In this piece, we will take a look at the 12 best aggressive growth stocks to buy according to hedge funds.
For a large portion of investors who put money in the market, growth is the primary objective. The stocks that these investors prefer are also stocks that are either currently exhibiting strong revenue growth or have product strengths or other competitive advantages that can ensure that they will dominate their markets and grow in the future.
Broadly speaking, it is possible to identify such stocks by looking at which industries are expected to grow strongly. A few years ago, semiconductor design and fabrication was one such sector. Back then, the world’s largest integrated chip manufacturer known for its Core processor lineup had started to struggle. The nature of the semiconductor industry which requires years of research expertise and billions of dollars in capital expenditure meant that the market was not only open to new players but also that this opening favored incumbents that already had the necessary investments and expertise in place.
This gap led to the price-to-earnings (P/E) ratio of the firm which ranked 3rd on our list of 10 AI Stocks That Will Skyrocket to touch astronomically high levels as soon as the firm started to turn a profit. As an illustration, consider the P/E ratio of this stock at Q1 2018’s close. The ratio back then was 111, while the integrated chip manufacturer was trading at 19 and the Taiwanese contract chip manufacturer which ranks 2nd on our list of 10 Best Tech Stocks For Long-Term Investment traded at 16.11. During the same period, Wall Street’s favorite AI GPU stock whose shares have gained 700%+ since OpenAI publicly released ChatGPT was trading at a P/E ratio of 37.
Naturally, this indicated that investors were betting heavily on the firm to grow. Since 2018’s first quarter, its shares have gained a whopping 1,204% while the GPU company has gained 2,175% and the integrated chip manufacturer is down by 57.6%. Between its fiscal years 2017 to the latest trailing-twelve-month revenue, the growth stock that traded at a P/E ratio of 111 in 2018 has grown revenue by 358%, so it’s safe to say that in this case, growth investors were right, and their investments if dearly held since then have outpaced the firm’s revenue in growth terms.
Therein lies the magic of growth stocks, which can generate substantial returns for investors. However, as is the case with all things in life, this promise also comes with a dark side. Research from the University of Michigan shows that growth stocks are punished harder than value stocks in case of negative earnings surprises. For their research, the researchers analyzed consensus earnings forecasts, quarterly share prices, stock prices, P/E ratios, and other variables for 13 years to determine the returns of growth and value stocks that missed or beat analyst earnings estimates.
By bifurcating their results across five categories starting from Low Growth and ending at High Growth, they demonstrate a clear difference between the post-earnings stock returns of growth and non-growth stocks. For the Low Growth stocks, a negative earnings surprise led to -3.57% in share price returns starting two days following the report and ending before the next report. The High Growth stocks led the Low Growth stocks by 3.75 percentage points in negative returns as they lost 7.32% over the same period after posting a negative earnings surprise. The 3.75 percentage point differential is key when we analyze these two categories’ stock price performance after positive earnings surprises. This is because while the Low Growth stocks gained 5.44% after the earnings surprise, the High Growth stocks led them by only 0.88 percentage points by gaining 6.32%.
Similarly, not only are growth stocks punished harder if they miss investor expectations, but the share price drops can make earlier optimism regarding their fortunes appear misplaced as well. The best example of this fact is the software-as-a-service (SaaS) industry. SaaS firms were the pinnacle of growth investing because of their business model which allows them to earn recurring revenue through sizable contracts while keeping costs low. Investor optimism surrounding SaaS stock touched a feverish pitch in Q1 2021 when their median EV/Revenue multiple sat at 14.1x. This meant that the firms’ market capitalization and debt minus cash and other assets were valued 14 times their sales. But, by Q4 2022 this had dropped to 4.6x as a combination of factors such as higher rates leading to tighter business spending and the pivot towards artificial intelligence soured sentiment. SaaS firms were particularly hurt since AI enables businesses to self-develop software which reduces the need for SaaS products and services.
So, with the landscape surrounding growth stocks being as dynamic as their share prices, we decided to look at some aggressive growth stocks with high revenue growth and significant hedge fund interest.
