In this article, we will take a look at 8 Hot Growth Stocks To Buy According to Hedge Funds.
A month before the election that spelled Donald Trump’s victory, the U.S. Bureau of Labor Statistics released a report showing a robust labor market with rising wages, a decrease in unemployment, and the addition of 254,000 jobs in September. The unemployment rate fell to 4.1% in September, down from 4.2% in August and 4.3% in July. Earlier concerns arose when the unemployment rate increased, leading some economists to worry that the Federal Reserve’s decision not to cut interest rates impacted the labor market.
However, the Fed eased those concerns in September by cutting the federal funds rate by half a percentage point. The Fed had initially raised rates aggressively beginning in March 2022 to combat inflation, pausing mid-2023. While inflation has cooled significantly since peaking in June 2022, economists note the high rates continue to impact the economy, especially the housing market. That said, Fed Chair Jerome Powell addressed the housing market on September 30, noting that he expects housing inflation to keep easing and that overall economic conditions are conducive to further disinflation.
On another note, while September’s Consumer and Producer Price Indexes aligned with expectations, signaling that inflation is trending toward the Federal Reserve’s 2% target, economists at Goldman believe the Fed may have already reached that goal. The investment bank forecasts that the Commerce Department’s Personal Consumption Expenditures (PCE) price index for September will show a 12-month inflation rate of 2.04%. If accurate, this figure would be rounded down to 2%, aligning perfectly with the Fed’s long-standing objective. This would come just over two years after inflation surged to a 40-year high, prompting a series of aggressive interest rate hikes. Moreover, the S&P 500 has gained 4% since the Fed’s rate initial cut last month, as investors have poured over $20 billion into U.S. stock funds.
Both Fundstrat and Goldman raised their year-end stock market forecasts in week 41 of this year, with Goldman predicting an additional 2% rise after the S&P 500 exceeded its previous target. This would cap off an already strong year, with the index up more than 20%. A key driver behind the forecasts for continued stock price growth is the expectation that a broader range of industries will contribute to the market’s rise. However, in reality, indexes like the S&P 500 remain largely dependent on investor enthusiasm for tech, particularly in the realm of artificial intelligence. On that note, the bank also pointed to a recovering microchip supply chain, which is expected to lift profits for both chipmakers and tech giants as they develop new AI applications.
While historical performance isn’t always a reliable indicator, seasonal trends suggest that Q4 often boosts the broader U.S. markets, partly driven by increased consumer spending during the holiday season. Market analysts also note that growth stocks tend to perform well when global interest rates reverse course. However, Adam Parker, CEO of Trivariate Research, shared in an interview with CNBC that he feels more pessimistic about growth stocks compared to his outlook before August 5 lows, citing the unusual market conditions and a slight dip in corporate earnings growth projections.
Moreover, despite high expectations that interest rate cuts by the Federal Reserve would boost the stock market, this hasn’t materialized as anticipated. Investors seem to be increasingly sensitive to growth concerns amid a global landscape marked by the U.S. presidential election, Middle East instability, and an uncertain Fed rate outlook for next year. While the Fed has hinted at more rate cuts, moving too quickly could jeopardize inflation goals. Regarding this, analysts at Stifel made the following remarks:
“The conclusion … is that if the Fed cuts rates in 2025 absent a recession (two 25’s as this year comes to a close do not count) then that would be a mistake, with investors paying the price in latter 2025 / 2026, based on historical precedent.”
In terms of making money in the stock market, most investors are naturally drawn to growth stocks. While defensive investments are gaining traction due to global economic slowdown, Andrew Slimmon of Morgan Stanley Investment Management advises against this approach. These sentiments emphasize that high-growth stocks can outperform the market and deliver strong returns even if the stock fluctuates during the short term. Many of these stocks have shown impressive revenue growth and, with key catalysts in place, may continue to outperform.
Additionally, hedge funds see the most promising growth stocks as those positioned to benefit from rising consumer purchasing power. As the Fed aims for a soft economic landing, consumer cyclical stocks may gain, bolstered by improved consumer spending. Rate cuts should also support growth and tech stocks, setting the stage for potential gains across these sectors. In that same vein, the average annual return for the 500 largest-cap companies has consistently exceeded 10%, giving investors strong confidence to favor the stock market over more conservative options like bonds or fixed-income securities.
