Despite the concerns surrounding the market over the last few years, the broader market has performed exceptionally well as the S&P 500 reached new record highs crossing 5,300 points by mid-May. While the broader market has been surrounded by bearish sentiment since 2022 and even after its tremendous performance in 2023, many analysts have retracted their statements and are now expecting a positive future. For the year-end 2024, UBS and BMO expect the index to reach 5,600, Wells Fargo predicts that it will close out the year at 5,535 and even one of the most bearish analysts, Morgan Stanley’s Mike Wilson, raised the target to 5,400 from the prior 4,500.
Interest Rate Predictions
Interest rate hikes and cuts have been a major part of discussion in the markets for the last couple of years. In 2023, many analysts predicted up to six cuts in 2024 but the predictions faded over time with hotter-than-expected inflation data. At the Federal Reserve’s May 1 meeting, Chairman Jerome Powell showed hesitation in providing a specific time for any decision on rate cuts and said that the Fed needs more data before taking any step. However, the chairman did hint that the chances of hikes are highly unlikely. Some experts also believe that there may not be a rate cut this year as discussed in our previous article about best soaps and cleaning materials stocks.
According to CME’s FedWatch tool, 98.9% of the market is expecting interest rates to remain the same at the Fed’s June meeting while 1.1% believe that the Fed may raise the rates by 25 basis points (bps). Morgan Stanley predicts rate cuts to start in September at 25 basis points as they expect that inflation will begin to decline which could give the Fed enough confidence to start cutting rates. The FedWatch tool reveals that in September, 51.6% of the market isn’t expecting any rate cuts, 42.8% expects a 25 bps reduction, 5% expect rates to be cut by 50 bps and 0.6% believe that the rates will be 25 bps higher than the current levels of 5.25% to 5.5%.
Market Upside Potential Amidst Tightening Policies
Recently, we have seen another pullback in the market as the broader market has contracted by 1.5% between May 27 to 30. However, some experts still expect an upside and believe that the market is in healthy condition.
On May 29, former chief investment strategist for The Leuthold Group and Wells Capital Management, Jim Paulsen told CNBC that he is optimistic about the economy and highlighted its resilience despite previous recession predictions and challenges like inverted yield curves. He noted the strength of corporate balance sheets, overall economic health, liquidity, and positive recent earnings reports. He also acknowledged that tightening policies such as higher yields, a stronger dollar, a lower fiscal deficit to GDP ratio, modest monetary growth, and balance sheet contraction will eventually slow the economy and reduce inflation. Paulsen predicts that inflation will fall below 3%, creating favorable conditions for the market and suggesting potential for further upside. Moreover, Paulsen noted that the inflation has indeed come down if we compare it to 2022’s 9% and added that he does not think that the Fed target of 2% inflation is needed for “things to be good.”
12 Best Up and Coming Stocks To Buy According to Hedge Funds
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify over 400 stocks that have experienced revenue growth of at least 40% year-over-year and have a market cap of above $300 million. We then narrowed down our list to 12 stocks that have seen growth in hedge fund sentiment between the fourth quarter of 2023 and the first quarter of 2024, have positive analyst sentiment, and have consistent revenue growth. We listed the best up and coming stocks in ascending order of their hedge fund sentiment.
The hedge fund data was taken from Insider Monkey’s database of 919 elite hedge funds as of the first quarter of 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 best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Best Up and Coming Stocks To Buy According to Hedge Funds
12. Codere Online Luxembourg, S.A. (NASDAQ:CDRO)
Year-over-Year Revenue Growth in FQ3 2023: 42.2%
Year-over-Year Revenue Growth in FQ4 2023: 31.74%
Year-over-Year Revenue Growth in FQ1 2024: 34%
Number of Hedge Fund Holders: 3
Codere Online Luxembourg, S.A. (NASDAQ:CDRO) is an online casino gaming and sports betting company that provides wagering products and services, online gambling, and more. The company is among our best up and coming stocks to buy according to hedge funds. In Q1, 3 hedge funds had investments in Codere Online Luxembourg, S.A. (NASDAQ:CDRO), with positions worth $1.034 million. Citadel Investment Group is the biggest shareholder in the company as of the first quarter and has a position worth $73,400.
