Julie Lamb

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Why You Should Pay Attention to Marshall Wace’s 2Q Moves: Micron Technology, Inc. (MU), Apple Inc. (AAPL), NVIDIA Corporation (NVDA)

Delving into the Hedge Fund's Key Q2 Moves in the Tech World


Marshall Wace has built a multi-billion foundation over the last twenty years with systematic-meets-quantitative savvy to trade in long and short global equity investments. Not only has Marshall Wace reported gains in double-digits for two funds, but investors also like what they see when it comes to founders Ian Wace’s and Paul Marshall’s risk management strategy as well as qualities including transparency coupled with infrastructure. Though Wace and Marshall were divided by Brexit, this is a hedge fund that managed to reap profits in the wake of a post-Brexit reality. In the world of leading technology players, the firm’s most recently quarterly trades reveal rising interest in Micron Technology, Inc. (NASDAQ:MU) and Apple Inc. (NASDAQ:AAPL), but a sudden retreat in NVIDIA Corporation (NASDAQ:NVDA).

Micron Sees a Major Ante Up

Marshall Wace is backing Micron, choosing to up its stake in the chip giant in a second-quarter move vying for an extra 1,759,521 shares to a position of 1,781,567 shares worth $53,447,000. While some rumors have whispered through the Street of too much abundance in the memory chip atmosphere, one seller’s weakness is another’s compelling buying prospect.

Though this is a stock that climbed past 44% from the start of the year, Micron suddenly took a sharp turn amid memory overcapacity apprehensions that struck, leading to an 11% depreciation.

Citigroup analyst Christopher Danely acknowledges fears running amiss that on back of DRAM chip capital expenditure raises, too much inventory will drag down prices- but believes that this solo concern will not be enough to weigh on shares. It appears then that Marshall Wace is taking a page right out of Danely’s book in strengthening its position in the chip giant.

Projecting Micron can rise almost 60% this year, the analyst reiterates a Buy rating on the stock with a price target of $45, which implies a just under 48% increase from current levels. (To watch Danely’s track record, click here)

Morgan Stanley analyst Joseph Moore seems to back Danely’s insights on the sell-off, pointing out, “We don’t dismiss either of those factors, but still think stocks can strengthen into year end as prices firm and 2018 capital spending plans start to form.”

Therefore, finding that deficiencies in memory supply “have abated somewhat,” the analyst maintains an Outperform rating on shares of MU with a $35 price target, which represents a 15% increase from where the stock is currently trading. (To watch Moore’s track record, click here)

At the end of the day, the computing space still presents a “healthy” market from Moore’s point of view, as he notices that the majority of cloud players put forth “an expectation that supply will remain tight through next year, and continued increased in mobile DRAM in 4q.” In fact, the analyst would not be surprised to see Micron be the true comeback kid of the Street, finding its way back to average run rates by next year.

Most of the Street remains unfazed by cries of memory shortage, supporting Marshall Wace’s huge vote of confidence, as TipRanks analytics exhibit MU as a Strong Buy. Out of 19 analysts polled by TipRanks in the last 3 months, 17 are bullish on Micron stock while 2 remain sidelined. With a return potential of 35%, the stock’s consensus target price stands at $42.00.

Another Bite into Apple

Apple is getting a bigger bite from Marshall Wace in a quarterly play for an added 8,424 shares, taking the hedge fund’s stake to 105,132 shares worth $15,139,000. Currently, the major core of Apple’s revenue (70%) and shooting past 70% of total profits points to growth riding the back of iPhone momentum. However, the tech titan’s long-term could be golden thanks to a new, emerging field: augmented reality (AR).

Bernstein analyst Toni Sacconaghi also is throwing a bullish parade for the titan, especially, because he believes that Apple “smartglasses” have the potential to be “enormous.”

Deeming Apple’s opportunities in a new space of AR rife to be favorable, the analyst maintains an Outperform rating on shares of AAPL with a $175 price target, which represents a 9% increase from where the stock is currently trading. (To watch Sacconaghi’s track record, click here)

Sacconaghi underscores, “In recent years, the question of what will be Apple’s ‘next big thing’ has become especially pertinent, as the iPhone has continued its inexorable march towards global market saturation. Can AR be the catalyst that safely launches Apple on its next wave of growth?” adding that “While it is unclear if Apple today believes its ‘next big thing’ will be augmented reality, enthusiasm is mounting.”