A trader at a stock exchange, vigorously watching the stocks’ trends in the stock market.
Our Methodology
To compile our list of the best aggressive growth stocks, we first sifted out 12 stocks with annual latest quarter revenue growth greater than 35% from multiple growth ETFs. The stocks were then ranked by the number of hedge funds that had bought the shares during Q3 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).
12. Symbotic Inc. (NASDAQ:SYM)
Revenue Growth: 57.7%
Number of Hedge Fund Investors In Q3 2024: 15
Symbotic Inc. (NASDAQ:SYM) is an artificial intelligence company that specializes in machine learning. The firm caters to the needs of the logistics and warehousing industry through products such as warehouse process automation. Symbotic Inc. (NASDAQ:SYM)’s target sector introduces seasonality into its earnings and places it at the mercy of the broader economy. Warehouse stocks tend to do well when economic output and consumer spending are high. Consequently, the fact that Symbotic Inc. (NASDAQ:SYM)’s shares are down 44% year-to-date is unsurprising given that industrial and other economic sectors have lagged this year. However, the firm benefits from being one of the few players of its kind, which is evident through its backlog of $22.4 billion despite a broader industrial slowdown. Symbotic Inc. (NASDAQ:SYM) also benefits from having no debt on its balance sheet which frees up considerable cash flow for operations and other purposes and a partnership with retail giant Walmart to introduce certainty into future cash flows.
Symbotic Inc. (NASDAQ:SYM)’s management commented on its backlog during the Q4 2024 earnings call. Here is what they said:
“Turning to backlog. Our backlog of committed contracted orders of $22.4 billion remained largely consistent with last quarter as the revenue recognized during the quarter was partially offset by final pricing on contracts already in the lane. I will note that Walmex was signed after the quarter end and will be additive to the backlog next quarter. As mentioned earlier, system margins rebounded strongly, returning to historical levels. Gross margin on software maintenance and support is up 50% for the quarter, trending towards typical industry softness as more systems go operational. In operation services, we did experience a slight negative gross margin as we added resources at certain sites where we have large projects and are adding new capabilities.”
11. Ares Management Corporation (NYSE:ARES)
Revenue Growth: 68.30%
Number of Hedge Fund Investors In Q3 2024: 24
Ares Management Corporation (NYSE:ARES) is a California-based asset management company. The firm has a global presence, and it operates through products and services such as investment funds, private equity, and real estate. Ares Management Corporation (NYSE:ARES)’s strong revenue growth is built on the back of the growth in private credit in the finance industry. This has come on the back of tighter regulations for bank lending as well as high rates and a large number of entities not qualifying for traditional finance. Ares Management Corporation (NYSE:ARES)’s favorability to entities that prefer to avoid bank financing also positions it well to navigate a low-rate environment. Not only do lower rates increase demand for private credit, but they also increase the value of rate-sensitive assets and bolster the real estate sector. The firm’s shares reflect these factors, as the shares are up 54% year-to-date.
ClearBridge Investments mentioned Ares Management Corporation (NYSE:ARES) in its Q3 2024 investor letter. Here is what the fund said:
“We took action in the quarter to shore up our financials exposure with two new buys in the sector. Ares Management Corporation (NYSE:ARES) is an alternative asset manager and leading player in private credit, a large and growing market that continues to be supported by secular tailwinds such as increased bank regulation, rising retail penetration and the migration of insurance assets. With its scale, Ares should take outsize share of industry asset growth and drive fee-related earnings and margin expansion over time. The company’s high underwriting standards and performance in past downturns position it well to not only manage through a future credit cycle but also emerge stronger versus peers.”