On May 15, Codere Online Luxembourg, S.A. (NASDAQ:CDRO) announced first-quarter earnings for 2024. The company’s revenue for the quarter was €50.4 million and net gaming revenue was €53 million, witnessing a growth of 34% when compared to Q1 of 2023. The company reported a net income of €3.4 million, compared to a net loss of €1.3 million in the first quarter of 2023.
Analysts expect Codere Online Luxembourg, S.A. (NASDAQ:CDRO) to report an EPS of $0.15 in 2024 and $0.37 in 2025. The company benefits from an omnichannel presence as it leverages the physical retail footprint of its parent company, Codere Group. Moreover, the company has a strong market position and is a well-recognized brand in its core markets of Spain and Latin America. Its first-mover advantage and strong brand position it well to capitalize on its growth.
11. GigaCloud Technology Inc. (NASDAQ:GCT)
Year-over-Year Revenue Growth in FQ3 2023: 39.2%
Year-over-Year Revenue Growth in FQ4 2023: 94.8%
Year-over-Year Revenue Growth in FQ1 2024: 96.5%
Number of Hedge Fund Holders: 13
GigaCloud Technology Inc. (NASDAQ:GCT), previously known as Oriental Standard Human Resources Holdings Limited, is a California-based company that offers end-to-end B2B e-commerce solutions for large parcel merchandise.
On May 22, Maxim initiated coverage of GigaCloud Technology Inc. (NASDAQ:GCT) with a buy rating and a $69 price target. GigaCloud Technology Inc. (NASDAQ:GCT) is trading at a trailing twelve-month price-to-earnings multiple of 11.8x, significantly below the technology sector’s average PE ratio of 41.57.
Despite a nearly 8% year-over-year decline in retail furniture sales in Q1 of 2024, GigaCloud Technology Inc. (NASDAQ:GCT) achieved its strongest first-quarter results ever, marking the fifth consecutive quarter of revenue growth. This performance underscores the company’s ability to drive sustainable and profitable growth even when consumer spending is softening. Moreover, the company’s total revenues nearly doubled to $251 million in Q1 of 2024, with a sequential increase of 2.4% over Q4 of 2023, which is typically the strongest period due to seasonal trends and highlights a solid growth trajectory. Service revenues from GigaCloud Technology Inc.’s (NASDAQ:GCT) 3P operations grew by 92%, and product revenues from off-platform e-commerce surged by almost 200% year-over-year. Such impressive financial performance reflects the company’s successful operational strategies and market positioning.
GigaCloud Technology Inc.’s (NASDAQ:GCT) marketplace gross merchandise value increased by 64% year-over-year, reaching $908 million for the trailing 12 months, as of March 31. The number of active 3P sellers grew by 44%, while the number of active buyers increased by 29%. These metrics indicate a healthy and expanding marketplace, driven by a growing supplier base and a diverse product portfolio.
According to our database, in the first quarter 13 hedge funds had stakes in GigaCloud Technology Inc. (NASDAQ:GCT), with total positions worth $33.391 million.
10. XPeng Inc. (NYSE:XPEV)
Year-over-Year Revenue Growth in FQ3 2023: 25%
Year-over-Year Revenue Growth in FQ4 2023: 154%
Year-over-Year Revenue Growth in FQ1 2024: 62.3%
Number of Hedge Fund Holders: 16
XPeng Inc. (NYSE:XPEV) is a Chinese company engaged in designing, developing, manufacturing, and marketing smart electric vehicles. 16 hedge funds held stakes in XPeng Inc. (NYSE:XPEV) in the first quarter, with positions worth $194.903 million. Of those, Millennium Management was the top shareholder of the company. The firm increased its stake in the company by 578% to 10.7 million shares worth $82.178 million in the first quarter.
