We recently compiled a list of the 10 Stocks That Will Skyrocket. In this article, we are going to take a look at where Berkshire Hathaway Inc. (NYSE:BRK-B) stands against the other stocks.
The primary lure of investing, as you’re likely to know, is to make money. Every day thousands of investors pour into the market to pick out what they believe will be winners to make them rich. And, the market delivers as well. This has been quite clear in 2024, with the hype surrounding artificial intelligence having delivered previously unthinkable returns. Wall Street’s favorite AI stock, the chipmaker that’s responsible for providing the industry with GPUs to run AI workloads, has gained a whopping 636% since ChatGPT was released in November 2022. This stock ranks 4th in our list of Analyst Says These 10 AI Stocks Have More Upside Potential, so if you haven’t guessed by now, then do take a look.
Looking at these spectacular returns, one would be hard pressed to conclude that if you want to make money on the stock market, then growth is the way to go. But as is the case with most things in life, details are lurking under the hood that go against this simple supposition. On this front, professors from the University of Illinois looked at the returns of large cap and small cap value and growth stocks starting from 1969 and ending in 2001. Taking a geometric mean of these returns, they revealed that large cap growth (‘glamour’) stocks delivered mean returns of 4.5%, 7.9%, and 3.8% between 1969-2001, 1979-2001, and 1990-2001, respectively. On the other hand, large cap value stocks delivered returns of 16.4%, 20.4%, and 18% over the three respective time periods. What’s more, is that the returns offered by the value stocks during 1969 and 2001 also surpassed the returns of the S&P 500 index which sat at 11.4%!
But what about small caps? After all, small caps are all the hype on Wall Street these days as investors position themselves for an interest rate cut. July 11th saw the S&P’s flagship index bleed 91 basis points, with the technology heavy NASDAQ shedding 1.98%. The NASDAQ’s drop was led by its 100 most valuable non financial companies which shed 2.15% during the same day. On the other hand, the rising fortunes of small cap stocks accelerated on the 11th. The leading small cap stock index gained 2% during the day and nearly matched this during the first half an hour of trading on the 12th by gaining 1.6% as it opened significantly higher after the after and pre market trading sessions.
Looking at these gains, you might be wondering which small cap stocks might be worth their while. Well, we looked at analyst sentiment as part of our coverage of 8 Best Small-Cap Stocks Ready to Explode According to Analysts and hedge fund sentiment as part of 15 Small-Cap Stocks with High Potential so you should check them out if you’re interested in small cap stocks.
Coming back to the professors’ research, during 1969-2001, 1979-2001, and 1990-2001, small cap growth stocks, were down by 2.8%, 1.8%, and 6.2%, respectively. On the other hand, small cap value stocks delivered geometric mean returns of 18.3%, 22.8%, and 17.7%, respectively. Seems like over the long term, investing in value stocks appears to be just as, if not more, worthwhile while large cap growth stocks appear to fare better than their small cap. peers.
While you might be thinking that these stats do not apply to the current market, it’s also true that they are relevant to an extent especially since 1990 to 2001 was characterized by soaring valuations fuelled by internet stocks. Right now, AI is all that anyone can talk about, even as investors are moving out of big ticket technology names into the under appreciated small caps. Back then, the shares of a California based internet connectivity equipment provider soared by a whopping 53,207% between January 1991 and April 2000. So, this would have seen $1,000 invested during the start soar to $533,000 at the peak, which, fair to say, is life changing money for most of us. Yet, those same shares are down by 36% since then and had tumbled by as much as 79% by February 2009. If you’re interested in knowing what this stock is, it ranked 8th on our list of the 10 Best Communication and Media Stocks To Buy According to Hedge Funds.
At the same time, not all growth stocks end up lower. Some of the biggest examples that weathered the storm after the dotcom bubble popped are the largest companies today. They belong to the eCommerce, consumer and enterprise software, and the broader technology industries. Today’s mega cap stocks have gained anywhere between 6,455% to 203,377% and 437,010% since they were listed for trading. Safe to say, these ‘fads’ of the time weren’t fads and the market knew what it was doing.
Their returns are also what drive growth investors in droves to the stock market. While eCommerce and consumer technology were trends of the past, there are dozens of trends that newsletter publishers have embraced with open arms these days as they promise the next stock capable of delivering 10x or even 100x in returns. Since you’re likely to be aware of AI at this point, we’ll skip it out and list some other ideas. One of the biggest, and perhaps underreported ideas that newsletters have been pitching is quantum computing. Quantum computing expands the amount of data that a traditional computer can compute, and while its stocks haven’t delivered strong returns yet, publishers believe that the future is bright. You can look at some quantum computing stocks and a broader industry overview by reading 12 Best Quantum Computing Stocks To Invest In.
One trend that has delivered returns is weight loss. Since March 2023, these stocks have delivered as much as 173% in returns, and with newer products such as pills under development, some folks believe that there’s more room left for growth. Another highly pitched trend is energy, specifically nuclear energy, uranium miners, and energy infrastructure stocks. All these will benefit from the growth in electricity consumption from AI data centers, according to newsletter publishers.
Our Methodology
To make our list of the stocks that might skyrocket, we scanned investment newsletters from Stock Gumshoe and narrowed down 20 stocks from newsletters dated back as far as June 13th. These were ranked by the number of hedge funds that had bought the shares in Q1 2024 and the top ten stocks were chosen. Stock Gumshoe’s thesis and the date of each newsletter are also mentioned.
We also mentioned the number of hedge funds that had bought these stocks during the same filing period. 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).
A team of insurance professionals in a boardroom overlooking a city skyline.
Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Investors in Q1 2024: 119
Date of Newsletter: July 2nd
Coming back to Whitney Tilson, this stock is so good he’d be willing to bet not only his future but also his children’s future on it by putting 50% of their inheritance in it. This stock can “generate more returns than annuities, life insurance, gold, or a house,” so looks like it’s relevant to just cut to the chase and see what the hype is all about.
The hype, it appears, is about Warren Buffett’s investment holding company Berkshire Hathaway Inc. (NYSE:BRK-B). It has a fortress of a balance sheet with $38 billion in cash and it is also the most recognizable investment brand name in America. Tilson’s buy point for Berkshire Hathaway Inc. (NYSE:BRK-B) is $407, and Gumshoe also speculates that Tilson is also being a bit disingenuous in promoting the stock since it’s traded above the intrinsic value for quite some time. While Buffett will be a centurion in a couple of years, Berkshire Hathaway Inc. (NYSE:BRK-B) has some of the best investment professionals on its team. It might not be the stock for the growth junkies though, as Warren Buffett’s secret investment sauce is built on gradual value accretion through compounding.
Overall BRK-B ranks 3rd on our list of the stocks that will skyrocket. You can visit 10 Stocks That Will Skyrocket to see the other stocks that are on hedge funds’ radar. While we acknowledge the potential of BRK-B as an investment, our conviction lies in the belief that some 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 BRK-B but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.