Our Methodology
In this article, we compiled a list of the top growth stocks with year-to-date gains exceeding 20%. These hot stocks to buy are ranked in ascending order based on hedge fund sentiment, offering a clear view of which growth stocks are most favored by institutional investors.
At Insider Monkey, we are obsessed with 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. Palantir Technologies Inc. (NYSE:PLTR)
Year-To-Date Gain as of November 6: 152.83%
Number of Hedge Fund Holders: 44
Palantir Technologies Inc. (NYSE:PLTR) is a data analytics and software company whose platforms are used by government agencies, financial institutions, and large organizations to interpret complex data sets.
The company has made a number of strategic moves in the market, which include securing a $99.8 million military AI contract expansion from the DEVCOM Army Research Laboratory and a multi-year contract with Nebraska Medicine to implement its AI platform (AIP). Additionally, Palantir Technologies Inc. (NYSE:PLTR) partnered with Edgescale AI Inc. to launch Live Edge, combining its Edge AI with Edgescale’s infrastructure technology.
On September 16, BofA Securities reiterated a Buy rating for Palantir Technologies Inc. (NYSE:PLTR), setting a price target of $50. CEO Dr. Alexander Karp’s confidence in the company’s growth potential—especially after its inclusion in the S&P 500—has bolstered investor sentiment. Karp believes the company has the potential to grow tenfold from its current size.
7. Applovin Corp. (NASDAQ:APP)
Year-To-Date Gain as of November 6: 321.69%
Number of Hedge Fund Holders: 54
AppLovin Corp (NASDAQ:APP) is a U.S.-based mobile technology company that connects app developers with advertisers, offering a suite of tools and services to help developers monetize their apps through advertising, while providing advertisers with effective strategies to reach their target audience.
Loop Capital initiated coverage on AppLovin Corp (NASDAQ:APP) with a Buy rating and a price target of $181 on October 22, emphasizing the company’s pivotal role in the mobile gaming industry and its successful use of big data and artificial intelligence as key drivers of its positive outlook. Loop Capital also highlighted AppLovin’s potential expansion into eCommerce advertising as a key growth driver, which could significantly increase the company’s total addressable market (TAM).
AppLovin Corp (NASDAQ:APP) reported impressive third-quarter earnings, exceeding analyst expectations. The mobile app technology company posted adjusted earnings per share of $1.25, outperforming the consensus estimate of $0.92 by $0.33, while its quarterly revenue reached $1.2 billion, marking a 39% year-over-year increase and surpassing the analyst forecast of $1.13 billion. Notably, revenue from the company’s Software Platform, a significant growth driver, soared by 66% year-over-year to $835 million.
ClearBridge Mid Cap Strategy stated the following regarding AppLovin Corporation (NASDAQ:APP) in its Q3 2024 investor letter:
“Stock selection in the IT sector was the greatest contributor to relative performance, driven by AppLovin Corporation (NASDAQ:APP), which operates a software-based platform for advertisers to enhance the marketing and monetization of their content, particularly in mobile apps. We believe the company is one of the best examples of an AI beneficiary in the mid cap market, as it has already incorporated AI capabilities into its platform, translating into more effective take rates on clients’ mobile games and transactions. We believe mobile games represent only the tip of the iceberg of AppLovin’s potential for its AI-enabled platform and that it has a strong growth trajectory over the next few years.”
6. Boston Scientific Corporation (NYSE:BSX)
Year-To-Date Gain as of November 6: 44.57%
Number of Hedge Fund Holders: 82
Boston Scientific Corporation (NYSE:BSX) is a global leader in medical device manufacturing, offering a wide range of products such as heart monitors, brain stimulation systems, catheters, and stents.
The company posted a strong 18% year-over-year organic growth in third-quarter results, exceeding market expectations. This strong performance contributed to a 26% annual increase in earnings per share. In response, the company raised its 2024 guidance, now expecting 15% organic sales growth by year-end. Additionally, Boston Scientific Corporation (NYSE:BSX) announced plans to acquire Axonics, reinforcing its commitment to boosting capacity and efficiency across key medical segments.