On May 21, XPeng Inc. (NYSE:XPEV) reported Q1 earnings. The non-GAAP EPADS topped the estimates by $0.03 at -$0.21. The revenue beat the estimates by $60.08 million at $910 million and grew by 62.3% year-over-year. XPeng Inc. (NYSE:XPEV) also provided Q2 2024 outlook in which it projects substantial delivery and revenue growth and expects delivery volumes of 29,000 to 32,000 units and total revenue ranging from RMB 7.5 billion to RMB 8.3 billion (RMB 1 = US$0.14 as of May 30). This optimistic outlook reflects the company’s confidence in achieving significant breakthroughs in sales volume, margins, and cash flow, driven by their ongoing strategic and organizational transformations.
With RMB 41.4 billion in cash as of the end of Q1 2024, XPeng Inc. (NYSE:XPEV) has a strong financial foundation. This liquidity allows the company to invest in strategic initiatives, ensuring long-term growth and stability. The company plans to invest in advanced driver-assistance systems (ADAS) and smart EV platforms to ensure it stays ahead in its respective market. Moreover, the company aims to expand its international footprint significantly by expanding overseas sales networks to over 20 countries, with strategic partnerships in Western Europe, Southeast Asia, the Middle East, and Australia.
9. Viasat, Inc. (NASDAQ:VSAT)
Year-over-Year Revenue Growth in FQ2 2024: 61.1%
Year-over-Year Revenue Growth in FQ3 2024: 58.2%
Year-over-Year Revenue Growth in FQ4 2024: 72.6%
Number of Hedge Fund Holders: 21
Viasat, Inc. (NASDAQ:VSAT) is a California-based company that offers broadband and communications products and services. The stock’s average price target of $31.04 represents an upside of 88.12% from current levels .
Viasat, Inc. (NASDAQ:VSAT) is one of the best up and coming stocks as its long history of technology and business model innovation, combined with its strategic merger with Inmarsat, which was completed on May 30, 2023, positions it as a leader in the satellite communications industry. The company’s focus on the development of multi-orbit services, enhancement of satellite capabilities, and integration of hybrid networks will keep it ahead of competitors and drive long-term growth. Additionally, Viasat, Inc. (NASDAQ:VSAT) is on track to achieve positive free cash flow by the end of Q1 FY2026. The company has made significant strides to better its mobility business, expand coverage, improve service agreements, and foster partnerships. These efforts are expected to drive profitable growth and ensure sustainable cash flow generation.
Investor sentiment was positive toward Viasat, Inc. (NASDAQ:VSAT) in Q1 as the stock was part of 21 hedge funds’ portfolios, compared to 15 hedge funds in the third quarter of 2023. FPR Partners is the top investor in the company and has a position worth $31.18 million as of the first quarter.
Cove Street Capital stated the following regarding Viasat, Inc. (NASDAQ:VSAT) in its first quarter 2024 investor letter:
“Regarding Viasat, Inc. (NASDAQ:VSAT), we do not have much to say here other than up quarter/down quarter performance prevails as the company awaits the launch of its next satellite of capacity. The company continues to be an outstandingly cheap stock with multiple catalysts.”
8. Joint Stock Company Kaspi.kz (NASDAQ:KSPI)
Year-over-Year Revenue Growth in FY 2023: 51%
Year-over-Year Revenue Growth in FQ1 2024: 40%
Number of Hedge Fund Holders: 36
Joint Stock Company Kaspi.kz (NASDAQ:KSPI), along with its subsidiaries, offers comprehensive payments, marketplace, and fintech solutions for both consumers and merchants in Kazakhstan. The company runs a “super app” that combines payments, marketplace, and fintech services. The consumer app features e-commerce, grocery delivery, travel bookings, bill payments, QR code payments, and various government services. Joint Stock Company Kaspi.kz (NASDAQ:KSPI) launched its IPO on January 29, 2024. In the first quarter of its IPO, 26 out of 919 hedge funds tracked by Insider Monkey added the stock to their portfolio. Additionally, the company’s stock has gained over 35% year-to-date, as of May 30.
