Hedge fund manager George Estes Hall has demonstrated a bullish outlook towards three key tech stocks in Q1 2017 according to 13F forms filed by Clinton Group with the SEC. He ramped up the $1.72 billion fund’s holdings of volatile semiconductor stock Advanced Micro Devices, Inc. (NASDAQ:AMD), as well as NVIDIA Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC).
George Estes Hall holds three of the fund’s major positions; he is President, CEO and Chief Investment Officer at Clinton Group. As a result, Hall has the final say on the firm’s investment and trading decisions, risk management and quantitative analysis. Hall’s expertise comes from his time as CEO of ROIC Acquisition Holdings and CIO of ROI Acquisition Corp. Previous to this Hall owned Axiom Bank and working in mortgage securities at CitiCorp. Hall, who graduated from the Wharton School of Business, takes a long-term approach towards hedge funds: “It’s easy to forget about the bear markets we’ve had, and how terrible they’ve been. In terms of the typical retail investor, I think with hedge funds the market needs more time to shake out some of the people who are not going to be successful.”
In terms of the fund, Clinton Group has a specific investing philosophy that involves both a fundamental and quantitative approach. Intriguingly, the fund has developed its own data-intensive quantitative equity strategy based on ten years of actual “time-tested” trading. The method uses statistical arbitrage and adaptive systems to find patterns that it believes can identify return-drivers for specific stocks and sectors. On the fundamental side the fund says it has a “unique macro vantage point” from which to source attractive opportunities. In particular, the fund tries to use “deep research” and opportunistic trading to optimize the portfolio without incurring too much risk.
Now let’s see how this strategy and these ambitions played out in three of the fund’s key Q1 moves:
Advanced Micro Devices, Inc.
In Q1, Hall upped the fund’s holding in AMD by 15%, which is about 22,800 shares. The fund’s holding now stands at close to 180,000 shares with a value of $2,616,556.
AMD has just received a boost from giant Apple in its fight against fellow chipmaker Nvidia. Apple is using AMD’s Radeon cards AMD’s for its latest iMac computers including the 4K and 5K Retina iMac. The biggest news however is that the new iMac Pro out in December will feature AMD’s Radeon Pro Vega graphics card. This is a real coup for AMD because Apple is touting the $4,999 Pro as its most powerful computer yet, and this is also its much-hyped offering for creative professionals. On the news- announced at Apple’s recent WWDC 2017 conference- shares in AMD surged by over 7%. Shares are also up due to rumored product sellouts and increased demand from a booming cryptocurrency market.
The stock has a hold analyst consensus rating. TipRanks reveals that in the last three months, the stock has received 6 buy, 9 hold and 3 sell ratings. The average analyst price target of $11.70 now stands at close to 5% below the current share price of $12.28.
Hall also displayed a bullish outlook towards AMD rival Nvidia, increasing the fund’s holding in the stock by a whopping 1597% (about 45,447 shares) to a $5,260,556 position, which makes up about 0.3% of the total portfolio.
An opposing view has just been revealed by famous blogger Andrew Left of Citron Research. He surprised the market by publishing a bearish call on the stock on June 9. He believes shares will fall back to $130- approximately $20 below their current price. Shares in Nvidia more than tripled last year, which has led to an undercurrent of concern that the stock is overvalued.
On the news shares fell by 8%. Left- who is personally short Nvidia- wrote that although Nvidia is a “wonderful” company it has now become a “casino stock” with tough competition ignored and the market over optimistic that gains can continue especially as gaming growth decelerates (down 24%- gaming makes up 55% of NVDA’s revenue). His move is at odds with most of the major banks which have been busy upping their price targets on the stock- for example Merrill Lynch’s Vivek Arya just raised his price target from $155 to an incredible $185 (the Street’s highest price target). Left recommends leaving Nvidia for a stock like Alphabet which has similar exposure to tech stocks but without the risk due to its much higher core value.
Citron Research has a strong track record according to TipRanks which places the financial blogger at #569 out of 6,005 bloggers tracked by the financial accountability engine. Indeed, Citron- which correctly predicted the demise of healthcare calamity Valeant- has a 63% success rate and 11.6% average return per recommendation. Interestingly, the vast majority of the tech-focused blogger’s ratings are a sell- 90% to just 2% buy ratings.
Nvidia has a moderate buy analyst consensus rating on TipRanks based on the 13 buy, 8 hold and 2 sell ratings the stock has received over the last three months. At the same time, the average analyst price target of nearly $137 stands at a considerable -5.58% from the current share price.
Hall completed the trio by initiating a new holding in Intel with the purchase of 65,000 shares worth $2,368,068. Intel has just released its new Skylake Core X-series processor family at the Computex conference in Taipei. The new processor is intended for high-end gamers and is based on 2nd-generation 14nm Skylake architecture. Five-star Canaccord Genuity analyst Matt Ramsay reiterated his hold rating on the stock 12 days ago with a $38 price target (6.4% upside) due to stagnating gross margins. Ramsay says the processor is impressive but predicts Intel’s “PC revenue will remain in a modest secular decline” of around 3%. He says declines would be faster but Intel has a strong portfolio lineup.
Smaller rival AMD could also provide competition. Ramsay says AMD’s new 14nm Ryzen processor lineup offers “both competitive performance metrics and aggressive pricing and could take incremental share from Intel starting in Q3/17”. He is now looking for Intel to deliver returns not from just PCs and servers. Ramsay is the #39 analyst out of 4,560 analysts tracked by TipRanks.
Like Nvidia, Intel has a moderate buy analyst consensus rating on TipRanks. In the last three months, the stock has received 11 buy, 7 hold and 2 sell ratings. The average analyst price target of $40.50 paints a more positive picture than for the other two stocks with potential upside of 13% from the current share price of $36.