On October 21 TD Cowen expressed a positive outlook on Boston Scientific Corporation (NYSE:BSX), raising its price target from $86 to $100 and maintaining a Buy rating.
The company’s recent success is fueled by strong performance from key products like Farapulse, which is capturing market share from competing radiofrequency (RF) and cryoablation technologies.
Janus Henderson Enterprise Fund stated the following regarding Boston Scientific Corporation (NYSE:BSX) in its Q2 2024 investor letter:
“Medical device company Boston Scientific Corporation (NYSE:BSX) was another contributor. The stock rose on excitement over the company’s U.S. launch of FARAPULSE, a state-of-the-art pulsed field ablation system that treats atrial fibrillation with less damage to surrounding tissues relative to previous therapies. Boston Scientific is currently the only provider of this technology, which taps into a large and growing addressable market. Even beyond our excitement around FARAPULSE, we continue to like Boston Scientific for its diversified product portfolio, which has provided many potential drivers of revenue growth.”
5. Vistra Corp (NYSE:VST)
Year-To-Date Gain as of November 6: 213.92%
Number of Hedge Fund Holders: 92
Vistra Corp (NYSE:VST) is a Texas-based, vertically integrated energy company with a broad portfolio that includes electricity generation, wholesale energy sales, fuel production, and logistics. The company provides electricity and natural gas to residential, commercial, and industrial customers.
On October 17, JPMorgan initiated coverage of Vistra Corp (NYSE:VST) with an Overweight rating and a price target of $178. The firm emphasized the company’s strong positioning within Texas’s growing power demand landscape, noting potential gains from natural gas production growth and market volatility. JPMorgan’s analysis also highlighted a potential increase in baseload electricity demand, predicting a supply shortfall of around 40 gigawatts by 2030, mainly due to coal plant retirements and Texas Emissions Reduction Plan (TERP) incentives. This scenario could benefit Vistra Corp (NYSE:VST) significantly.
Looking ahead to 2025, Vistra Corp (NYSE:VST) raised its adjusted EBITDA midpoint range by $200 million, citing favorable market conditions and effective hedging strategies. The company, known for its shareholder-friendly approach, has returned about $5 billion to investors since late 2021 and plans to continue share buybacks of at least $2.25 billion through 2025.
Here’s what Fidelity Investments said about Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“An overweight stake in utility company Vistra Corp. (NYSE:VST) (+24%) was the top individual relative contributor. In Q1, the Texas-based independent power producer completed its acquisition of Ohio-based nuclear fleet operator Energy Harbor. The new Vistra, with its expanded geographic footprint, is in strong position to gain from the buildout of AI-capable data centers, which require enormous amounts of power to run. It is expected that local grids in the U.S. will need to invest heavily over the coming years to improve their power infrastructure and meet growing demand. In the nearer term, firms may choose to contract with independent power producers, like Vistra, rather than rely on the local provider.”
4. Micron Technology, Inc. (NASDAQ:MU)
Year-To-Date Gain as of November 6: 23.55%
Number of Hedge Fund Holders: 120
Micron Technology, Inc. (NASDAQ:MU) is a leading producer of memory and data storage solutions, including dynamic random-access memory (DRAM), flash memory, and solid-state drives (SSDs). As one of the world’s largest manufacturers of DRAM and NAND flash memory, its components are vital to various electronic devices.
Cantor Fitzgerald has reaffirmed its bullish stance on Micron Technology, Inc. (NASDAQ:MU), maintaining an Overweight rating and a price target of $150. This follows an investor call centered around the health of the DRAM and high-bandwidth memory (HBM) markets, as well as Micron’s evolving product lineup. The firm highlighted Micron’s strategic shift toward higher-value solutions, particularly in high-capacity server DRAM, LPDDR5, and enterprise SSDs. While HBM has garnered attention, the broader transition to high-margin products remains underappreciated by many investors. These innovations are expected to drive significant revenue in fiscal year 2025.
In Q4 2024, Micron Technology, Inc. (NASDAQ:MU) reported net income of $887 million on $7.75 billion in revenue, marking a 93% increase from $4 billion in the same period the previous year. Non-GAAP earnings were $1.18 per share. For the first quarter of 2025, the company expects revenue to reach $8.7 billion, surpassing Wall Street’s estimate of $8.21 billion.
