In this article, we take a look at 10 best upside stocks to buy right now. If you want to see more best upside stocks to buy right now, go directly to 5 Best Upside Stocks to Buy Right Now.
Stocks with upside are stocks that have the potential to increase in the future.
While every investors’ definition of the future is different, long term investors generally view the future as 10 years.
Given the decline in the market this year, there are arguably more stocks with upside than before.
Because inflation has increased substantially, demand for many companies have weakened as some consumers have looked for lower priced alternatives.
Given the higher inflation, the U.S. Federal Reserve has raised interest rates seven times this year which has increased borrowing costs and lowered equity valuations as capital has moved from the equity market into the U.S. government bond market.
With the Federal Reserve potentially increasing interest rates further next year, many economists think there could be a recession in 2023.
As a result of the high inflation, substantial interest rate increases, and the probability of a recession next year, the broader market has declined substantially and a lot of stocks are lower.
In the long term, however, it is likely that the Federal Reserve will win its fight against inflation and inflation will normalize. If inflation and interest rates normalize, the U.S. economy could grow faster and there’s potential for valuations to increase.
If market valuations increase substantially enough, many stocks could rise and hence realize some of their upside.
The Best Upside Stocks
The best upside stocks are stocks that not only could rally substantially but also have quality businesses with competitive advantages. Generally they would be blue chips that have fallen out of favor for various temporary reasons that might improve sometime in the next ten years.
Because they have great businesses, the blue chips are more likely to realize their upside in the long term versus companies that don’t have as great of a business.
Because they have great businesses, the best upside stocks also arguably have less downside as many have high quality earnings potential.
Downside
Just as every stock has an upside, every stock also has a downside. Stocks could decline further if the Federal Reserve raises rates more than expected or if economic data fails to meet expectations. Stocks could also decline for various company specific or sector specific reasons.
Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
Photo by Roberto Júnior on Unsplash
Methodology
For our list of 10 Best Upside Stocks to Buy Right Now, we picked 10 stocks that have quality businesses that could rally in the next 10 years.
We then ranked the 10 stocks based on the number of hedge funds in our database that held shares of the same stock at the end of Q3.
For those of you interested, check out 12 Best Blue Chip Stocks To Buy Today.
10 Best Upside Stocks to Buy Right Now
10. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 42
The Boeing Company (NYSE:BA) has upside if the civilian aerospace market recovers. Shares of The Boeing Company (NYSE:BA) fell substantially in 2020 given the pandemic which decreased demand for civilian air travel and the company’s earnings per share have not done well ever since despite The Boeing Company (NYSE:BA) also owning a leading aerospace defense business. While the company lost $2.05 per share in 2021, analysts expect the company to lose $7.93 per share in 2022 given the headwinds.
Nevertheless, analysts do think there could be a recovery in the future as they expect The Boeing Company (NYSE:BA) to make a profit of $3.70 per share in 2023 and earn $7.04 per share in 2024. Much of the expected profit recovery depends on the rebound on civilian air travel which is far from certain given the uncertainty with the pandemic. As a result, The Boeing Company (NYSE:BA) is arguably a high reward high risk blue chip on our list.
Alongside The Walt Disney Company (NYSE:DIS), Meta Platforms, Inc. (NASDAQ:META), and Amazon.com, Inc. (NASDAQ:AMZN), The Boeing Company (NYSE:BA) is a stock with upside that’s held by many hedge funds in our database at the end of Q3.
9. BlackRock, Inc. (NYSE:BLK)
Number of Hedge Fund Holders: 46
BlackRock, Inc. (NYSE:BLK) shares have declined over 22% year to date given the broader market decline which decreases the company’s profitability. In Q3, the company’s sales decreased 15% year over year and its adjusted EPS decreased 16% year over year given the headwinds.
