By Harriet Lefton,
Hedge fund trades have just been made public for the last quarter with the release of 13F forms filed with the SEC. TipRanks tracks top hedge fund transactions on more than 5,000 stocks, enabling us to monitor a couple of things when it comes to recent stock picks.
- See what the best performing fund managers are up to.
- Assess the overall hedge fund sentiment on any particular stock.
It should be noted that fund managers are only required to submit these 13F forms to the SEC 45 days after the end of the last quarter. That means by the time the information on these stock picks is made public, it is no longer necessarily current. Nonetheless, these trades still give a valuable insight into the direction top fund managers believe the market is heading.
Let’s take a closer look now:
Shares in this high-flying semiconductor stock have exploded by 98% in the last year. So it’s not surprising that funds want a slice of the action. A number of funds initiated new Micron positions in the last quarter including Rob Citrone, Philippe Laffont and George Soros. Meanwhile, David Tepper of Appaloosa Management boosted his MU holding 28% to $1.85 billion. Why change a winning strategy? Tepper made over $1 billion in personal earnings last year, partly due to the fund’s long position in MU.
Looking forward, MU shows little signs of slowing down. The company has just revealed multiple positive catalysts at its annual analyst day on May 21. First came an earnings guidance raise for fiscal Q3, then news of a deal with Intel- and the icing on the cake- a massive $10 billion share buyback program. The company will now return 50% of its free cash flow generation to stock repurchases.
This buyback announcement is important for two reasons. As five-star Needham analyst Rajvindra Gill explains “1) it signifies to the Street that management believes the shares are undervalued (choosing buyback instead of dividend) and 2) coincides with the structural changes occurring in the memory industry and at Micron.”
Gill ramped up his price target to $100, indicating huge upside potential of 60%. Overall, we can see that this ‘Strong Buy’ stock currently boasts 19 buy ratings, 4 hold ratings and 1 sell rating from the Street. Their average price target works out at $77 (23% upside potential).
Qualcomm (NASDAQ:QCOM) proved a big hit with funds in Q1- with 124 funds holding the stock. Most notably Theofanis Kolokotrones of the $133 billion Primecap fund boosted his holding 41% to $1.2 billion.
Kolokotrones is now heavily invested in the outcome of QCOM’s planned $44 billion takeover of NXP Semiconductors. The big question is whether China’s MOFCOM (Ministry of Commerce) will finally approve QCOM’s bid after 15 months of waiting! Thankfully, RBC Capital’s top analyst Amit Daryanani sees signs that approval is becoming increasingly likely. Fingers crossed because the “NXPI deal getting approved would unlock sizable $1.50+ synergies for QCOM”.
But even without NXPI, QCOM is an attractive large-cap value name:
“We think QCOM is an attractive name for value investors as a) either NXPI deal gets done or QCOM does a sizable buyback and b) we see high probability that OEMs under dispute could settle sooner now that it’s clear QCOM isn’t going anywhere. Finally, should we get more discipline and consistent execution, the stock should see a sustained multiple expansion.”
Daryanani reiterates a Buy rating on Qualcomm shares with a price target of $70 (20% upside potential). Overall the stock has a ‘Moderate Buy’ analyst consensus rating with a $62 price target.
As everyone knows, Apple is one of the favorite stocks of hedge fund guru Warren Buffett. Shares in Apple popped to record-highs on the news that his Berkshire Hathaway fund snapped up 75 million AAPL shares in Q1. This is in addition to the whopping 165.3 million shares the fund already held.
Buffett maintains that the market is getting Apple all wrong. He says that stressing over iPhone X demand is a mistake. “The idea that you’re going to spend loads of time trying to guess how many iPhone X … are going to be sold in a 3 month period totally misses the point,” Buffett says. “It’s like worrying about the number of BlackBerrys 10 years ago.”
Instead, he told investors at the annual fund meeting: “It is an unbelievable company … If you look at Apple, I think it earns almost twice as much as the second most profitable company in the United States.” It looks like these feelings are mutual. Apple CEO Tim Cook replied in a statement: “On a personal level, I’ve always greatly admired Warren and have always been grateful for his insight and advice.”
Apple is one of the top 20 stocks held by huge funds- although in the last quarter it slipped from 8th to 18th place. Indeed 31 funds count AAPL as one of their 10 biggest stocks. Meanwhile, the Street is cautiously optimistic on AAPL right now with a ‘Moderate Buy’ rating.
“iPhone volumes are not deteriorating though iPhone X remains uninspiring,” wrote Nomura analyst Jeff Kvaal on May 21. “Apple guidance implied third fiscal-quarter iPhone unit volumes that were better than feared. We do not believe, however, sell through has meaningfully improved.”