We recently compiled a list of the “10 Best Technology Stocks to Buy” recommended by Brad Gerstner, and in this article we'll take a look at how Confluent, Inc. (NASDAQ:CFLT) stands relative to other technology stocks.
Gerstner is bullish on tech for 2024
On December 1, 2023, Altimeter Capital CEO Brad Gerstner appeared in an interview with CNBC and explained that tech stocks are expected to outperform non-tech stocks in 2024. Over the past decade, tech stocks have compounded returns at nearly 16% and non-tech stocks at 6%. 2023 was a recovery year for the tech industry after a slump in 2022 due to rising interest rates. Large tech companies and their operating efficiencies are poised for strong growth. While inflation and interest rates will determine what will fall, companies that have invested in augmented intelligence will experience long-term growth. Gerstner believes that the 16% to 6% difference will be a trend that repeats in 2024.
Gerstner believes now is the right time to invest in technology.
On June 11, Brad Gerstner appeared on CNBC again to talk about speculation surrounding the software industry. Gerstner suggested that the software industry is still valuable as companies and startups are still making deals despite the headwinds. Gerstner believes there are three main reasons for the software industry's downward trend. He believes CEOs and CTOs are becoming cautious about investing in software. Executives want to paint a clearer picture of the AI ​​boom before making risky investments. In addition, interest rates are higher than expected due to delayed interest rate cuts and multiple compression. Finally, general uncertainty about the future is negatively impacting the software industry's growth. Gerstner noted that now may be the best time to allocate stock to software companies as the software industry is trading at 20% below its 10-year average. Also see Best Robinhood Stocks Under $20.
Gerstner believes that data and databases are crucial to AI applications. He believes that companies that use data to drive AI will be much more advanced than those that simply automate services. Big tech companies are putting data at the forefront of all artificial intelligence applications. You may also want to read our article on the stocks that hedge funds are crazy about right now.
Brad Gerstner is bullish on technology, particularly software and AI. In Q1 2024, he initiated six new positions and added holdings in two more stocks, bringing his portfolio of 13F securities to $6.5 billion at the end of the quarter. Now, let's talk about his top tech stock picks.
Our Methodology
We looked at Altimeter Capital's Q1 portfolio and selected growth stocks from the fund's top 13F holdings. Additionally, we added hedge fund overall sentiment as of Q1 2024. Why are we interested in stocks where hedge funds are concentrated? The reason is simple: our research shows that you can outperform the market by mimicking the top holdings of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks each quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points (more details here).
Note: All pricing data is accurate as of June 28th.
A team of suited consultants discusses the importance of stream governance of real-time data.
Confluent (NASDAQ:CFLT)
Altimeter Capital stock value: $396,622,751
Number of hedge fund holders: 37
Systems software company Confluent, Inc. (NASDAQ:CFLT) is the sixth-largest holding in Brad Gerstner's portfolio. Confluent, Inc. (NASDAQ:CFLT) specializes in data streaming, helping companies analyze data generated in real time by various platforms such as mobile devices and social media.
The company was the first to commercialize Apache Kafka, the open-source real-time data analytics software used by companies like Uber to match drivers and passengers in response to ride requests. Today, Confluent, Inc. (NASDAQ:CFLT) has many high-profile clients, including Expedia and Vimeo, who use its services to book travel and stream videos on its platform. The company is continually adding new features to its platform to help its customers manage massive real-time data streams and run core business operations.
Confluent (NASDAQ:CFLT)'s cloud revenue grew 45% to $107 million, with subscription revenue making up the majority of its revenue. Earlier this month, the company launched Build with Confluent, which helps increase the effectiveness of data streaming use cases by increasing speed. The new partner program also includes specialized software bundles that help customers develop solutions more efficiently. Confluent, Inc. (NASDAQ:CFLT) is not limited to offering data streaming applications. Its Connect and Govern products, part of the company's Data Streaming Platform (DSP), are gaining momentum in the industry. Govern's revenue growth was the fastest of any product launched by Confluent, Inc. (NASDAQ:CFLT). The company expects its cloud revenue to reach $116 million in Q2 2024, up 39% year over year.
Confluent, Inc. (NASDAQ:CFLT) is in a fast-growing industry. According to the company's research, 86% of IT leaders suggest that data streaming is a priority investment for their companies in 2024, indicating the need for real-time data use cases and applications. Overall, Confluent, Inc. (NASDAQ:CFLT) is popular among investors. As of the end of the first quarter of 2024, 37 hedge funds held shares in the company, with total holdings of $949.63 million. The company's shares have risen 30% year-to-date, and analysts' average price target suggests an additional 22% upside.
Overall, CFLT ranks 6th on our list of the best tech stocks to buy, as recommended by Brad Gerstner. For other tech stocks that hedge funds are watching, see our 10 best tech stocks to buy, as recommended by Brad Gerstner. While we acknowledge the potential of CFLT as an investment, we believe AI stocks offer a better chance of delivering higher returns in a shorter time frame. If you're looking for AI stocks that are more promising than CFLT but trade at less than 5x price to earnings, check out our report on the cheapest AI stocks.
Read next: Analyst sees new $25 billion 'opportunity' in NVIDIA, Jim Cramer recommended these 10 stocks in June.
Disclosures: None. This article was originally published on Insider Monkey.