While the short term is bearish, BlackRock, Inc. (NYSE:BLK) benefits from being a leader in passive ETFs, which is a multi-trillion dollar asset class that’s expected to continue to grow in the long term. If BlackRock, Inc. (NYSE:BLK) maintains its market share and grows its AUM, the company could continue to grow its earnings in the long term.
Of the 920 hedge funds in our database, 46 owned shares of BlackRock, Inc. (NYSE:BLK) at the end of Q3.
8. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 51
ASML Holding N.V. (NASDAQ:ASML) is a leader in producing cutting edge semiconductor producing equipment that’s pretty essential for the industry.
Considering the semiconductor industry has slowed this year and the tensions between China and the United States have increased, analysts expect the company’s EPS to decrease to $14.34 in 2022 from $15.63 per share in 2021. With the headwinds, the company’s stock has declined 27% year to date.
Nevertheless the semiconductor industry will grow in the long term and analysts expect ASML Holding N.V. (NASDAQ:ASML)’s EPS to rise. In terms of the consensus, analysts expect the company to earn $19.22 per share for 2023 and $23.87 per share for 2024.
Baron Opportunity Fund commented on ASML Holding N.V. (NASDAQ:ASML) in a Q2 2022 investor letter,
ASML Holding N.V. designs and manufactures semiconductor production equipment. It specializes in photolithography equipment, where light sources are used to photo-reactively create patterns on wafers that become printed circuits. ASML is the dominant leader across all types of lithography but, most importantly, is the only company selling equipment for extreme ultra-violet (EUV) lithography, the latest generation technology.
Indeed, because of the stalling out of Moore’s Law, advanced lithography of larger and multi-patterned silicon chips has been critical for leading-edge chip manufacturing and continued improvement in semiconductor chip performance over time. The company is well positioned to continue growing above industry rates as it rapidly adds capacity across its entire business to meet rising industry demand, especially from leading-edge customers continuing to invest to stay ahead of their competitors and drive chip performance forward.
Additionally, the introduction of high-NA EUV technology in the middle of the decade will add another leg to the growth opportunity.
7. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 70
Due to high inflation, NIKE, Inc. (NYSE:NKE) is a stock that has a great brand that hasn’t done well this year given the lower than expected demand and higher inventories. If there is a recession next year, NIKE, Inc. (NYSE:NKE)’s EPS might not do very well in 2023 given its apparel and shoes cost more than many competitors.
Nevertheless, the global economy will recover in the long run and NIKE, Inc. (NYSE:NKE)’s EPS could increase substantially in the next ten years if it maintains its market share in the premium apparel and shoe industry.
6. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 85
Citigroup Inc. (NYSE:C) is one of the big four U.S. banks with substantial scale and earnings power. Given the potential for a recession next year in addition to other factors, Citigroup Inc. (NYSE:C) stock has decreased 25.8% year to date. Furthermore, Citigroup Inc. (NYSE:C) has underperformed some of its other big four bank peers given it doesn’t benefit as much from the rising net interest income given its consumer business isn’t as big.
At the end of the third quarter, Citigroup Inc. (NYSE:C) had a book value per share of $92.71 and a tangible book value per share of $80.34, which is substantially higher than the bank’s current price of $44.81 per share. Although many banks trade at a considerable discount to their book values, the metric nevertheless indicates that Citigroup Inc. (NYSE:C) has long term upside if it can improve the quality of its earnings and maintain its market share.
Of the 920 hedge funds in our database, 85 owned shares of Citigroup Inc. (NYSE:C) at the end of Q3, ranking the stock #6 on our list of 10 Best Upside Stocks to Buy Right Now.
Like Citigroup Inc. (NYSE:C), The Walt Disney Company (NYSE:DIS), Meta Platforms, Inc. (NASDAQ:META), and Amazon.com, Inc. (NASDAQ:AMZN) are stocks with upside that are held by many hedge funds in our database at the end of the third quarter.
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Disclosure: None. 10 Best Upside Stocks to Buy Right Now is originally published on Insider Monkey.
