Tech stocks tend to be very popular with investors of all kinds, and indeed they remained quite popular with institutional investors during the second quarter. Most large-cap tech stocks have average portfolio allocations that are higher than their S&P 500 benchmark weights. The only two that did not were Apple and Microsoft.

Amazon, Microsoft gain in popularity among institutions

In general, ownership of large-cap tech stocks by institutional investors was flat quarter over quarter, although a few big players did see meaningful increases. Portfolio allocations for Amazon and Microsoft among institutional investors increased the most quarter over quarter relative to other large-cap tech names.

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Morgan Stanley analyst Katy Huberty and her team analyzed the second quarter 13F filings of institutional owners to determine which large-cap tech stocks are coming into favor and which are falling out.

Institutional ownership of Apple remains flat

Like large-cap tech stocks in general, the average portfolio allocation of Apple remained roughly flat quarter over quarter, indicating that institutions weren’t really buying or selling the stock much or at least weren’t really adjusting its allocation in their portfolios. The average weighting of Apple in institutions’ portfolios was 2.9% at the end of the second quarter, representing the highest allocation level in two years, according to Huberty. Nonetheless, it’s significantly lower than Apple’s weighting of 3.6% in the S&P 500 and even lower still than when ownership peaked at 4.5% in the third quarter of 2012.

Her team thinks this is a favorable set-up for Apple going into the second half of the year, particularly since investors started dumping shares of the tech giant following the last earnings report. Wall Street has again become concerned about iPhone units and apparently expects to see a decline.

Unsurprisingly based on her history of ratings on Apple, Huberty sees a buying opportunity in the recent weakness in the stock. She believes iPhone units will ultimately surprise to the upside and that Apple’s gross margins will expand in fiscal 2016. If these two things happen, she expects the stock’s multiple to expand, moving closer to 15 times and putting it in line with the historical trading range from last year.

Expectations for PC stocks remain low

Institutional investors have been understandable bearish on PC stocks like Hewlett-Packard, as PC stock ownership remained about the same due to the weak PC market. HP’s portfolio allocation among institutional investors was essentially flat quarter over quarter at 0.5%. Nonetheless, that’s still the lowest level over the last six years.

Huberty and team remains Overweight on Hewlett-Packard because investor expectations are quite low. The company did manage to surprise to the positive with its latest earnings report on Thursday, sending shares up by more than 3% during regular trading hours today.

The Morgan Stanley team noted that portfolio allocations of IBM and Intel were also about flat sequentially at a 1% average portfolio allocation for each of them, which is higher than their S&P 500 weights. Interestingly, Intel’s top 100 shareholders now own half of the company’s outstanding shares, which is a new record high.

Building positions in Amazon

The analysts also noted that investors continued to add to their positions in Amazon during the second quarter on the back of improvements in profitability and strength in Amazon Web Services. They said the average weighting among the online retailer’s top 100 shareholders hit 1.3% during the second quarter compared to the previous quarter’s 1.1% weighting and the 1.2% weighting in last year’s second quarter.

They also found that eBay and Facebook were still overweight in terms of portfolio allocation during the second quarter. They found the two highest portfolio concentrations in their coverage in relation to the companies’ S&P weightings. On eBay, they think investors were waiting for the PayPal spinoff, which was completed on July 20.

Investors bearish on Cisco

The Morgan Stanley team found little change in portfolio allocation of Cisco Systems, noting that the average was in line with the company’s 0.8% weighting in the S&P 500. Further, they state Cisco is the second-least widely-held large cap tech stock, with Hewlett-Packard being the only one with a lower average allocation.

They warned that the historically low ownership could foreshadow weak potential for revenue growth and margin expansion. They think Cisco’s current valuation is related to its current product cycle and remain cautious on the stock.

Qualcomm allocation declines

Qualcomm received a boost from activist interest in the first quarter, but the average portfolio allocation fell by about 10 basis points during the second quarter as institutional investors worried about its place in the smartphone market and its margins. However, the chip maker’s allocation is still higher than its 0.5% weighting in the S&P 500.

The Morgan Stanley team notes that sentiment has shifted hard to the negative, but they see potential upside drivers like a beat in chip unit shipments, improvements in royalty capture and cost of goods sold. They think it’s also possible that Qualcomm will start looking for places to cut costs.