Harriet Lefton

About the Author Harriet Lefton

Harriet originates from the UK where she worked as a journalist specializing in the metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer.

Invest Like Ken Fisher: Apple Inc. (AAPL), NVIDIA Corporation (NVDA), Facebook Inc (FB)

Billionaire hedge fund manager Ken Fisher is feeling bullish about the state of the market- a sentiment reflected in his fourth-quarter trades when he upped positions in key stocks such as Apple Inc. (NASDAQ:AAPL), NVIDIA Corporation (NASDAQ:NVDA) and Facebook Inc (NASDAQ:FB).

Fisher is a long-time stock market expert. Not only is he Forbes’ longest-running columnist, but he is also the author of 11 books and the executive chairman and co-chief investment of Fisher Asset Management fund. The fund, which Fisher founded with just $250 in 1979, is now one of the largest funds in the world with a portfolio value of $57.43 billion.

“A primary feature in my brain has always been the question ‘What can you fathom others find unfathomable?’ Fisher said recently. So it’s perhaps not surprising that Fisher has recently been busy writing about how its “backwards” to think that in the current climate “normal investors” should wait for prices to fall.

Instead he tells the Financial Times: “Stocks aren’t overvalued. Valuation techniques are.” Fisher’s message to investors? If you need long-term growth, your default asset allocation should be stock-heavy as “no other liquid asset has approached stocks’ 10 percent annualized return since 1926, which includes 13 bear markets.”

As this TipRanks graph shows, Fisher’s strategy has seen the fund considerably outperform the average hedge fund for 2017, 2016 and part of 2015- although it continues to lag the measured performance of the S&P 500.

Indeed, the fund’s average returns (based on the weighted portfolio performance of 651 stocks) are relatively impressive: in the last quarter, the fund saw an average return of 5.58%. This rises to 17.82% for the last year and 11.51% over an annualized three-year time period.

Now let’s dig deeper into three of Fisher’s most interesting Q4 moves:

Apple Inc.

In Q4, Fisher increased the fund’s Apple holding by 1.11% to 11.5 million shares with a reported value of $1.33 billion making Apple the fund’s third biggest stock.

Already since the last filing date the shares have gained over 20% in value. And there is much further to go if Bernstein’s top analyst Toni Sacconaghi is to be believed. This famous Apple bear has recently had a change of heart about the future of the consumer giant, raising his AAPL price target to $160 on March 21.

Sacconaghi is predicting great things for Apple’s iPhone 8 which is due to be released in September this year with a radical redesign, telling CNBC that the iPhone 8 cycle will be significant. He says “we believe that users have been holding off — that the last two products have been relatively incremental and evolutionary, and that the iPhone 8 will be a significant form factor change.”

Although the analyst maintained a slightly bearish note with his warning that Apple has seen its best days, he is bullish on the benefit to Apple from changing tax laws on cash repatriation as well as the potential from augmented reality which could drive a new wave of popularity for Apple’s gaming apps. Ultimately he says that in order to remain relevant, Apple will have to keep updating its product portfolio.

TipRanks exhibits a moderate buy analyst consensus rating for Apple with 28 buy ratings, 6 hold ratings and 2 sell ratings published on the stock in the last three months. The average analyst price target of $150 suggests that Apple has further upside potential from the current share price of 6.5%.

NVIDIA Corporation

In Q4 Fisher initiated a new position in chipmaker Nvidia with 2,249 shares that have a reported value of $240,000. Since the last filing date prices of the stock have dropped marginally by 0.65%.

Top Goldman Sachs analyst Toshiya Hari reiterated his buy rating on the stock two days ago with a $130 price target (21% upside) following the recent NVDA Deep Learning Connect conference in London.

After the conference, Hari wrote this analysis of why Nvidia’s management libraries (a C-based API for monitoring and managing various states of the NVIDIA GPU devices) and the support of customers, is so important: “by growing its sales and support capability, NVDA can create sticky relationships with customers in verticals outside of cloud, in our view (note customers outside of the cloud space are more likely to depend on such support from NVDA”.

The analyst adds that this tactic gained Nvidia considerable success in gaming, and that Nvidia’s plan to increase spending over the next few quarters could help drive similar results in the data center, enterprise and automotive businesses.

Nvidia has a moderate buy analyst consensus rating on TipRanks with an average analyst price target of $117.100- which represents a 9.7% upside from the current share price.

Facebook Inc

Fisher boosted the fund’s Facebook holding by 7.37% in Q4 to 255,638 shares worth $29.4 million. The shares have appreciated in value by 20.39% since the last filing date.

Four-star BTIG analyst Richard Greenfield admitted he had been wrong about the stock as he upgraded FB to buy on March 21 with a $175 price target. “Not having a Buy on Facebook has clearly been a mistake in 2017 and we are simply not going to allow that mistake to continue,” said Greenfield.

“Over the past several months, it has become increasingly clear that Instagram Stories is an overwhelming success story for Facebook” Greenfield added. The analyst also referred to Facebook video and the continued shift of advertising to mobile platforms as catalysts for the social media giant’s success. BTIG is now estimating revenue of $38.7 billion for Facebook in 2017, 40% up from their previous estimate.

BTIG is now in line with the vast majority of analysts: Facebook has a strong buy consensus rating on TipRanks with 34 buy ratings and only 2 hold ratings published on the stock in the last three months. In terms of average analyst price target, we can see that there is a potential 16.5% upside from the current share price of $139.


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