Saturday, 2 April 2022

Hedge Funds Prefer These 9 Tech Stocks Over Netflix


In this article, we discuss the 9 tech stocks that hedge funds prefer over Netflix. If you want to read about some more tech stocks that hedge funds like, go directly to Hedge Funds Prefer These 4 Tech Stocks Over Netflix.
Streaming giant Netflix, Inc. (NASDAQ:NFLX) has announced a series of measures aimed at shoring up business in recent months as competitors eat away at the subscription growth story of the firm. These measures include expansion into gaming services and limits to password sharing. The revenues of the company have taken a hit as subscription growth stalls and competitors pour billions into their content production. According to a report by The Information, Netflix, Inc. (NASDAQ:NFLX) executives have been told to limit spending and hiring as well.
At the end of the fourth quarter of 2021, 113 hedge funds in the database of Insider Monkey held stakes worth $14.5 billion in Apple Inc. (NASDAQ:AAPL), up from 106 in the previous quarter worth $14.8 billion. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in Netflix, Inc. (NASDAQ:NFLX) with 5.4 million shares worth more than $3.2 billion.
However, there are many technology stocks that hedge funds prefer over Netflix, Inc. (NASDAQ:NFLX). These include Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), among others discussed in detail below.
Our Methodology
The companies that operate in the technology sector and had a greater number of hedge funds with stakes in them compared to Netflix, Inc. (NASDAQ:NFLX) at the end of the fourth quarter of 2021 were selected for the list. The analyst ratings, business fundamentals, and growth catalysts of the stocks are also discussed to provide some additional context to readers.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.






Hedge Funds Prefer These 9 Tech Stocks Over Netflix

Copyright: lculig / 123RF Stock Photo
Hedge Funds Prefer These Tech Stocks Over Netflix
9. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 134
Apple Inc. (NASDAQ:AAPL) makes and sells consumer electronics. News platform Bloomberg reports that the company has started working on a long-term plan to reduce reliance on third parties for financial payments and related infrastructure. It is also looking to China for supplies of memory chips, a key component in the manufacture of the best-selling iPhones, as it tackles supply chain disruptions. The moves come as interest rates rise and result in a mass exodus from growth stocks towards value plays.
On March 30, Bank of America analyst Wamsi Mohan maintained a Buy rating on Apple Inc. (NASDAQ:AAPL) stock with a price target of $215, underlining that the demand for iPhones remained high based on trade-in prices despite concerns around the sales due to the war in Ukraine.
At the end of the fourth quarter of 2021, 134 hedge funds in the database of Insider Monkey held stakes worth $186 billion in Apple Inc. (NASDAQ:AAPL), up from 120 in the previous quarter worth $146 billion.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL) is one of the stocks that hedge funds are buying.
In its Q4 2021 investor letter, Berkshire Hathaway highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:


“Apple Inc. (NASDAQ:AAPL) – our runner-up Giant as measured by its yearend market value – is a different sort of holding. Here, our ownership is a mere 5.55%, up from 5.39% a year earlier. That increase sounds like small potatoes. But consider that each 0.1% of Apple’s 2021 earnings amounted to $100 million. We spent no Berkshire funds to gain our accretion. Apple’s repurchases did the job. It’s important to understand that only dividends from Apple are counted in the GAAP earnings Berkshire reports – and last year, Apple paid us $785 million of those. Yet our “share” of Apple’s earnings amounted to a staggering $5.6 billion. Much of what the company retained was used to repurchase Apple Inc. (NASDAQ:AAPL) shares, an act we applaud. Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple Inc. (NASDAQ:AAPL) products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well.”


8. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 142
Visa Inc. (NYSE:V) is a payments technology firm. As part of a larger plan to diversify in the crypto business, the company recently announced that it would be launching a program to help entrepreneurs grow their business through non-fungible tokens. Back in August, the company had purchased an NFT for $150,000 worth of Ethereum. The initiative aims to support creators working in art, music, fashion and film. It also helps the payment giant test alternative digital payment mechanics on the blockchain.
On February 9, Erste Group analyst Hans Engel upgraded Visa Inc. (NYSE:V) stock to Buy from Hold, noting that cross-border should see a robust recovery this year and help companies like Visa with their transaction volumes.
At the end of the fourth quarter of 2021, 142 hedge funds in the database of Insider Monkey held stakes worth $29 billion in Visa Inc. (NYSE:V), compared to 143 in the preceding quarter worth $26 billion.
In its Q4 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Visa Inc. (NYSE:V) was one of them. Here is what the fund said:


“We initiated two new positions in Q4, adding Visa. Visa Inc. (NYSE:V) is a global payments company and is one of the four major US credit card networks (along with Mastercard, American Express and Discover). Visa is accepted at over 80 million merchant locations in 200 countries, interacts with 15 thousand financial institutions and processed 165 billion transactions with $13 trillion of payments and cash volume in the 12-month period ending September 2021. We have always admired Visa’s business, but its valuation prevented it from getting over the hurdle and into the portfolio. As of late, the stock has been caught up in indiscriminate selling as part of a larger unwind trade in a richly valued fintech space. Concerns also exist about Visa’s slowdown in cross-border transactions due to COVID and its net-revenue sharing arrangements with Amazon. This created an opportunity to purchase a very highquality business that benefits from substantial barriers to entry, network effects and several structural growth drivers, including consumer spending growth, the shift from cash to card, increasing ecommerce penetration, market share growth and global expansion. We believe Visa Inc. (NYSE:V) has a long runway for revenue growth as cash and checks continue to lose share. Consumers can’t use cash and checks online, after all. From a “safer” perspective, the company has a rocksolid balance sheet and has a high conversion of net income to free cash flow, which it uses for share repurchases, dividend growth and tuck-in acquisitions.”


7. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 144
Mastercard Incorporated (NYSE:MA) is a technology company that provides transaction processing services. As competitors push into the crypto economy, Mastercard has launched plans of its own for the future of finance. On March 7, the firm announced that it would be signing a long-term partnership with Zeta, a fintech startup, for the launch of a new type of payments mechanism that will provide card processing services to banks and other financial institutions. It relies on a cloud-native and fully API-ready credit processing stack.
On March 4, Tigress Financial analyst Ivan Feinseth kept a Strong Buy rating on Mastercard Incorporated (NYSE:MA) stock and raised the price target to $472 from $460, noting the firm was one of the “best ways to play the ongoing secular shift to electronic and other new payment technologies”.
Among the hedge funds being tracked by Insider Monkey, Virginia-based investment firm Akre Capital Management is a leading shareholder in Mastercard Incorporated (NYSE:MA) with 5.8 million shares worth more than $2.1 billion.
In its Q4 2021 investor letter, Saturna Capital, an asset management firm, highlighted a few stocks and Mastercard Incorporated (NYSE:MA) was one of them. Here is what the fund said:


“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our position in Mastercard. Although Mastercard Incorporated (NYSE:MA) does not charge or collect interest, its association with credit activities was problematic.”


6. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 153
Uber Technologies, Inc. (NYSE:UBER) develops and operates proprietary technology applications. The firm has recently stepped up accusations of local taxi firms in large metropolitan areas in the US, giving the stock a major boost in the past few weeks. Reports indicate that the company is close to a deal with a large taxi company in San Francisco under the terms of which a fleet of vehicles will be added to the Uber platform in the area. Earlier in March, Uber had entered into a similar agreement with taxi firms in New York.
On March 24, MKM Partners analyst Rohit Kulkarni reiterated a Buy rating on Uber Technologies, Inc. (NYSE:UBER) stock with a price target of $65, highlighting that deals with local taxi firms in New York was a “sentiment driver” for the stock.
Among the hedge funds being tracked by Insider Monkey, Boston-based Altimeter Capital Management is a leading shareholder in Uber Technologies, Inc. (NYSE:UBER) with 1.5 million shares worth more than $482 million.
Along with Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), Uber Technologies, Inc. (NYSE:UBER) is one of the stocks that institutional investors have their eye on.
ClearBridge Investments, in its Q3 2021 investor letter, mentioned Uber Technologies, Inc. (NYSE:UBER). Here is what the fund has to say in its letter:


“We have also been looking for multiyear secular trends outside of the IT and Internet sectors to help us maintain a portfolio that can perform well in markets with varied sector or factor leadership. In particular, electrification of the global economy and the transition to electric vehicles (EVs) are areas where we continue to add exposure. We are investing in the brains behind EVs through NXP in the control center and Aptiv for safety features. Global rideshare leader Uber Technologies, Inc. (NYSE:UBER) will also be a key player in the transition from internal combustion engines to EVs.”


5. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 158
The ticker, Alphabet Inc. (NASDAQ:GOOG), represents the Class C shares of tech firm Alphabet. The firm owns and runs various products and platforms related to the tech world. It was recently named among the 100 most influential companies in the world by the Time magazine. The company has recently started rolling out a new feature that will allow applications owners on the Play Store to directly charge consumers for bills rather than having to go through the Store. The testing for the feature has already begun via the Spotify app.
On March 10, Deutsche Bank analyst Ben Black initiated coverage of Alphabet Inc. (NASDAQ:GOOG) stock with a Buy rating and a price target of $3,150, underlining that the firm was a “structural winner” from the secular trend of commerce and services shifting to digital platforms.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG) with 2.9 million shares worth more than $8.5 billion.
In its Q4 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:


“In contrast, we made a different kind of mistake about a decade ago. Google, now Alphabet Inc. (NASDAQ:GOOG), performed very well for us while we owned it. The company kept outperforming our assumptions and we kept lowering them to be conservative. “Trees do not grow to the sky.” The stock kept going up and our value grew but did not keep pace with the stock. It hit our estimate of fair value and we sold it with a nice gain, patting ourselves on the back. We kept following Alphabet Inc. (NASDAQ:GOOG) and what they actually did over the next several years was roughly double the assumptions we used to value it. Therefore, our value was too conservative, and we sold it too cheaply, missing many years of compounding. Fortunately, we experienced some volatility several years ago that allowed us to purchase Alphabet Inc. (NASDAQ:GOOG) (Google) again with a margin of safety.”


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Disclosure. None. Hedge Funds Prefer These 9 Tech Stocks Over Netflix is originally published on Insider Monkey.


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