In this article, we’re going to talk about the 8 high growth high margin stocks to invest in now.
How Market Trends Shape Opportunities
When investor confidence is high, capital tends to flow into growth sectors, driving up stock prices and valuations. This is particularly relevant for companies with strong growth prospects and high margins, as they are often seen as more resilient in a recovering economy. Current market dynamics indicate that much of the upward movement may be attributed to multiple expansions rather than just earnings growth. High-growth stocks typically trade at higher price-to-earnings ratios, so if the market continues to expand, these stocks could benefit significantly as investors are willing to pay a premium for growth potential.
Jason Trennert, Strategas Research Partners chairman and CEO, joined CNBC’s ‘Squawk Box’ on October 3 to discuss the latest market trends and the state of the economy, highlighting that the bar is high to get bearish now.
Jason Trennert revealed that he turned bullish at the end of 2023 after initially predicting a recession. Despite the challenges of 2022 and early 2023, which made it difficult to envision a market recovery, he noted that the market has defied expectations and continued to rise. Trennert attributed a significant portion of this upward movement to multiple expansions rather than just earnings growth. He marked a pivotal moment in 2023 as the failure of Silicon Valley Bank, which led to increased liquidity in the market and a subsequent rally. He recalled that around eleven months ago, the S&P 500 briefly hit 4,100 when ten-year yields reached 5%, suggesting that market dynamics have shifted considerably since then.
When discussing current valuations, Trennert pointed out that the market is trading at approximately 22 times earnings during an easing cycle. He expressed skepticism about future earnings growth, as expectations for a 14% increase in S&P earnings next year seem inconsistent with the anticipated six rate cuts from the Fed. He emphasized that if the market is expecting such significant easing while also projecting strong earnings growth, there may be a disconnect.
Trennert also addressed concerns regarding government spending and deficits, noting that the federal deficit has reached 7% of GDP and expressing a desire for more free-market-oriented policies rather than gridlock in Washington. He criticized both parties for their lack of commitment to reducing deficits and highlighted the moral hazard created by prolonged quantitative easing over the past 12 years. He believes that this situation has led to irresponsible spending practices that will eventually necessitate accountability. Despite these concerns, Trennert acknowledged that it is challenging to adopt a bearish outlook given current market conditions. He noted that ten-year treasury yields above 4.5% typically lead to market indigestion, while yields below this threshold make it hard to remain pessimistic.
As for small-cap stocks, Trennert pointed out that they have historically been underrepresented in portfolios and may offer opportunities for future growth. He highlighted that many venture capital-backed firms are looking to go public, with approximately 45% of them potentially tapping into the IPO market at some point. However, he cautioned that if the economy continues to slow down and earnings growth expectations are not met, small caps may struggle.
Skepticism about the projected earnings growth for the S&P 500 could also apply to high-growth stocks. If expectations for earnings growth are too optimistic relative to economic conditions, such as anticipated rate cuts, it may lead to volatility in high-growth stocks, especially if actual earnings do not meet these elevated expectations. Companies with high-profit margins are generally better positioned to weather economic downturns. As Trennert noted concerns regarding government spending and deficits, firms that maintain or improve their profit margins may be more attractive to investors seeking stability amidst economic uncertainty.
Trennert’s overall analysis underscores the importance of monitoring government policies and economic indicators as they influence investor sentiment and market performance moving forward. Still, his predominantly bullish sentiment lays the groundwork for a lot of investors, and to make the portfolio expansion process even easier for them, we’re here with a list of the 8 high growth high margin stocks to invest in now.
Methodology
We sifted through Finviz to compile an initial list of the top stocks. From that list, we narrowed our choices to 15 companies with TTM net profit margin above 20% and 5-year net income compound annual growth rates above 25%. We then selected the 8 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 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 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).
