Fund managers in the third quarter continued buying tech stocks, a sector that outperformed all others over the past five years.
The S&P 500 Technology SPDR (XLK, Financial) returned 89.84% over the past half decade, more than double the rise in the S&P 500 index. Companies in the sector glided on innovations in the Internet of Things (IoT), cloud computing, artificial intelligence and consumer electronics.
Their ability to generate a profit spurred investor interest. The sector’s net profit margins expanded to 22.1% in the third quarter, their highest since FactSet began tracking data in 2008. It also saw all of its constituents report earnings above estimates.
Nevertheless, some wind left the sector’s sails in this year. It has achieved only a 2.53% gain year to date, making it the fourth-best performer in the S&P 500, though it beat the index’s decline of 1.38%.
Meanwhile, its valuations have fallen, potentially making it more attractive to some investors. GuruFocus calculates its price-earnings ratio at 27.1, significantly below its peak of 39.4 from June and its lowest since March. It has the fourth-highest price-earnings ratio of the 11 sectors in the index.
Analysts have attributed the sector’s drop to lower demand, trade uncertainty with China and overvaluation. Earnings growth is expected to reach 9.8% for 2019, according to FactSet, which in September revised its estimate up from 6.9% in June. Bloomberg data forecasts earnings growth for the sector at 9.7% for 2019 and 10% for 2020.
In the third quarter, the most investors GuruFocus tracks bought shares of the following tech companies: Microsoft (MSFT, Financial), Apple (AAPL, Financial), Facebook (FB, Financial), Electronic Arts (EA, Financial) and Alphabet (GOOG, Financial). This data was found using GuruFocus S&P 500 Screener, a premium feature.
Twenty investors GuruFocus tracks bought shares of Microsoft in the third quarter. George Soros (Trades, Portfolio) made the largest increase, raising his position 801% to 1.37% of his portfolio. Stanley Druckenmiller (Trades, Portfolio) has the largest position at 19.16% of his portfolio after an 18.03% increase.
Microsoft Corp. has a market cap of $829.61 billion; its shares were traded around $109.08 with a price-earnings ratio of 45.26 and price-sales ratio of 7.37. The trailing 12-month dividend yield of Microsoft Corp. stocks is 1.58%. The forward dividend yield of Microsoft Corp. stocks is 1.69%. Microsoft Corp. had an annual average earnings growth of 6.20% over the past 10 years. GuruFocus rated Microsoft Corp. the business predictability rank of 4-star.
Nineteen investors GuruFocus tracks bought shares of Apple. Chase Coleman (Trades, Portfolio) started the largest new position at 1.1% of his portfolio. Coatue Management made the largest increase, raising its position by 938.39% to 2.09% of its portfolio.
Apple Inc. has a market cap of $807.06 billion; its shares were traded around $169.10 with a price-earnings ratio of 14.25 and price-sales ratio of 3.20. The trailing 12-month dividend yield of Apple Inc. stocks is 1.67%. The forward dividend yield of Apple Inc stocks is 1.73%. Apple Inc. had an annual average earnings growth of 28.10% over the past 10 years. GuruFocus rated Apple Inc. the business predictability rank of 3-star.
Eighteen investors GuruFocus tracks bought shares of Facebook. Jeff Auxier (Trades, Portfolio) made the largest increase, growing his position by 577.06% to 0.34% of his portfolio. David Tepper (Trades, Portfolio) has the largest holding at 9.68% of his portfolio, though he reduced it by 34.98% in the third quarter.
Facebook Inc. has a market cap of $414.59 billion; its shares were traded around $144.50 with a price-earnings ratio of 21.81 and price-sales ratio of 8.17. Facebook Inc. had an annual average earnings growth of 63.5% over the past five years.
Electronic Arts (EA, Financial)
Fifteen investors GuruFocus tracks purchased shares of Electronic Arts. Zeke Ashton (Trades, Portfolio) started he largest new position at 3.79% of his portfolio. Joel Greenblatt (Trades, Portfolio) made the largest increase, growing his position by 1566.01% to 0.23% of his portfolio.
Electronic Arts Inc. has a market cap of $25.07 billion; its shares were traded around $82.99 Wednesday with a price-earnings ratio of 26.59 and price-sales ratio of 4.98. Electronic Arts Inc. had an annual average earnings growth of 39.5% over the past five years.
Fifteen investors GuruFocus tracks purchase shares of Alphabet. Glenn Greenberg (Trades, Portfolio) started the largest new position at 0.05% of his portfolio. Paul Tudor Jones (Trades, Portfolio) made the largest increase to his position, growing it by 276.27% to 0.04% of his portfolio.
Alphabet Inc. has a market cap of $743.22 billion; its shares were traded around $1,063.68 Wednesday with a price-earnings ratio of 40.43 and price-sales ratio of 5.88. Alphabet Inc. had an annual average earnings growth of 16.6% over the past 10 years. GuruFocus rated Alphabet Inc. the business predictability rank of 3-star.
See more of the most-bought stocks of the S&P 500 at the screener here.
