In this article, we will take a detailed look at the 11 High Growth Low/No Dividend Stocks to Buy. For a quick overview of such stocks, read our article 5 High Growth Low/No Dividend Stocks to Buy.
There has been a lot of talk about expected rate cuts from the Federal Reserve in 2024. While rate cuts might be coming in the second half of 2024, many analysts believe we are in for an elevated interest rate environment for several years to come. Vanguard said in its 2024 outlook report that after years of zero interest rates we are expected to see the dawn of elevated interest rates, which the firm said would be the return of “sound money.” Vanguard believes this development would bode well for the global financial markets. Vanguard said the persistence of positive real interest rates “provides a solid foundation” for long-term risk-adjusted returns. Vanguard said that this “return of sound money” would help individuals reach their financial goals and result in judicious spending and allocation of budgets.
Soft Landing Unlikely?
Vanguard also thinks the much-awaited “soft landing” is unlikely amid a decline in growth as US household savings that kept powering the resilience of the economy in 2023 are expected to run out.
“A resilient consumer and fiscal policy are behind this outperformance. A strong labour market that has averaged more than 225,000 monthly job creations in 2023 has driven above-trend growth in real incomes. This has added to household balance sheets that were already stronger because of the fiscal support received during the Covid-19 pandemic. Legislation such as the Bipartisan Infrastructure Law, the CHIPS Act and the Inflation Reduction Act—all enacted between November 2021 and August 2022—have further supported growth through private and public investment. Despite significant progress on inflation and strong economic growth, we believe a “soft landing”—where inflation returns sustainably to the Federal Reserve’s target absent weakness in demand—is unlikely. The last mile on the path to 2% inflation will be the most difficult. In the year ahead, we expect a combination of below-trend growth, rising unemployment and slowing wage growth. This would occur as the labour market loosens, in large part because of higher-than- expected labour supply growth. We expect the Fed to start easing policy in the second half of 2024, and we expect the policy rate to be cut below 4% by the end of 2024,” the Vanguard report added.
Double-Digit Growth in Stocks in 2024?
But how all of this would affect the stock market in the US? Many analysts are highly bullish on stocks for 2024 as they believe inflation will come down and the Fed will begin to cut rates. Fundstrat’s Tom Lee in December 2023 said while talking to a program on CNBC that he sees a 50% chance of double-digit growth in US stocks in 2024.
Tom Lee said the 2% inflation target set by the Fed was becoming very “visible.” Lee expects the S&P 500 to touch 5200 in 2024. When asked how he came up with this number, Lee said in his calculations earnings expectations hold a lot of weight in addition to PE multiples. Lee thinks a 10% growth in earnings would be easy in 2024.
Methodology
In this backdrop it would be interesting to take a look at some top profitable stocks with high growth in which smart money investors are investing. While we regularly talk about dividend stocks like International Business Machines Corporation (NYSE:IBM), The Procter & Gamble Company (NYSE:PG), and Colgate-Palmolive Company (NYSE:CL), in this article we will focus on stocks with low or no dividend yields. For this article we first used a stock screener to identify profitable stocks with dividend yields less than 0.5% and high revenue growth (over 25%). From these companies we picked 11 companies with the highest number of hedge fund investors. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
11. Inter & Co. Inc (NASDAQ:INTR)
Number of Hedge Fund Investors: 3
Brazil-based financial services company Inter & Co. Inc (NASDAQ:INTR) ranks 11th in our list of the best high-growth stocks with no or low dividends. In August, Citi analyst Rafael Frade upgraded the stock to Buy from Hold.
A total of three hedge funds tracked by Insider Monkey had stakes in Inter & Co. Inc (NASDAQ:INTR).
In November Inter & Co. Inc (NASDAQ:INTR) posted third quarter results. Net income in the quarter came in at R$104 million. Total gross revenue in the quarter came in at R$2.1 billion, a 39% YoY growth.
10. Afya Ltd (NASDAQ:AFYA)
Number of Hedge Fund Investors: 8
Brazil-based medical education company Afya Ltd (NASDAQ:AFYA) ranks 10th in our list of the best high-growth stocks with no or low dividends. In November Afya Ltd (NASDAQ:AFYA) posted third quarter results. GAAP EPS in the period came in at R$1.03. Revenue in the quarter jumped 25.1% year over year to R$726.48 million.
As of the end of the third quarter of 2023, 8 hedge funds in Insider Monkey’s database of 910 hedge funds had stakes in Afya Ltd (NASDAQ:AFYA).
9. White Mountain Insurance Group Ltd (NYSE:WTM)
Number of Hedge Fund Investors: 16
Insurance and financial services company White Mountain Insurance Group Ltd (NYSE:WTM) is one of the best high-growth stocks with low dividend yield according to smart money investors. The stock’s dividend yield is 0.068% as of January 7. In November White Mountain Insurance Group Ltd (NYSE:WTM) posted Q3 results. Revenue in the period jumped about 35.6% year over year to $519.6 million.
