Former equity trader and founder of $5.9 billion fund Laurion Capital, Benjamin A. Smith, made some eye-opening moves in the last quarter for his fund. Smith almost eliminated position in Advanced Micro Devices, Inc.(NASDAQ:AMD), added a significant amount of shares to Laurion’s holding of NVIDIA Corporation (NASDAQ:NVDA), while initiating a position in Apple Inc. (NASDAQ:AAPL).
Smith, a Harvard graduate, started Laurion Capital in 2005 after 11 years being an equity trader at JPMorgan Chase & Co. Laurion is a hedge fund based out of New York City that manages assets on behalf of foundations, endowments, family offices, pension funds and other institution and individual investors. The firm mainly focuses its resources to pooled investment vehicles and invests in public equities, fixed income and commodities across the globe. The hedge fund using a combination of quantitative and qualitative analysis to give its investors quality returns.
Last summer, Laurion was forced to close up a large macro fund due to losses of close to 5%. The losses accumulated due to various low-probability and high-impact events such as China’s devaluation of the yuan and Brexit. The fund managed just over $1B and investors were given the option to move their capital into Laurion’s flagship fund.
Let’s take a look at some of the stocks that Laurion is hoping will give its fund a much-needed boost moving forward:
Advanced Micro Devices, Inc.
After a year that saw AMD’s stock jump over 100%, Smith cuts off his firm’s holding in the semiconductor company. Laurion sold of 799,729 shares, a 90% reduction, to bring the value of the firm’s holding down to $1,207,000. While Smith was willing to take the gains from the high-soaring stock, there are still analysts that believe this is just the beginning for AMD.
Analyst Mark Lipacis of Jefferies believes that this amazing stock rally run for AMD this past year is just the beginning of a bigger run. He believes that AMD will be able to gain market share from Intel in the cloud computing server chip market. After meeting with AMD’s CEO he is also confident in the firm’s server microprocessor unit, its ability to reach its target gross margin of 40-44% and its new desktop microprocessor unit products.
With Microsoft, Baidu and Tencent all announcing their intentions to use AMD’s latest server chips in their cloud computing data centers, the analyst believes AMD is well on its way to surpass Intel. Lipacis predicts AMD’s share of the server processor market to rise to 2% by the end of 2017 and 8% by the end of 2018.
Most analysts on the street remain bullish on AMD with the average price target being $14.54, representing a 18% upside from current levels. Out of 20 analysts who rated the company in the last three months; 9 gave a Buy rating, 8 gave a Hold rating and the remaining 3 gave Sell ratings.
In the second quarter, Smith increased his exposure to one of the hottest stocks of the year by purchasing 124,651 shares of NVIDIA, a 2320% increase. The value of Laurion’s total shares of NVIDIA is now $18,796,000. The company has gone up over 180% this year, but there is still more room to grow according to many experts.
On August 10th, NVIDIA reported an extremely strong quarter with revenues increasing 56% to $2.23 billion and EPS increasing 124%. Even though the stock fell 5% on this report, it has gone up since then to make up most of its losses and analysts are still confident in a bullish picture for this technology company.
There are many trends that factor into why investors remain bullish on NVIDIA. The first is that NVIDIA’s revenues soared by over 250%, to $416 million, for the data center market, marking the 5th straight quarter of triple-digit growth. Additionally, NVIDIA’s core Graphics Processing Unit (GPU) chips are ideal for deep learning, Artificial Intelligence (AI), and high performance computing. Chips for these industries are in high demand as customers are looking for technologies to help them discover critical insights and trends.
NVIDIA also continues to innovate, recently launching its Volta-based V100 accelerator, a next-generation technology. This new chip allows for a 10 times improvement in deep learning power. They already have partnerships with Baidu, Volkswagen and Foxconn. Lastly, growth in the automotive segment is expected to pick up for NVIDIA after only showing growth of 19% this past quarter. NVIDIA has signed up more than 225 customers for the DRIVE PX AI system. Even with all these new growth segments, NVIDIA’s original focus, gaming, is still doing strong with revenues jumping 52% this past quarter.
Although many analyst are optimistic about NVIDIA’s future growth, others believe that its valuation has become too stretched and are more cautious about its future stock price. Out of 25 analysts, 16 gave the company a Buy rating, 6 gave a Hold rating and then 3 Sell ratings. The average price target is $155.61, an 9% downside from current levels.
In the last quarter, Smith began a holding in Apple by purchasing 1,221,093 new shares worth a value of $175,862,000. Since his purchase, the stock has risen from $144 to $159.59, a return of 10.8%. A lot of this surge in price has been attributed to Apple’s most recent product launch.
The consensus view around Wall Street was that the most anticipated technology event in years lived up too its hype. There is a lot of optimism surrounding the potential upgrade cycle for Apple’s new iPhone X and iPhone 8 models that were unveiled this past Tuesday. Drexel Hamilton’s Brian White believes that Apple “took the iPhone franchise to a whole new level” and he walked away even more optimistic about Apple’s new iPhone cycle and its future in Augmented Reality.
The new iPhone X included new features such as facial recognition, wireless charging, new cameras and a new OLED display. The company also rolled out a new Apple TV that brings HDR and 4K technology to the product and a new Apple Watch that has built-in-mobile connection. The only downside was that the launch date for the iPhone X, November 3rd, was several weeks later than expected, but in long run it is not a major factor.
Overall, the Street has a bullish sentiment towards the technology giant with 24 out of 33 analysts giving Apple a Buy rating in the last three months. The other 9 gave Hold ratings. Even though the stock has risen over 40% this year, analysts believe there is still room to grow giving the company an average price target of $173.11, representing an 8% upside from current levels.