In this piece, we will take a look at the top stocks that are leading the market in investing in their growth according to Goldman Sachs.
With the 2024 US Presidential Election having come to a close, Wall Street can now focus on the future of artificial intelligence, the Federal Reserve’s interest rate cut cycle, and an economy with lower inflation. As was the case during the coronavirus pandemic when historically low interest rates propelled markets to new highs only to come crashing when rates were hiked in 2022, the shifts that are currently taking place should also affect investors for the next couple of years at the very least.
Naturally, this merits a look at what professional analysts are projecting about the future. On this front, investment bank Goldman Sachs recently updated its long-term forecasts for the US stock market. In a research report titled ‘Global Strategy Paper No. 71, the bank outlined that the upgrade is necessary due to market concentration. This ‘concentration’ refers to roaring investor interest in large and mega-cap stocks primarily due to enthusiasm surrounding artificial intelligence.
Since the biggest technology companies are also the heaviest investors in AI, market returns have also focused on them. As an illustration, consider the performance of the flagship S&P index which is up 30.64% over the past twelve months. Now, consider the performances of Wall Street’s top AI GPU stock, the software company behind Windows, the social networking giant that owns Facebook, Jeff Bezos’ eCommerce company, and the world’s leading search engine provider. Their shares have gained roughly 192.21%, 12.66%, 69.01%, 42.44%, and 27.63% over the same period. Consequently, most mega-cap stocks have driven the market in returns.
As per Goldman, this bifurcation implies that the equal-weight flagship S&P index is likely to outperform the market cap-weighted index “by an annualized 200 bp-800 bp” over the next decade, or between 2024 and 2034. To build its argument, the bank cites historical data which also covers the dotcom boom of the late 1990s and the early 2000s. This bubble is key in understanding today’s market, as it does share some characteristics with the surge in artificial intelligence stocks following OpenAI’s release of ChatGPT and Jensen Huang’s prediction of a trillion dollars of compute capacity waiting for an upgrade.
GS points out that the equal-weight S&P tends to underperform the market weight index sharply before the trend reverses. It cites the market’s performance of the two indexes before the bubble’s ‘pop’ to point out that “the trough in 10-year relative underperformance of the equal-weight vs. cap-weight index occurred during the lead-up to the Dot Com bubble (1990-2000).” This saw the equal weight index lag the market weight index by four percentage points (pp) at the trough or the bottom. After the bottom, the differential flipped and the equal weight index led its counterpart by close to seven points (pp). As per Goldman, the four-point shortfall “has been matched during the past decade (2014-2024E) as the aggregate index has been powered by a few mega-cap Tech stocks and AI euphoria.”
Linking historical performance trends with investor concentration in mega caps and AI stocks, the bank shares that this “extreme level of market concentration (99th percentile) suggests the magnitude of equal-weight outperformance over the next decade should also be stronger than average.” Just how strong can this be? Well GS outlines that the equal weight index can outperform the market weighed index by 8 percentage points. On the flip side, since this is the most bullish forecast, the bank notes that if equal weight index performance reverts to its historical mean over the past 50 years, then “this would imply a less dramatic 2 pp of annualized outperformance.”
While stock market math is all good, other factors also drive its performance. November has seen headlines talk about nothing else but the Presidential Election. Post-election stock performance saw some firms, like Elon Musk’s car company record stunning gains. Goldman’s Shawn Tuteja, who works with exchange-traded funds (ETFs) and baskets, shared some insights about what sectors performed well after the election and whether this outperformance will continue. In a podcast, he outlined that “the biggest themes that we saw play out the day after the election on Wednesday were regional banks and banks getting bought.” He shared that “any sectors that were linked to de-regulation, benefited.” These include “energy, traditional energy versus renewables” with the former up by 4% while the latter losing roughly 10%.
Tuteja added that “the resilience and strength of US tech over the past couple of days post the election” was a standout from the market’s post-election performance in 2016. As to what lies in the future, the Goldman analyst is optimistic. He believes that “what I would expect to come over the next couple of weeks is a continuation on the factor level of the themes that worked post the election.” This is because “it takes time for money to be deployed and for themes to play out.” According to him, in 2016, “regional banks and big banks rallied for months after the election and they outperformed all of the other sectors in the market.” Additionally, while the broader markets might have calmed at a surface level, Tuteja points out that “under the surface, those sector moves become a lot more violent as correlations in the market break, as people start picking winners and losers in the new government regime’s policies.”
For some bank stocks, you can check out 10 Best Local Bank Stocks To Invest In Now and 10 Best Diversified Bank Stocks to Buy Now.
Within this dynamic environment that will see the Fed continue to tailor its interest rate decisions to the economy and companies adjust to a looser monetary policy, firms might also increase their cash spending. In a note covering spending, Goldman shared that the benchmark S&P index firms can increase their spending to 11% next year from 2024’s 8%. This will be driven by rising profits, as the bank believes that earnings “growth alone can explain 40% of next quarter’s cash spending growth.”
Just like it expects equities performance to broaden in the future, the bank also posits that the “typical stock should close the earnings growth gap with the mega-cap tech stocks.” Finally, on the topic of mergers and acquisitions, which slowed down in the wake of historic interest rates, GS is optimistic. It expects “cash M&A will rebound by 20% in 2025,” but cautions that “the potential for tariffs, regulatory changes, and corporate tax reform could meaningfully shift these forecasts.”
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Our Methodology
To make our list of Goldman Sachs’ top growth investment stocks, we used the bank’s recent list of stocks and picked out those with a growth investment ratio of 70% or higher. This ratio is defined as the ratio of capital expenditure and R&D spending excluding depreciation over a firm’s cash flow from operations.
For these stocks, we also mentioned the number of hedge fund investors. 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).
34. Autodesk, Inc. (NASDAQ:ADSK)
Growth Investment Ratio: 70%
Number of Hedge Fund Holders: 55
Autodesk, Inc. (NASDAQ:ADSK) is a productivity software firm that caters to the needs of engineering, architecture, construction, and other industries. As a result, its business is dependent on the broader economic health and activity in the real estate and industrial sectors. For the six months ending in June 2024, 47% of Autodesk, Inc. (NASDAQ:ADSK)’s $2.9 billion in revenue came from the architecture, engineering, and construction industries. Consequently, the health of this sector, driven primarily by interest rates, is key to the firm’s hypothesis. Unlike other productivity software companies, namely Adobe, Autodesk, Inc. (NASDAQ:ADSK) is yet to fully blend artificial intelligence into its product mix. This opens up significant potential for the firm to expand its product offerings to an industry that is typically hesitant to adopt new technologies due to the wide-scale impacts of such decisions. Autodesk, Inc. (NASDAQ:ADSK) also benefits from the fact that its significant market share provides it with strong customer loyalty due to high switching costs. Additionally, the software-centered nature of its business also enables Autodesk, Inc. (NASDAQ:ADSK) to earn subscription revenue and keep costs low.