A total of 16 hedge funds tracked by Insider Monkey had stakes in White Mountain Insurance Group Ltd (NYSE:WTM).
8. Kanzhun Ltd (NASDAQ:BZ)
Number of Hedge Fund Investors: 18
With a quarterly earnings growth (yoy) of 101% and quarterly revenue growth of 36%, China-based recruitment services company Kanzhun Ltd (NASDAQ:BZ) ranks 8th in our list of the best high-growth stocks with no or low dividend yields.
Insider Monkey’s database of 910 hedge funds shows that 18 hedge funds had stakes in Kanzhun Ltd (NASDAQ:BZ) as of the end of the third quarter of 2023. The biggest stakeholder in Kanzhun Ltd (NASDAQ:BZ) is Chase Coleman and Feroz Dewan’s Tiger Global Management LLC which had a $50 million stake in Kanzhun Ltd (NASDAQ:BZ).
7. Li Auto Inc (NASDAQ:LI)
Number of Hedge Fund Investors: 28
Chinese EV company Li Auto Inc (NASDAQ:LI) is one of the best high-growth stocks to buy with no dividend according to hedge fund investors. In November 2023, Li Auto Inc (NASDAQ:LI) posted fiscal third quarter results. Q3 Non-GAAP EPADS came in at $0.45. Revenue in the quarter jumped about 271.2% year over year to $4.75 billion, beating estimates by $170 million.
In the third quarter the company delivered 105,108 units, up 296.3% on a year-over-year basis.
As of the end of the third quarter of 2023, 28 hedge funds tracked by Insider Monkey had stakes in Li Auto Inc (NASDAQ:LI).
During Q3 earnings call, the company talked about its fourth quarter of 2023 outlook:
Net income in the third quarter was RMB 2.81 billion or USD 385.5 million, compared with RMB 1.65 billion net loss in the same period last year and increasing 21.8% from RMB 2.31 billion net income in the second quarter of this year. And now turning to our balance sheet and cash flow. Our cash position remains strong and stood at RMB 88.52 billion or USD 12.13 billion as of September 30, 2023. Net cash provided by operating activities in the third quarter was RMB 14.51 billion or USD 1.99 billion.
Free cash flow was RMB 13.22 billion or USD 1.81 billion in the third quarter. And now for our business outlook. For the fourth quarter of 2023, the company expects the deliveries to be between 125,000 and 128,000 vehicles, representing an increase of 169.9% to 176.3% from the fourth quarter of 2022. The company also expects fourth quarter total revenues to be between RMB 38.46 billion and RMB 39.38 billion, representing an increase of 117.9% to 123.1% from the fourth quarter of last year. This business outlook reflects the company’s current and preliminary view on its business situation and market condition, which is subject to change.
Read the entire earnings call transcript here.
In 2022 when rates jumped and inflation crisis started, many turned to dividend names like International Business Machines Corporation (NYSE:IBM), The Procter & Gamble Company (NYSE:PG), and Colgate-Palmolive Company (NYSE:CL). But amid rate cut expectations, growth stocks like Li Auto are in demand.
6. Kinsale Capital Group Inc (NYSE:KNSL)
Number of Hedge Fund Investors: 24
With a dividend yield of 0.16%, specialty insurance company Kinsale Capital Group Inc (NYSE:KNSL) ranks sixth in our list of the best high-growth stocks with low or no dividends.
In October Kinsale Capital Group Inc (NYSE:KNSL) posted third quarter results according to which its revenue in the period jumped about 44% on a YoY basis.
As of the end of the third quarter of 2023, 24 hedge funds in Insider Monkey’s database of 910 hedge funds had stakes in Kinsale Capital Group Inc (NYSE:KNSL). The most significant stakeholder of Kinsale Capital Group Inc (NYSE:KNSL) was Richard Driehaus’s Driehaus Capital which owns an $106 million stake in Kinsale Capital Group Inc (NYSE:KNSL).
While many investors have been looking to pile into solid dividend stocks like International Business Machines Corporation (NYSE:IBM), The Procter & Gamble Company (NYSE:PG), and Colgate-Palmolive Company (NYSE:CL), some are hunting growth names to take advantage of the expected bull run after rate cuts.
Baron Discovery Fund made the following comment about Kinsale Capital Group, Inc. (NYSE:KNSL) in its Q3 2023 investor letter:
“Specialty insurer Kinsale Capital Group, Inc. (NYSE:KNSL) contributed to performance after reporting consensus-beating quarterly results. Gross written premiums grew 58%, and earnings per share increased 50%. Market conditions remained favorable, with rising premium rates and more business shifting from the standard lines market to the excess and surplus lines market where Kinsale operates. The company is also capitalizing on disruption in the property market, where rates are rising rapidly after years of industry losses and a reduction in reinsurance capacity. We continue to own the stock because we believe Kinsale is well managed and has a long runway for growth in an attractive segment of the insurance market.”
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Disclosure. None. 11 High Growth Low/No Dividend Stocks to Buy was initially published on Insider Monkey.