Apple CEO Tim Cook had said back in last October, “I am so excited about [AR], I just want to yell out and scream,” and a slew of public comments from Cook all to do with AR are not going unnoticed by the analyst, who assesses that it is becoming increasingly apparent the titan believes AR could be a game-changer. Interestingly, for a company that does not have a history of swinging for large acquisitions, Saconaghi pinpoints that in four years, the titan has invested in at least 5 AR-relevant tech acquisitions.

Understanding that “The current AR space is a fragmented one that is still in the stages of infancy,” the analyst wagers, “By dipping its toe into AR, Apple has entered an increasingly hyped and crowded field of technology that features multiple prominent names within the tech sector […]”

Ultimately, “The key takeaway here is that the AR space has not yet seen a breakout success […] Instead, it is evident that most players remain content to fiddle with prototype and beta products, which are still years away from commercial viability,” which importantly in a “state of persistent fragmentation” translates to “a potential opening for Apple,” surmises Sacconaghi.

Wall Street is predominantly showcasing positive sentiment on the tech titan, with TipRanks analytics demonstrating AAPL as a Buy. Based on 34 analysts polled by TipRanks in the last 3 months, 25 rate a Buy on Apple stock while 9 maintain a Hold. The 12-month average price target stands at $170.42, marking a nearly 6% upside from where the stock is currently trading.

Nvidia Loses Some Confidence

Nvidia is not looking quite as promising to Marshall Wace, as the hedge fund decided to dial back 9,863 shares to a holding of 26,152 shares worth $3,792,000. Is the hedge fund seeing fit to question the chip giant’s sustainability in terms of gaming or crypto currency mining? Leading chip players launched new products from processors to graphics chips in the first quarter only to experience a dip in shipments and subsequent questions of whether demand can make a comeback.

While in one corner, this hedge fund is opting to shed some Nvidia shares from its portfolio, when glancing at the company’s 10-Q filing for the second fiscal quarter of 2018, RBC Capital analyst Mitch Steves offers a bullish take.

Perhaps Ian Wace and Paul Marshall are antsy like other investors who fear short-term that gaming chip demand could be soft. Yet, this is one of Steves’ key encouraging takeaways, anticipating initial Volta shipments are in good standing with card replacements likely to see a “ramp” throughout the quarter- even if this will be “difficult to track near-term.” Furthermore, the analyst expresses strong conviction in the chip giant’s DGX-1V shipments and sales, seeing a solid trajectory through the third quarter of fiscal 2018.

Therefore, though Marshall Wace may be veering toward the side of caution, the analyst conversely sees Nvidia rolling full steam ahead, reiterating an Outperform rating on the stock with a $175 price target, which implies an 8% increase from where the stock is currently trading. (To watch Steves’ track record, click here)

Steves highlights, “We believe Nvidia products are best of breed and if GPU chips continue to sell well we think this is due to 1) a scarcity pocket due to crypto-currency miners last quarter and 2) continued gaming demand for the newest high-end products by Nvidia,” elaborating that when looking at the former, “Some lingering demand remains from cypto-currencies ~$40-45M thus far assuming similar demand based on the Ethereum network rate.”

Regarding the self-driving technology market, the analyst concludes on a note of enthusiasm: “The Company reiterated the Toyota win in the filing (Volvo and Autoliv Drive PX self-driving to hit the market in 2021) and we think this is a signal for continued unit increases over the next ~2 years.”

The Street largely seems to echo Steves’ positive sentiment over Marshall Wace’s step back on the giant, considering TipRanks analytics showcase NVDA as a Buy. Out of 25 analysts polled by TipRanks in the last 3 months, 16 are bullish on Nvidia stock, 6 remain sidelined, and 3 are bearish on the stock. With a loss potential of 5%, the stock’s consensus target price stands at $156.45.

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