Polen Capital mentioned Autodesk, Inc. (NASDAQ:ADSK) in its Q2 2024 investor letter. Here is what the fund said:
“With Autodesk, most of the stock’s price weakness came in April. The company announced that it would delay the release of its earnings and 10-K filing as it launches an internal investigation regarding its practices on some non-GAAP financial metrics. Upon further analysis, we were encouraged to hear that they were taking this very seriously and being very comprehensive in their investigation. Ultimately, [it] announced it was closing the investigation and that no re-statements would be required. As discussed in the following section, we chose to exit the position in favor of a more attractive investment.
. . . .We sold our small position in Autodesk to help fund our purchase of Shopify. We still think Autodesk is an advantaged business, with 95%+ recurring revenue, dominant in its end market, and nice tailwinds behind digitization in that end market. It should be a durable grower over time, perhaps with continued fits and starts, but we found the risk-reward around Shopify to be more compelling”
33. eBay Inc. (NASDAQ:EBAY)
Growth Investment Ratio: 71%
Number of Hedge Fund Holders: 38
eBay Inc. (NASDAQ:EBAY) is a well-known e-commerce retailer that has been operating since the start of the dotcom era of the 1990s. However, unlike Amazon, the firm’s decision to focus primarily on third-party sellers and not bulk merchants has meant that it has been unable to grow to Amazon’s scale. Yet, like Amazon and other retailers, eBay Inc. (NASDAQ:EBAY) also depends on high volumes to drive margins and earn profit. The firm has undertaken a new strategy to attract high-spenders to its platform by offering them hard-to-find items and then retaining them by offering other products. eBay Inc. (NASDAQ:EBAY) is also expanding its consumer-to-consumer business model globally to drive volumes in its marketplace. Subsequently, this strategy is now central to the firm’s hypothesis and should influence the share price. The strategy also tends to perform well in an economy where inflation is slowing. As a result, eBay Inc. (NASDAQ:EBAY) could see tailwinds in the future contingent on successful management execution.
During the Q3 2024 earnings call eBay Inc. (NASDAQ:EBAY)’s management shared details for its new strategy. Here is what they said:
“One of the key building blocks underpinning our return to positive GMV growth has been our geo-specific investment, where we leverage our innovation playbook from focused categories to better serve customer needs at the local level. While many of these product experience changes benefit all sellers and buyers, we are particularly focused on consumer-to-consumer or C2C sellers for several reasons. C2C sellers bring some of the most unique inventory to eBay and are typically less price sensitive than B2C sellers. C2C sellers accelerate e-commerce as roughly 60% of their GMV comes from used and refurbished items compared to 40% for our marketplace overall.
Selling on eBay also creates a flywheel effect that stimulates incremental GMV as buyers who sell purchased roughly twice as much on eBay as non-sellers with most of their incremental spend supporting small businesses. As a reminder, our first major geo-specific initiative launched in Germany in March of 2023, and more than 18 months later, we continue to see significantly higher customer satisfaction or CSAT and improved GMV trends for the overall German market. This past April, we rolled out significant enhancements in the UK for pre-owned apparel categories. These improvements included simplified tools for selling and new tools to drive demand through enhanced discovery like Explore and Shop the look. Since then, we have observed material improvements to key C2C metrics like CSAT and active sellers alongside a double-digit improvement in C2C GMV growth in pre-owned apparel versus our prior baseline.”
32. Southwest Airlines Co. (NYSE:LUV)
Growth Investment Ratio: 71%
Number of Hedge Fund Holders: 38
Southwest Airlines Co. (NYSE:LUV) is a sizable American airline with 817 aircraft in its fleet. Like other players in the airline industry, the firm has also faced ‘turbulence’ in 2024 stemming from Boeing’s production woes and delays. Southwest Airlines Co. (NYSE:LUV)’s stock is up 13.7% year-to-date as it continues to recover from a 16% drop in March when Boeing’s delays meant that the airline would receive fewer planes and head into a busy season with tight inventory. To stem the headwinds from these problems, Southwest Airlines Co. (NYSE:LUV) has undertaken a strategy to increase redeye flights, increase revenue from existing passengers, launch vacation packages, and increase partnerships with international airlines. Subsequently, the firm’s narrative is driven by the strategic aims that should drive Southwest Airlines Co. (NYSE:LUV)’s stock performance.
Southwest Airlines Co. (NYSE:LUV)’s management shared details about its strategies during the Q3 2024 earnings call. Here is what they said:
“Our strategic initiative work is also progressing as planned. On the seating and cabin front, we are working actively with both regulatory agencies and vendor partners towards successful approval and certification of our new premium cabin configurations. That would allow aircraft retro fits to begin early next year. We will start with our larger aircraft and the 700s will follow. We are planning to retrofit 50 to 100 aircraft per month, completing the work late next year. We are also announcing today that we have signed our first three direct lodging partners for our Getaways by Southwest product that is planned to launch mid next year and that includes Caesars Properties in Las Vegas. And finally, we are narrowing the launch date of our previously announced partnership with Icelandair for the first quarter of 2025.
Looking at cost and efficiency of initiatives, we continue to expect to end this year with headcount down 2,000 as compared to year end 2023. Improved turn times are reflected in existing schedules starting in November and red-eye service will begin next February. We’re also very proud of our industry-leading domestic operational reliability. We had the best completion factor and on time performance of any major airline this quarter and Andrew will share additional highlights shortly. Regarding progress on our fleet monetization strategy, we’re already starting actively exploring the market and are encouraged by what we are seeing.”
31. F5, Inc. (NASDAQ:FFIV)
Growth Investment Ratio: 73%
Number of Hedge Fund Holders: 17
F5, Inc. (NASDAQ:FFIV) is one of the few software as a service (SaaS) companies that enables customers to secure their virtual software workloads. This is important in today’s cloud computing-driven era where businesses are increasingly relying on third-party virtual products and services as opposed to setting up costly in-house systems. Cloud computing is particularly important in today’s AI-driven technology industry where a few mega players like Microsoft and Amazon offer a plethora of AI-based cloud services to users. This creates a new market for F5, Inc. (NASDAQ:FFIV)’s software and makes it unsurprising that the stock is up by 40% year-to-date. The momentum surrounding the firm was also evident in its fourth fiscal quarter results that sent the stock soaring by 10%. During the quarter, F5, Inc. (NASDAQ:FFIV)’s $583 million in recurring revenue accounted for 78% of its $747 million in overall revenue. It also guided high-end revenue growth of 5% and an operating margin of 35% for fiscal year 2025, leading to fresh investor optimism but also creating concerns about whether F5, Inc. (NASDAQ:FFIV) could sustain recent deal momentum.
