In this piece, we will take a look at the 15 most undervalued technology stocks to buy according to hedge funds. If you want to skip our introduction to the technology industry, then check out 5 Most Undervalued Tech Stocks To Buy According To Hedge Funds.
Technology is one of the most glamorous and lucrative industries these days. The soaring popularity of technology firms and stocks follows the massive impact that personal computing, connectivity, and the Internet have made on our lives. In fact, nearly every aspect of modern day living, whether it's work, transportation, entertainment, shopping, or business, has been revolutionized by technology and the firms that play a role in this have seen their shares rewarded heftily on the stock market.
When we look at mega cap stocks, out of the ten largest companies traded on U.S. exchanges in terms of market capitalization, eight are technology stocks. This makes the segment one of the most lucrative in the world, and it is also a segment that has defied investor expectations and soared to new highs in 2023. The broader economic environment this year has been worrying, to say the least, with the Federal Reserve's rapid interest rate hikes jolting the stock market last year. These hikes were expected to continue this year, but very few investors could have predicted in 2022 that the first half of 2023 would see big tech retake most of 2022's losses with the tech heavy NASDAQ 100 index gaining 45% between January to June.
Leading the charge in the mega cap arena is the graphics processing unit (GPU) designer NVIDIA Corporation (NASDAQ:NVDA). NVIDIA's shares have gained more than 300% on the stock market this year, fueled by the firm's stunning guidance for its second quarter of the fiscal year 2023. While Wall Street analysts were expecting the firm to guide the Q2 revenue at $7.2 billion, NVIDIA blew past these estimates as it projected its first annual revenue growth in the last couple of quarters by expecting the net sales figure to sit at $11 billion. Analysts were delighted, to say the least, and they have rated NVIDIA's shares as Strong Buy on average. As if this weren't enough, the firm's average share price target is $524.19, and based on the closing share price at the time of writing, this pens in an upside of 14.8%. Briefly looking at recent analyst coverage, out of the ten analyst notes that have covered the shares, eight have rated them as either Strong Buy, Overweight, or Outperform.
The surge in NVIDIA's shares is part of the broader hype in the industry surrounding artificial intelligence. AI is a set of technologies that leverage high powered computing systems to use pre determined relationships to generate insights into new data. The uptick of AI by firms has been equally explosive, with data from McKinsey showing that in less than a year after the debut of the latest technologies, nearly 25% of top level executives said that they are using AI technologies while 40% have already set AI as an agenda on their board. Bifurcating the responses according to industries, the top two industrial users of AI are the technology & telecommunications and financial services industries. In terms of business roles, marketing and product development professionals are the highest users of AI while manufacturing and supply chain people rely the least on the latest technology. One additional industry that heavily benefits from AI and has been using it even before the recent mania is the biotechnology sector, and for more details on this particular front, be sure to check out 11 Most Profitable Biotech Stocks Today.
Shifting gears from technology to financial evaluation, one way in which stocks are valued is the price to earnings ratio. This ratio comes in several flavors, out of which the most popular is the price to trailing earnings ratio. If you want to find out what this ratio is all about, we've covered it in detail in 10 Best Inexpensive Stocks To Buy Right Now. As a short primer for the sake of this piece, this ratio divides a firm's current share price with its earnings per share in its four latest quarters, providing a moving valuation that incorporates the latest financial results to gauge market sentiment about a stock. A P/E ratio below an industry average implies that a stock is undervalued and its share price can potentially appreciate in the future. A ratio that is higher than the average can indicate, purely from a P/E ratio perspective, that the price might come down in the future. We've sifted dozens of stocks through their P/E ratios, in pieces such as 10 Undervalued Canadian Stocks To Invest In and 12 Undervalued European Stocks to Buy.
Today, we'll take a look at undervalued technology stocks being bought by hedge funds, out of which the top picks are Avnet, Inc. (NASDAQ:AVT), Gen Digital Inc. (NASDAQ:GEN), and Concentrix Corporation (NASDAQ:CNXC).
15 Most Undervalued Tech Stocks To Buy According To Hedge Funds
To compile our list of the most undervalued technology stocks being bought by hedge funds, we first make a list of 40 technology companies with a price to trailing earnings ratio of less than 15. Then, the number of hedge funds that had bought their shares as of this year's second quarter was determined via Insider Monkey's database of 910 hedge funds and the top 15 undervalued technology stocks bought by hedge funds are as follows.
Most Undervalued Tech Stocks To Buy According To Hedge Funds
Nokia Oyj (NYSE:NOK) is one of the most iconic technology companies in the world, known for having popularized the cellphone before the smartphone era. The firm is currently buying back its own shares in a bid to perhaps increase the share price, and it announced in August that it aims to be the first broadband equipment vendor to be eligible for the Biden Administration's Buy in America program.
As of Q2 2023 end, 15 out of the 910 hedge funds part of Insider Monkey's database had bought a stake in Nokia Oyj (NYSE:NOK). Out of these, the firm's largest investor is Jim Simons' Renaissance Technologies since it owns 18 million shares that are worth $77 million. However, Renaissance and other hedge funds significantly trimmed their stakes in Nokia in the quarter, so perhaps there's something brewing under the surface.
Nokia Oyj (NYSE:NOK) joins Gen Digital Inc. (NASDAQ:GEN), Avnet, Inc. (NASDAQ:AVT), and Concentrix Corporation (NASDAQ:CNXC) in our list of most undervalued technology stocks to buy according to hedge funds.
