Markets

3 Top Tech Stocks Hedge Funds Want For Themselves

With just a couple of weeks to go, hedge fund managers are looking to boost their portfolios before the end of the year. The three stocks we look at below are all possible hedge fund picks. Indeed, these stocks already boast a very bullish outlook from the Smart Money based on last quarter’s trades.

To scan for top stocks we used the powerful Nasdaq Smart Portfolio stock screener. The screener has a database of over 5,000 stocks as well as multiple filter options. Here we scanned for stocks with the double whammy of a positive hedge fund signal and a ‘Strong Buy’ best analyst consensus. These are the analysts that consistently score the highest success rate and average return.

Using our big data analytics, we can also track exactly why analysts are so bullish on the stock- and how far the stock can potentially spike from the current share price. Bearing that in mind, let’s now take a closer look at these 3 top stock picks:

Vantiv Inc (VNTV): Leading payment processor Vantiv now processes more debit and credit transactions than any other acquirer in the US. And it seems like hedge fund managers want a piece of this explosive action. The stock has a ‘Very Positive’ hedge fund signal with hedge funds increasing holdings by 5.6 million shares in the last quarter. Big name hedge funds initiating new positions in VNTV include legendary fund manager Daniel Loeb of This Point LLC with a $193 million stake. But the biggest holding still belongs to Diamond Hill’s Ric Dillon with $309 million.

Vantiv sealed a $10.4 billion takeover of UK payment processing company Worldpay back in August. "With e-commerce revenue synergies boosting the top line outlook to 10+%, we believe VNTV will become the merchant acquirer to own over the course of 2018 and we want to be early," says Buckingham Research Group analyst Chris Brendler. This four-star analyst ramped up his price target from $77 to a bullish $90 and upgraded his rating to Buy on December 8.

Chris Brendler isn’t the only convert to the VNTV story. Top Wedbush analyst Moshe Katri also upgraded Vantiv at the beginning of December. He says the Worldpay acquisition provides exposure to the UK and the Asia Pacific region, which are both high-growth, potentially more profitable regions. At the same time the deal also drastically cuts its national merchants exposure.

TipRanks shows that this top stock has a ‘Strong Buy’ analyst consensus rating. This breaks down into 11 buy ratings and 3 hold ratings over the last three months. On average, these analysts are projecting upside potential of close to 8% from the current share price.

PayPal Holdings (PYPL): Why have one payment stock when you can have two? It’s also worth checking out worldwide online payments system PayPal. Hedge funds increased holdings in PYPL by 6.6 million shares in the last quarter -- giving the stock a very bullish outlook from the Smart Money. Currently the stock’s no 1 fund manager is Carl Icahn with a whopping $630 million position. But notably Lone Pine Capital’s Steve Mandel made his own sizeable play on the stock in the third quarter with a brand new $429 million investment.

It isn’t so surprising hedge funds want a piece of the PayPal pie given that year-to-date the stock is up by an impressive 85%. And according to the Street the stock still has plenty of upside potential left to run. PayPal has just announced an agreement with Synchrony Financial (SYF) to expand their strategic consumer credit relationship. Top Oppenheimer analyst Glenn Greene boosted his price target from $75 to $80 on the news.

He says: “Simply, the transaction de-risks PYPL's balance sheet, while substantially boosting its capital flexibility. Trading at ~28.5x our adjusted FY19E EPS, the shares remain attractive, in our view.” He also likes PYPL's unique competitive position within the large online payments market, and its accelerating volume/revenue growth.

Note that Glenn Greene seems to know what he is talking about when it comes to PayPal. On TipRanks he is ranked #3 out of over 4,700 analysts, with a very impressive 85% success rate and 20.6% average return across his stock ratings.

In total analysts have published 23 buy ratings and 7 hold ratings on this ‘Strong Buy’ stock over the last three months. We can see the average price target of $79.57 stands at about 8.6% upside from the current share price.

Splunk Inc (SPLK)

San Francisco-based Splunk produces software for searching, monitoring, and analyzing machine-generated big data. In the third quarter, both George Soros and Ray Dalio initiated brand new positions in SPLK. However, the stock’s biggest fund owner remains five-star Frank Sands of Sands Capital Management with a huge $540 million position.

Following strong fiscal Q2 results, five-star Canaccord Genuity analyst Richard Davis sees the stock breaking out and soaring higher. He acknowledged that the stock was ‘wildly expensive’ during its early 2014 peak. But the situation now vs 2014 is very different.

Davis says “Since then, this firm has done nothing but execute – that means product enhancements, business model improvements, and forthright management commentary – and the multiple has compressed. It’s to the point now where SPLK shares look comparatively cheap, both on a revenue and cash flow basis, which is why we think this stock is one of the best mid-cap growth opportunities in software.” He has a $90 price target on the stock.

Overall, Splunk has the backing of 23 out of 26 analysts in the last three months. This ‘Strong Buy’ stock has an average analyst price target of $85 (7% upside).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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