In this article, we will discuss the 10 Stocks with Biggest Upside Potential According to Hedge Funds.
The US equities saw a strong move after the September jobs report exceeded the economists’ estimates. As per the report, the US economy added 254,000 jobs last month, exceeding the economists’ estimates of 150,000 jobs. As a result of strong job gains, the unemployment rate was pushed lower to 4.1% from 4.2%. The strong jobs report puts rest to the rumors that the US Fed might aggressively lower the rates in a bid to keep the labor market afloat. The apex bank lowered its key benchmark rate last month for the first time in over 4 years by 50 basis points. This led to the current range of 4.75% – 5% from the 23-year high of 5.25% – 5.5%.
Several renowned economists believe that the US Fed will decrease the pace of rate cuts. They expect a 25-basis points reduction instead of another half point at its next meeting on 6 -7 November. The September jobs report hints at the underlying health of the labor market, which is healthier than initially expected. This means that the private job creation remains robust.
U.S. Equities September 2024- Commentary
As per S&P Global, the S&P 500 saw an increase of ~2.02% in September, resulting in a YTD return of ~20.81%. The September month was dominated by the news about inflation remaining under control, and the US Fed delivering a 0.50% rate decrease, with the expectations of two 0.25% decreases expected later in the year. Additionally, Q2 2024 earnings were able to set a record, with more earnings records expected for Q3 2024 and Q4 2024. Notably, even China also contributed at the end of the month, ensuring low-cost U.S. supplies. China needs to continue to do so to achieve its goal of supporting real estate and encouraging consumer spending.
Market experts believe that while the September month saw decent momentum in the US equities, October kicked off on a strong note. The release of the strong jobs report was enough to erase the losses on the nervousness over Middle East tensions and port strikes. The Chief Investment Officer at Independent Advisor Alliance believes that the current economic environment is an excellent time to own equities. This optimism stems from the fact that the economy has been expanding, the job market remains solid (if not strong) and the US Fed has not only stopped raising rates but is focused on cutting them.
After Strong Jobs Report, What Lies Ahead?
Market experts opine that the US Federal Reserve decided to go for a soft landing by increasing the interest rates to slow inflation without negatively impacting the labor market to the point of a recession. Charles Schwab believes that investors should not expect a uniform economic recovery. The strength in services hiring continues to offset the weakness in manufacturing. The company highlighted that healthcare and government are the areas that have had strong hiring trends over the past few months. Manufacturing has been witnessing a recession, as hinted by the continued contraction of the ISM manufacturing index. The company believes that rate-sensitive areas, like utilities, financials, and real estate investment trusts (REITs), are expected to deliver strong performance moving forward.
Morgan Stanley Wealth Management believes that the US Fed doesn’t have to cut rates aggressively in the upcoming meetings. The investment firm expects that investors should look for value across the whole market, and emphasize quality companies as the market continues to broaden. While the economy has not strengthened for the small-caps, the firm expects that mid-caps provide a good investment opportunity as a soft landing becomes more visible.
With this in mind, let us look at the 10 Stocks with Biggest Upside Potential According to Hedge Funds.
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Our methodology
To list 10 Stocks with Biggest Upside Potential According to Hedge Funds, we did extensive research and sifted through online rankings. After compiling a list of 25-30 stocks, we narrowed the list to the ones having the biggest upside potential, as of October 4. Finally, the selected stocks have been ranked in the ascending order of their hedge fund sentiment, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Stocks with Biggest Upside Potential According to Hedge Funds
10) Prudential plc (NYSE:PUK)
Average Upside Potential: 57.95%
Number of Hedge Fund Holders: 11
Prudential plc (NYSE:PUK) offers life and health insurance, and asset management solutions to individuals in Asia and Africa.
Prudential plc (NYSE:PUK) announced a partnership with Bank Syariah Indonesia, which means the former is expected to become the Shariah life insurance provider to BSI starting in early 2025. As a result of this partnership, Prudential plc (NYSE:PUK) is expected to broaden its distribution platform, which has predominantly relied on agents in this country. Market experts opine that the benefits of the company’s disciplined focus on quality and sustainability, which include product and repricing actions, should continue to aid its margins for the foreseeable future.
Prudential plc (NYSE:PUK)’s recent actions consist of repositioning its business in China in expectation of both regulatory and macroeconomic changes. The company is the first to move on to repricing, and its decision has started to bear fruit in achieving a different product mix. Prudential plc (NYSE:PUK) has started to see some turnaround in its China business. Its management highlighted that consumer demand for protection and retirement products has been robust and it has a good product range that is well-aligned with the recent regulatory moves.
