Nexus 6P is the larger, more powerful albeit pricier option against the Nexus 5X.

The Nexus 6P is powered by a 64-bit octa-core Qualcomm Snapdragon 810 processor, Adreno 430 graphics processor and 3GB of random access memory (RAM). Its other features include a 5.7-inch wide quad HD AMOLED screen, 12-megapixel Sony rear camera with laser autofocus and 4K video capture capability, 8-megapixel front camera, a back-mounted fingerprint reader called the Nexus Imprint and a USB Type-C port which the firm claims can charge the phone twice as quickly, compared to the iPhone 6 Plus (see our compilation of smartphones with fastest charging times). While less powerful, the Nexus 5X is no slouch either as it is equipped with a hexa-core Qualcomm Snapdragon 808 processor, Andreno 418 graphics processor and 2GB of RAM. Featuring a 5.2-inch full-HD screen, it comes with the same back camera as the Nexus 6P and a 5-megapixel front camera, Nexus Imprint and a USB Type-C port. Both devices have no expandable memory. Preorders are open today in the US, UK, Ireland, and Japan for the Nexus 6P, with Korea added to the countries for the Nexus 5X, while shipments are scheduled to start next month. The Nexus 6P and Nexus 5X start at $499 (32GB internal memory) and $379 (16GB internal memory), respectively. While being the highlight of the Nexus event, the phones were far from the only new products released by Google.

Google also announced that Android 6.0 Marshmallow, the latest version of its mobile operating system, will begin rolling out to users next week. The new version sports better notifications, battery life improvements through more efficient power management, improved Google Now and Google Search features, and more detailed privacy controls. Google also announced that it plans to offer Project Fi, a wireless network that combines major cellular networks and Wi-Fi for just $20 per month on the Nexus 5X and Nexus 6P. Project Fi now works only with the older Nexus 6 phone.

The technology giant also unveiled a new, faster version of its content streaming stick, the Chromecast 2, which will be sold at the same price of the original Chromecast, $35. There is also a new version of the Chromecast application as users continue to swarm to online content consumption. Google also unveiled Chromecast Audio, a device that connects to speakers and streams audio from any Chromecast-connected device through Wi-Fi networks. The technology behemoth also unveiled a new family plan for Google Play Music which includes up to six different users for just $14.99 per month. Last but not the least, Google also previewed the Pixel C, a tablet powered by Android that is reminiscent of Microsoft’s Surface tablet.

Hedge funds from our database were positive on Google Inc (NASDAQ:GOOG) during the second quarter as there were 107 hedge funds with long positions in class C shares of the internet giant at the end of June, pushing it into our top 10 most popular stocks, even though the number of investors declined by one during the second quarter. The more telling metric, however, is the total value of hedge funds’ holdings in the stock, which went up by nearly 25% to $8.59 billion, representing 2.40% of all class C shares of the firm, despite a nearly 5% drop in the value of the stock in the second quarter. Moreover, 115 funds from our database amassed nearly $8.19 billion of Google’s class A stock, representing 2.20% of the outstanding stock. Andreas Halvorsen’s Viking Global owned 1.15 million class C shares of Google by the end of June, up by 37% on the quarter. Boykin Curry’s Eagle Capital Management owned 1.74 million class C shares, up by 53% from the end of March.

Disclosure: None