10. RenaissanceRe Holdings Ltd. (NYSE:RNR)
Revenue Growth: 112.5%
Number of Hedge Fund Investors In Q3 2024: 29
RenaissanceRe Holdings Ltd. (NYSE:RNR) is one of the largest insurance and reinsurance companies in the world. Its scale is evidenced by its assets, which sit at a whopping $52.7 billion as of the third quarter. In a US economy marked by high inflation that has only recently started to fall, RenaissanceRe Holdings Ltd. (NYSE:RNR) has benefited from growing premiums. As of H1 2024, the firm wrote $7.4 billion in premiums which marked a strong 37% annual growth. Additionally, RenaissanceRe Holdings Ltd. (NYSE:RNR) has also benefited from high interest rates which pushed its net investment income to grow by 46% during the first half. As is with other insurers, the firm is particularly vulnerable to rising climate catastrophes in the form of hurricanes that have ravaged the US this year. This was evident on October 7th when RenaissanceRe Holdings Ltd. (NYSE:RNR)’s shares fell by 9% after Hurricane Milton was upgraded to a Category 4 storm. On a broader scale, the shares depend on premium sustainability and climate outlook.
TimeSquare Capital Management mentioned RenaissanceRe Holdings Ltd. (NYSE:RNR) in its Q3 2024 investor letter. Here is what the fund said:
“RenaissanceRe Holdings Ltd. (NYSE:RNR), a provider of reinsurance and insurance services, surged ahead by 22%. Solid second quarter results were generated by favorable reserve releases in the Catastrophe, Casualty, and Specialty segments. There were also lower than anticipated losses in their Total Property business. Net investment income and share buybacks also exceeded projections.”
9. Duolingo, Inc. (NASDAQ:DUOL)
Revenue Growth: 39.9%
Number of Hedge Fund Investors In Q3 2024: 31
Duolingo, Inc. (NASDAQ:DUOL) is one of the few software-based language learning-focused firms in the world. As it is one of the earliest movers in the industry, the firm has managed to create a sizable moat for itself fueled particularly through its profitability during the coronavirus pandemic. Duolingo, Inc. (NASDAQ:DUOL) has also managed to capitalize on the surge in generative artificial intelligence technologies by introducing new features such as Video Calls and Duocons to try to use AI to replace traditional language teachers. Its focus on technology sets the firm up well to capitalize on young users who are more tech-savvy. At the same time, like any other social media or associated firm, Duolingo, Inc. (NASDAQ:DUOL)’s hypothesis depends on its monthly active users, their growth, and retention. The firm boasts of having 100 million monthly active users and 8 million subscribers, which hints at the potential that lies ahead of it in terms of market penetration.
Baron Funds mentioned Duolingo, Inc. (NASDAQ:DUOL) in its Q3 2024 investor letter. Here is what the fund said:
“Duolingo, Inc. (NASDAQ:DUOL) is the world’s leading language learning app with over 100 million monthly active users, known for its effective gamification and high engagement. After monitoring the company over the past year and a half, we developed conviction to buy the stock for a few reasons. The company has maintained premium levels of user growth (daily average user growth of over 50%) and revenue growth (40%-plus), executed well against their product roadmap, gained early traction with new functionality, and maintained impressive 40%-plus incremental margins. We view the founder-led management team as best in class, technically capable (CEO and CTO both earned PhDs in machine learning from Carnegie Mellon University), and product focused. We initiated a position in the quarter as the share price fell to what we deemed attractive levels from a long-term valuation perspective, coupled with material catalysts on the horizon, particularly the broader launch of AI functionality (branded “Max”) that enables users to have real-time conversations with AI based characters and a substantial improvement of the company’s Advanced English offering. We believe that these two initiatives take Duolingo from more of a hobby app to a company that can address the broader market of 1.8 billion people learning English today. As these products roll-out in the coming quarters, we believe their adoption should drive the realization of higher pricing, faster revenue growth, lower churn, and continued margin improvement. We also believe there is additional optionality in newer products such as math and music, which are earlier in their product evolution.”