Adeia Inc. (NASDAQ:ADEA) is a technology patents firm that holds rights to media and semiconductor technologies. Its shares are rated Strong Buy on average, despite the fact that the stock has remained relatively flat year to date.
During this year's June quarter, 16 out of the 910 hedge funds surveyed by Insider Monkey had invested in Adeia Inc. (NASDAQ:ADEA). The firm scored a win in July when it renewed its intellectual property licensing agreement with a hospitality company.
Bel Fuse Inc. (NASDAQ:BELFB) makes and sells technology devices that are used in printed circuit boards (PCBs) and other products. It has performed well on the earnings front lately, topping off the second quarter earnings with a massive 73 cent beat to mark four consecutive quarters of surpassing analyst EPS estimates.
Insider Monkey dug through 910 hedge funds for their second quarter of 2023 shareholdings to discover that 16 had bought the firm's shares. Bel Fuse Inc. (NASDAQ:BELFB)'s biggest hedge fund shareholder is George Mccabe's Portolan Capital Management since it owns a $20.3 million stake.
Canadian Solar Inc. (NASDAQ:CSIQ) is a solar power products manufacturer and seller. The firm's shares tanked by more than 12% in August after its second quarter earnings missed analyst revenue guidance estimates. The stock is still rated Buy on average with an average share price target of $49.78.
After looking at 910 hedge fund portfolios for 2023's June quarter, Insider Monkey found 16 investors in Canadian Solar Inc. (NASDAQ:CSIQ). Out of these, the largest stakeholder is Ken Griffin's Citadel Investment Group through its $56.5 million investment.
STMicroelectronics N.V. (NYSE:STM) is one of the most important chip firms in the world, particularly when it comes to meeting the demand of the automotive market. The firm somewhat weathered the storm in the chip sector in its second quarter earnings, as it beat market estimates for the second quarter and projected sales growth for the current quarter.
By the end of Q1 2023, 22 out of the 910 hedge funds profiled by Insider Monkey had held a stake in the chip manufacturer. Steve Cohen's Point72 Asset Management is STMicroelectronics N.V. (NYSE:STM)'s biggest investor among these since it owns 2.2 million shares that are worth $111 million.
PagSeguro Digital Ltd. (NYSE:PAGS) is a financial technology firm that enables customers to manage their daily transactions and other operations. It is taking full advantage of the growth in digitization, as it has either met or beat analyst EPS estimates for its four latest quarters despite a slowdown in the global economy.
Insider Monkey sifted through 910 hedge funds for their second quarter of 2023 investments and found out that 22 had invested in PagSeguro Digital Ltd. (NYSE:PAGS). Out of these, the firm's largest shareholder is Daniel Patrick Gibson's Sylebra Capital Management through a $109 million investment.
Vishay Intertechnology, Inc. (NYSE:VSH) is a semiconductor company that sells power management chips. Like STMicro, it also beat analyst EPS estimates for its second quarter earnings, and the firm guided a low end of $840 million in revenues for the current quarter.
By the end of this year's June quarter, 22 out of the 910 hedge funds polled by Insider Monkey had held a stake in the company. Vishay Intertechnology, Inc. (NYSE:VSH)'s biggest hedge fund investor is Ken Fisher's Fisher Asset Management through a $90 million stake that comes via 3 million shares.
Daqo New Energy Corp. (NYSE:DQ) is a Chinese firm that sells semiconductors used in solar power products. It's facing a torrid time in the earnings department, as a slowing Chinese economy has led it to miss analyst EPS estimates for all four of its latest quarters.
After scouring through 910 hedge fund portfolios for 2023's second quarter, Insider Monkey discovered that 22 had bought and invested in Daqo New Energy Corp. (NYSE:DQ)'s stock. Lei Zhang's Hillhouse Capital Management is the company's largest stakeholder since it owns a stake worth $80 million.
Sanmina Corporation (NASDAQ:SANM) enables technology companies to design and manufacture their products. The firm has teamed up with Nokia to manufacture broadband equipment that is designed to benefit from a U.S. government program of increasing internet access in America.
Insider Monkey's June quarter of 2023 survey covering 910 hedge funds revealed that 23 had held the firm's shares. Sanmina Corporation (NASDAQ:SANM)'s biggest investor in our database is Ric Dillon's Diamond Hill Capital through its $41.2 million investment.
ExlService Holdings, Inc. (NASDAQ:EXLS) is a software company that provides data analytics and other services enabling customers to manage their daily operations such as billing and customer relationship management. Despite a broader slowdown in corporate spending in a high interest rate environment, the firm has beaten analyst EPS estimates for all four of its latest quarters indicating a growing demand for digital transformation and perhaps artificial intelligence in the corporate sector.
25 out of the 910 hedge funds part of Insider Monkey's database had invested in ExlService Holdings, Inc. (NASDAQ:EXLS) as of Q2 2023. Out of these, the largest stakeholder is Israel Englander's Millennium Management since it owns a $42.7 million stake.
Avnet, Inc. (NASDAQ:AVT), ExlService Holdings, Inc. (NASDAQ:EXLS), Gen Digital Inc. (NASDAQ:GEN), and Concentrix Corporation (NASDAQ:CNXC) are some undervalued tech stocks that hedge funds are piling into.