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.
10) Amer Sports, Inc. (NYSE:AS)
Number of Hedge Fund Holders: 25
Amer Sports, Inc. (NYSE:AS) designs, manufactures, markets, distributes, and sells sports equipment, apparel, footwear, and accessories. The company’s stock began trading on the NYSE on 1st February 2024.
Amer Sports, Inc. (NYSE:AS)’s growth trajectory is being supported by a potentially strong Chinese market and optimism around its Arc’teryx and Salomon brands. TD Cowen analyst, John Kernan, believes that Amer Sports, Inc. (NYSE:AS)’s $938 million share offering should help it in debt reduction, which, together with lower tax rates and refinancing, can enhance valuation multiples over the long term.
The growth in Arc’teryx and Salomon brands, mainly via direct-to-consumer channels, has been driving significant margin expansion, which is expected to continue. As per the analyst, Amer Sports, Inc. (NYSE:AS)’s operations in China should contribute significantly to incremental sales, with a projected sales CAGR of 25% over 3 years. Amer Sports, Inc. (NYSE:AS)’s performance and premium positioning in outdoor categories and styles continue to gain traction in North America and China.
The overall outdoor apparel market in China continues to expand rapidly, with sales in the outdoor sports category soaring across various platforms. During the Double 11 shopping festival, sales increased by 70% year-over-year on platforms like Douyin, reflecting a strong consumer interest in outdoor gear. Therefore, Amer Sports, Inc. (NYSE:AS)’s focus on premium technical brands and direct-to-consumer strategies has placed it well to leverage China’s growing demand.
9) CAVA Group, Inc. (NYSE:CAVA)
Number of Hedge Fund Holders: 32
CAVA Group, Inc. (NYSE:CAVA), which made its public debut on NYSE on 15th June 2023, owns and operates a chain of restaurants under the CAVA brand in the US.
Wall Street analysts are optimistic about CAVA Group, Inc. (NYSE:CAVA)’s expansion strategy. Furthermore, analysts have pointed out potential catalysts for future growth including the continued expansion of the restaurant network, further menu innovations, enhancements to digital ordering experience, and potential international expansion opportunities. CAVA Group, Inc. (NYSE:CAVA)’s expansion strategy emphasizes increasing its geographic footprint and enhancing its existing store performance.
As per industry experts, CAVA Group, Inc. (NYSE:CAVA)’s plan to open new units across various markets offers a clear path for revenue growth. By carefully choosing new locations and optimizing its store format, CAVA Group, Inc. (NYSE:CAVA) can tap into underserved markets and capture a larger share of the fast-casual dining segment.
CAVA Group, Inc. (NYSE:CAVA)’s focus on digital ordering and delivery services also places it well to adapt to dynamic consumer preferences and expand customer base beyond traditional dine-in patrons. As CAVA Group, Inc. (NYSE:CAVA) scales, it can benefit from economies of scale in supply chain management and marketing efficiencies, potentially resulting in margin expansion and improved profitability.
Next Century Growth Investors, LLC sees a material upside to CAVA Group, Inc. (NYSE:CAVA)’s stock on the back of new store growth rate and same-store sales growth. Here’s what the firm said in its Q1 2024 investor letter:
“CAVA Group, Inc. (NYSE:CAVA) is a fast-casual restaurant chain serving authentic Mediterranean cuisine, featuring customizable bowls and pitas. CAVA currently owns and operates >300 stores, and the company targets a 15% plus new store growth rate. The intermediate goal is to have 1,000 stores by 2032 with plenty of opportunity to grow beyond that level. The company already delivers solid restaurant-level margins >20% and they believe 3-5% same-store sales growth is achievable over time. As the business matures, they should be able to leverage G&A expense which should lead to strong earnings growth over many years.”
8) Lineage, Inc. (NASDAQ:LINE)
Number of Hedge Fund Holders: 35
Lineage, Inc. (NASDAQ:LINE) is a global leader in temperature-controlled logistics, specializing in the storage and transportation of perishable goods. It began trading on 25th July 2024.