Prudential plc (NYSE:PUK) entered FY 2024 with a clear strategy and certain outcomes and is confident about achieving them by 2027. These include a compounded annual growth rate for a new business profit of 15% – 20% and a double-digit for cash generation, both measured from the 2022 base. For FY 2024, the company expects new business profits to grow at a rate consistent with the trajectory required to meet its 2022 – 2027 new business profit growth objective.
As per Insider Monkey’s Q2 2024 database, Prudential plc (NYSE:PUK) was in the portfolios of 11 hedge funds, up from 10 in the preceding quarter.
9) Genmab A/S (NASDAQ:GMAB)
Average Upside Potential: 61.78%
Number of Hedge Fund Holders: 13
Genmab A/S (NASDAQ:GMAB) is engaged in developing antibody therapeutics for the treatment of cancer and other diseases primarily in Denmark.
Genmab A/S (NASDAQ:GMAB) completed its $1.8 billion acquisition of ProFound Bio. This strategic move should enhance the former’s market position and potentially drive future growth. The company reported promising results from several trials. Its folate receptor ADC, Rina S., demonstrated encouraging efficacy in a Phase 1/2 trial for ovarian and endometrial cancer patients. Wall Street analysts continue to remain optimistic about its pipeline. Epcoritamab, a T-cell engager for non-Hodgkin’s lymphoma (NHL), has been considered as a potential backbone in diffuse large B-cell lymphoma (DLBCL) treatment.
Genmab A/S (NASDAQ:GMAB) has been developing GEN1042 and GEN1046 in partnership with BioNTech, aiming at large markets like pancreatic ductal adenocarcinoma (PDAC), colorectal cancer (CRC), and non-small cell lung cancer (NSCLC). Such collaborations mean that the company is focused on expanding its therapeutic reach and addressing unmet medical needs.
Genmab A/S (NASDAQ:GMAB)’s healthy pipeline should drive future growth, potentially offsetting the anticipated decline in Darzalex revenue post-2029. In the earnings call, the company emphasized the attractiveness of EPKINLY to physicians based on positive customer reactions.
HC Wainwright restated a “Buy” rating on the shares of Genmab A/S (NASDAQ:GMAB), setting a $50.00 price target on 20th September. As per Insider Monkey’s Q2 2024 data, 13 hedge funds reported owning stakes in the company.
8) Rambus Inc. (NASDAQ:RMBS)
Average Upside Potential: 59.56%
Number of Hedge Fund Holders: 21
Rambus Inc. (NASDAQ:RMBS) offers semiconductor products in the US, South Korea, Singapore, and internationally.
Wall Street analysts opine that Rambus Inc. (NASDAQ:RMBS)’s long-term growth is expected to stem from the optimism around data center and AI markets. Since the company continues to make strategic investments in new products and technologies for data centers and client devices, analysts believe that it remains well-placed in the data center and AI markets with its new DDR5 server PMICs and Client Clock driver chip.
Rambus Inc. (NASDAQ:RMBS) expects that Q3 2024 should see continued product revenue growth. It is leveraging its leadership in DDR5 technology to drive growth in the data center and AI sectors and has maintained its focus on RCD generations, artificial intelligence, power, performance, and security in data centers and client spaces. Rambus Inc. (NASDAQ:RMBS) is investing in technologies addressing the challenging requirements of the broader PC market.
The company’s strategic focus on product development and market expansion places it well to capitalize on the improving demands of the data center and client markets. On a GAAP basis, Rambus Inc. (NASDAQ:RMBS) expects licensing billings in the range of $60 million – $66 million and product revenue of between $62 million – $68 million.
Analysts at Rosenblatt Securities reissued a “Buy” rating on the shares of Rambus Inc. (NASDAQ:RMBS), setting a price target of $85.00 on 10th September. As per Insider Monkey’s Q2 2024 data, 21 hedge funds were long Rambus Inc. (NASDAQ:RMBS).
Chartwell Investment Partners, LLC, an affiliate of Carillon Tower Advisers, Inc., released the first quarter 2024 investor letter. Here is what the fund said:
“Rambus Inc. (NASDAQ:RMBS) shares lagged as the company disappointed investors with weak guidance for the first quarter of 2024, due to lower product revenues for the semiconductors it makes. Spending on traditional servers has been lower, replaced by AI spending, which is having a negative impact on Rambus.”
7) Celsius Holdings, Inc. (NASDAQ:CELH)
Average Upside Potential: 65.29%
Number of Hedge Fund Holders: 27
Celsius Holdings, Inc. (NASDAQ:CELH) is engaged in developing, processing, marketing, distributing, and selling functional energy drinks and liquid supplements in the US, Australia, New Zealand, Canada, Europe, Middle Eastern, Asia-Pacific, and internationally.
