We recently compiled a list of the Tiger Global’s 15 Long-Term Stock Picks. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other stock picks.
Even as the venture capital efforts of Tiger Global Management come under increased scrutiny on the back of reportedly disappointing post-pandemic performance, the 13F portfolio of the fund seems to be performing exceedingly well to taper over these concerns. From the beginning of 2023 through to the end of the first quarter of 2024, the public long positions of the fund returned more than 80% to investors. These were dominated by prominent stakes in hyperscalers riding the AI boom. The rate of return posted by the fund was more than double the returns of the benchmark S&P 500 over the period. In contrast, a recent report by news publication Bloomberg reveals that the sixteenth private markets fund of Tiger Global, which set out with a target to raise more than $6 billion in funding back in 2022, closed with $2.2 billion in funding earlier this year. Tech news platform TechCrunch reports that the VC efforts of Tiger Global are suffering from a reputation of making bad bets during the pandemic.
Read more about these developments by accessing 10 Best AI Data Center Stocks and 10 Buzzing AI Stocks According to Goldman Sachs.
Even though perfectly-timed bets on tech stocks are the claim to fame for Tiger Global in the past few years, a team from the fund recently noted in an investor letter that 30% of its exposure sits in businesses other than the AI-driven tech sector. Per the fund, these positions have roughly doubled over the last fifteen months with an 80% hit rate. Compared to these astute bets, the venture capital efforts of the company paint a grimmer picture. For example, a recent report by the California State Teachers’ Retirement System reveals that the paper losses on the fifteen private markets fund stood at more than 15% at the end of June 2024. This fund had raised more than $12.7 billion back in 2021 to invest in high growth areas. Data from PitchBook Benchmarks shows that the steep losses of this fund place it in the bottom 10% of all venture funds raised in 2021.
However, there is still time for some of these investments to bear fruit in the long term. The investment team at Tiger Global is certainly losing no sleep over these numbers. In a letter to investors, the fund has noted that the private holdings of the fund generated positive returns in the first quarter of 2024. This year, the VC arm of Tiger Global has invested in many prominent startups, including Waymo, OpenAI, Scale AI and Wiz. The Tiger Global team stressed in the letter that a meaningful portion of the private exposure of the public fund is concentrated in global market leaders who are performing well and awaiting attractive opportunities to go public. The team further added that it was also encouraged by the signs of life in the IPO market following relative dormancy over the last two years.
Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.
For this article, we selected stocks by combing through the 13F portfolio of Tiger Global Management at the end of the third quarter of 2024. Only the companies that have been in the 13F portfolio of the fund consistently for the past three years were selected. These stocks are also popular among other hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a Washington-based technology company. Tiger Global is bullish on the stock and has maintained a stake in the tech firm since late 2016. At the end of the third quarter of 2024, Microsoft was the second largest holding in the 13F portfolio of the fund. This stake comprised over 5.3 million shares worth close to $2.3 billion, representing 9.8% of the entire 13F portfolio. Back in 2016, Tiger Global had bought shares in the firm at an average price of $60.15. The stock is presently trading at over $440 per share.
Wall Street analysts echo the bullish sentiments of Tiger Global regarding Microsoft Corporation (NASDAQ:MSFT) stock. UBS recently raised the price target on the stock to $525 from $500 and kept a Buy rating on the shares. Given the new capacity will come on throughout the second half, it is more likely that the Azure acceleration is more back-end loaded, the advisory told investors in a research note. Microsoft sentiment is modestly improving but remains mixed, reflecting concerns about supply-related push-outs of the Azure acceleration, lack of conviction in the timing of capacity go-lives, weariness about elevated capex and uncertainty about how the OpenAI relationship will evolve, UBS added.
Overall MSFT ranks 2nd on our list of Tiger Global Management’s long-term stock picks. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.