12 Best Up and Coming Stocks To Buy According to Hedge Funds

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.”

4. Trip.com Group Limited (NASDAQ:TCOM)

Year-over-Year Revenue Growth in FQ3 2023: 95.2%

Year-over-Year Revenue Growth in FQ4 2023: 99%

Year-over-Year Revenue Growth in FQ1 2024: 29%

Number of Hedge Fund Holders: 49

Trip.com Group Limited (NASDAQ:TCOM) is a travel service provider and offers various travel-related services, including accommodation reservation, transportation ticketing, packaged tours and in-destination, corporate travel management, and more. It offers its services through different brands, namely Ctrip, Qunar, Trip.com, and Skyscanner. It is among the best up-and-coming stocks to buy according to hedge funds.

On May 21, Trip.com Group Limited (NASDAQ:TCOM) reported first-quarter earnings. The non-GAAP EPADS beat the estimates by $0.26 at $0.83. The company’s revenue surged 23.1% year-over-year to $1.6 billion. The company’s domestic hotel and air ticket bookings grew by 20% to 30% year-over-year. According to its management, the inbound travel to China has seen a notable resurgence, with a staggering 400% increase in bookings year-over-year. This growth is supported by China’s proactive visa-free policies for citizens of multiple countries, including prominent European nations. Initiatives like free city tours for layover travelers at Shanghai Pudong International Airport demonstrate Trip.com Group Limited’s (NASDAQ:TCOM) commitment to make the inbound travel experience better and unlock new avenues for revenue growth.

While Trip.com Group Limited (NASDAQ:TCOM) is trading at a slightly higher multiple at 22.6x compared to the S&P 500’s 21x, the company’s earnings per share are expected to increase substantially in 2024. Analysts polled by Yahoo Finance expect the company’s EPS to grow by 13.5% in 2024 and 28.5% in 2025, compared to 2023 levels.

In Q1, hedge funds were bullish on Trip.com Group Limited (NASDAQ:TCOM) as hedge funds with investments in the stock were 49 in the quarter, with positions worth $1.354 million. This is compared to 40 funds with positions worth $1.136 billion in the preceding quarter. Kontiki Capital is the largest shareholder in the company, as of March 31, with a position worth $198.55 million.

3. Nu Holdings Ltd. (NYSE:NU)

Year-over-Year Revenue Growth in FQ3 2023: 61.5%

Year-over-Year Revenue Growth in FQ4 2023: 57%

Year-over-Year Revenue Growth in FQ1 2024: 66.7%

Number of Hedge Fund Holders: 63

Nu Holdings Ltd. (NYSE:NU) offers a digital banking platform, spending solutions, mobile payment solutions, and more. On May 15, Susquehanna raised the price target on Nu Holdings Ltd. (NYSE:NU) to $14 from $12 and kept a positive rating.

Nu Holdings Ltd. (NYSE:NU) is one of the best up and coming stocks to buy as it has demonstrated robust customer acquisition and retention capabilities across its key markets, especially in Brazil and Mexico. As of Q1 of 2024, the company reported a total customer base of 99.3 million, marking a 26% year-over-year increase. This growth accentuates Nu’s position as a leading digital banking platform in Latin America, with impressive figures in Mexico, where the customer base reached 6.6 million, growing by 106% year-over-year. Moreover, Nu Holdings Ltd. (NYSE:NU) has achieved significant financial milestones. In Q1 2024, the company reported revenues of $2.7 billion, up 66.7% year-over-year. This growth was supported by increased customer engagement as it achieved a 30% year-over-year growth in average revenue per active customer, which reached $11.4. The company maintains a highly efficient operating model with a low cost-to-serve per active customer standing at $0.90. Nu Holdings Ltd. (NYSE:NU) also plans to increase its product offerings and market penetration. Its strategy includes increasing its product offerings such as secure lending initiatives in Brazil and leveraging advanced technologies like real-time payments and AI. These initiatives aim to refine customer experience and capture additional market share in the competitive fintech landscape.

In the first quarter, 63 hedge funds racked up shares of Nu Holdings Ltd. (NYSE:NU) with stakes amounting to $5.56 billion. This is compared to 54 with positions worth $4.54 billion in Q3 of 2023. As of March 31, Warren Buffett’s Berkshire Hathaway is the most significant shareholder of the company and has a position worth $1.278 billion.

Baron FinTech Fund stated the following regarding Nu Holdings Ltd. (NYSE:NU) in its first quarter 2024 investor letter:

“Nu Holdings Ltd. (NYSE:NU) is a digital bank with operations in Brazil, Mexico, and Colombia. Shares appreciated during the quarter after the company reported strong balance sheet growth and improving margins. New product launches and expansion in newer countries are yielding favorable results. Nu also benefited from inclusion in the MSCI Brazil Index, which prompted buying from passively managed funds. We continue to own the stock because Nu is disrupting the financial services industry in Latin America with its digital distribution and intense focus on user experience. The company has grown to serve over 90 million customers in less than 10 years, largely through word-of-mouth referrals. We believe the company’s superior product offering will drive continued share gains in large and growing markets. “

2. DraftKings Inc. (NASDAQ:DKNG)

Year-over-Year Revenue Growth in FQ3 2023: 57.4%

Year-over-Year Revenue Growth in FQ4 2023: 44%

Year-over-Year Revenue Growth in FQ1 2024: 53.2%

Number of Hedge Fund Holders: 64

DraftKings Inc. (NASDAQ:DKNG) is a Massachusetts-based digital sports entertainment and gaming company that provides various products and services, including online sports betting and casino, DraftKings marketplace, and more. Investor sentiment was positive toward DraftKings Inc. (NASDAQ:DKNG) in Q1 as 64 hedge funds had stakes in the stock with a total stake value of $3.1 billion. This is compared to 55 funds, with positions worth $2.24 billion in the preceding quarter.