8 High Growth High Margin Stocks to Invest In Now
8. Lantheus Holdings (NASDAQ:LNTH)
5-Year Net Income CAGR: 32.86%
TTM Net Profit Margin: 29.80%
Number of Hedge Fund Holders: 34
Lantheus Holdings (NASDAQ:LNTH) is a radiopharmaceutical-focused company focused on developing and commercializing innovative products for various medical imaging applications. It specializes in imaging agents used to diagnose and monitor diseases like cancer, heart disease, and neurodegenerative disorders. The products are classified into three categories: Radiopharmaceutical Oncology, Precision Diagnostics, and Strategic Partnerships.
Revenue growth in Q2 2024 was 22.50% year-over-year. Radiopharmaceutical Oncology was up 29.3%, attributable entirely to the continued strength of PYLARIFY, where sales grew 30%, driven by increased awareness and adoption. Precision diagnostic revenue was 14.9% higher. Highlights include sales of DEFINITY, 10.7% higher year-over-year, driven by its clinical and commercial value proposition, along with TechneLite revenue, up 30.5% due to opportunistic sales in the quarter.
Strategic partnerships and other revenue were down 31.7% due to the prior year’s comparable having $7 million of RELISTOR-related royalties not repeated this year, offset by a strong MK-6240 contribution. Even though this decline was observed, the company had made significant strides in patient care and research partnerships by the second quarter of 2024.
It’s heavily focused on promising treatments for Alzheimer’s disease and prostate cancer. It acquired two potential diagnostic tools: NAV-4694 and MK-6240 for Alzheimer’s for early detection and diagnosis. It acquired the global rights to RM2, a promising diagnostic tool for early-stage prostate cancer. The company also licensed two promising drug candidates from Radiopharm Theranostics.
Lantheus Holdings (NASDAQ:LNTH) has been a standout performer, delivering a 306% return in 3 years. This impressive growth is fueled by strong financial performance, including a recent transition to profitability and increasing earnings per share ($1.80 in Q2 2024). The company’s recent momentum and positive outlook make it a promising investment option.
ClearBridge Small Cap Value Strategy stated the following regarding Lantheus Holdings, Inc. (NASDAQ:LNTH) in its Q2 2024 investor letter:
“Health care results lifted relative performance during the period and included our top two individual performers in Lantheus and newer portfolio addition Corcept Therapeutics. Lantheus Holdings, Inc. (NASDAQ:LNTH), which makes diagnostic and therapeutic products that help clinicians diagnose and treat heart, cancer and other diseases, saw its share price rise on strong first-quarter results.”
7. StoneCo Ltd. (NASDAQ:STNE)
5-Year Net Income CAGR: 44.06%
TTM Net Profit Margin: 26.86%
Number of Hedge Fund Holders: 35
StoneCo Ltd. (NASDAQ:STNE) is a Brazilian financial technology company that provides payment solutions and financial services to small and medium-sized businesses, offering products like point-of-sale systems, payment gateways, and credit card machines. It differentiates itself with superior client service, tech-enabled distribution, and a comprehensive merchant platform.
The company has experienced significant growth in the micro and small business (MSMB) market. Financial services revenue has increased by 10.6% due to a 30% growth in MSMB payment customers and higher revenue per customer. The company’s overall customer base has grown by 30%, and total payment volume (TPV) has increased by 25%.
Its banking division has seen even more impressive growth, with a 62% increase in clients and a 65% rise in client deposits, driven by investments in sales and the opportunities presented by Brazil’s PIX NFC and open banking initiatives.
Total revenue in Q2 was down 1.06% year-over-year, due to the rising popularity of PIX QR Code payments, which has reduced card transactions. Despite this, the company has made progress in credit and banking and remains well-positioned to capitalize on Brazil’s growing fintech market, where it currently holds a market share of ~11%. Vertical software revenue increased 3% year-over-year due to higher recurring revenue, though non-recurring revenue declined in priority sectors.
StoneCo Ltd. (NASDAQ:STNE) is well-positioned for continued growth. Its focus on empowering clients, combined with its strong competitive advantages, has driven impressive revenue growth and profitability. The company’s recent financial results demonstrate its strength in payments, banking, and software solutions, making it a promising investment opportunity.
Based on the strong trajectory of results demonstrated through the year’s first half, StoneCo Ltd. (NASDAQ:STNE) is set to achieve its long-term goals.
