In this article, we take a look at the 15 best growth stocks to buy according to hedge funds. If you want to see more of the best growth stocks, go directly to 5 Best Growth Stocks to Buy According to Hedge Funds.
In a report titled “2023 Long-Term Capital Market Assumptions” JPMorgan mentioned some reasons why now could be the right time to pile into growth stocks, citing lower valuations. Here are some of the important comments of JPMorgan relevant to our article:
“Lower valuations and higher yields mean that asset markets today offer the best long-term returns in more than a decade. It took a painful slump in stock and bond markets to get here, the worst of which may not yet be over. Still, the turmoil of 2022 might be considered a cathartic moment, revitalizing the portfolio toolkit and creating attractive investment opportunities in the years ahead.”
Growth stocks could be the solid investment options for beginner investors as JPMorgan believes that the current market pressures would eventually recede. That means growth stocks could rebound strongly.
“We expect today’s inflationary surge to eventually subside to a rate only slightly above our previous estimates. Our forecast annual return for a USD 60/40 stock-bond portfolio over the next 10–15 years leaps from 4.30% last year to 7.20%. Over the last 25 years, the rolling 10-year return for this portfolio has averaged 6.10%.”
The report also said:
“Opportunities for long-term investors with capital to deploy are the best we’ve seen since 2010. Meanwhile, we would remind those shouldering losses from the last year that investors able to avoid selling during drops tend to be rewarded in the longer run, and that the sharpest gains are often banked early in the cycle as markets first turn.”
Photo by Ruben Sukatendel on Unsplash
Our Methodology
For this article, used the growth ETF SPDR Portfolio S&P 500 Growth ETF (SPYG) and ranked the stock holdings of the ETF based on the number of hedge funds having stakes in these companies as of the end of the third quarter. From the resulting data set, we picked the top 15 stocks.
Best Growth Stocks to Buy According to Hedge Funds
15. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Holders: 88
While Tesla Inc (NASDAQ:TSLA) suffered heavily in 2022, analysts believe it’s just a matter of time the stock will begin to turn the corner. On Monday, Tesla Inc (NASDAQ:TSLA) led a big rally in the EV sector as analysts are hopeful that China’s economic reopening would fuel growth in the EV industry.
As of the end of the third quarter, 88 funds out of the 920 funds tracked by Insider Monkey had stakes in Tesla Inc (NASDAQ:TSLA).
14. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 89
Advanced Micro Devices, Inc. (NASDAQ:AMD) has increased by 445.20% in the past five years.
On December 15, Morgan Stanley analyst Joseph Moore maintained an ‘Overweight’ rating and a $77 price target on AMD shares.
According to Insider Monkey’s database, 89 hedge funds had a stake in Advanced Micro Devices, Inc. (NASDAQ:AMD) as of Q3 2022. The total value of their holdings was $4.99 billion. Ken Fisher’s Fisher Asset Management is the company’s largest shareholder, with shares worth $1.23 billion.
Baron Funds, an asset management company, mentioned Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2022 investor letter. Here is what the fund said:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global fabless semiconductor company focusing on high-performance computing technology, software, and products. AMD designs leading high-performance central and graphics processing units (known as CPUs and GPUs) and integrates them with hardware and software to build differentiated solutions for customers……. (Click here to read the full text)”
13. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 89
The Home Depot, Inc. (NYSE:HD) is a specialized retailer of home renovation products. At the end of the third quarter, the company had 2,319 retail outlets dispersed throughout all 50 states.
The Home Depot, Inc. (NYSE:HD) delivered a 60.61% return in the past five years. On December 13, Max Rakhlenko, a Cowen analyst, increased his price target on The Home Depot, Inc. (NYSE:HD) from $350 to $379 and reiterated an ‘Outperform’ rating on the stock.
As of the end of the third quarter of 2022, 89 hedge funds in Insider Monkey’s database held stakes in The Home Depot, Inc. (NYSE:HD), an increase compared to 80 funds in the preceding quarter. Ken Fisher’s Fisher Asset Management is The Home Depot, Inc. (NYSE:HD)’s most significant stakeholder, with 8.17 million shares worth $2.25 billion.
Matrix Asset Advisors mentioned The Home Depot, Inc. (NYSE:HD) in its Q3 2022 investor letter. Here’s what the firm said:
“During the quarter, we re-established a position in The Home Depot, Inc. (NYSE:HD) sold earlier this year, after the shares declined sharply on big picture concerns about a softer housing market and lower consumer spending. We believe that HD is a very well-managed company, positioned to continue showing good profits even as the economy decelerates. The products it carries in inventory are in year-round demand from contractors and homeowners wanting to maintain and improve their homes. The company has historically been shareholder friendly, repurchasing shares and increasing the dividend, most recently by 15% earlier this year. On September 30, HD’s current dividend yield was 2.8%.”
12. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 92
Thermo Fisher Scientific Inc. (NYSE:TMO) sells laboratory and scientific materials, life science reagents, and diagnostic tools. The company’s four business segments are analytical technologies, specialized diagnostics, life science solutions, and lab products and services, which include CRO services. At the end of Q3 2022, 92 hedge funds owned a stake in Thermo Fisher Scientific Inc. (NYSE:TMO).
In its Q2 2022 investor letter, Stewart Asset Management highlighted a few stocks and Thermo Fisher Scientific Inc. (NYSE:TMO) was one of them. Here is what the fund said:
“Recently we initiated two new investments. One in Thermo Fischer Scientific (NYSE:TMO), a supplier to the life sciences industry. We have followed the company for many years and the recent downturn in share price gave us a good entry price at which to invest. Thermo has had strong earnings growth for many years and is led by a superb team. The company’s recent acquisitions make it a full-service supplier to the biopharma and biotech industries.”
11. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 93
Adobe Inc. (NASDAQ:ADBE) is a software company that works in the publishing, advertising, digital media, and digital experience sectors. On December 16, J. Parker Lane, an analyst at Stifel, increased his price objective on Adobe from $375 to $400 while maintaining a ‘Buy’ rating. This was in response to Adobe Inc. (NASDAQ:ADBE)’s solid quarter.
According to Insider Monkey’s database, 93 hedge funds were long Adobe Inc. (NASDAQ:ADBE) as of Q3 2022. The total value of their holdings was $6.75 billion. Fisher Asset Management is the leading shareholder of Adobe Inc. (NASDAQ:ADBE), with a stake worth over $1.42 billion.
Here is what Jackson Square Partners said about Adobe Inc. (NASDAQ:ADBE) in its Q3 2022 investor letter:
“Two significant actions taken in the quarter were the exit of Adobe Inc. (NASDAQ:ADBE) and the initiation of Boeing. Adobe paid a price to acquire a competitor called Figma ($22B) that we could not justify even under the most bullish fundamental outlook. It struck us as desperate, defensive, and reactive. After reassuring investors for many quarters that Figma was not having a negative competitive impact on its business, to us this was a clear admission of the opposite. While a more optimistic interpretation could be that Figma is a good asset, Adobe just got rid of a competitor, and the day 1 stock reaction already wiped out more than $22B from Adobe’s market cap – we saw too many red flags potentially signaling worsening trends to come in Adobe’s core. It is also not obvious to us why Figma sails through anti-trust clearance, which if the deal is not allowed to proceed would leave a gaping exposure as Adobe just showed its hand.”
10. Activision Blizzard, Inc. (NASDAQ:ATVI)
Number of Hedge Fund Holders: 96
Activision Blizzard, Inc. (NASDAQ:ATVI) creates and distributes interactive entertainment content and services. The forward P/E ratio for Activision Blizzard, Inc. (NASDAQ:ATVI), Inc. is 24.94x. Given that the forward P/E for its sector is 16.32x, one may assume that Activision Blizzard, Inc. is selling at a premium in comparison.
Based on 13 Wall Street analysts’ 12-month price forecasts for Activision Blizzard, Inc. (NASDAQ:ATVI) in the preceding three months, the average price target for the stock is $92.50.
In the third quarter of 2022, 96 hedge funds had stakes worth $9.08 billion in Activision Blizzard, Inc. (NASDAQ:ATVI). Berkshire Hathaway held 60.14 million of Activision Blizzard, Inc. (NASDAQ:ATVI) shares, valued at $4.47 billion, making it the most prominent stakeholder in the company.
Cooper Investors, an asset management company, mentioned Activision Blizzard, Inc. (NASDAQ:ATVI) in its Q2 2022 investor letter. Here is what the fund said:
“Activision Blizzard, Inc. (NASDAQ:ATVI) – our investment preceded news that the company was under investigation for workplace bullying. When it became clear management had misled the market on the extent of the problem we sold, led by our principles of Responsible Investing. We did not benefit from the subsequent M&A premium paid by Microsoft.”
9. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 100
T-Mobile US, Inc. (NASDAQ:TMUS) is the fastest-growing of the U.S. telecom oligopolies, despite the fact that it still isn’t profitable by some measures (negative free cash flow but positive net income) and doesn’t pay a dividend.
The trailing 12-month P/E for T-Mobile US, Inc. (NASDAQ:TMUS) is 39.73X, while the P/E for the Wireless National industry is 25.48X. T Mobile US has an average rating of “Strong Buy” from 13 Wall Street analysts.