8. Super Micro Computer, Inc. (NASDAQ:SMCI)
Revenue Growth: 143%
Number of Hedge Fund Investors In Q3 2024: 33
Super Micro Computer, Inc. (NASDAQ:SMCI) is a Taiwan-based computer hardware company. It is one of the most controversial AI-related stocks of 2024, as is evident in the share price. From the start of the year to the end of October, Super Micro Computer, Inc. (NASDAQ:SMCI)’s shares had gained a respectable 72%. However, since then, the stock is down 10.6% amidst delays to the firm’s Form 10K SEC filing after an accounting manipulation claim from a short seller. This put Super Micro Computer, Inc. (NASDAQ:SMCI)’s compliance with the NASDAQ’s rules in question, but the shares gained 13.9% after the exchange accepted the firm’s request for a filing extension. However, Super Micro Computer, Inc. (NASDAQ:SMCI)’s troubles have generated rumors that the firm’s key customer NVIDIA, which has accounted for most of its share price gains in 2024, is looking to diversify its supply chain. Consequently, the shares might struggle if these rumors turn out as a reality.
Columbia Acord Fund mentioned Super Micro Computer, Inc. (NASDAQ:SMCI) in its Q3 2024 investor letter. Here is what the fund said:
“Super Micro Computer, Inc. (NASDAQ:SMCI) had a tough quarter due to a confluence of negative events. It declined, but is still up significantly for the year. While demand for the company’s AI server racks remains strong, with revenue up over 100%, gross margins have fallen sharply for two straight quarters, implying a price war. In addition, Super Micro was the subject of a short-seller report and a delay in filing its annual report with the SEC. We have been taking profits in the stock all year and have only a small position, which we are maintaining given the strong performance and demand for Super Micro’s AI racks and a depressed stock valuation.”
7. Tradeweb Markets Inc. (NASDAQ:TW)
Revenue Growth: 36.50%
Number of Hedge Fund Investors In Q3 2024: 34
Tradeweb Markets Inc. (NASDAQ:TW) is a New York-based financial services firm that enables institutional and professional investors to trade asset classes, run data analytics, and conduct associated operations. It is a sizable company with $7.3 billion in total assets as of the third quarter. Tradeweb Markets Inc. (NASDAQ:TW)’s reliance on financial markets means that the firm prospers as activity in sectors such as fixed income and derivatives grows and remains robust. Higher rates followed by a rate cut cycle typically mean that rate fixed assets see greater investor interest, and Tradeweb Markets Inc. (NASDAQ:TW)’s shares have gained 46% year-to-date as higher commissions and trading activity led to a 30% commission revenue growth in H1 2024. Looking ahead, since rate derivatives, corporate bonds, and municipal bonds account for nearly 75% of Tradeweb Markets Inc. (NASDAQ:TW)’s revenue, activity in these markets will drive the firm’s hypothesis.
Tradeweb Markets Inc. (NASDAQ:TW)’s management shared insights into its credit business during the Q3 2024 earnings call. Here is what they said:
“Strong double-digit revenue growth was driven by 37% and 14% year-over-year revenue growth across U.S. and European credit respectively. We also achieved strong double-digit revenue growth across credit derivatives, Munis and China bonds. Automation continues to surge with global credit AiEX average daily trades increasing over 25% year-over-year.
We achieved our second highest fully electronic market share across U.S. IG helped by IG block market share of over 8%. We also achieved our second highest fully electronic high yield market share with record high yield block market share of nearly 5%. During the quarter, we achieved a new monthly high yield record of 9% in July. Our institutional business continues to scale as clients adopt our diverse set of protocols. Year-to-date, we estimate over 40% of our U.S. institutional variable revenue growth was driven by non-market factors, mainly market share. Our primary focus on growing institutional RFQ continues to pay off with average daily volume growing over 45% year-over-year with strong double-digit growth across both IG and high yield.
Moreover, portfolio trading average daily volume rose over 50% year-over-year with growth of over 70% across IG portfolio trading and over 20% growth across high yield. We continue to focus on leading with innovation and this is resonating with our clients leading to user growth of over 20% year-over-year. Retail credit revenues were up over 15% year-over-year as financial advisors continue to allocate investments towards credit to compliment their buying of U.S. treasuries and retail certificates of deposits. All trade produced a solid quarter with over $185 billion in volume, up over 35% year-over-year. Specifically, our all-to-all average daily volume grew over 20% year-over-year and our dealer RFQ offering grew over 25% year-over-year. The team continues to be focused on broadening out our network and increasing the number of responders on the all trade platform.