Parnassus Value Equity Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Micron Technology, Inc. (NASDAQ:MU) posted fiscal-third-quarter results that met expectations. Micron’s DRAM (dynamic random access memory) and NAND (non-volatile storage technology) segments grew revenue strongly, continuing the company’s recovery from a cyclical downturn last year. We believe Micron is well positioned to capitalize on AI-driven demand for greater memory.”
3. Broadcom Inc. (NASDAQ:AVGO)
Year-To-Date Gain as of November 6: 55.63%
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) is a global leader in technology, specializing in semiconductor design and enterprise software. The company’s product lineup includes cable modems, networking processors, and storage adapters, catering to diverse markets such as data centers, networking, software, broadband, storage, and wireless.
BofA Securities reaffirmed its Buy rating on Broadcom Inc. (NASDAQ:AVGO) with a price target of $215, following a meeting at Broadcom’s headquarters attended by CEO Hock Tan, CFO Kirsten Spears, and IR head Ji Yoo, which saw strong investor interest. The discussion focused on Broadcom’s growing presence in the artificial intelligence market. The company expects AI-related sales to contribute roughly $12 billion, or 24% of its total revenue, in fiscal year 2024. This growth comes from a total addressable market (TAM) projected between $100 billion and $125 billion, driven by increasing AI workload demands.
In the third quarter, Broadcom Inc. (NASDAQ:AVGO) reported $13.1 billion in revenue, reflecting a 47% increase year-over-year. This growth was fueled by robust AI-related revenue, strong VMware bookings, and stable non-AI semiconductor sales. For Q4 2024, Broadcom anticipates a 10% sequential increase in AI revenue to $3.5 billion, bringing the full-year total to $12 billion, primarily driven by ethernet networking and custom AI accelerators for data centers.
2. Uber Technologies, Inc. (NYSE:UBER)
Year-To-Date Gain as of November 6: 25.47%
Number of Hedge Fund Holders: 145
Uber Technologies, Inc. (NYSE:UBER) is a global leader in ride-hailing, food delivery, and freight services, transforming urban transportation by connecting users with drivers via its app since its inception.
Notably, Uber Technologies, Inc. (NYSE:UBER) has announced a partnership with autonomous tech startup Avride to enhance its self-driving capabilities. Uber Eats will deploy Avride’s sidewalk delivery robots in Austin, with plans to expand to Dallas and Jersey City. Additionally, Uber Technologies, Inc. (NYSE:UBER) aims to launch robotaxi services in Dallas next year.
In that same vein, On October 11, Jefferies reiterated its Buy rating and $100 price target for Uber Technologies, Inc. (NYSE:UBER) following Tesla’s unveiling of the Cybercab at its robotaxi event. Tesla plans to implement full self-driving technology in its Model 3 and Model Y by 2025 in California and Texas, with Cybercab production slated for 2027. Analysts view this as a positive development for Uber’s ride-hailing business.
1. NVIDIA Corporation (NASDAQ:NVDA)
Year-To-Date Gain as of November 6: 181.03%
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) continues to lead in artificial intelligence, driven by the high demand for its graphic processing units (GPUs), which are essential for powering AI models. The company offers cutting-edge computing and networking solutions, with its GPUs seeing strong demand in both gaming and AI applications, solidifying NVIDIA as a favorite on Wall Street.
Goldman Sachs raised its price target for NVIDIA Corporation (NASDAQ:NVDA) to $150 from $135 per share in a note on October 11, reflecting an 11% potential upside. The bank highlighted NVIDIA’s competitive edge, which is built on factors like its large installed base, continuous innovation at both the chip and data center levels, and a growing portfolio of software solutions, including NVIDIA Parabricks for genomics analysis and NVIDIA AI Aerial for cloud-native 5G networks.
NVIDIA Corporation (NASDAQ:NVDA) shares surged to a record high on November 7, making it the first company to reach a $3.6 trillion market valuation as Wall Street’s rally continued, buoyed by Donald Trump’s return to the White House. Moreover, the company has led the U.S. stock market in gains amid an intense competition among Microsoft, Alphabet, and other major players to expand their AI computing power and capture leadership in this fast-growing sector, with its stock having risen more than 206% year-to-date.
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 potential of NVDA, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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