During the Q4 2024 earnings call, F5, Inc. (NASDAQ:FFIV)’s management commented on the variability in its deals and licensing revenue during a fiscal year. Here is what they said:
“So we provided some context on the overall revenue growth seasonality for the year where we said it would be kind of low-single digit growth in the first half of the year in mid-single digits second half. And really, the leading contributor to our overall growth in software as you kind of get an idea that the software growth will also probably be stronger in the second half. And again, that’s tied to that larger renewal base that we have coming up in the second half of the year. And so we’ll see how that plays out over the course of the year. But a lot of these opportunities, as we said, they can be pretty material in size. So in any given quarter, there’s going to be some variability up or down in the growth rate.
And so we wouldn’t prescribe too much emphasis on an individual quarter’s growth outlook, but probably the upper-single digit growth, we feel really good about for software. And again, as Francois noted earlier, we have pretty good line of sight to about two-thirds of the footprint of where that software is going to be coming from because its business we’ve already attracted. So that gives us a lot of confidence in the outlook for the year.”
30. Royal Caribbean Cruises Ltd. (NYSE:RCL)
Growth Investment Ratio: 73%
Number of Hedge Fund Holders: 48
Royal Caribbean Cruises Ltd. (NYSE:RCL) is one of the largest cruise ship operators in the US. After the cruise and broader global travel industry was dealt a near-death blow by the coronavirus pandemic, the firm has been on a steady path to recovery. Royal Caribbean Cruises Ltd. (NYSE:RCL) has been seeing booming demand for its products. This was evident in the firm’s third quarter which saw it grow revenue by 17.8% to $4.9 billion. During the quarter, Royal Caribbean Cruises Ltd. (NYSE:RCL)’s load factor, which measures its ship capacity utilization, was an impressive 111%. This indicated that the demand for its products is greater than the firm’s ship inventory. Royal Caribbean Cruises Ltd. (NYSE:RCL) is also aggressively targeting future growth. The firm is developing resorts to expand revenue streams, and its high load factors create the opportunity to charge higher prices and boost margins.
During the Q3 2024 earnings call, Royal Caribbean Cruises Ltd. (NYSE:RCL)’s management shared details about its new resorts. Here is what they said:
“During the quarter, we also announced two exciting expansions of our private destinations portfolio with the incredible Perfect Day Mexico opening in 2027 and Silversea’s new hotel in Puerto Williams, Chile opening in the winter for the 2025-2026 Antarctica season. I want to thank the entire Royal Caribbean Group team for their passion, dedication, and commitment that enables us to deliver the best vacation experiences responsibly and to drive exceptional financial results. These strong financial results and the achievement of our Trifecta financial goals 18 months ahead of schedule are truly just the beginning for us. With our industry-leading global brands, the most innovative fleet and private destinations and the best people, we remain focused on winning a greater share of the $1.9 trillion vacation market.”
29. Trimble Inc. (NASDAQ:TRMB)
Growth Investment Ratio: 80%
Number of Hedge Fund Holders: 41
Trimble Inc. (NASDAQ:TRMB) is a hardware and software firm that serves the needs of the construction, mapping, and other industries. Since it primarily offers positioning products and services, the firm’s fate is dependent on the economy since it determines the performance of industries such as shipping. Trimble Inc. (NASDAQ:TRMB) benefits from the fact that most of its revenue is from margin-heavy subscription services. During the first three months of 2024, 63% of Trimble Inc. (NASDAQ:TRMB)’s revenue came from its subscription business. The firm’s third-quarter results also hinted at the potential pent-up momentum in the stock. Prior to the report, Trimble Inc. (NASDAQ:TRMB)’s shares had marked a modest 17.5% year-to-date gains. After the earnings, the stock shot up by 17.9% as the company’s subscription revenue grew by 10.7% to sit at $568 million. The revenue growth hinted at a recovery in Trimble Inc. (NASDAQ:TRMB)’s key markets of agriculture and transportation in the wake of interest rate cuts by the Federal Reserve.
Meridian Funds mentioned Trimble Inc. (NASDAQ:TRMB) in its Q2 2024 investor letter. Here is what the fund said:
“Trimble Inc. (NASDAQ:TRMB) is a leading industrial technology company that provides hardware, software, and services primarily to the construction, geospatial, transportation, and agricultural industries. Over the last several years, Trimble has been transitioning toward a subscription-based, recurring revenue model. The stock fell in the quarter when its 10K filing was delayed due to an audit that called for additional documentation of internal controls. We don’t view the issue as material and the delay detracted from what otherwise was a very good quarter for its business and maintained our position in the company during the period.”
28. QUALCOMM Incorporated (NASDAQ:QCOM)
Growth Investment Ratio: 82%
Number of Hedge Fund Holders: 100
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the biggest and most important semiconductor design firms in the world. Its processors and graphics processors power most of the world’s smartphones. QUALCOMM Incorporated (NASDAQ:QCOM) operates through a two-fold business model, generating revenue through chip sales and licensing revenue. Its presence in the smartphone industry as the go-to for chips provides QUALCOMM Incorporated (NASDAQ:QCOM) with a wide moat particularly since in-house chips are costly to design and produce. On the flip side, the firm might face headwinds in the future if British design house Arm Ltd. continues its business transformation of offering firms a one-stop-shop solution of chip designs that simply have to be manufactured by contract manufacturers like TSMC. QUALCOMM Incorporated (NASDAQ:QCOM) and Arm are already locked in a legal dispute regarding design rules, and the firm’s dependence on the smartphone market also leaves it vulnerable to cyclical downturns.
Aristotle Capital Management mentioned QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter. Here is what the fund said:
“Qualcomm, a leading wireless communications technology company, was the largest contributor for the quarter. After a period of weaker global demand for smartphones (driven by a slowdown in China) and elevated channel inventory, demand from Chinese handset manufacturers accelerated 40% year‐over‐year. More importantly, in our opinion, Qualcomm continues to execute on a previously identified catalyst of shifting its business mix beyond smartphones. The company announced increased progress for its automotive and Internet of Things (IoT) solutions. Within auto, the increase in vehicle content has resulted in 35% year‐over‐year revenue growth, with a design win pipeline of ~$45 billion, keeping the company on track to achieving ~$4 billion in auto‐related revenues by 2026. In recent years, despite persistent threats of insourcing from large clients (most notably Apple), Qualcomm has been able to retain its high market share in handsets while simultaneously expanding in non‐smartphone devices. We believe this progress is a testament to Qualcomm’s history of high (and productive) R&D spending, resulting in technological superiority. We believe Qualcomm’s technologies will continue to benefit as the world stays on a path toward a proliferation of connectivity between varying devices and as AI applications extend from the cloud to on‐device.”