Wall Street analysts believe that Celsius Holdings, Inc. (NASDAQ:CELH) should continue to maintain its position as the category growth leader and expand its shelf presence. Its strong partnership with PepsiCo and a strategy to execute growth-driving programs should continue to act as growth enablers, which might get reflected in the stock price.
Celsius Holdings, Inc. (NASDAQ:CELH) focuses on investing in growth and monitoring raw material costs. The company is targeting gross margins in the high 40s – 50s range in H2 2024. It has also announced new flavours and market expansions, which include the UK, Ireland, Australia, New Zealand, and France. Wall Street expects that Celsius Holdings, Inc. (NASDAQ:CELH) should be able to stabilize and grow its market share via strategic investments and promotions.
In Q2 2024, the company’s revenue went up by 23% to $402.0 million as against $325.9 million for the prior-year period. This increase stemmed from North American business and its success in sustaining consumer demand growth. Its gross profit as a percentage of revenue came in at 52.0% for the three months ended June 30, 2024, reflecting a rise from 48.8% for the prior-year period. This was due to freight optimization and lower materials costs.
BNP Paribas assumed coverage on the shares of Celsius Holdings, Inc. (NASDAQ:CELH) on 24th June. They gave an “Outperform” rating and a $87.00 price target. As per Insider Monkey’s Q2 2024 data, 27 hedge funds reported owning stakes in the company.
Fred Alger Management, an investment management company, released its second quarter 2024 investor letter. Here is what the fund said:
“Celsius Holdings, Inc. (NASDAQ:CELH) engages in the development, marketing, sale, and distribution of functional drinks and liquid supplements. It also offers post-workout functional energy drinks and protein bars. During the quarter, shares detracted from performance after the company reported fiscal first quarter revenues below analyst estimates. The revenue shortfall was attributed to ongoing inventory management challenges with PepsiCo, which decelerated year-over-year revenue growth from over 100% to approximately 37%. Despite the near-term growth slowdown, we believe Celsius remains well positioned to potentially capture market share within the large energy and soft drink industry over the long-term.”
6) Symbotic Inc. (NASDAQ:SYM)
Average Upside Potential: 69.88%
Number of Hedge Fund Holders: 29
Symbotic Inc. (NASDAQ:SYM) is an automation technology company, which is engaged in developing technologies to improve operating efficiencies in modern warehouses.
Market experts opine that Symbotic Inc. (NASDAQ:SYM)’s stock is well-placed for strong growth as a result of the plans to internalize some operations to improve margins. It is focused on in-sourcing its Engineering Procurement Construction (EPC) process so that costs can be reduced and system integration control can be enhanced. Symbotic Inc. (NASDAQ:SYM) remains optimistic about reaccelerating revenue growth in Q1 2025.
The company has locked in steel prices and expects a positive future impact on margins. Symbotic Inc. (NASDAQ:SYM)’s technology reduces labor and inventory costs and supports an unlimited number of customer SKUs. This results in improving efficiency and flexibility. The company wrapped up 3 system deployments and started 5 new ones, resulting in a total of 21 operational systems. Symbotic Inc. (NASDAQ:SYM) anticipates revenue growth to pick up in Q1 2025, with system gross margins returning to historical levels.
The company has been making progress on a new minibot and the deployment of the first system for GreenBox. This exhibits strong future growth prospects. For Q4 2024, Symbotic Inc. (NASDAQ:SYM) expects to achieve revenue in the range of $455 million – $475 million and projects an adjusted EBITDA of $28 million – $32 million.
Deutsche Bank Aktiengesellschaft upped its target price on shares of Symbotic Inc. (NASDAQ:SYM) from $58.00 to $59.00, giving a “Buy” rating on 30th July. As per Insider Monkey’s Q2 2024 data, 29 hedge funds were long Symbotic Inc. (NASDAQ:SYM).
5) Royalty Pharma plc (NASDAQ:RPRX)
Average Upside Potential: 51.35%
Number of Hedge Fund Holders: 34
Royalty Pharma plc (NASDAQ:RPRX) is engaged in operating as a buyer of biopharmaceutical royalties and a funder of innovations in the biopharmaceutical industry in the US.
Wall Street experts opine that Royalty Pharma plc (NASDAQ:RPRX)’s growth trajectory is expected to be aided by its high-quality royalty portfolio having an average royalty duration of ~12 years. The FDA’s approval of Voranigo should be a new growth driver. Royalty Pharma plc (NASDAQ:RPRX) raised its full-year 2024 guidance and it now expects portfolio receipts to be between $2.7 billion and $2.775 billion.
