This Week in Technology: Tesla, Microsoft, Twitter, and More

It was an eventful week in the technology sector. Not only did several big companies report their latest quarterly results, but also potential M&A activity has perked up.

In this article, we will take a look at the developments that surrounded Tesla Motors Inc (NASDAQ:TSLA), Microsoft Corporation (NASDAQ:MSFT), Twitter Inc (NYSE:TWTR), Time Warner Inc (NYSE:TWX), and AT&T Inc. (NYSE:T) this week. In addition, we will assess the hedge fund sentiment towards the companies in question.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

Taina Sohlman / Shutterstock.com

Tesla Motors Inc (NASDAQ:TSLA) shares inched up by 1.8% from Monday through Friday, versus the NASDAQ’s 0.83% advance. One reason for the bullishness was Tesla’s announcement this week that all vehicles it currently makes will have full self-driving hardware. If Tesla executes, and its cars become fully autonomous in several years, the company could feasibly compete against Uber and Lyft by allowing Tesla owners to rent out their vehicles to the company’s potential ride-sharing network, Tesla Network. That would not only give Tesla a potential Uber style cut of the revenue from ride sharing, but also it would make Tesla cars more affordable (as the owners of the vehicles can use their cut of the ride sharing fees to pay down their monthly bills). Of the 749 funds we track, 36 funds owned $1.13 billion worth of Tesla Motors Inc (NASDAQ:TSLA)’s stock, which accounted for 4.00% of the float on June 30, versus 39 funds and $1.08 billion, respectively, on March 31.

Microsoft Corporation (NASDAQ:MSFT) surged to an all-time high of on Friday after it reported better-than-expected fiscal first quarter results. During the period, Microsoft earned $0.76 per share on revenue of $22.3 billion, beating the consensus estimates by $0.08 and $590 million, respectively. Sales appreciated by 3% year-over-year, as Azure sales jumped by 116% and the company continued to make headway in the cloud space, with cloud margins improving and the company’s position in the segment strengthening. With its growing cloud sales, the company working to integrate AI to all its products, and the Hololens eventually hitting the market, Microsoft certainly has plenty of growth in the future to support its attractive dividend even if PC sales continue to shrink. Ken Fisher’s Fisher Asset Management raised its stake in Microsoft Corporation (NASDAQ:MSFT) by 1% to 18.37 million shares in the third quarter.

On the next page, we recap the weekly events that occurred to Twitter, Time Warner, and AT&T.

Although Salesforce, Disney, and Alphabet have ruled out a bid for the social media company for the time being, Twitter Inc (NYSE:TWTR)’s stock nevertheless surged by 7% on Friday on the back of rumors that SoftBank Group could make a bid. While nothing public supports the veracity of the rumors, Softbank, along with Saudi Arabia and others, is planning to form a fund of as much as $100 billion to invest in the global tech sector over the next half decade. With that massive capital bankroll, a potential purchase of Twitter wouldn’t be a problem financially speaking. Whether it makes much sense for shareholders is another question. A total of 30 funds from our database had a bullish position in Twitter Inc (NYSE:TWTR) at the end of the second quarter, up by three funds from the previous quarter.

While we are on the topic of M&A in the technology sector, AT&T Inc. (NYSE:T) has agreed in principle to buy Time Warner Inc (NYSE:TWX) for $85 billion according to CNBC’s sources. That would translate to about $110 in cash and stock for each Time Warner share, which would be a nice premium to the stock’s Friday close. Although the purchase of Time Warner will diversify AT&T and help unlock synergies/deliver value in the long run, AT&T might have to take on additional debt, which might in turn pressure its credit rating in the near term. According to our records, 63 funds amassed around 5.6% of Time Warner Inc (NYSE:TWX)’s float on June 30. By contrast, 55 investors owned 1.3% of AT&T Inc. (NYSE:T).

Disclosure: None