Ave Maria World Equity Fund stated the following regarding StoneCo Ltd. (NASDAQ:STNE) in its fourth quarter 2023 investor letter:
“StoneCo Ltd. (NASDAQ:STNE) provides solutions that enable merchants and integrated partners to conduct electronic commerce seamlessly across in-store, online, and mobile channels in Brazil. StoneCo has faced near-term operational challenges because of the pandemic and high levels of inflation in Brazil. The company appears to be moving past these challenges and it appears that the successful integration of the newly acquired software business with its payments business will drive substantial shareholder value longer term.”
6. Protagonist Therapeutics Inc. (NASDAQ:PTGX)
5-Year Net Income CAGR: 180.40%
TTM Net Profit Margin: 53.26%
Number of Hedge Fund Holders: 36
Protagonist Therapeutics Inc. (NASDAQ:PTGX) operates as a clinical-stage biopharmaceutical company, focusing on discovering and developing peptide-based new chemical entities to address significant unmet medical needs. It provides effective and well-tolerated treatment options for patients with autoimmune diseases.
JNJ-2113, a potential treatment for psoriasis, is being evaluated in two Phase 3 clinical trials. The ICONIC-LEAD and ICONIC-TOTAL studies are expected to complete their primary endpoint portions by Q4 2024. The ANTHEM study, investigating JNJ-2113 for ulcerative colitis, is also anticipated to complete its primary endpoint by Q4.
Rusfertide, a potential treatment for polycythemia vera, has shown promising results in the REVIVE study. Long-term follow-up data presented at the European Hematology Association (EHA) 2024 demonstrated durable hematocrit control, reduced need for bloodletting, and a favorable safety profile. The VERIFY study, also evaluating rusfertide, is expected to report topline results for the primary endpoint by Q1 2025.
The company received a $300 million upfront payment for a collaboration agreement. $255 million was recognized as revenue in the first quarter of 2024. Over time, the remaining $45 million will be recognized as revenue as Protagonist Therapeutics Inc. (NASDAQ:PTGX) completes its obligations in the ongoing Phase 3 VERIFY trial for rusfertide.
The company made $4.17 million in Q2 2024 revenue, missing Street estimates by $2.50 million. There was a loss per share of $0.50. It has shown strong growth potential, despite missing revenue estimates in Q2. The track record of exceeding earnings expectations and recent share price gains suggest it could be a promising investment.
5. Crocs Inc. (NASDAQ:CROX)
5-Year Net Income CAGR: 29.08%
TTM Net Profit Margin: 20.02%
Number of Hedge Fund Holders: 40
Crocs Inc. (NASDAQ:CROX) is a footwear company that manufactures and markets the Crocs brand of foam footwear. It has expanded its product line to include other footwear styles, such as sandals, sneakers, and boots, focusing on providing casual and comfortable footwear for both adults and children.
Q2 2024 revenue increased by 3.65% from a year-ago period. In North America, revenue grew by 3%, exceeding expectations due to strong D2C sales and increased retail demand. Internationally, revenue grew by 22%, with China and Australia showing particularly impressive growth.
The company’s focus on collaborations and partnerships is driving consumer engagement and brand recognition. In the second quarter, it celebrated SpongeBob’s 25th anniversary by creating a SpongeBob and Patrick clog, along with strategic partnerships with popular brands like Pringles, Naruto, Treasure, and Minions. It’s expanding into sneakers and lifestyle products, as evidenced by the successful launch of the Salehe Juniper sneaker. The iconic Classic Clog continues to drive growth. It’s also introducing highly anticipated fan-requested products, including Pet Crocs, Classic Lined Clogs, and a life-sized Crocs Costume, to celebrate its annual Croctober festivities.
Its brand, HEYDUDE, partnered with musician Jelly Roll to create a limited-edition shoe inspired by his new album. The shoes cost come with a free vinyl copy of the album (while supplies last). Part of the proceeds will go to Big Brothers Big Sisters youth mentoring organization. Crocs Inc. (NASDAQ:CROX) recently broke above the 50-day moving average, indicating a potential bullish trend. Its recent share price gains, and positive earnings estimate revisions make it a promising investment opportunity.