In the third quarter, the average number of responses per all-to-all inquiry rose over 10% year-over-year. We also continue to increase our engagement and wallet share with ETF market makers with average daily volume up over 45% year-over-year. Finally, our session’s average daily volume grew over 45% year-over-year. Looking ahead, U.S. credit remains a key focus area and we like the way we are positioned across our three client channels. We believe we have a long runway for growth with ample opportunity to innovate alongside our clients. During the quarter, we enhanced our multi-client net spotting offering based on client feedback, expanded our PT offering to include auto send capabilities and continue to see growing adoption of our RFQ Edge offering.”
6. Seagate Technology Holdings plc (NASDAQ:STX)
Revenue Growth: 49.10%
Number of Hedge Fund Investors In Q3 2024: 46
Seagate Technology Holdings plc (NASDAQ:STX) is a computer hardware company that makes and sells hard disk drives, solid-state drives, and other associated products. Its end-products make it unsurprising that the shares are up by a lackluster 19% year-to-date. This is because while Seagate Technology Holdings plc (NASDAQ:STX) does cater to the AI data center demand with its products, its stature as a traditional IT supplier also exposes the firm to broader non-AI IT spending. Therefore, for the shares to thrive, IT spending simulated by low rates and a robust economy has to pick up. Seagate Technology Holdings plc (NASDAQ:STX)’s industry experience puts it at the forefront of developing new storage technologies to inject tailwinds into the stock. These days the firm is focusing on developing Heat-Assisted Magnetic-Recording drives, and if they clear industry standards, then it could see positive catalysts.
Seagate Technology Holdings plc (NASDAQ:STX)’s management commented on the new drives during the Q3 2024 earnings call. Here is what they said:
“We have expanded customer qualifications on our three plus terabyte per disc Mozaic HAMR based platform with a few customer quals already completed spanning the enterprise nearline, VIA and mass market segments. The qualification with our lead CSP customer is progressing well through what has been a very intensive and thorough testing process. The learnings that we have gained are already being leveraged into future customer qualifications and product generations. To that end, HAMR qualification drives are now in the hands of multiple global cloud and enterprise customers. Our expectation for shipment and revenue ramp timing across the broader customer base still points to mid-calendar 2025. Our confidence in HAMR technology remains strong and customer feedback has reinforced our value proposition that the Mozaic platform provides the foundational technologies required to satisfy high capacity storage requirements at the lowest total cost of ownership.”
5. Blackstone Inc. (NYSE:BX)
Revenue Growth: 54%
Number of Hedge Fund Investors In Q3 2024: 50
Blackstone Inc. (NYSE:BX) is a mega player in the global asset management market as is evidenced by its $43 billion in total assets as of the third quarter. The firm operates in the market through several products such as minority investments, buyouts, and debt. With interest rates starting to lower, deal activity could pick up and Blackstone Inc. (NYSE:BX) is already seeing some favorable tailwinds. By the Q3 of 2024 close, the firm’s assets under management grew by 10% to sit at a whopping $1.1 trillion. Additionally, it is busy making big moves in the data center market in the wake of the AI-driven boom. Blackstone Inc. (NYSE:BX) acquired Australian firm AirTrunk for $16 billion which makes it one of the biggest data center companies in the world. Looking ahead, further lowering of interest rates and added momentum in financial markets, particularly through deal activity can generate added tailwinds for Blackstone Inc. (NYSE:BX)’s shares which are 46% year-to-date.
