Was Cliff Asness Right to Bet Big on These Tech Stocks?

Billionaire Cliff Asness founded quant fund AQR Capital Management in 1998. Less than two decades later, AQR Capital has grown to have an equity portfolio of $50.44 billion and is one of the largest hedge funds in the world. Given the strong growth, AQR Capital must be doing something right. Let’s take a look at some of AQR’s tech picks, in which the investor has more than doubled his stakes during the second quarter and how they performed in the following three months.

At Insider Monkey, we track major investors like Asness, in order to identify actionable patterns and profit from their moves. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks lagged the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.

#6 Blackberry Ltd (NASDAQ:BBRY)

Shares held (as of June 30): 3.81 million
Total Value (as of June 30): $31.13 million
Percent Change from First Quarter: 103%

Blackberry Ltd (NASDAQ:BBRY)’s stock lost 25.1% in the third quarter as investors threw in the towel on CEO John Chen’s turnaround plan. Although Blackberry is free cash flow positive, its hardware revenues are contracting. Meanwhile Blackberry’s software, licensing, and services revenue isn’t growing as quickly as investors would like it to. The bulls look forward to Blackberry’s Priv phone launch to change things for the better. The Priv phone will be Blackberry’s first Android-based smartphone and has a slide-out keyboard. If Priv phone sales beat expectations, Blackberry shares could rally. Prem Watsa‘s Fairfax Financial Holdings owned 46.7 million shares at the end of the second quarter.

#5 Infosys Ltd ADR (NYSE:INFY)

Shares held (as of June 30): 11.89 million
Total Value (as of June 30): $188.39 million
Percent Change from First Quarter: 109%

Infosys Ltd ADR (NYSE:INFY) rose by 20.4% in the third quarter, as sentiment around outsourcing and business consulting improved. The strong dollar helps Infosys in some ways, because its costs are lower in India in dollar terms if the dollar rallies against the Rupee. With a forward P/E of 18.98 and dividend yield of 2.47%, Infosys Limited certainly isn’t expensive. AQR is optmistic, as it increased its position by 109% in the second quarter to 11.89 million shares. Ken Fisher‘s Fisher Asset Management owned 21.67 million shares at the end of June.

#4 Applied Materials, Inc. (NASDAQ:AMAT)

Shares held (as of June 30): 1.58 million
Total Value (as of June 30): $30.3 million
Percent Change from First Quarter: 227%

Applied Materials, Inc. (NASDAQ:AMAT) slid by 23.1% in the third quarter as investors worried about oversupply. Applied Materials, Inc. (NASDAQ:AMAT) helps companies make the latest and best NAND flash technology, but will see its business slow down as its customers consolidate and reduce their expansion plans. The company did recently get some good news, however, after Intel Corporation (NASDAQ:INTC) announced it will be spending up to $5.5 billion building new capital plants in China. AQR is a believer in the company, as it increased its position by 227% from the first quarter to 1.58 million shares. David Einhorn’s Greenlight Capital owned 8 million shares at the end of June.

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

Shares held (as of June 30): 104,567
Total Value (as of June 30): $45.39 million
Percent Change from First Quarter: 364%

Amazon.com, Inc. (NASDAQ:AMZN) soared by 17.9% in the third quarter as more investors took note of Amazon.com’s infrastructure as a service division’s success. Amazon Web Services might not be a ten-billion-dollar-a-year company yet, but it is quickly getting there. AWS revenues in the third quarter grew by 78% year-over-year as more corporations and startups outsourced their computing needs. Given the size of the cloud market, there is plenty of growth ahead. Ken Fisher’s Fisher Asset Management owned 2.49 million at the end of September. AQR increased its holding by 364% in the second quarter to 104,567 shares.

#2 Xilinx, Inc. (NASDAQ:XLNX)

Shares held (as of June 30): 1.61 million
Total Value (as of June 30): $70.92 million
Percent Change from First Quarter: 989%

Xilinx, Inc. (NASDAQ:XLNX) inched down by 3.3% in the third quarter amid a broader market sell-off. Analysts think there is limited upside, as they have a consensus target price of $47.67 per share, or roughly 1.07% above current levels. Given the forward P/E of 20.98 and dividend yield of 2.63%, shares of the semiconductor company are not cheap, but the company could do well if it merges with another company or does an accretive acquistion.

#1 Twitter Inc (NYSE:TWTR)

Shares held (as of June 30): 814,578
Total Value (as of June 30): $29.5 million
Percent Change from First Quarter: 3797%

Twitter Inc (NYSE:TWTR) fell by 25.6% in the third quarter as investors worried about slowing user growth and management’s unsuccessful attempts at monetization. The investor worries may be too negative, however, as Twitter has plenty of things going for it. With a user base in the hundreds of millions and the majority of the world’s celebrities on the platform, Twitter has all the potential in the world. It is just up to new CEO Jack Dorsey to unlock it. Dorsey has plenty of billionaire fellow shareholders, including Steve Ballmer and Alwaleed bin Talal, rooting for him to succeed. If Dorsey fails, a sale to Google is not out of the question. Daniel Benton‘s Andor Capital Management owned 1.5 million shares at the end of June.

Disclosure:none