The head of an IT stock fund that far outperformed the S&P 500 named four favorite companies

The Janus Henderson Global Technology and Innovation (JAGTX) fund has outperformed the S&P 500 index 1.7 times over the past three years. In an interview with Business Insider, fund manager Danny Fish named four securities in which he now has particular faith.

Since the market pushed off the bottom in October 2022 and began to rise, JAGTX has returned 136% - 1.7 times higher than investors in the S&P 500 index over the same period (81%), writes Business Insider. Such an impressive outperformance of the fund provided a bet on technology giants: Nvidia, Microsoft, TSMC and Broadcom make up 42% of its portfolio.

Today, Fish still believes AI is the one "big idea" worth betting on. But when asked which stocks he's most optimistic about right now, he named four companies, three of which are not among the fund's top six positions.

- Taiwan Semiconductor Manufacturing Co. (TSMC) is the largest position mentioned and the third largest in the fund (stake: 9.5%). According to Fish, demand for chips remains extremely strong. "If you're Broadcom or Nvidia, there's only one place you're going to want to manufacture your chips, and that's TSMC, because of their [process] technology, know-how and leadership [in the industry]," he said.

- Cadence Design Systems, an electronics design automation (EDA) company, is well positioned for growth amid continued demand for AI hardware, Fish said. Cadence ranks eighth (2.5%) in its portfolio.

"It's a global duopoly," the fund manager characterized the market position of Cadence and its competitor Synopsys. - "They dominate the market, have incredible returns on capital, and in the chip design business, you can't move forward without these companies.

- KLA is a manufacturer of process control systems for semiconductor manufacturing. According to Fish, the company has an "extremely dominant position" in its segment. KLA is the thirteenth largest position in the fund's portfolio with a 1.9% stake.

- MercadoLibre is the Latin American counterpart of Amazon's marketplace, which is also developing a fintech arm: digital wallets, lending, payment solutions and transfers. Fish said he's impressed with the company's use of AI. "They're doing some really unique things with AI across their ecosystem to improve the customer experience and also improve the efficiency of underwriting (assessing a borrower's ability to pay. - Oninvest) and fintech businesses," he said. MercadoLibre is the seventh largest asset in Fish's fund with a 2.6% stake.

According to FactSet, Wall Street sees the greatest potential for growth in MercadoLibre. Analysts on average believe that securities of this company in the U.S. can rise in price by about 25% - from the current $2338 to $2923. Most experts recommend to buy these securities (Buy rating).

Cadence 's growth opportunities are estimated more modestly - at 6% of the current market price. Consensus rating - Overweight (corresponds to the recommendation to buy).

KLA stock is now trading near a level that most analysts think is fair - 1% below the average target price. But experts are positive, with a consensus rating of Overweight.

The situation with TSMC is even more interesting. The price of its American Depositary Receipts (ADRs) has already risen 6.5% above the level that Wall Street considers reasonable. Despite this, almost all experts continue to recommend them for purchase (43 Buy and Overweight ratings out of 45), believing in the growth of the largest contract chip maker.

This article was AI-translated and verified by a human editor