Royalty Pharma plc (NASDAQ:RPRX) is a leader when it comes to large royalty transactions and has a strong repeat business record with partners. Its development stage pipeline should unlock significant value, with expectations to garner more than $1.2 billion in annual peak royalties. Wall Street believes that Royalty Pharma plc (NASDAQ:RPRX)’s late-stage development pipeline possesses significant potential to contribute to future earnings. The company has a robust deal pipeline, with $14.7 billion in transactions announced since 2020.
The company has exciting pipeline opportunities like LP(a) drugs and frexalimab, which are anticipated to help it in the upcoming years. Given the strength and diversification of the company’s portfolio, it remains well-placed for long-term revenue growth. Its proactive approach to identifying and investing in innovative therapies should act as a critical growth driver despite potential market challenges.
The Goldman Sachs Group increased its price target on the shares of Royalty Pharma plc (NASDAQ:RPRX) from $50.00 to $51.00, giving a “Buy” rating on 14th August.
Patient Capital Management, a value investing firm, released its second quarter 2024 investor letter. Here is what the fund said:
“While Royalty Pharma plc (NASDAQ:RPRX) is in the health care space, it is more like an investment firm that buys royalty assets in the healthcare space. The company has an extremely strong track record, running the business for over 20 years as a private fund before bringing it public. The market opportunity for external royalty funding has only grown as early-stage start-ups need funding and legacy players are looking to lower their debt levels. We think Royalty Pharma is perfectly positioned as the partner of choice. The company is disciplined, maintaining deal internal rate of returns (IRRs) in the low-teens despite the higher interest rate environment. We think as the company continues to deliver as a public company, the market will start paying attention.”
4) Rivian Automotive, Inc. (NASDAQ:RIVN)
Average Upside Potential: 62.84%
Number of Hedge Fund Holders: 37
Rivian Automotive, Inc. (NASDAQ:RIVN) designs, develops, manufactures, and sells electric vehicles and accessories.
Rivian Automotive, Inc. (NASDAQ:RIVN) continues to focus on advancements in production, with strategic partnerships to act as a primary growth enabler. Wall Street remains optimistic about its JV with Volkswagen. This JV should help Rivian Automotive, Inc. (NASDAQ:RIVN) in achieving significant cost savings, operating efficiencies, and future revenues. Collectively, these factors should fuel its stock price moving forward.
Rivian Automotive, Inc. (NASDAQ:RIVN) has been ramping up production for its second-generation R1 vehicles and continues to develop the R2 platform. Its focus is also on vertical integration and cost reductions through material and supplier cost savings. Moving forward, Rivian Automotive, Inc. (NASDAQ:RIVN)’s growth is expected to be helped by progression in gross profit via improved variable cost, fixed cost leverage, and a rise in revenue per delivery unit.
In Q2 2024, the company saw total revenues of $1,158 million, mainly aided by the delivery of 13,790 vehicles. Total revenues from the sale of regulatory credits were $17 million for the quarter. Rivian Automotive, Inc. (NASDAQ:RIVN) continues to make investments in expanding its spaces, service infrastructure, and fast-charging network. This will help enhance customer experience and brand exposure.
Analysts at Wedbush reiterated an “Outperform” rating on the shares of the company, issuing a $20.00 price target on 7th August. Meridian Funds, managed by ArrowMark Partners, released its second quarter 2024 investor letter. Here is what the fund said:
“Rivian Automotive, Inc. (NASDAQ:RIVN) is a US-based electric vehicle manufacturer focused on the design, development, and production of electric adventure vehicles, pickup trucks, and commercial delivery vans. We own Rivian because we believe the company is a future leader in the growing electric vehicle market with a strong brand, compelling products, and a vertically integrated business model. During the quarter, Rivian’s stock price was driven by its progress on cost reduction initiatives and management’s stated confidence in achieving positive gross margins by the end of 2024. The recent announcement of a joint venture with Volkswagen, involving up to $5 billion in investment, also significantly boosted Rivian’s financing outlook and validated its technology. We trimmed our position in Rivian given the strong performance in the quarter.”
3) Weatherford International plc (NASDAQ:WFRD)
Average Upside Potential: 64.30%
Number of Hedge Fund Holders: 43
Weatherford International plc (NASDAQ:WFRD) is an energy services company, which offers equipment and services for the drilling, evaluation, completion, and natural gas wells worldwide.
Despite facing challenges, Weatherford International plc (NASDAQ:WFRD) introduced a shareholder return program, including a $1 per share annual dividend and a $500 million share buyback over 3 years.
