This Billion Dollar Hedge Fund’s Top Tech Picks

Joe DiMenna founded Zweig-DiMenna Associates with his mentor Martin Zweig in 1984. Seeing as DiMenna’s fund was one of the first to do long/short trading successfully, the fund has grown to have an equity portfolio of over $2.2 billion as of September 30, according to its recently filed 13F documents. Given Zweig’s successful track record, we’ll take a closer look at the fund’s top tech picks in this article, which are Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), Priceline Group Inc (NASDAQ:PCLN), Tableau Software Inc (NYSE:DATA), and Apple Inc. (NASDAQ:AAPL). 

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#5 Apple Inc. (NASDAQ:AAPL)

 – Shares held (as of September 30): 252,439
– Total Value (as of September 30): $27.84 million

Apple Inc. (NASDAQ:AAPL) is a buyback machine. The company buys back tens of billions of dollars of stock every year, and bought back $13.3 billion worth of shares in the fourth quarter of fiscal year 2015 alone, up from $10 billion in the prior fiscal quarter. Apple’s buybacks will help the stock rise even if iPhone demand growth levels off, which is the primary concern of investors. So far though, iPhone demand is still strong, with Apple’s Greater China sales jumping by 99% year-over-year to $12.5 billion in the fiscal fourth quarter. Gross margin is stable-to-rising slightly. Carl Icahn‘s Icahn Capital LP owned 52.76 million Apple shares at the end of September and believes the company should trade for $240 a share, or more than double their current price.

#4 Tableau Software Inc (NYSE:DATA)

 – Shares held (as of September 30): 353,748
– Total Value (as of September 30): $28.22 million

Tableau Software Inc (NYSE:DATA) represents a new investment for Zweig-DiMenna Associates, with the fund adding over 350,000 shares of the company to its portfolio in the third quarter. The business analytics software company reported excellent third quarter results, with EPS of $0.14 on revenue of $170.83 million, exceeding estimates by $0.07 per share and $13.09 million respectively. Revenue rose by 63.5% year-over-year and guidance is pretty strong, with the company expecting fourth quarter revenue of $195 million-to-$200 million, beating analyst estimates of $193 million. 45 funds that we track owned approximately 20% of the company’s float at the end of the third quarter. Among those elite funds is Renaissance Technologies, founded by Jim Simons, with a stake of 551,000 shares.

Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.6% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

#3 Priceline Group Inc (NASDAQ:PCLN)

 – Shares held (as of September 30): 33,376
– Total Value (as of September 30): $41.28 million

Priceline Group Inc (NASDAQ:PCLN) shares are up by 12% year-to-date, as analysts remain bullish on the company. 13 analysts have ‘Buy’ ratings on the stock, while seven have ‘Hold’ ratings, with them having a consensus price target of $1,471 between them. The buy-side smart money is also bullish on the online travel reservation and search site. Of the 730 elite funds that we track, 86 of them owned $7.08 billion worth of Priceline shares on September 30, good for 11.3% of the float. Among the believers is Larry Robbins‘ Glenview Capital, with a holding of 209,470 Priceline shares at the end of the third quarter.

#2 Facebook Inc (NASDAQ:FB)

 – Shares held (as of September 30): 459,718
– Total Value (as of September 30): $41.33 million

Although CEO Mark Zuckerberg recently wrote in an open letter that he will donate 99% of his Facebook Inc (NASDAQ:FB) holdings to a charitable LLC, Zuckerberg’s actions are unlikely to affect the favorable supply and demand balance of Facebook. Zuckerberg is only 31 and his selling will likely not account for much of the daily volume. After almost a decade of being on top, Facebook is still dominating the social networking space and now, more recently, the messaging space. Because of Zuckerberg’s wise move to buy Whatsapp in 2014, Facebook now has a majority share of the messaging app sector, which has lately eclipsed the social networking space in terms of active users. Facebook’s Whatsapp and Messenger have plenty of room to monetize as their functionality begins to catch up with Tencent’s WeChat.

#1 Amazon.com, Inc. (NASDAQ:AMZN)

 – Shares held (as of September 30): 81,744
– Total Value (as of September 30): $41.84 million

Amazon.com, Inc. (NASDAQ:AMZN) is fast becoming the everything store. The company started as a boring online book seller, and started selling other tangential products several years later. Twenty years after its founding, Amazon sells nearly everything, from videos, to cloud services, and diapers. Although Jet.com recently raised half-a-billion dollars to try to take Amazon.com down, the startup faces long odds, as Amazon.com has industry-leading efficiency, the sector’s brightest engineers, and a customer-first culture. Among the savvy investors who recently bought into Amazon are Stan Druckenmiller of Duquesne Capital and Stephen Mandel’s Lone Pine Capital. Not to be left out, Zweig-DiMenna Associates upped its stake by 77% to 81,744 shares during the third quarter.

Disclosure: None