Hedge Fund Star Touts Top Tech Stocks
NEW YORK (TheStreet) --Hedge fund manager Philippe Laffont of Coatue Management touted Equinix(EQIX) and Virgin Media(VMED) as top tech stocks at the Ira Sohn Conference this week. The stocks, he explained, could double or triple in value over the next three to five years.
Equinix is a datacenter specialist, which Laffont referred to as the "core" during a keynote presentation at the Ira Sohn conference. Data warehouses have become strategic and the company is considered "beachfront property," he added.
Equinix has spent $2 billion buying data centers, and it generates 30% return on equity. Laffont believes over the next four to five years the company's revenue could reach $4 billion and its share price could hit $500 a share. The fund manager is the largest holder of Equinix stock.
Shares of Equinix, which reported revenue of $1.6 billion in 2011, currently trade around $157.
Laffont also noted that companies within Facebook's(FB) ecosystem have to be near the social networker's data servers, something which is benefitting Equinix. The Redwood City, Calif.-based company was mentioned by TheStreet as one of ten stocks that could benefit off Facebook's IPO.
Virgin Media has been adding significant amounts of broadband users, which Laffont believes is a high return on capital business. Virgin Media generates an unlevered 20% return on capital.
There are no costs to broadband as no one owns the Internet, and it's a highly profitable segment of Virgin Media, Laffont said. Despite having just 4% revenue growth, Virgin Media has strong free cash flow growth, which allows the company to buy back significant amounts of stock.
In the past two years Virgin Media has bought back 25% of its shares, according to Laffont, and could buy back 20% of its shares next year. The company could buy back all of them in the next five years, he added.