DraftKings Inc. (NASDAQ:DKNG) has a consensus strong buy rating among 26 analysts, and its average price target of $54.04 implies an upside of 50.87% from the last price of $35.82, as of May 30. It is among our best up-and-coming stocks to buy according to hedge funds.

On May 3, DraftKings Inc. (NASDAQ:DKNG) reported impressive first-quarter results with revenue growing by 53% year-over-year to reach $1.175 billion. The company’s increased guidance for fiscal year 2024 now projects revenue in the range of $4.8 billion to $5 billion, which reflects robust year-over-year growth expectations. Adjusted EBITDA for the year is forecasted to be between $460 million and $540 million. According to the company management, the key drivers of this financial success include efficient customer acquisition, enhanced engagement strategies, and a structural sportsbook hold percentage that is expected to rise to approximately 10.5% in fiscal year 2024. Finally, with a projected free cash flow of approximately $400 million in FY 2024 and cash and cash equivalents expected to reach around $1.6 billion by year-end, DraftKings Inc. (NASDAQ:DKNG) maintains a robust financial position.

Baron Discovery Fund stated the following regarding DraftKings Inc. (NASDAQ:DKNG) in its first quarter 2024 investor letter:

“Shares of DraftKings Inc. (NASDAQ:DKNG), a leading online sportsbook in the U.S., rose during the quarter following an earnings release that showed strong market share gains and an improved outlook for future profitability. Market share capture has been driven by investment in innovative product offerings that are resulting in strong customer retention. The company also announced the acquisition of JackPocket, a digital lottery courier service. We believe the acquisition will help DraftKings achieve a first-mover advantage in many states that offer the JackPocket service but have not yet legalized online sports betting and casino gaming. DraftKings is well positioned to expand margins and generate positive free cash flow as it grows revenues alongside the rapidly expanding U.S. sports betting market, in our view.”

1. PDD Holdings Inc. (NASDAQ:PDD)

Year-over-Year Revenue Growth in FQ3 2023: 94%

Year-over-Year Revenue Growth in FQ4 2023: 123%

Year-over-Year Revenue Growth in FQ1 2024: 131%

Number of Hedge Fund Holders: 76

PDD Holdings Inc. (NASDAQ:PDD), previously known as Pinduoduo Inc., is an owner and operator of various businesses, including an e-commerce platform known as Pinduoduo and an online marketplace called Temu.

On May 22, PDD Holdings Inc. (NASDAQ:PDD) announced first-quarter earnings. The non-GAAP EPS was $2.83, which beat the estimates by $1.40. The revenue grew by 131% year-over-year to $12.02 billion and topped the estimates by $1.44 billion.

On its earnings day, PDD Holdings Inc. (NASDAQ:PDD) reported substantial net cash generated from operating activities, amounting to RMB 21.1 billion in the first quarter of 2024, compared to RMB 1.3 billion in the same period last year. As of March 31, it holds RMB 242.1 billion in cash, cash equivalents, and short-term investments, providing ample liquidity to support future growth initiatives, R&D investments, and strategic acquisitions.

Wall Street analysts are quite bullish on PDD Holdings Inc. (NASDAQ:PDD) as all 14 analysts that have covered the stock in the last three months maintain a buy-equivalent rating on it. The stock’s average price target of $217.75 represents a 42.2% upside to its share price, as of May 30. Over the last twelve months, PDD Holdings Inc.’s (NASDAQ:PDD) stock has gained nearly 120% yet has a relatively cheap valuation as it is trading at a trailing twelve-month PE ratio of 19.8 as of May 30 as compared to the internet retail industry’s average of 37.74x.

In Q1, hedge fund sentiment was positive toward PDD Holdings Inc. (NASDAQ:PDD) as 76 funds had stakes in the stock, compared to 71 funds in the prior quarter. Hillhouse Capital Management is the biggest shareholder in the company with a position worth $1.37 billion, as of March 31.

Baron Emerging Markets Fund stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its fourth quarter 2023 investor letter:

“We added to our digitization theme by building a position in PDD Holdings Inc. (NASDAQ:PDD), a leading Chinese e-commerce platform. Founded in 2015, the company has emerged as China’s second largest e-commerce player, capturing approximately 20% market share. In our view, PDD’s competitive moat lies in its team purchase model that facilitates bulk buying through direct partnerships with manufacturers, thereby eliminating intermediaries (e.g., distributors and middlemen) and lowering costs. Key factors driving the company’s meteoric growth include rising consumer demand for affordable products in China amid an economic slowdown, small-scale merchants seeking alternatives to Alibaba, and superior management execution. PDD’s revenue growth outpaces gross merchandize value growth owing to rising take rates as merchants aggressively compete for consumer traffic on the platform. In our view, PDD should continue to gain market share given its dominance in the value-for-money segment, growing affordable branded product offerings, and high operational efficiency. We believe the company’s growth will be further supported by the recent launch of its international e-commerce platform, Temu, which has become one of the fastest growing apps globally. Leveraging China’s excess manufacturing capacity, Temu has strong negotiating power with domestic suppliers and attracts global consumers with competitively priced products. Temu’s recent initiatives to improve unit economics, coupled with achieving variable breakeven in the sizable U.S. market, showcase management’s skill and commitment to sustained growth. We expect PDD to at least double its earnings and free cash flow in the next three years, with the potential for continued compounding thereafter.”

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