Joint Stock Company Kaspi.kz (NASDAQ:KSPI) has recently shown strong revenue and earnings growth, while its shares trade at a low valuation at a price-to-earnings ratio of nearly 12x, as of May 30. The company’s focus on value-added services has paid off, which contributes significantly to the marketplace’s growth. Services like classifieds, e-grocery, and tours have seen impressive uptake, with e-grocery growing by 125% year-over-year and tours generating a substantial 7% of Kaspi Travel’s gross merchandise value (GMV). The company performed well among all three of its platforms, which include payments, marketplace, and fintech. The payments platform’s total payment volume (TPV) grew by 35%, accompanied by a 25% increase in revenue and net income. Marketplace Gross Merchandise Value (GMV) surged by 62%, driving revenue growth of 108% year-over-year, with promising net income growth of 36%. Fintech also saw solid growth, with TPV up 48% and revenue up 26%, despite a slight 3% dip in net income, cushioned by high-quality volumes and reduced interest rates.
According to analysts polled by WSJ, 7 Wall Street analysts maintain a buy rating on Joint Stock Company Kaspi.kz (NASDAQ:KSPI) with an average price target of nearly $141.5, showing a 13.2% upside from current levels on May 30. On May 7, New Street Research initiated coverage of the company with a buy rating and a $175 price target. The firm noted the company’s dominant position in the payments sector and said that it’s currently experiencing rapid growth driven by triple-digit sales on the top local e-commerce platform, as reported by The Fly.
7. SentinelOne, Inc. (NYSE:S)
Year-over-Year Revenue Growth in FQ3 2024: 42.4%
Year-over-Year Revenue Growth in FQ4 2024: 38.2%
Year-over-Year Revenue Growth in FQ1 2025: 39.7%
Number of Hedge Fund Holders: 36
SentinelOne, Inc. (NYSE:S) is a cybersecurity provider and its offerings include its Singularity Platform, endpoint protection, attack surface management, and more. SentinelOne, Inc. (NYSE:S) was held by 36 hedge funds in the first quarter and the stakes amounted to $627.690 million. Of those, Eminence Capital was the top shareholder of the company and held a position worth $128.603 million.
On May 30, SentinelOne, Inc. (NYSE:S) announced its first-quarter earnings. The company beat EPS estimates by $0.05 and its revenue of $186.36 million grew by 39.7% year-over-year and topped the estimates by $5.3 million. The company also achieved a gross margin increase to a record high of 79%, which showcases sustained and significant margin improvements over consecutive quarters. According to the company management, SentinelOne, Inc. (NYSE:S) is expanding its market presence, with notable growth in its customer base. The number of customers with more than $100,000 in annual recurring revenue (ARR) grew by 30% year-over-year, and those with over $1 million in ARR reached a new company record. The company’s platform adoption and success with larger enterprises are driving double-digit increases in ARR per customer.
Baron Discovery Fund stated the following regarding SentinelOne, Inc. (NYSE:S) in its fourth quarter 2023 investor letter:
“SentinelOne, Inc. (NYSE:S) is a cybersecurity software company that specializes in endpoint protection, cloud security, and security data analytics. Shares rose on outstanding quarterly financial results and strong guidance. SentinelOne is one of the fastest growing public cybersecurity companies, with revenue expected to grow more than 46% this fiscal year. Growth has been driven by a combination of: 1) market share capture from legacy endpoint vendors that struggle to compete against SentinelOne’s AI-enabled platform; 2) an ongoing shift of Information Technology (IT) infrastructure to the cloud driving demand for cloud application protection (growing triple digits); and 3) cybersecurity vendor consolidation favoring end-to-end platforms with comprehensive security portfolios over single-point solutions. The company is also leveraging its single data store and AI capabilities to cross-sell more products into its existing customer base and increase average sale prices. Between larger deal sizes and improving operating efficiencies, we believe the company can continue to expand margins at a significant rate and begin generating positive free cash flow in the next fiscal year.”