27. Palantir Technologies Inc. (NYSE:PLTR)
Growth Investment Ratio: 82%
Number of Hedge Fund Holders: 44
Palantir Technologies Inc. (NYSE:PLTR) has shaped up to be one of the most important stocks in today’s AI-driven technology industry. It provides a variety of software products and solutions that enable customers to deploy software, analyze intelligence data, and centralize data management. Palantir Technologies Inc. (NYSE:PLTR) has been one of the best-performing stocks of 2024 as the shares are up 266% year to date. This optimism has been driven by the firm’s unique suitability towards artificial intelligence. Palantir Technologies Inc. (NYSE:PLTR) differs from most other software companies by providing customers the ability to deploy custom models. It does so by assigning teams to gauge customer-specific needs and then tailoring its products to them. This has enabled Palantir Technologies Inc. (NYSE:PLTR) to grow its presence in the US private sector. The firm’s US commercial revenue grew by 70% during Q2, and it kept up the growth pace in Q3. Following Palantir Technologies Inc. (NYSE:PLTR)’s Q3 earnings, the stock soared by 47% over the next week or so. The results saw the firm’s commercial revenue jump by 54% as it indicated strong demand for its AI code evaluation platform.
Palantir Technologies Inc. (NYSE:PLTR)’s management mentioned AI during its Q3 2024 earnings call. Here is what they said:
“We’re witnessing the commoditization of cognition with the rapid advancement of AI models. Almost all investment in the AI space has been focused on supplying and improving these models. What will differentiate the AI haves from the have nots, is the ability to maximally leverage these models in production by capitalizing upon the rich context within the enterprise. This is Palantir’s focus. We see this in the results we’re delivering for our customers. Those who embrace quantified exceptionalism through AIP are able to take advantage of the commoditized cognition in a levered way to advance their differentiation. In this winner take all AI economy, the divide is widening between those who are leveraging AIP and those who are not. At a leading global insurance organization, AIP has helped automate key underwriting workflows, reducing the typical underwriting response time from over two weeks to 3 hours.”
26. Meta Platforms, Inc. (NASDAQ:META)
Growth Investment Ratio: 83%
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META) is the world’s biggest social media company. Courtesy of its social media network Facebook, the firm can boast about having a whopping 3.2 billion users under its wing. This massive user base is also at the center of Meta Platforms, Inc. (NASDAQ:META)’s hypothesis. It makes the firm indispensable to advertisers who have no choice but to run ads on its platform if they want to capture sizable users. The scale has enabled Meta Platforms, Inc. (NASDAQ:META) to amass significant resources, as evident through its $156 billion in trailing twelve-month revenue and $43.9 billion in cash and equivalent. The firm has used these to create a foothold in the AI industry by developing the Llama foundational AI model. Unlike other big tech players which are gearing their AI products towards cloud computing, Meta Platforms, Inc. (NASDAQ:META) is targeting everyday consumers and advertisers on its platform. The billions it has invested in AI means that investors are on the watch-out for profit generation.
Polen Capital mentioned Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter. Here is what the fund said:
“Meta Platforms delivered robust results in the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here, and its guidance for 2Q revenue fell below market expectations. After the company’s “year of efficiency,” where it cut costs in its core business, management is now indicating another ramp-up in GenAI and metaverse spending, spurring concerns about future profit margins. Metaverse spending, by our calculations, is now over $20 billion per year with little to no expected return on the foreseeable horizon.”
25. Garmin Ltd. (NYSE:GRMN)
Growth Investment Ratio: 85%
Number of Hedge Fund Holders: 31
Garmin Ltd. (NYSE:GRMN) is a fitness and recreation technology products provider. The firm designs and sells a variety of gadgets such as smartwatches, golf products, and software. It also has a presence in the aviation and maritime industries and uses it to establish a brand reputation among customers. As of H1 2024, 55% of Garmin Ltd. (NYSE:GRMN)’s revenue came through its Fitness and Outdoor businesses. These businesses are quite cyclical and depend on a robust consumer environment to drive spending. The exposure to cyclicality was evident in Garmin Ltd. (NYSE:GRMN)’s June quarter results when Outdoor revenue dropped 2% annually to sit at $439 million. Yet, even though it is exposed to consumer spending, the firm’s strong brand image and high product quality mean that when spending does recover, it is well positioned to capitalize from it. These strengths have enabled Garmin Ltd. (NYSE:GRMN) to withstand the sluggish US consumer environment by beating analyst Fitness revenue estimates of $396 million for Q3 by posting $463.9 million. The company has also launched new products for the upcoming holiday season, and its shares should respond to consumer demand.
Upslope Management mentioned Garmin Ltd. (NYSE:GRMN) in its Q3 2024 investor letter. Here is what the fund said:
“The Fund also significantly reduced its positions in Garmin Ltd. (NYSE:GRMN) (GRMN, technology business known for smartwatches and navigation systems, among other products) and Kongsberg (KOG-OSL, Norway-based aero/defense and maritime business), due to full valuations. Both are very well-managed leaders in their respective niches. However, a significant amount of good news is clearly baked into shares today.”
24. Uber Technologies, Inc. (NYSE:UBER)
Growth Investment Ratio: 85%
Number of Hedge Fund Holders: 145
Uber Technologies, Inc. (NYSE:UBER) is the most widely used ride-sharing service in the US. It commands 76% of the American market, which provides it with a wide moat and strong brand leverage. Since it’s primarily a ride-sharing company, Uber Technologies, Inc. (NYSE:UBER)’s hypothesis depends on its bookings. The dependence is despite the fact that the firm has diversified its business into other areas such as food delivery and eagerly invests in growth opportunities such as urban air mobility and autonomous ridesharing. Consequently, bookings play a key role in Uber Technologies, Inc. (NYSE:UBER)’s hypothesis as they signal to investors that the firm continues to hold market share. The role of bookings was clear following the firm’s third-quarter earnings when its shares fell by more than 7% after Uber Technologies, Inc. (NYSE:UBER)’s bookings for the quarter missed analyst estimates. Growth in US consumer confidence and tapering inflation could help with bookings moving forward.
RiverPark Advisors mentioned Uber Technologies, Inc. (NYSE:UBER) in its Q1 2024 investor letter. Here is what the fund said:
“UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.4 billion of unrestricted cash and $4.8 billion of investments, the company today has an enterprise value of $165 billion, indicating that UBER trades at 21x our estimates of next year’s free cash flow.”