Silver Beech Capital stated the following regarding Crocs, Inc. (NASDAQ:CROX) in its first quarter 2024 investor letter:
“In October 2023, we invested in Crocs, Inc. (NASDAQ:CROX), the manufacturer/retailer of iconic foam casual footwear, at an attractive mid-teens FCF yield. Crocs is a well-managed, capital light, high margin, growing consumer-favorite brand.
We believe a combination of cognitive and institutional biases prevented the market from correctly evaluating the company, including anchoring sales expectations to the company’s pre-pandemic sales volume, overextrapolating sales slowdowns at the company’s relatively small HeyDude subsidiary, and focusing on questionable short-term oriented alternative data. The market misunderstood (and perhaps still does) the company’s growth profile, earnings quality, and earnings power. In the year ahead, we forecasted there was a straightforward path to Crocs posting strong near-term topline and FCF growth while deleveraging.
After a few months, the market agreed with us that Crocs was simply too cheap and quickly rerated the company. The Fund does not own a stake in Crocs today. The Fund’s investment in Crocs generated a 248% gross IRR / 40% total gross return over our 4-month investment period.”
4. Docusign Inc. (NASDAQ:DOCU)
5-Year Net Income CAGR: 28.13%
TTM Net Profit Margin: 34.55%
Number of Hedge Fund Holders: 44
Docusign Inc. (NASDAQ:DOCU) is a software company that provides products for organizations to manage electronic agreements with electronic signatures on different devices, offering a cloud-based platform that enables businesses to streamline their document workflows, manage contracts, and automate various processes.
80% of the company is owned by institutional investors, which can be a sign of confidence in the company’s future. However, it also means the stock price could be more volatile depending on their trading decisions. While no single investor holds a majority stake, the top 23 shareholders control half the company. There’s also 5% insider ownership.
Revenue in FQ2 2025 improved 7.03% year-over-year, driven by a focus on product innovation, improved sales strategies, and operational efficiency. The customer base continued to grow, with a 12% increase in direct customers. Large-value customers also saw modest growth. Contract Lifecycle Management (CLM) revenue grew at a faster pace than overall revenue, and the company strengthened partnerships with major technology providers like Microsoft, SAP, and Salesforce.
In the second quarter, the company’s new Intelligent Agreement Management (IAM) platform was launched. It has the potential to address significant economic losses faced by organizations when managing agreements. IAM was initially introduced to small and mid-sized commercial customers in the US, Canada, and Australia, with training for salesforce teams planned for FQ3. Early results for IAM have been promising, with higher win rates, larger deal sizes, and faster closing times. Customer adoption is increasing steadily.
Docusign Inc. (NASDAQ:DOCU) remains a strong player in the electronic signature market, with a dominant market position and a growing demand for digital transformation. Despite challenges posed by increased competition and a post-pandemic slowdown, the company’s strong financial health, expanding use cases, and focus on innovation position it for long-term success.
Polen Focus Growth Strategy made the following comment about DocuSign, Inc. (NASDAQ:DOCU) in its Q3 2023 investor letter:
“We eliminated our remaining 1% position in DocuSign, Inc. (NASDAQ:DOCU). While the company remains the leader by a wide margin at the higher end of the digital signature market, it has become clearer to us that its addressable e-signature market is likely significantly smaller than we had believed or will take much longer to develop than we had anticipated. The lower end of the market is highly competitive. We were patient with our very small position. Impressive new management joined from Google and The Trade Desk in hopes of them being able to reinvigorate growth in core e-signature. Still, it does not appear that this is likely anytime soon with new management articulating that the company will need to develop new products to achieve higher levels of e-signature growth despite what we considered to be low penetration rates within existing e-signature products. As such, we used the proceeds of our sale as part of the funding for our Novo position.”
