10 Most Promising Growth Stocks According to Hedge Funds

4. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 216

Alphabet Inc. (NASDAQ:GOOGL), a global tech titan, has made a name for itself on a search that continues to power its lucrative advertising business. While the company controls a 90% market share in search, it remains well-positioned to generate significant value as the digital advertising industry grows by more than 15%  through the rest of the decade.

Additionally, Alphabet Inc. (NASDAQ:GOOGL) owns the largest video platform, YouTube, the top streaming service in daily TV viewership. As more families opt to cancel their conventional cable plans in favor of the more affordable and more accessible nature of streaming services, YouTube is expected to attract more viewers. This, in turn, will result in increased advertising income for the company.

The ad sales from YouTube brought in $8.7 billion for Alphabet in the second quarter, showing a growth from the $7.7 billion seen in the year before and affirming why it is one of the most promising growth stocks according to hedge funds.

On the other hand, Google Cloud ranks as the third most popular cloud service globally, just after Amazon Web Services and Microsoft Azure. Google Cloud reported a 29% increase in revenue from the previous year in the second quarter. Moreover, it achieved $1.2 billion in operating income, achieving a profit margin of 11%.

The operating margin for Alphabet Inc. (NASDAQ:GOOGL) has consistently been outstanding, averaging a remarkable 26.6%. Its substantial earnings allowed Alphabet to produce an impressive $13.5 billion free cash flow (FCF) during the second quarter. The firm is utilizing this FCF to fund its artificial intelligence technology and benefit its investors by buying back shares and distributing a $0.20 dividend. Analysts on Wall Street maintain a buy rating on Alphabet with an average price target of $206.60, implying 26.77% upside potential.

As per the Insider Monkey database, 216 hedge fund portfolios held Alphabet Inc. (NASDAQ:GOOGL) at the end of the second quarter, which was 222 in the previous quarter.