Lineage, Inc. (NASDAQ:LINE)’s growth is expected to be aided by significant investment in technology and automation. The technological advancements should drive substantial operational efficiencies and margin improvements. These improvements should stem from cost-saving measures in labor and power consumption and enhanced data analytics capabilities that optimize warehouse operations. Lineage, Inc. (NASDAQ:LINE)’s focus on automation and data-driven decision-making places it well to address industry challenges like labor shortages and energy costs.
Lineage, Inc. (NASDAQ:LINE)’s proprietary warehouse management system, LinOS, and customer-facing platform, Lineage Link, should enhance operational efficiency and improve customer experience. Technological advancements can also lead to higher warehouse utilization rates.
As Lineage, Inc. (NASDAQ:LINE) focuses on refining and expanding its technological capabilities, it can offer more value-added services to its customers, potentially increasing revenue per cubic foot of storage space. Also, the company’s data analytics capabilities can offer valuable insights to its customers, supporting them in optimizing supply chains and inventory management. This can further strengthen customer relationships and create additional revenue streams via consulting or data services.
7) Arm Holdings plc (NASDAQ:ARM)
Number of Hedge Fund Holders: 38
Arm Holdings plc (NASDAQ:ARM) is a British semiconductor and software design company. It was listed on NASDAQ on 14th September 2023.
Wall Street believes that Arm Holdings plc (NASDAQ:ARM)’s latest v9 chip architecture continues to gain traction. This transition is significant because v9-based chips command increased royalty rates, potentially doubling or even quadrupling the fees the company receives per chip.
The transition should act as a revenue driver as it affects Arm Holdings plc (NASDAQ:ARM)’s core mobile market, where it has a strong market position. As and when smartphone manufacturers upgrade their devices to incorporate v9-based processors, Arm Holdings plc (NASDAQ:ARM) will benefit from increased royalty rates on a massive installed base. Furthermore, the enhanced capabilities of v9 architecture, which includes improved AI performance and security features, can ramp up adoption in other markets like automotive and IoT, further driving royalty growth.
The compounding effect of increased royalty rates and expanding market applications should support topline and bottom-line growth. Arm Holdings plc (NASDAQ:ARM)’s energy-efficient chip designs are well-suited for an increased demand for on-device AI processing in smartphones, PCs, and other edge devices. The on-device AI market size was valued at US$17 billion in 2023 and should reach US$114.36 billion by 2031, as per Verified Market Research. Arm Holdings plc (NASDAQ:ARM) is well-positioned to capture a substantial portion of this expanding market.
6) Astera Labs, Inc. (NASDAQ:ALAB)
Number of Hedge Fund Holdings: 39
Astera Labs, Inc. (NASDAQ:ALAB), which began trading on March 20, 2024, designs, manufactures and sells semiconductor-based connectivity solutions for cloud and AI infrastructure. Its products address bottlenecks in modern computing architectures, enabling seamless communication between various components of high-performance computing systems.
Wall Street analysts are optimistic about Astera Labs, Inc. (NASDAQ:ALAB)’s strong pipeline of upcoming products which should propel growth. As per Morgan Stanley, the Scorpio PCIe Gen 6 Switch is expected to significantly boost content per GPU, which should help add hundreds of dollars per unit. This new product is incrementally positive to Morgan Stanley’s financial forecast and should be a meaningful driver of CY25 revenue and earnings. This will also be the first Gen 6 product available on the market. Notably, the previous generation was mainly dominated by Broadcom.
The Scorpio Smart Fabric Switch family expands Astera Labs, Inc. (NASDAQ:ALAB)’s mission of solving the increasingly complex connectivity challenges within AI infrastructure, both for scale-out and for scale-up networks.
Astera Labs, Inc. (NASDAQ:ALAB) expects that Scorpio will expand its total market opportunity for the four product families to over $12 billion by 2028. Over the coming quarters, the company plans to further expand its business opportunities for the Scorpio product family across PCIe Gen 5, PCIe Gen 6, and platform-specific customized connectivity platforms.
