In this article, we will discuss the 12 Best New Stocks to Buy According to Hedge Funds.
US public markets continue to brace themselves for a 2025 resurgence, which should be led by interest rate cuts, pent-up investor demand, and a growing backlog of IPO expectations. As per PwC, there are over 700 unicorns in the private market as a result of the subdued IPO activity over the previous 3 years.
Many IPO candidates, which also include some unicorns, have utilized this time to improve and strengthen their finances and transition to sustainable growth models. Apart from this, pressure continues to mount on private equity fund managers to return capital after an elongated exit dry spell, reported PwC.
IPO Market Analysis – A Quick Recap
As per PwC, the traditional IPO market saw its gradual comeback in 2024, with proceeds garnered ~50% higher than in 2023 and ~4x the amount raised in 2022. The IPO activity was broad-based, with strong participation from sectors such as technology, life sciences, consumer markets, and financial services. Stock prices of this year’s traditional IPOs appreciated ~29%, surpassing the S&P 500 index’s return of ~27% on a YTD basis (ended 26th December 2024). This highlights the strength, investor interest, and traction in new offerings.
PwC went on to add that IPO activity saw a strong increase in 2024, with 61 traditional IPOs garnering more than $26.4 billion YTD, which was in line with the combined total number of IPOs in 2022 and 2023, which witnessed 28 and 35 IPOs, respectively. Despite this improvement, IPO activity remained short of early anticipations and historical levels of activity. This is because several IPO candidates decided to stay on the sidelines as they waited for a clearer economic picture after the U.S. presidential elections.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What Lies Ahead?
The continued rate cuts and a stable policy environment should boost investor confidence, which can help create more favorable market conditions. PwC gave a 60% probability of a “soft landing” scenario and a 20% probability of an optimistic “no landing.” Notably, both of these scenarios offer a supportive environment for IPOs.
As per Lynn Martin, president of the NYSE, 2025 year will be an active one for the IPOs. Also, Reuters highlighted that reduced interest rates and inflation slowdown should act as catalysts for new listings. Furthermore, the expected easing of regulations under the new Administration paints a positive picture of the deal activity in capital markets. Bloomberg reported that, as per Goldman Sachs, the number of IPOs in the tech sector is expected to more than double next year.
With this in mind, let us now have a look at the 12 Best New Stocks to Buy According to Hedge Funds.
Stocks
Our Methodology
To list the 12 Best New Stocks to Buy According to Hedge Funds, we used a screener to shortlist the companies that went public in the past 2 years. Next, we narrowed the list to the ones having high hedge fund positioning. Finally, the stocks were ranked in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with 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 Best New Stocks to Buy According to Hedge Funds
12) Rubrik, Inc. (NYSE:RBRK)
Number of Hedge Fund Holders: 23
Rubrik, Inc. (NYSE:RBRK), which went public on 25th April 2024, provides data security solutions to individuals and businesses.
Wall Street believes that Rubrik, Inc. (NYSE:RBRK) is well-positioned to continue to take share from legacy data backup providers. With companies shifting their focus from mere prevention to holistic cyber resilience strategies, Rubrik, Inc. (NYSE:RBRK)’s integrated platform provides a compelling solution. The company can leverage its healthy reputation and innovative products to tap a larger share of the growing cyber resilience market.
With continuous enhancements in security capabilities, the company can drive adoption and expand its customer base. Unlike legacy vendors, Rubrik, Inc. (NYSE:RBRK)’s architecture primarily focuses on recovery over prevention, leveraging air-gapped systems that tend to isolate threats and minimize downtime, payroll disruptions, and legal costs during breaches. The company’s innovative approach and partnerships with cybersecurity giants such as Mandiant, CrowdStrike, and Zscaler further strengthened its reputation.
Rubrik, Inc. (NYSE:RBRK)’s platform is designed for the cloud era, providing seamless integration with public and private cloud environments. This flexibility enables organizations to manage and protect data throughout diverse infrastructures, a capability that legacy backup solutions often lack.
ClearBridge Investments sees a material upside to Rubrik, Inc. (NYSE:RBRK)’s stock on the back of its cloud-based offerings and its plans to take share from legacy data backup providers. Here’s what the firm said in its Q2 2024 investor letter:
“The IPO and capital markets have begun to rebound, albeit slowly, providing new investment opportunities and idea generation. In fact, this quarter saw our first IPO participation since the capital markets fervor of 2021 with data security provider Rubrik, Inc. (NYSE:RBRK). Rubrik, meanwhile, is a next-generation data storage, backup and recovery provider showing strong, double-digit subscription revenue growth. We believe its cloud-based offerings have resonated with its Fortune 500 customer base, positioning it well to continue to take share from legacy data backup providers. The introduction of new AI data security products could offer an additional revenue source to Rubrik’s business.”
11) Klaviyo, Inc. (NYSE:KVYO)
Number of Hedge Fund Holders: 24
Klaviyo, Inc. (NYSE:KVYO), which began trading on the NYSE on 20th September 2023, is a technology company providing a software-as-a-service platform.
Industry experts believe that Klaviyo, Inc. (NYSE:KVYO)’s focus on product innovation and expansion should drive the next leg of growth. The company introduced new language offerings and expanded its SMS reach. Such enhancements focus on broadening Klaviyo, Inc. (NYSE:KVYO)’s appeal in international markets and strengthening its position in the SMS marketing segment.
Next, Klaviyo, Inc. (NYSE:KVYO)’s focus on international expansion provides a significant growth opportunity. By venturing into new markets, it can tap into previously untapped customer bases and diversify revenue streams. Furthermore, the company’s recent introduction of new language offerings places it well for international growth. By addressing local preferences and needs, Klaviyo, Inc. (NYSE:KVYO) can increase its appeal to businesses in different regions, which should accelerate adoption rates in new markets.
Also, international expansion should lead to new partnerships and collaborations, further enhancing Klaviyo, Inc. (NYSE:KVYO)’s product offerings and market reach. Such relationships are expected to provide valuable insights into local market dynamics and help the company tailor its solutions to meet specific regional requirements.
Analysts at Loop Capital lifted their target price on the shares of Klaviyo, Inc. (NYSE:KVYO) from $45.00 to $60.00, giving a “Buy” rating on 23rd December 2024.