23. Zebra Technologies Corporation (NASDAQ:ZBRA)
Growth Investment Ratio: 92%
Number of Hedge Fund Holders: 35
Zebra Technologies Corporation (NASDAQ:ZBRA) is a warehousing and logistics technology products provider. The firm’s shares are up 49% year to date despite the fact that its target industry typically struggles in a weak economy constrained by high interest rates. The stock is up because Zebra Technologies Corporation (NASDAQ:ZBRA) is a key player in the warehouse robotics industry. Apart from AI, industry watchers are quite optimistic about the future of robotics particularly due to their ability to perform repetitive and dangerous tasks. Robotics’ exposure to warehousing and logistics serves Zebra Technologies Corporation (NASDAQ:ZBRA) since it is one of the key players in its industry. The firms’ key business divisions, which cater to asset tracking and other operations through barcodes can benefit from dipping inflation if its customers decide to refresh their product inventories. This optimism was also present in Zebra Technologies Corporation (NASDAQ:ZBRA)’s third-quarter earnings during which it guided Q4 EPS at a $3.90 midpoint to beat analyst estimates of $3.54.
Zebra Technologies Corporation (NASDAQ:ZBRA)’s management commented on its automation and AI plans during the Q3 2024 earnings call. Here is what they said:
“We remained well-positioned to benefit from secular trends to digitize and automate workflows with their comprehensive portfolio of innovative solutions including purpose-built hardware, software, and services. We empower frontline workers to execute tasks more effectively by navigating constant change in real time to advance capabilities including automation, prescriptive analytics, machine learning and artificial intelligence. Zebra continues to demonstrate market leadership through innovation. We have consistently reinvested approximately 10% of our revenues into research and development to advance our vibrant core and bring new innovative solutions to market. At recent customer events we hosted in North America and EMEA, we unveiled solutions that underscore our commitment to innovation.
These include the latest version of our work cloud software utilizing advanced AI and machine learning and new rugged tablets for demanding environments. We also highlighted a Zebra kiosk solution offering self-checkout including tap-to-pay capabilities, which enhance the customer experience and enables frontline associates to focus on higher value tasks. This launch enables us to expand Zebra’s addressable market with near adjacent technology that leverages our core software platform. Additionally, we are developing a generative AI mobile computing solution designed to assist frontline workers with sales, merchandising, and operating procedures, which we will feature at the National Retail Federation Trade Show in January.”
22. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Growth Investment Ratio: 92%
Number of Hedge Fund Holders: 108
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor designer that designs and sells CPUs and GPUs. Its products are used by consumers and businesses. In today’s AI era, Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the few companies capable of offering both CPUs and GPUs for AI computing. This places it well to capitalize on any cost constraints that NVIDIA’s GPU customers might face or for firms looking to switch away from Intel’s CPUs. Yet, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s limited resources also mean that the firm struggles to compete at scale with its larger rivals. As a result, it is the perpetual underdog in an industry where high volumes often determine brand and pricing power. Advanced Micro Devices, Inc. (NASDAQ:AMD)’s third-quarter results led to the firm’s Gaming business seeing a strong 90%+ operating income drop, and soon afterward, the firm announced that it would lay off 4% of its workforce. Sustained revenue from AI customers is key to Advanced Micro Devices, Inc. (NASDAQ:AMD)’s hypothesis.
During the Q3 2024 earnings call, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s management commented on its AI business:
“Turning to our Data Center AI business, Data Center GPU revenue ramped as MI300X adoption expanded with cloud, OEM and AI customers. Microsoft and Meta expanded their use of MI 300X accelerators to power their internal workloads in the quarter. Microsoft is now using MI 300X broadly for multiple co-pilot services powered by the family of GPT 4 models.
Meta announced they have optimized and broadly deployed MI 300X to power their inferencing infrastructure at scale, including using MI300X exclusively to serve all live traffic for the most demanding Llama 405B frontier model. We are also working closely with Meta to expand their Instinct deployments to other workloads where MI300X offers TCO advantages, including training. MI300X public cloud instance availability expanded in the quarter with Microsoft, Oracle Cloud and multiple AI specialized cloud providers now offering Instinct instances with leadership performance and TCO for many of the most widely used models. Instinct cloud instance adoption is strong with multiple start-ups and industry leaders adopting MI300 instances to power their models and services, including Essential AI, Fireworks AI, Luma AI and Databricks.”
21. Electronic Arts Inc. (NASDAQ:EA)
Growth Investment Ratio: 106%
Number of Hedge Fund Holders: 40
Electronic Arts Inc. (NASDAQ:EA) is one of the biggest video game companies in the world. It has developed some of the best-known video game brands in the world such as The Sims, FIFA, and Need for Speed. Electronic Arts Inc. (NASDAQ:EA)’s hypothesis depends on its ability to regularly churn out popular video game titles. In an internet-driven era, the firm has been able to secure margin improvements for itself by capitalizing on selling video games online instead of through disks. Additionally, Electronic Arts Inc. (NASDAQ:EA) also benefits from access to sporting franchises such as FIFA and NFL, through which it can count on a loyal fanbase regularly buying newer video game versions. Electronic Arts Inc. (NASDAQ:EA)’s sports titles like College Football and Madden NFL are driving its hypothesis this year. They have allowed it to increase full-year bookings guidance to a midpoint of $7.65 billion from an earlier $7.5 billion and should drive the narrative for the short term.
During its Q2 2025 earnings call, Electronic Arts Inc. (NASDAQ:EA)’s management shared details about these titles:
“With Madden NFL connecting real world events with our own community driven moments, we are extending the in-game experiences to drive engagement 365 days a year. And combined with the launch of College Football this quarter, we have seen incredible success expanding our audience. New players into the community more than doubled year over year, and represented around a quarter of the player base. Through September, College Football 25 was not only the best-selling HD title in North America, it has also proven to be a wholly unique moment of sports culture, connection, and fandom. The impressive launch with the world’s largest NIL program, support from universities, colleges, athletes, partners, and fans, has arguably become one of the biggest moments in American sports entertainment so far this year.
Each week, conversations from the stadiums to social media, from broadcast booths to tailgates, from dorm rooms to wherever fans are, we are seeing our experience at the epicenter of fandom around the sport. This success demonstrates our strategy at work. Combining College with the long history of our success in Madden NFL, we have built the most immersive and deepest American Football experience, making it part of the very fabric of the sport. With new offerings like the MVP bundle and connected modes between the titles, we have seen incredible engagement in our American Football community. We have more players than ever immersed in the sport: for example, total hours played in Q2 are up over 140% year-over-year, demonstrating fans are playing both games.”