Wall Street analysts remain optimistic about its strategic acquisition of Datagration Solutions Inc. They believe that this acquisition should enhance Weatherford International plc (NASDAQ:WFRD)’s digital offerings and amplify the capabilities of existing platforms. The move is focused on improving decision-making throughout the well lifecycle and streamlining operating efficiencies across the Weatherford International plc (NASDAQ:WFRD)’s enterprise. The company is expected to continue to maintain a strong focus on margin and cash flow growth.
Weatherford International plc (NASDAQ:WFRD) continues to target a 30% return on invested capital and is focusing on net working capital efficiency and on reducing interest costs. The company is optimistic about the international and offshore market outlook. Also, it sees significant potential for organic growth and value creation. The company’s overall long-term growth is expected to be aided by successful pricing and market share strategies.
Weatherford International plc (NASDAQ:WFRD)’s top management anticipates improved free cash flow conversion with the help of efficiencies and lower interest costs. Barclays increased its price objective from $160.00 to $165.00, giving an “Overweight” rating on 25th July. Notably, 43 hedge funds held stakes in Weatherford International plc (NASDAQ:WFRD) at the end of Q2 2024, as per Insider Monkey’s database of 912 hedge funds.
2) Ionis Pharmaceuticals, Inc. (NASDAQ:IONS)
Average Upside Potential: 62.23%
Number of Hedge Fund Holders: 43
Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) discovers and develops RNA-targeted therapeutics in the US.
Wall Street analysts believe that Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) continues to advance multiple late-stage candidates focused on potential approval and commercialization. With its proprietary antisense oligonucleotide (ASO) technology platform, the company remains focused on addressing significant unmet needs in rare diseases and cardiometabolic disorders.
Ionis Pharmaceuticals, Inc. (NASDAQ:IONS)’s pipeline has a strong potential, featuring numerous candidates in late-stage development that might reshape treatment paradigms for their respective indications. At the forefront is eplontersen, which is being developed in alliance with AstraZeneca for treating transthyretin-mediated amyloidosis (ATTR), both in its polyneuropathy (PN) and cardiomyopathy (CM) forms.
While the company focuses on investing significantly in R&D to advance its pipeline, it is also progressing toward a more sustainable financial position. Wall Street analysts expect that Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) will reach an EBIT trough in 2024, with several product launches that are planned for 2024-2025 anticipated to drive revenue growth. Its partnership with AstraZeneca offers global distribution capabilities, which might help Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) in maximizing the commercial potential of eplontersen.
The company’s revenue increased for Q2 2024 and H1 2024 by 20% and 8% as compared to the same periods last year, respectively. These increases were mainly due to higher R&D revenue reflecting the value Ionis Pharmaceuticals, Inc. (NASDAQ:IONS)’s pipeline and technology generates.
Leerink Partners raised the company’s shares from a “Market perform” rating to an “Outperform” rating, increasing its price objective from $53.00 to $62.00 on 24th July.
1) Jazz Pharmaceuticals plc (NASDAQ:JAZZ)
Average Upside Potential: 59.99%
Number of Hedge Fund Holders: 44
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) identifies, develops, and commercializes pharmaceutical products for unmet medical needs in the US, Europe, and internationally.
Its continued focus on developing medicines for complex and underserved patient populations placed it well in the pharmaceutical industry. Jazz Pharmaceuticals plc (NASDAQ:JAZZ) continues to actively invest in its pipeline to fuel future growth. It has been targeting late-stage programs like zanidatamab (zani) for gastroesophageal cancer, Epidiolex in Japan, and Zepzelca for non-small cell lung cancer. In a bid to enhance shareholder value, Jazz Pharmaceuticals plc (NASDAQ:JAZZ) announced a $500 million share repurchase program.
In the oncology space, the company has been working to strengthen its position via pipeline development and strategic initiatives. Its emphasis on large market opportunities in sleep disorders, epilepsy, and oncology places the company well for robust long-term revenue expansion. Jazz Pharmaceuticals plc (NASDAQ:JAZZ)’s leading position in narcolepsy and idiopathic hypersomnia treatments, together with a diverse product portfolio throughout neuroscience and oncology, means that the company is well-positioned for a long-term growth trajectory.
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) saw record revenues of more than $1 billion in Q2 2024, which were driven by healthy execution and improved demand for its key growth drivers, Xywav, Epidiolex, and Rylaze. The company has affirmed GAAP net income guidance of $385 million – $530 million.
Royal Bank of Canada upped its price objective from $174.00 to $175.00, giving an “Outperform” rating on 4th October.
While we acknowledge the potential of JAZZ as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than JAZZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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