5) Veralto Corporation (NYSE:VLTO)
Number of Hedge Fund Holders: 43
Veralto Corporation (NYSE:VLTO) provides water analytics, water treatment, marking and coding, and packaging and color services. The company began trading as a publicly traded company on 2nd October 2023.
Jefferies believes in Veralto Corporation (NYSE:VLTO)’s long-term growth potential, which should stem from its focus on mission-critical applications, consistent pricing power, and a strong direct-to-customer distribution channel. With the company’s recurring sales accounting for ~61% of total sales during the nine-month period that ended September 27, 2024, Wall Street believes that this provides some sort of stability of revenues.
As per Jefferies, an acceleration in growth is expected in 2025, fueled by a recovery in consumer-packaged goods (CPG) and industrial markets. With industries seeking to reduce their water footprint and operating costs, there seems to be growing interest in closed-loop water systems and process water recycling. Therefore, Veralto Corporation (NYSE:VLTO)’s capabilities in these areas should drive significant growth.
As consumer demand stabilizes and increases, Veralto Corporation (NYSE:VLTO) will witness improved volumes in its Materials & Chemicals (M&C) and Products & Consumables (P&C) subsegments.
Jefferies believes that Veralto Corporation (NYSE:VLTO)’s combination of mid-single-digit (MSD) organic growth and healthy potential for strategic capital deployment places it well to compound its earnings at a double-digit rate.
While Jefferies is bullish on Veralto Corporation (NYSE:VLTO), Aristotle Capital Management, LLC recently sold its position because the firm believes that its other holdings within the water value chain are more optimal investments. Here is what the fund said:
“In the fourth quarter of 2023, we received shares of the water and product quality company Veralto Corporation (NYSE:VLTO) when Danaher, a current Value Equity holding, spun off the business. After further assessing the now independently operated Veralto, we decided to exit our position. We believe our other holdings within the water value chain, including Xylem, American Water Works (our most recent purchase) and to some extent Ecolab, are more optimal investments.”
4) Kenvue Inc. (NYSE:KVUE)
Number of Hedge Fund Holders: 46
Kenvue Inc. (NYSE:KVUE) operates as a consumer health company worldwide. It was listed on NYSE on 4th May 2023.
Kenvue Inc. (NYSE:KVUE) was the result of spun-off from Johnson & Johnson in 2023. Wall Street analysts remain optimistic about the company’s Essential Health and Self Care segments. This is because it has been investing more in marketing and innovation, particularly for critical mega brands such as Tylenol and Zyrtec. This strategic focus on brand building should support Kenvue Inc. (NYSE:KVUE)’s near-term growth prospects.
Jefferies remains optimistic about Kenvue Inc. (NYSE:KVUE) due to growth potential and market share improvement. These factors are expected to be aided by the promising trend in Listerine’s performance. Jefferies highlighted that Listerine continues to attract a younger demographic, including Gen Z and Millennials. This shift remains important as it aligns Listerine with high-growth competitors and broadens its customer base. Some of the recent strategic moves should drive near-term growth for Kenvue Inc. (NYSE:KVUE).
These moves include higher online sales penetration, hinting at the successful enhancement of the company’s e-commerce capabilities. Also, Jefferies believes that there is strong potential in expanding Listerine’s non-alcoholic product line, which is popular among consumers looking for less abrasive options. Furthermore, optimization of product SKUs should result in better efficiency and shelf space utilization.
3) Viking Holdings Ltd (NYSE:VIK)
Number of Hedge Fund Holders: 49
Viking Holdings Ltd (NYSE:VIK), which started trading on the NYSE on 1st May 2024, is engaged in passenger shipping and other forms of passenger transport in North America, the United Kingdom, and internationally.
One of the significant factors supporting Viking Holdings Ltd (NYSE:VIK)’s growth trajectory is its direct marketing strategy. The company’s ability to source its passengers via direct channels reduces customer acquisition costs and also allows it to have better control over the customer experience and brand messaging. Viking Holdings Ltd (NYSE:VIK)’s fleet is the youngest among publicly traded cruise lines, resulting in consistent yields and a longer FCF profile. This modern fleet remains a critical factor in attracting and retaining customers in the luxury segment, in which expectations for quality and amenities are high.