20. Biogen Inc. (NASDAQ:BIIB)
Growth Investment Ratio: 107%
Number of Hedge Fund Holders: 46
Biogen Inc. (NASDAQ:BIIB) is a biotechnology company that makes and sells treatments for a variety of diseases such as muscular atrophy, psoriasis, Alzheimer’s, and leukemia. Since it’s a profitable company, the firm is less risky than several other biotechnology stocks that are loss-making entities. As of H1 2024, 62% of the firm’s revenue came from its portfolio of drugs targeting multiple sclerosis. Within this portfolio, TYSABRI and TECFIDERA accounted for substantial portions of Biogen Inc. (NASDAQ:BIIB)’s sales. As a result, the firm’s hypothesis depends on its ability to sustain sales of these drugs until it can launch new products. On this front, Biogen Inc. (NASDAQ:BIIB)’s SKYCLARYS drug for nervous system damage raked in $170 million in revenue in H1 for a nice addition to its portfolio. However, TECFIDERA and TYSABRI revenue fell, and if the drops continue then the firm could face trouble down the road.
As for the treatments that it is developing, here’s what Biogen Inc. (NASDAQ:BIIB)’s management shared during the Q3 2024 earnings call:
“So BIIB080, one of the things that excites me is that although this is an intrathecal as Priya will say, we recruited early on this one and were finished recruiting. And to me, as someone who’s had commercial experience over 35 years, when I see a clinical trial recruiting early, particularly in a competitive space where there are existing therapies, that augurs well for the product downstream. Dapirolizumab, we saw positive Phase 3 results, and I’d like to congratulate Priya because Priya had already thought about this and it’s worked with UCB and there’s actually a Phase 3 protocol ready to go. And so we’ll be starting Phase 3 very soon. Lupus is an area of huge unmet need, and we have not only dapi, but we have litifilimab in two indications.
And behind that, we have also felzartamab actually in lupus nephritis. In felza, we had some very encouraging data at San Diego in IgAN, and we’ve had breakthrough status on AMR. This is a game changer for us in terms of our pipeline because, again, here, we’ve got Phase 2 data that look very compelling. We all know that there are no guarantees in pipeline development. But at least we have, I think, reason to believe that these products could come to market and make a big difference. And as we start to look at the peak revenue for each of these products, the cumulative of all of these, if they all actually made it to market and got approved, have peak sales cumulatively of about $14 billion. And when you consider that our pharma business today is about $7.5 billion, this late-stage pipeline could really transform Biogen over the longer term.”
19. Synopsys, Inc. (NASDAQ:SNPS)
Growth Investment Ratio: 108%
Number of Hedge Fund Holders: 53
Synopsys, Inc. (NASDAQ:SNPS) is an American firm that provides semiconductor design tools and software. While semiconductor stocks have mostly fared well in 2024 due to tailwinds from AI demand, Synopsys, Inc. (NASDAQ:SNPS)’s shares are up by a lackluster 11.8% year to date. This is because the chip design tool segment is yet to see major interest from AI companies. However, Synopsys, Inc. (NASDAQ:SNPS) benefits from the fact that it is one of two major players in the design tool industry. Consequently, as evidenced by Amazon’s recent interest in a custom AI chip along with OpenAI rumored to be pursuing the same, Synopsys, Inc. (NASDAQ:SNPS) could see tailwinds in the future. The firm’s strong market position and industrial partnerships also position it well for a resurgence in the broader, non-AI chip industry.
Aristotle Partners mentioned Synopsys, Inc. (NASDAQ:SNPS) in its Q3 2024 investor letter. Here is what the fund said:
“Synopsys, Inc. (NASDAQ:SNPS) detracted from performance in the third quarter as the stock was part of the general investor pullback in AI-related semiconductor names due to concerns about overall AI market growth in the near-term and profitability of the massive capex investments being made in AI infrastructure. The company continues to execute well on its AI-enhanced product suite and Synopsys IP and Tools continue to be an integral part of the semiconductor design and manufacturing supply chain. As semiconductor companies and enterprises continue to rely on increasingly complex semiconductors in their technology stack, we see Synopsys as a key beneficiary of the increased design and manufacturing spend.”
18. Carnival Corporation & plc (NYSE:CCL)
Growth Investment Ratio: 109%
Number of Hedge Fund Holders: 53
Carnival Corporation & plc (NYSE:CCL) is a major US-based cruise ship operator. As has been the case with its peers such as Royal Caribbean, the firm is also seeing a resurgence of cruise ship demand in 2024 after volumes collapsed during the pandemic and consumers struggled with inflation. Like its peers, Carnival Corporation & plc (NYSE:CCL)’s hypothesis depends on its bookings, capacity utilization, pricing power, and oil prices. For bookings, the firm’s third quarter saw it achieve a new record of $7 billion in customer deposits. Its limited capacity is also enabling Carnival Corporation & plc (NYSE:CCL) to charge higher prices, and despite stronger pricing power, the firm has already booked half of its inventory for 2025. In short, provided that inflation continues to fall and consumer spending remains high, Carnival Corporation & plc (NYSE:CCL) could continue to experience tailwinds in the future.
Carnival Corporation & plc (NYSE:CCL)’s management shared details about its 2025 bookings during the Q3 2024 earnings call:
“Looking forward, the momentum continues as we actively manage the demand curve. At this point in time, 2025 is a historical highs on both occupancy and price. All core deployments are at higher prices than the prior year. Every brand in our portfolio is well booked at higher pricing in 2025, demonstrating the ongoing benefit of our demand generation efforts throughout our optimized portfolio. Our base loading strategy is continuing to work well, allowing us to take price, thanks to having pulled ahead on occupancy. In fact, in the last three months, our 2025 booked positions price advantage versus last year has actually widened for the full year and for each quarter individually. And with nearly half of 2025 already booked, we feel confident in maintaining our trajectory.
While early days, the benefit of our enhanced commercial performance is carrying nicely into 2026 as we just achieved record booking volumes in the last three months for sailings that for out. This incredibly strong book position for 2024, 2025 and 2026 drove record third quarter customer deposits towards $7 billion, and that’s along with continued growth in pre-cruise purchases of onboard revenue. It’s also gratifying to note the onboard spending levels were not only up strong again this quarter. Our year-over-year improvement in onboard per diems actually accelerated from the prior quarter. In essence, all demand indicators are continuing to move in the right direction.”
17. Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)
Growth Investment Ratio: 111%
Number of Hedge Fund Holders: 31
Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) is the third and final cruise ship stock on our list. Like its peers, the firm is also benefiting from pent-up demand in the wake of the coronavirus pandemic and the post-pandemic inflationary wave. During Q2, Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)’s occupancy sat at nearly 106%, which bodes well for the firm as it allows it to charge higher prices. The firm’s revenue grew by 11% in Q3 to sit at $2.81 billion with advanced ticket sales growing by 6% to touch $3.3 billion. Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) has also tailored its strategy to control costs after the troubles that it faced during the pandemic and its inflationary aftermath. Now, the firm has balanced its product quality in line with the prices that it charges, and it expanded capacity in September by adding a new ship capable of accommodating 3,550 guests.
Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) shared details about its capacity expansion during the Q3 2024 earnings call. Here is what the firm said:
“Speaking of Norwegian Aqua, we’re making excellent progress towards your launch in early 2025. Earlier this month I visited the Fincantieri shipyard in Italy and witnessed firsthand the impressive final touches being applied to the vessel. I’m incredibly excited for our guests to experience this next generation Prima class ship. At Oceania Cruises, we remain committed to delivering the finest cuisine at sea with new experiences on every new build. In this case, I’m sorry, in the case of the brand’s upcoming Allura, we are introducing the Creperie for which Oceania’s newly appointed executive culinary directors and resident master chefs of France, Alice Coretti and Eric Burrell, have crafted over 20 exquisite recipes. I’m eagerly anticipating our food loving guests reaction to this new exciting culinary experience when Allura debuts next year, and of course I’ll be first in line.
Finally, Regent Seven Seas Cruises recently celebrated the steel cutting for its latest ultra luxury ship, Seven Seas Prestige. At 77,000 tons and accommodating only 850 guests, this vessel will offer our guests unrivaled space at sea with one of the highest guest to space ratios in the industry. The ship will introduce exciting innovations including a reimagined palatial region suite, a new set of duplex suites and other accommodation categories, fresh dining experiences and numerous other incredible offerings that will allow our guests to experience luxury transcended. Moving to Slide eight, we have enhanced our offering and partnership building on our bold aspiration for our guests to vacation better and experience more. Norwegian launched its new brand positioning, Experience More at Sea, which underscores NCL’s commitment to provide guests with more variety, more to see, more to do, more to enjoy and more value through elevated offerings providing more of what they love while vacationing.”
16. Albemarle Corporation (NYSE:ALB)
Growth Investment Ratio: 112%
Number of Hedge Fund Holders: 32
Albemarle Corporation (NYSE:ALB) is a key player in the global lithium industry. As a result, it has substantial exposure to battery production and the electric vehicle industry. This hasn’t fared well for Albemarle Corporation (NYSE:ALB) in 2024 as the lithium industry has struggled from overcapacity. Not only has the demand for electric vehicles slowed in a high-rate and inflationary environment, but a sluggish Chinese economy has also cut the demand for lithium since a large number of battery manufacturers are based in the country. Consequently, the fact that Albemarle Corporation (NYSE:ALB)’s shares are down 26.3% year to date is unsurprising, with the firm reporting a $1.1 billion net loss during its fiscal Q3. The bearishness surrounding lithium has also shifted the narrative for the lithium company. Albemarle Corporation (NYSE:ALB) is now aiming to save as much as $400 million in operating expenses in 2025 and cut its capital expenditure by 50%. These efforts, coupled with new initiatives such as its plans to sell spodumene in its raw firm should drive Albemarle Corporation (NYSE:ALB)’s hypothesis moving forward.
The London Company mentioned Albemarle Corporation (NYSE:ALB) in its Q2 2024 investor letter. Here is what the fund said:
“Sold our remaining position in ALB after the stock triggered our soft stop loss review. We are concerned that weaker demand in the US for electric vehicles coupled with greater than expected supply of lithium reaching the market may lead to declining lithium prices. This will likely lead to lower cash flow generation in the years ahead, which weakens the downside protection case for the stock.”
15. Cadence Design Systems, Inc. (NASDAQ:CDNS)
Growth Investment Ratio: 112%
Number of Hedge Fund Holders: 64
Cadence Design Systems, Inc. (NASDAQ:CDNS) is an upstream semiconductor company that provides the building blocks of chip design to firms such as NVIDIA and AMD. This provides it with a key role in the ongoing rush of artificial intelligence since these building blocks are indispensable for any chip design. However, Cadence Design Systems, Inc. (NASDAQ:CDNS)’s shares are up by a modest 14.9% year to date primarily due to the firm’s exposure to the broader semiconductor industry and not just AI chips. Cadence Design Systems, Inc. (NASDAQ:CDNS) has missed analyst guidance for several quarters this year, and this led to its shares being down 3.8% prior to the third quarter earnings. However, Q3 was a reversal in fortune, as the stock soared by 12.5% in its aftermath. This was on the back of Cadence Design Systems, Inc. (NASDAQ:CDNS) raised its full-year profit per share forecast to $5.90 over the previous $5.87 on the back of AI-related tailwinds. Subsequently, any AI demand materializing or a recovery in the broader chip sector should benefit the firm.
Artisan Partners mentioned Cadence Design Systems, Inc. (NASDAQ:CDNS) in its Q3 2024 investor letter. Here is what the fund said:
“Bottom contributors to performance for the quarter included semiconductor design and simulation company Cadence Design Systems, Inc. (NASDAQ:CDNS). Cadence declined due to weaker-than-expected guidance, sensitivity to Cadence’s hardware product cycle in the near term, and uncertainty around China exposure.”
14. Merck & Co., Inc. (NYSE:MRK)
Growth Investment Ratio: 114%
Number of Hedge Fund Holders: 96
Merck & Co., Inc. (NYSE:MRK) is a well-known global pharmaceutical company. It primarily targets the specialty drugs market and is one of the world leaders in cancer drugs. Merck & Co., Inc. (NYSE:MRK) is also one of the biggest companies of its kind, as evident through its $7 billion in cash and $10 billion in receivables. The firm’s largest product right now, and one that is central to its hypothesis, is its cancer drug KEYTRUDA. The cancer drug brought Merck & Co., Inc. (NYSE:MRK) a whopping $7.2 billion in sales in Q2, and it is expected to generate an equally remarkable $33 billion in sales in 2027 according to FactSet. Yet, the drug’s spectacular success can also prove to be Merck & Co., Inc. (NYSE:MRK)’s Achilles’ heel. This is because KEYTRUDA’s patent will expire in 2028 and open the way for low-cost biosimilars. To prevent a sizable hit to its sales, the pharma company will have to invest in new drugs and launch other products. On these fronts, it is focusing on the HPV vaccine GARDASIL and has acquired a cancer antibody for $750 million to develop new treatments.