3. Liberty Broadband Corp. (NASDAQ:LBRDK)
5-Year Net Income CAGR: 132.96%
TTM Net Profit Margin: 81.86%
Number of Hedge Fund Holders: 55
Liberty Broadband Corp. (NASDAQ:LBRDK) operates and owns interests in a broad range of communications businesses; primarily comprised of GCI Holdings, a wholly owned subsidiary, and an equity method investment in Charter Communications. Through its subsidiaries, it provides cable television services, high-speed internet, and other telecommunications services to residential and commercial customers. The focus is on investing in and managing cable assets.
The company made $246 million in the second quarter of 2024 while earning $1.36 per share. While both these values missed Street estimates, there was still 0.41% year-over-year revenue growth, driven by continued strength in data sales, particularly to the rural health care and school customers, partially offset by declines in wireless. The data segment contributed $60 million and the wireless segment contributed $47 million to the total revenue.
GCI, the subsidiary, invested $58 million in capital expenditures to improve its wireless and data networks in Alaska during Q2. This investment has contributed to a customer base of 158,000 for the data segment and 201,900 for the wireless segment. Liberty Broadband Corp. (NASDAQ:LBRDK) is focused on reducing debt and evaluating strategic alternatives for its TripAdvisor investment.
In late September, John Malone, a billionaire investor, proposed a merger between two companies he owns: Liberty Broadband and Charter Communications, to create a larger cable TV company in the US. Liberty Broadband’s stock price rose 25% after the proposal was announced.
The company has successfully reduced debt and improved its financial flexibility. While challenges remain, such as the impact of the Affordable Connectivity Program (ACP) on its subscriber base, the focus on cost management and operational efficiency positions it well for future success.
Weitz Investment Management Partners III Opportunity Fund stated the following regarding Liberty Broadband Corporation (NASDAQ:LBRDA) in its Q2 2024 investor letter:
Liberty Broadband Corporation (NASDAQ:LBRDA) (26% owner of Charter Communications) was the Fund’s top year-to-date detractor. Shares of Charter Communications remain in the penalty box as investors wait to see how the mid-May expiration of the federal Affordable Connectivity Program (ACP) impacts subscriber results. We anticipate Charter will retain many, if not most, of its five million ACP customers, but we acknowledge this uncertainty has created an added overhang on the stock price. Beyond this one-time event, we believe the long-term picture for Charter remains intact.
2. PDD Holdings Inc. (NASDAQ:PDD)
5-Year Net Income CAGR: 74.92%
TTM Net Profit Margin: 28.93%
Number of Hedge Fund Holders: 86
PDD Holdings Inc. (NASDAQ:PDD) is a Chinese online retailer that focuses on group buying and discounted prices. It offers products like consumer electronics, apparel, groceries, and more. Its business model revolves around aggregating large groups of buyers to negotiate lower prices from suppliers, passing the savings on to its users.
It also owns the online marketplace Temu, which is expanding rapidly in Europe and North America and has the potential to become one of the world’s most popular online shopping destinations. The company has experienced impressive growth in the second quarter of 2024, making $13.63 billion in total revenue, an increase of 89.93% from a year-ago period, driven by an increase in revenues from online marketing services and transaction services. Revenues from the marketing services and others were up 29%. Revenues from transaction services were up 234%.
In Q2, the top-line growth slowed down significantly versus the last few quarters. Further slowdown is inevitable as a result of competition and global uncertainties. However, the user base and cross-border business continue expanding. PDD Holdings Inc. (NASDAQ:PDD) has invested heavily in R&D to improve its platform for merchants and customers, contributing to its overall success and growth.
In September, its stock price soared 40% due to China’s economic stimulus efforts. Despite a negative news item regarding trade loopholes, the broader market rally fueled by interest rate cuts, reserve requirement reductions, and a focus on boosting consumer spending lifted the company. Later in the first 10 days of October, its stock was down 7.2% this week, but investors are still up 314% over the past 5 years despite the recent dip. The company recently turned profitable, which could explain the long-term growth.