Viking Holdings Ltd (NYSE:VIK) can maintain a closer relationship with its customers, leading to higher brand loyalty and repeat bookings, courtesy of its direct marketing strategy. This direct connection results in more personalized marketing efforts and a clearer understanding of customer preferences.
Because of lower customer acquisition costs, Viking Holdings Ltd (NYSE:VIK) experiences higher profit margins. This allows the company to reinvest in product quality and customer experience. Furthermore, the direct approach provides the company with valuable first-party data, allowing more effective targeting and product development.
2) Reddit, Inc. (NYSE:RDDT)
Number of Hedge Fund Holders: 52
Reddit, Inc. (NYSE:RDDT), which went public on March 21, 2024, operates a website that organizes digital communities.
Industry experts are quite optimistic about Reddit, Inc. (NYSE:RDDT)’s monetization strategies. Despite being in the early stages, these efforts demonstrate strong room for Average Revenue Per User (ARPU) gains and sustained revenue growth. The introduction of new ad products like Search, Video, and Dynamic Product Ads continues to attract higher advertiser interest. These innovations should fuel incremental ad spend and improve overall monetization.
Reddit, Inc. (NYSE:RDDT)’s focus on developing advanced advertising tools, such as Reddit Pro and shopping features, should attract a broader range of advertisers. These tools are expected to increase the platform’s competitiveness in the digital advertising market. As and when these new ad products mature and gain traction, they might fuel substantial improvements in advertising ARPU and overall revenue.
Another promising development in Reddit, Inc. (NYSE:RDDT)’s monetization strategy is its data licensing business. It has secured deals with major tech firms such as Google and OpenAI, using its vast archive of contextual content for AI training purposes. Experts believe that Reddit, Inc. (NYSE:RDDT)’s vast repository of user-generated content and discussions should be valuable for training large language models and AI systems.
1) SharkNinja, Inc. (NYSE:SN)
Number of Hedge Fund Holders: 56
SharkNinja, Inc. (NYSE:SN), which became a publicly traded company on 31st July 2023, is a leading global consumer goods company specializing in innovative household products.
SharkNinja, Inc. (NYSE:SN) has been strategically leveraging new category entries and international expansion to fuel its growth. In 2024, the company introduced 25 innovative products, venturing into new market segments like skincare with the Shark CryoGlow facemask in the UK and Mexico, and rolling out products such as Ninja Slushi Professional Frozen Drink Maker and the Ninja Luxe Cafe at-home espresso and coffee maker. These expansions should continue to contribute to significant financial growth.
Let’s talk about international expansion now. SharkNinja, Inc. (NYSE:SN) expanded into the Middle East, Mexico, and Brazil. This international growth is aided by strong relationships with key retailers and local expertise, allowing the company to effectively penetrate new markets and cater to regional consumer preferences.
Therefore, by continuously innovating and expanding its product portfolio, alongside strategic international market entries, SharkNinja, Inc. (NYSE:SN) is well-positioned to sustain its growth trajectory.
Artisan Partners sees material upside to SharkNinja, Inc. (NYSE:SN)’s stock on the back of new category entries and international expansion. Here’s what the firm said in its Q3 2024 investor letter:
“Among our top Q3 contributors were Guidewire, Veracyte and SharkNinja, Inc. (NYSE:SN). SharkNinja is a leading household consumer products company. Its Shark brand focuses on the cleaning category (vacuums, mops, carpet cleaners, etc.) and, more recently, beauty (hair dryers, hair stylers, etc.). Its Ninja brand focuses on food preparation (blenders, food processors, ice cream makers, juicers, etc.) and cooking (indoor grills, ovens, toasters, cookers, air fryers, etc.). We believe a healthy combination of market share gains within existing categories, new category entries and international expansion will drive growth. Shares rallied after reporting strong earnings results, including 31% revenue growth and 600bps of gross margin expansion.”
While we acknowledge the potential of SN 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 SN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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