According to Insider Monkey’s data, 100 hedge funds were bullish on T-Mobile US, Inc. (NASDAQ:TMUS) at the end of Q3 2022, compared to 96 funds in the prior quarter. Legendary investor and billionaire Warren Buffett’s Berkshire Hathaway is the biggest stakeholder in T-Mobile US, Inc. (NASDAQ:TMUS) out of the 920 hedge funds tracked by Insider Monkey as of the end of the third quarter. The Oracle of Omaha owns 5.24 million shares of the company worth $703.32 million.
8. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 103
ServiceNow, Inc. (NYSE:NOW) provides software solutions to organize and automate various business operations via an SaaS delivery model. Morgan Stanley identified NOW shares as its “best buy” in the software sector and believes that its subscription business model should enable its growth to remain robust. This positive prognosis is supported by ServiceNow, Inc. (NYSE:NOW)’s rise in subscription revenue, which makes up most of its top line.
Additionally, ServiceNow, Inc. (NYSE:NOW) recorded revenues of $1.83 billion in the third quarter of 2022, an increase of 21.1% year over year.
In addition, the number of hedge funds tracked by Insider Monkey having stakes in ServiceNow, Inc. (NYSE:NOW) grew to 103 in Q3 from 99 in the preceding quarter. These stakes hold a consolidated value of $4.27 billion.
Renaissance Investment Management mentioned ServiceNow, Inc. (NYSE:NOW) in its Q3 2022 investor letter. Here is what the fund said:
“ServiceNow, Inc. (NYSE:NOW) was another detractor in the quarter. The company reported strong operating results, but management lowered full-year guidance after seeing broad-based demand weakness in their European markets and currency headwinds from the strong U.S. dollar.”
7. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 110
Health insurance giant UnitedHealth Group Inc. (NYSE:UNH) stands eighth on our list of 15 best growth stocks to buy according to hedge funds. UnitedHealth Group Inc. (NYSE:UNH) shares have risen 120.57% over the past five years.
At the end of the third quarter of 2022, 110 hedge funds in the database of Insider Monkey held stakes worth $10.33 billion in UnitedHealth Group Incorporated (NYSE:UNH), up from 91 in the preceding quarter worth $10.91 billion.
In its Q3 2022 investor letter, Stewart Asset Management mentioned UnitedHealth Group Incorporated (NYSE:UNH). Here is what the fund said:
“Looking at the Great Recession which began at year-end 2007 and lasted to mid-year 2009 is helpful too. Our four largest current holdings in the portfolio weathered that period well. UnitedHealth’s (NYSE:UNH) earnings were resilient. While it reported modestly down earnings in 2008, its earnings rebounded quickly to record highs in 2010 and the shares responded strongly in anticipation of this.”
6. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 140
Apple Inc. (NASDAQ:AAPL) produces and sells wearables, accessories, computers, tablets, and smartphones. Apple is currently trading at a forward P/E ratio 20.23x. This is a premium above the sector-average forward P/E of 7.99x. Apple Inc. (NASDAQ:AAPL)’s P/E ratio peaked at 33.9x five years ago in September 2020. Apple’s P/E ratio of 18.2x touched a five-year low in September 2019.
On January 4, Tigress Financial analyst Ivan Feinseth retained a ‘Strong Buy’ rating on the shares of Apple Inc. (NASDAQ:AAPL) and a $210 price target. The company’s enormous installed user base, expanding ecosystem, and rising services revenue, in the analyst’s opinion, will continue to fuel accelerating trends and improved shareholder value generation.
At the end of Q3 2022, 140 hedge funds held Apple Inc. (NASDAQ:AAPL) shares, up from 128 in Q2, taking the seventh spot on our list of 15 best growth stocks to buy according to hedge funds. Berkshire Hathaway is the company’s largest shareholder with 894.80 million shares, valued at $123.66 billion.
TimesSquare Capital Management made the following comment about Apple Inc. (NASDAQ:AAPL) in its Q3 2022 investor letter:
“Apple Inc. (NASDAQ:AAPL) designs and manufactures smartphones, personal computers, tablets, and wearable devices. The company reported better than expected revenues, though that came from a lower-than-expected supply chain impact. Apple called out pockets of weakness in wearables as well as home & accessories. Management referenced macroeconomic uncertainty and sounded somewhat guarded when commenting on fourth quarter expectations. In September, Apple introduced four new iPhones with retail prices kept at last year’s levels. Its shares edged forward by 1% in consideration of these developments. We trimmed the position after evaluating the channel which highlighted some consumer demand choppiness.”
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Disclosure: None. 15 Best Growth Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.