Hayden Capital stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its Q2 2024 investor letter:
“PDD Holdings Inc. (NASDAQ:PDD): A few weeks ago, Latepost (a leading Chinese technology news outlet) confirmed Pinduoduo’s online grocery initiative is solidly profitable (LINK). According to the article, Duoduo Grocery is able to achieve ~5% net profit margins in competitive markets (where they go up against Meituan Select). In non-competitive markets, they can achieve ~10 – 15% net margins.
The company doesn’t disclose the exact scale of Duoduo Grocery, but our calculations indicate it’s likely around ~RMB 300BN this year, and still growing in the double-digits. At that level, the division is likely contributing ~US $2.5BN in annual profits.
It’s an impressive result, but admittedly, not a huge needle-mover in light of the total $17.6BN net profits the company is expected to make this year (~14% of overall profits)…” (Click here to read the full text)
1. NVIDIA Corp. (NASDAQ:NVDA)
5-Year Net Income CAGR: 56.73%
TTM Net Profit Margin: 55.04%
Number of Hedge Fund Holders: 179
NVIDIA Corp. (NASDAQ:NVDA) is the pioneer of GPU-accelerated computing, specializing in products and platforms for the large, growing markets of gaming, professional visualization, data center, and automotive. Its GPUs have been instrumental in driving advancements in various fields, including deep learning, autonomous vehicles, and virtual reality.
NetApp has launched a new AI tool utilizing NVIDIA technology. Elon Musk’s xAI is leveraging 100,000 NVIDIA H100 GPUs for its AI project, Colossal, with potential future expansion to include H200 GPUs and Blackwell chips.
NVIDIA Corp. (NASDAQ:NVDA) has formed a strategic partnership with Accenture to accelerate AI innovation. Its AI chip, Blackwell, is now in mass production and experiencing high demand. A partnership with Salesforce is established to enhance businesses’ utilization of AI and data. In September, the company introduced Aerial, an AI tool designed to optimize wireless networks for various devices. Its proprietary software, CUDA, provides a competitive edge. The company’s continued success hinges on its ability to sustain innovation and monetize AI effectively.
The company’s CEO believes its competitive advantage in AI chips is sustainable. Snowflake, a cloud data warehousing company, that utilizes Nvidia’s AI Enterprise software to integrate NeMo Retriever microservices into its Snowflake Cortex AI, has seen its stock price rise 10% in the past month due to strong prospects driven by a strong portfolio and expanding partner base.
The recent earnings beat, upwardly revised guidance, and upward stock movement all point to a potential continued upward trajectory. Investors may want to consider adding NVIDIA Corp. (NASDAQ:NVDA) to their watchlist or portfolios given its positive momentum.
Vltava Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“Over the summer, we devoted a lot of time to studying the AI-related investment wave. This spans a wide range of sectors and our view could be very briefly summarised as follows: The first-tier beneficiaries are primarily companies in the semiconductor sector, NVIDIA Corporation (NASDAQ:NVDA) perhaps the most. That company is benefiting from the huge increase in investment by large technology companies to build enormous data centres. We know who NVIDIA’s customers are. They are companies like Meta, Alphabet, Amazon, and Microsoft. They are investing hundreds of billions of dollars into their AI capabilities. What is not entirely clear, however, is who are and will be the customers of NVIDIA’s customers, and, more importantly, when, and if, they will be able to come up with such huge demand for AI services that the profits from AI will justify and pay for the enormous investments all these companies have been making. The further we move away from the starting point that NVIDIA represents in our more broadly-reaching estimates, the lessreliable those estimates are.So far, we know just one thing for sure, and that is that investments in AI capabilities are ongoing and they are huge. They are not only bringing large demand to chipmakers and the semiconductor sector but to some other sectors as well. Indeed, building AI clusters also requires the construction of new semiconductor factories, new energy sources, and all the associated infrastructure. The numbers under consideration are incredibly high. It is possible that over the next decade the construction of AI centres will necessitate a 20% increase in US energy consumption. The investment required will be measured not in the hundreds of billions of dollars, but in an order of magnitude higher. Maybe two orders of magnitude.”
While we acknowledge the growth potential of NVIDIA Corp. (NASDAQ:NVDA), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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