Aristotle Partners mentioned Blackstone Inc. (NYSE:BX) in its Q3 2024 investor letter. Here is what the fund said:
“Blackstone Inc. (NYSE:BX), one of the world’s largest alternative asset managers, was a leading contributor for the period. Blackstone reported nearly $40 billion in inflows and deployed $34 billion during the quarter, its highest investment activity in two years. With over $180 billion in dry powder, the company possesses significant purchasing power to invest in attractive opportunities such as its recent $24 billion acquisition of data center platform AirTrunk, its largest investment in the Asia/Pacific region. Moreover, Blackstone continues to make progress in penetrating the retail and private wealth channels, as the company raised $7.5 billion overall during the quarter, with assets raised in perpetual vehicles over the first half of 2024 eclipsing full-year totals in 2023. BCRED (a private credit vehicle), BREIT (a private real estate vehicle) and the newly launched BXPE (a private equity vehicle) have all seen encouraging signs with new inflows. Despite BREIT’s challenges last year, all redemption requests since February have been fulfilled at 100%, and requests in June were down 85% from the peak of 2023. As the overall industry fundamentals improve, we believe Blackstone’s first-mover and distribution advantages in its retail initiatives and its overall reputation as a best-in-class operator will continue to create shareholder value.”
4. AppLovin Corporation (NASDAQ:APP)
Revenue Growth: 38.6%
Number of Hedge Fund Investors In Q3 2024: 51
AppLovin Corporation (NASDAQ:APP) is a software company that works with video game companies to enable them to run advertisements, analytics, and other associated operations. It is one of the best-performing stocks of 2024 as the shares are up an unbelievable 935% year-to-date. AppLovin Corporation (NASDAQ:APP) is also a diversified company as it owns and runs more than 200 video games in a market where the internet and digital entertainment mediums reign supreme. The firm benefited from a blowout third-quarter earnings report in November which sent its shares surging by a stunning 33% in aftermarket trading. AppLovin Corporation (NASDAQ:APP)’s $1.2 billion in revenue marked a 38.6% annual growth and beat analyst estimates of $1.12 billion. Its median guidance of $1.25 billion for fourth-quarter revenue also beat analyst estimates of $1.17 billion by a comfortable $800 million. Looking ahead, AppLovin Corporation (NASDAQ:APP) could benefit from expanding into tertiary markets such as connected televisions to add more juice to its stock.
SaltLight Capital mentioned AppLovin Corporation (NASDAQ:APP) in its Q3 2024 investor letter. Here is what the fund said:
“This quarter, our notable contributors included AppLovin Corporation (NASDAQ:APP). We start with the current state of the “hit” title-driven market. These dynamics are not new, so many studios have transitioned to free-to-play games (FTP). We then talk about AppLovin, which is at the nexus of making this traditional market successful.
AppLovin is one of these intermediaries strategically positioned in the middle of the Bucket 3 segment
AppLovin has been a standout performer in our fund this quarter. In our 4Q 2023 letter, we highlighted the business, noting how it has built an exceptionally profitable AI-driven business by solving the abovementioned challenges for the game sector.
Saturated Player Time Growth: It’s worth restating the problem: growth in total engagement time has plateaued. The industry’s fight now is to claim a share of that time. But, what if, within this fixed engagement time, there was a scenario where gamers were discovering more relevant games, and, as a result, they might spend more money per hour of engagement – the game studios could still prosper? An analogy would be a scenario in which every employee was matched to their perfect job. They would be more productive, and everyone would be wealthier….” (Click here to read the full text)
3. HEICO Corporation (NYSE:HEI)
Revenue Growth: 37.30%
Number of Hedge Fund Investors In Q3 2024: 57
HEICO Corporation (NYSE:HEI) is a large American industrial products firm that sells aircraft parts, electric systems, and other products that cater to civil aviation and defense industries. Its aircraft business makes it unsurprising that the firm’s shares are up 48% year-to-date given the turmoil that the sector has experienced in the aftermath of Boeing’s quality control fallout. The US aircraft manufacturing giant has slowed its aircraft deliveries which has grown the burden on existing aircraft fleets to meet the needs of a global travel industry still reeling from the impact of the coronavirus pandemic. Consequently, HEICO Corporation (NYSE:HEI)’s share price gain is fueled by the fact that the firm’s aftermarket replacement parts revenue grew by a whopping 79% during H1 2024 to touch $1.2 billion. The firm has also benefited from a $2 billion 2023 acquisition to expand its aftermarket portfolio, and the deal along with continued troubles in the aviation industry could lead to more tailwinds for the stock in the future.