6. New Oriental Education & Technology Group Inc. (NYSE:EDU)
Year-over-Year Revenue Growth in FQ1 2024: 47.7%
Year-over-Year Revenue Growth in FQ2 2024: 36.3%
Year-over-Year Revenue Growth in FQ3 2024: 60%
Number of Hedge Fund Holders: 42
New Oriental Education & Technology Group Inc. (NYSE:EDU) is a China-based company that offers private educational services through its New Oriental brand.
On May 25, New Oriental Education & Technology Group Inc. (NYSE:EDU) announced that it received authorization to repurchase shares in the form of ADSs and/or common shares worth nearly $153.7 million through May 31, 2025, as part of an extension to its previously announced share repurchase program. New Oriental Education & Technology Group Inc. (NYSE:EDU) is also positioned for sustained growth with strategic plans for capacity expansion and investment in new business lines as it plans to increase the capacity of its learning centers by 30% in fiscal year 2024. For FQ4 2024, the company expects total net revenue in the range of $1.1 billion to $1.127 billion, representing a 28%-31% increase year-over-year. Analysts expect the company to post an EPS of $2.61 in 2024 and further grow it to $3.77 in 2025, from 2023 levels.
In the first quarter of 2024, 42 hedge funds had stakes in New Oriental Education & Technology Group Inc. (NYSE:EDU) worth $1.5 billion. This is compared to 39 funds with positions worth $1.38 billion in the previous quarter. Alkeon Capital Management is the most dominant shareholder in the company, as of March 31. In the quarter, the firm increased its stake by 51% to 1.79 million shares worth $155.4 million. It is one of the best up-and-coming stocks to buy according to hedge funds.
5. Duolingo, Inc. (NASDAQ:DUOL)
Year-over-Year Revenue Growth in FQ3 2023: 45%
Year-over-Year Revenue Growth in FQ4 2023: 45.4%
Year-over-Year Revenue Growth in FQ1 2024: 43.2%
Number of Hedge Fund Holders: 43
Duolingo, Inc. (NASDAQ:DUOL) is a mobile learning platform that offers language courses through its app. With a stake value of $1.84 billion, 43 hedge funds held long positions in Duolingo, Inc. (NASDAQ:DUOL) at the close of the first quarter of 2024. Durable Capital Partners is the most prominent shareholder in the company and has a position worth $684.93 million.
Duolingo, Inc. (NASDAQ:DUOL) is one of the best up and coming stocks as it has consistently managed to increase its revenue over the last few quarters. The company’s ability to continuously upgrade its product based on user data drives higher engagement and conversion rates, which is highlighted by a 54% growth in daily active users (DAUs) in the first quarter of 2024, compared to the previous year. Moreover, analysts see further upside to the stock. The stock’s average price target of $255.33 represents a 31.36% upside from current levels, as of May 30.
ClearBridge Investments stated the following regarding Duolingo, Inc. (NASDAQ:DUOL) in its first quarter 2024 investor letter:
“Encouragingly, we are seeing underlying improvements from companies we do own in the portfolio, with several being recent portfolio additions or subjects of repositioning work executed in 2023.
The first quarter represented another period of fruitful new idea generation with nine new investments. Consistent with historical practice, these initial investments represent modest position sizes that we intend to build over time.
Duolingo, Inc. (NASDAQ:DUOL), in the consumer discretionary sector, is a category leader in online language learning. With a freemium digital education model offering 40+ languages, Duolingo’s application has exhibited rapid growth in users and conversion to paid subscribers. The company has opportunity to expand its English-learning focus as well as broaden into new categories like math and music. Duolingo offers a long history of product innovation, marketing efficiency and attractive profitability/unit economics.”
