In this article, we will take a look at the 12 aggressive stocks picked by hedge funds. To see more such companies, go directly to Aggressive Stock Portfolio: 5 Stocks Picked by Hedge Funds.
Aggressive investing isn’t for the faint hearted, especially during the current market turmoil where even the most stable companies are wavering amid rising inflation, the Federal Reserve’s rate hikes, and uncertainty about the future.
According to a report by US Bank:
“Inflation levels and interest rates influence the price investors are willing to pay for anticipated earnings. Elevated inflation erodes the purchasing power of future dividend payments and earnings streams while rising interest rates make higher-yielding safer assets such as U.S. Treasuries more attractive. Taken together, elevated inflation and rising interest rates cause investors to demand higher compensation for taking on equity price risk, paying lower prices.”
However, aggressive portfolios by definition seek to invest in companies that have the potential to post high returns despite being risky. Aggressive investors should be ready to wait for long periods of time because small, high-growth companies do not start posting profits overnight.
According to a report by MFS Investment Management, investors who tend to sell during bear markets amid panic also lose potential profits when markets begin to turn the corner. The report said that historically, bull markets have beaten bears and driven long term gains. The report said that “time after time” markets have come out of the bear runs. These market declines, when you are in the middle of them, look never-ending. But in hindsight, these bear cycles look short.
The MFS report also highlighted an interesting data point which shows why long-term investors who are willing to wait almost always win. The report said that “stocks have generated positive returns 100% of the time over 20-year periods as of the end of 2022.”
When you start to decrease the time window of investments, stocks’ outperformance probability begins to decrease. For example, during a one-year period, the S&P 500 went up 74% of time, while on a ten-year window the index went up 92% of the time.
As investors continue to pile into defensive securities amid recession fears, investing in aggressive growth stocks might not be popular for the rest of the year. But, as we mentioned above, the aggressive growth investment strategy could bear fruit in the long term.
Photo by Chris Liverani on Unsplash
Our Methodology
For this article we used Yahoo Finance’s aggressive small cap stocks screener and picked the most popular aggressive stocks from this basket based on hedge fund sentiment. The Yahoo Finance’s screener identifies companies with high EPS growth on a YoY basis. We tried to pick pure growth stocks that have long-term growth potential. Our list is ranked in ascending order of the number of hedge funds having stakes in these stocks.
Aggressive Stock Portfolio: 12 Stocks Picked by Hedge Funds
12. Granite Construction Incorporated (NYSE:GVA)
Number of Hedge Fund Holders: 14
California-based construction company Granite Construction Incorporated (NYSE:GVA) shares have gained about 44% over the past 12 months. Recently, Granite Construction Incorporated (NYSE:GVA) posted strong Q4 results. Adjusted EPS in the quarter came in at $0.56, beating estimates by $0.20. Revenue in the quarter came in at $789.21 million, surpassing estimates by $57 million. For fiscal 2023, Granite Construction Incorporated (NYSE:GVA) expects its revenue to come in the range of $3.4 billion to $3.6 billion, versus the consensus estimate of $3.4 billion. Adjusted EBITDA margin came in the range of 7.5% to 9%.
A total of 14 hedge funds tracked by Insider Monkey had stakes in Granite Construction Incorporated (NYSE:GVA) at the end of 2022. The most notable hedge fund stakeholder of Granite Construction Incorporated (NYSE:GVA) was Ken Griffin’s Citadel Investment Group which has a $16 million stake in the company.
Bernzott Capital Advisors made the following comment about Granite Construction Incorporated (NYSE:GVA) in its Q4 2022 investor letter:
“Granite Construction Incorporated (NYSE:GVA): The engineering and construction company reported better than expected top and bottom-line results which led to outperformance during the quarter. As legacy contracts roll off the books and backlog of new, more profitable business continues to grow, margins should expand. The pace of new contract awards continues to accelerate as overall funding focused on the improvement in the nation’s infrastructure begins to materialize.”
11. Arhaus, Inc. (NASDAQ:ARHS)
Number of Hedge Fund Holders: 16
Furniture retailer Arhaus, Inc. (NASDAQ:ARHS) is having a remarkable 2023 after the company upped its guidance. Arhaus, Inc. (NASDAQ:ARHS) has gained about 50% year to date through February 27. Arhaus, Inc. (NASDAQ:ARHS) expects its revenue for the full year to come in the range of $1.22 billion to $1.23 billion, versus its prior guidance range of $1.17 billion to $1.19 billion. The consensus estimate for this figure is $1.19 billion. Comparable sales growth is expected to come in at 51.0% to 51.4%.
Arhaus, Inc. (NASDAQ:ARHS)’s management said that it was “encouraged” by the strengths and momentum in its business in the fourth quarter.
As of the end of the fourth quarter of 2022, 16 hedge funds tracked by Insider Monkey reported having stakes in Arhaus, Inc. (NASDAQ:ARHS), up from 13 hedge funds in the previous quarter.