Conestoga Capital Advisors mentioned HEICO Corporation (NYSE:HEI) in its Q3 2024 investor letter. Here is what the fund said:
“HEICO Corporation (NYSE:HEI): Commercial and military aircraft aftermarket parts company which designs, manufactures, repairs and distributes jet engine and aircraft component replacement parts. The company has benefitted from solid travel growth as well as healthy parts and maintenance spending due to the delayed retirement of older aircraft given production issues at Boeing (BA).”
2. Apollo Global Management, Inc. (NYSE:APO)
Revenue Growth: 285%
Number of Hedge Fund Investors In Q3 2024: 82
Apollo Global Management, Inc. (NYSE:APO) is one of the largest private equity firms in the world. The firm operates in its market through a variety of products such as buyouts, venture capital financing, and corporate restructuring. Apollo Global Management, Inc. (NYSE:APO)’s shares have been on a tear in 2024 as they are up by 94% year-to-date. Most of these gains have come after the November presidential election which has stoked investor hopes of fewer regulations for established financial sectors. Since the election, Apollo Global Management, Inc. (NYSE:APO)’s shares have gained 28%. As of H1 2024, 85% of the firm’s revenue came through its retirement services business. Out of this, 67% was through investment income. Within investment income, 60% of the revenue was through AFS securities which are a myriad of financial vehicles that Apollo Global Management, Inc. (NYSE:APO) has accumulated under its belt. Therefore, sharper financial market activity and lower interest rates that drive up the value of fixed-rate securities can prove to be catalysts for the stock.
Baron Funds mentioned Apollo Global Management, Inc. (NYSE:APO) in its Q2 2024 investor letter. Here is what the fund said:
“Strength in Tech-Enabled Financials was broad based, led by gains from alternative asset manager Apollo Global Management, Inc. (NYSE:APO) and specialty insurer Arch Capital Group Ltd. Apollo continues to benefit from disruptive trends in financial services, most notably the shift of retirement assets into higher-yielding private credit given the company’s dual role as an asset manager and an annuity provider.”
1. NVIDIA Corporation (NASDAQ:NVDA)
Revenue Growth: 122.4%
Number of Hedge Fund Investors In Q3 2024: 193
NVIDIA Corporation (NASDAQ:NVDA) is the world’s leading graphics processing unit (GPU) designer. The firm’s GPUs are dead center of the AI wave and have led to its shares gaining more than 700% since OpenAI publicly released ChatGPT. Consequently, NVIDIA Corporation (NASDAQ:NVDA)’s hypothesis is dependent on several facets of its GPU business. Firstly, the firm has to remain the market leader in performance to ensure that its products are not replaced by rivals like AMD or firms like Amazon designing custom chips. Secondly, not only does NVIDIA Corporation (NASDAQ:NVDA) have to ensure a robust supply chain for its products to avoid shortages, but it also has to ensure that production and development costs are sufficiently low to enable robust margins to eke out profits. Finally, the firm’s hypothesis is also dependent on the continued and growing demand for AI-enabled products and services in the business world.
Polen Capital mentioned NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter. Here is what the fund said:
“In a reversal from the past two quarters, NVIDIA Corporation (NASDAQ:NVDA) represented our top relative contributor this quarter, despite the modest underperformance, declining -1.7%. In many ways, NVIDIA was a microcosm of the broader market’s heightened volatility. Beneath the placid surface, the company experienced a 27% drawdown followed by a +31% rally, only to repeat the cycle with a -21% drawdown followed by a subsequent 20% rally to finish the quarter. In our view, the stock’s volatility goes beyond fundamental business drivers, but the company in turn benefitted from increasing capital spending budgets from cloud service providers and large enterprises for generative AI (“GenAI”) infrastructure spending. Simultaneously, the stock endured weakness related to the delayed next-generation Blackwell chip, and an earnings forecast that exceeded expectations, albeit not as much as some investors hoped. While we continue to believe NVIDIA is a highly advantaged business, with significant demand for their chips and servers ahead of the need for that hardware from real-world businesses, we are cautious about its growth sustainability since it lacks recurring revenue.”
NVDA is an aggressive growth stock that hedge funds are diving head first into. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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