In this article, we discuss the 12 most profitable growth stocks to invest in along with the latest market trends.
After the September inflation report, the market did feel a slight bit of panic but it seems to be fading away. After the report, the market expectations for a rate cut shifted, with 79.9% of participants predicting a cut to 450-475 basis points, while 20.1% expect the rates to remain unchanged. It was a change from 32.1% expecting a 50 bps rate cut and 67.9% anticipating a 25 bps cut at the beginning of the month as mentioned in our 8 Most Profitable Blue Chip Stocks to Invest in article.
However, on October 11, the CME FedWatch tool showed that 89.5% of the market now expects a 25 bps rate cut and the rest expect it to remain the same.
Market Corrections Ahead but No Bear Market in Sight
Christian Mueller-Glissmann from Goldman Sachs joined CNBC’s ‘Squawk Box’ to discuss the latest market trends. He believes that the stock market pullback in August could be a warning of more potential corrections, but he does not see a severe bear market ahead. His overall outlook is positive due to a healthy macroeconomic environment, where growth remains stable, inflation is under control, and central banks are starting to reduce rates. These factors create a favorable setting for equities and other risk assets.
He pointed out that while bullish market positioning contributed to August’s setback, the combination of declining inflation and rate cuts allows central banks to cushion against financial shocks, minimizing the risk of a deep downturn.
Mueller-Glissmann highlighted two key reasons for not expecting a major market decline: inflation has significantly dropped, giving central banks more flexibility, and price momentum over the past 6-12 months suggests a strong macroeconomic backdrop. With the labor market improving, he sees no signs of an economic downturn.
His strategy focuses on quality growth stocks that are temporarily undervalued and cyclical value stocks that could recover as the market stabilizes. Regarding inflation, he noted a shift from inflation relief to growth as the main market driver, raising concerns about inflation resurfacing if growth strengthens. However, he remains confident that inflation will stay anchored, and disinflation will continue into the year’s end.
12 Most Profitable Growth Stocks To Invest In
Our Methodology
For this article, we used stock screeners to identify nearly 25 growth stocks above the market cap of $10 billion with a 5-year revenue compound annual growth rate (CAGR) of 30% or above. Next, we narrowed our list to 12 stocks with the highest TTM net income. We also mentioned the hedge fund sentiment around each stock, which was taken from Insider Monkey’s Q2 database of 912 hedge funds.
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 Most Profitable Growth Stocks To Invest In
12. Kinsale Capital Group, Inc. (NYSE:KNSL)
5-Year Revenue CAGR: 40.29%
TTM Net Income: $371 million
Number of Hedge Fund Holders: 28
One of the most profitable growth stocks, Kinsale Capital Group, Inc. (NYSE:KNSL) is a property and casualty insurance company focused on the excess and surplus lines (E&S) market in the U.S., where it underwrites challenging and hard-to-place risks for small businesses and personal lines. The company operates across all 50 states, Puerto Rico, and the U.S. Virgin Islands through independent brokers.
According to the company, it uses technology to drive efficiency in underwriting and claims processing, which contributes to a low expense ratio. It also maintains a strong balance sheet, with conservative loss reserves and investments, to build trust among stakeholders. The company distributes its products through independent brokers and its own subsidiary, Aspera Insurance Services.
According to Polen Capital, Kinsale (NYSE:KNSL) prioritizes efficiency, technology, and strong underwriting, which drives its above-average growth and returns, often outperforming competitors. Its focus on smaller accounts and difficult-to-insure risks, alongside its tech-driven operations and disciplined approach, provides a competitive edge. These strengths, along with solid financial performance and growth potential, make the company an attractive portfolio choice.
Apart from Polen Capital, Baron Funds also holds a bullish sentiment on the company,, and here is what the firm said in its Q2 2024 investor letter:
“Shares of specialty insurer Kinsale Capital Group, Inc. (NYSE:KNSL) gave back some gains from earlier this year after the company reported slower premium growth in the first quarter. Earnings beat Street expectations with 44% EPS growth and 43% growth in book value per share. However, investors focused on the slowdown in gross written premiums to 25% growth from 34% last quarter, reflecting tough comparisons and moderating growth in property insurance. We continue to own the stock because we believe Kinsale is well managed and has a long runway for growth in an attractive segment of the insurance market. Recall that Kinsale was one of our best performers last quarter, and we believe we can endure some volatility to achieve strong long-term returns.”
11. Futu Holdings Limited (NASDAQ:FUTU)
5-Year Revenue CAGR: 61.84%
TTM Net Income: $540.4 million
Number of Hedge Fund Holders: 27
Futu Holdings Limited (NASDAQ:FUTU) is a fintech company, that operates digital platforms Futubull and Moomoo, which offers stock trading, market data, financial news, and investor education across the U.S., Hong Kong, China, Singapore, Australia, Japan, Canada, and Malaysia.
It holds over 100 licenses globally, including licenses from Hong Kong’s Securities and Futures Commission, the U.S. SEC, the Singapore Exchange, and the Australian Securities and Investments Commission. It also provides margin financing, wealth management, ESOP solutions, and IPO distribution. Its goal is to become a leading global financial platform through innovation and improved user experience. The company ranks at 11 on our list of most profitable growth stocks.
On August 26, Futu (NASDAQ:FUTU) announced that S&P Global Ratings maintained a stable outlook and reaffirmed Futu’s long-term issuer credit rating at BBB-. The company’s Hong Kong securities firm has a stand-alone credit profile of bbb. S&P highlighted its strong market position in Hong Kong and expected continued growth in its international operations, supported by its solid capitalization and funding profile.
In Q2, the company added 155,000 new paying clients, marking a 168% year-over-year growth. By the end of the quarter, it surpassed 2 million paying clients, with a 29% year-over-year increase and 8% quarter-over-quarter growth. The company raised its 2024 client growth guidance to 550,000 due to strong momentum. Client growth in Hong Kong, Singapore, and Japan was notable, with Malaysia contributing the most new clients despite slower growth. The company launched cryptocurrency trading in Hong Kong and Singapore, capitalizing on the favorable regulatory environment.