10. ZipRecruiter, Inc. (NYSE:ZIP)
Number of Hedge Fund Holders: 18
ZipRecruiter, Inc. (NYSE:ZIP) shares are under pressure after posting weak Q4 revenue. However, this aggressive stock portfolio pick could be a stock with long-term potential due to its presence in a high-growth market. ZipRecruiter, Inc. (NYSE:ZIP) is using AI to connect job seekers and employers. About 25 million users engage with ZipRecruiter, Inc. (NYSE:ZIP)’s platform and 9 million jobs are posted on ZipRecruiter website every month. Analysts believe ZipRecruiter, Inc. (NYSE:ZIP)’s large datasets and its technology used to increase efficiency could make it stand out among other job platforms.
At the end of the fourth quarter of 2022, 18 hedge funds tracked by Insider Monkey reported owning ZipRecruiter, Inc. (NYSE:ZIP) shares. The biggest hedge fund stakeholder of ZipRecruiter, Inc. (NYSE:ZIP) during this period was D E Shaw with an $11 million stake. The second biggest stakeholder of ZipRecruiter, Inc. (NYSE:ZIP) according to Insider Monkey’s database was John Osterweis’ Osterweis Capital Management with a $5 million stake.
9. H&E Equipment Services, Inc. (NASDAQ:HEES)
Number of Hedge Fund Holders: 18
H&E Equipment Services, Inc. (NASDAQ:HEES) rents and sells equipment. It ranks 8th in our list of aggressive stock portfolio picks of elite hedge funds. In February, H&E Equipment Services, Inc. (NASDAQ:HEES) posted its fourth-quarter results. Adjusted EPS in the quarter totaled $1.41, beating estimates by $0.45. Revenue in the quarter increased by 25.5% on a YoY basis to reach $353.1 million, beating estimates by $13.78 million.
H&E Equipment Services, Inc. (NASDAQ:HEES) said that its EBITDA in the fourth quarter of 2022 jumped about 56.1% to $171.5 million.
H&E Equipment Services, Inc. (NASDAQ:HEES) is also a dividend-paying stock. H&E Equipment Services, Inc. (NASDAQ:HEES)’s dividend yield stands at about 2% as of February 27. Earlier in February, H&E Equipment Services, Inc. (NASDAQ:HEES) declared a quarterly dividend of $0.275 per share, in line with the previous dividend. The dividend is payable on March 10.
As of the end of the fourth quarter of 2022, 18 hedge funds tracked by Insider Monkey reported owning stakes in H&E Equipment Services, Inc. (NASDAQ:HEES).
8. Pactiv Evergreen Inc. (NASDAQ:PTVE)
Number of Hedge Fund Holders: 19
Food packaging and food service products company Pactiv Evergreen Inc. (NASDAQ:PTVE) is a high-growth stock that has some volatility but with potential rewards in the long term. For the third quarter, Pactiv Evergreen Inc. (NASDAQ:PTVE)’s GAAP EPS came in at $0.98, beating estimates by $0.83. Revenue in the quarter jumped about 15% on a YoY basis to total $1.61 billion, beating estimates by $130 million.
Pactiv is a dividend-paying stock. In November, Pactiv Evergreen Inc. (NASDAQ:PTVE) announced a quarterly dividend of $0.10 per share, in line with previous. Forward dividend yield at the time came in at 3.73%.
As of the end of 2022, 19 hedge funds in Insider Monkey’s proprietary database of 943 hedge funds had stakes in Pactiv Evergreen Inc. (NASDAQ:PTVE). The total value of these stakes was about $87 million. The biggest stakeholder of Pactiv Evergreen Inc. (NASDAQ:PTVE) was David Rosen’s Rubric Capital Management which had a $51 million stake in the company.
7. Phreesia, Inc. (NYSE:PHR)
Number of Hedge Fund Holders: 19
Phreesia, Inc. (NYSE:PHR) makes software applications for the healthcare industry. In December Phreesia, Inc. (NYSE:PHR) posted strong Q3 results and also upped its fiscal 2023 guidance.
For the third quarter Phreesia, Inc. (NYSE:PHR)’s revenue came in at $73.1 million, a 31% increase on a YoY basis.
6. Masonite International Corporation (NYSE:DOOR)
Number of Hedge Fund Holders: 20
Interior and exterior doors designer Masonite International Corporation (NYSE:DOOR) ranks 5th in our list of aggressive stock picks of hedge funds. During the fourth quarter of 2022, Masonite International Corporation (NYSE:DOOR)’s adjusted EPS came in at $1.72, missing estimates by $0.15. Revenue in the quarter increased by about 6.3% on a YoY basis to reach $676 million, beating estimates by $34.99 million. Masonite International Corporation (NYSE:DOOR) said that its North American Residential sales jumped about 7% to reach $528 million.
Out of the 943 hedge funds tracked by Insider Monkey, 20 hedge funds had stakes in Masonite International Corporation (NYSE:DOOR) as of the end of the fourth quarter of 2022. The total worth of these stakes was about $267 million. The biggest stakeholder of Masonite International Corporation (NYSE:DOOR) was Kevin Oram and Peter Uddo’s Praesidium Investment Management Company which owns a $107 million stake in the company.
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Disclosure: None. Aggressive Stock Portfolio: 12 Stocks Picked by Hedge Funds is originally published on Insider Monkey.