Baron Funds mentioned Merck & Co., Inc. (NYSE:MRK) in its Q1 2024 investor letter. Here is what the fund said:
“Global pharmaceutical company Merck & Co., Inc. contributed on the continued growth of Keytruda, the company’s key asset and the leading immuno-oncology agent used to treat a variety of cancers. The FDA’s late March approval of pulmonary arterial hypertension drug sotatercept, also drove share gains. We retain conviction as Merck has started to transition from prioritizing its Keytruda franchise to building a more diversified business, with a focus on the Gardasil vaccine, pneumococcal vaccine development, and cardiovascular drug development, well in advance of the scheduled expiration of patent protection/exclusivity rights.”
13. First Solar, Inc. (NASDAQ:FSLR)
Growth Investment Ratio: 129%
Number of Hedge Fund Holders: 66
First Solar, Inc. (NASDAQ:FSLR) is an American solar power company that makes and sells solar modules. It generally sells its products to business and industrial users, which provides it with large-scale orders that are insulated against consumer spending weakness. First Solar, Inc. (NASDAQ:FSLR)’s stock has been on a roller-coaster ride in 2024. The stock soared by 50% in May around the time when the Biden Administration announced new tariffs on Chinese solar panels. Then, since the November Presidential election, First Solar, Inc. (NASDAQ:FSLR)’s shares are down 16.20% as the incoming Trump Administration is perceived by many to be less enthusiastic about climate change and green energy stocks. In between, First Solar, Inc. (NASDAQ:FSLR)’s third-quarter profit grew by 16.6% to $313 million while it slashed full-year sales guidance to $4.175 billion from an earlier $4.5 billion. Consequently, not only a lower-rate environment but also a favorable regulatory outlook for clean energy stocks along with robust demand are needed to generate tailwinds for First Solar, Inc. (NASDAQ:FSLR)’s stock.
First Solar, Inc. (NASDAQ:FSLR)’s management shared details about its bookings, a key metric for future performance, during the Q3 2024 earnings call:
“Reflected on Slide 7, our total pipeline of potential bookings remains strong with bookings opportunities totaling 81.4 gigawatts, an increase of approximately 0.8 gigawatts since the previous quarter. Our mid-to-late stage bookings opportunity decreased by approximately 5.1 gigawatts to 23.5 gigawatts, and that includes 20.9 gigawatts in North America and 2.3 gigawatts in India. Within our mid-to-late stage pipeline, 3.9 gigawatts of opportunities that are contract and subject to conditions precedent, including in the U.S. a 620-megawatt module supply grid with a customer that we supply in power to our hyperscaler, as referenced on our last earnings call and 0.8 gigawatts in India. As a reminder, signed contracts in India would not be recognized as bookings till we receive full security against the offtake.
And note that we’ve reduced our opportunities that our contract is subject to conditions precedent for India by 0.4 gigawatts as a result of terminating a defaulted module supply agreement with an India affiliate of a European oil major, who is reportedly in the process of selling this business.”
12. PG&E Corporation (NYSE:PCG)
Growth Investment Ratio: 136%
Number of Hedge Fund Holders: 46
PG&E Corporation (NYSE:PCG) is a California-based utility that serves the energy needs of customers in the state. Since it’s a regulated utility, the firm depends on negotiations with regulators to determine its return on equity. This means that it cannot use self-set rates, but on the flip side, fixed rates also protect PG&E Corporation (NYSE:PCG) against price drops due to low energy demand. PG&E Corporation (NYSE:PCG) is currently seeking to tailor its portfolio toward nuclear generation and raise capital to manage wildfire risks in California. The firm is also tailoring its customer relationship and application process to reduce costs for customers and quickening its regulatory implementation process to deliver quick services. Over the long term, these could create cost savings for PG&E Corporation (NYSE:PCG).
PG&E Corporation (NYSE:PCG)’s management shared details about its new strategy during the Q3 2024 earnings call:
“Last quarter, I shared how one team was reinventing the inspection process, identifying the right work, completing it 50% faster than our previous standard and delivering cost savings, which we look forward to passing along to customers in our next rate case. With the incremental energization capital spend top of mind, I thought I’d share how our service planning and design team is using our performance playbook to rapidly implement regulatory decisions and deliver for our customers. Following the CPUC approval of our initial SB410 energization filing and an incremental $1 billion of funding, the team immediately mobilized. Looking across a number of factors, including customer readiness, permitting agency timelines and materials availability, the team quickly identified over 3,000 incremental customer requests that can be completed this year.
The team is also implementing process improvements that lead to labor and cost savings to our customers. For example, we reimagined the application process, which we estimate will reduce our customer cancellation rate by 70%. And we updated the job package preparation and estimating standards, cutting processing time for electric design work by 40%. These are classic examples of waste and rework that we’re eliminating to the benefit of customers.”
11. Amazon.com, Inc. (NASDAQ:AMZN)
Growth Investment Ratio: 137%
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is one of the dominating players in the global eCommerce and cloud computing industries. These provide it with access to a volume-heavy business in the form of eCommerce, and a margin-heavy, recurring revenue-friendly business through cloud computing. Amazon.com, Inc. (NASDAQ:AMZN) is one of the few companies in the world with access to a foundational AI model. Called Claude, this model is courtesy of the firm’s investment in Anthropic – a firm set up by former OpenAI employees. Amazon.com, Inc. (NASDAQ:AMZN)’s resources, as evidenced by $71 billion in cash and equivalents, also provide it with the resources to develop an end-to-end AI stack. The latest bit on this front is a custom AI chip that Amazon.com, Inc. (NASDAQ:AMZN) believes will help it compete with NVIDIA’s GPUs on a cost basis. Additionally, the firm also hopes to provide businesses access to NVIDIA’s GPUs through its cloud computing business. On the e-commerce front, Amazon.com, Inc. (NASDAQ:AMZN)’s business depends on high volumes and sustained consumer spending in key seasons such as the upcoming holiday season.
Polen Capital mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter. Here is what the fund said:
“The largest absolute detractors were Alphabet, Airbnb, and Amazon.com, Inc. (NASDAQ:AMZN). Amazon’s position as a notable detractor speaks more to the size of the position than the magnitude of the underperformance, as the company delivered a solid set of results during the quarter.
We trimmed our positions in Amazon, Alphabet, and Microsoft during the quarter. As we have previously, we trimmed Amazon slightly to bring the weight back to 15% for risk management purposes. We remain very positive on our investment thesis of strong revenue growth and even stronger earnings and free cash flow growth continuing over the next few years.”
10. Insulet Corporation (NASDAQ:PODD)
Growth Investment Ratio: 168%
Number of Hedge Fund Holders: 44
Insulet Corporation (NASDAQ:PODD) is a specialty medical devices company. The firm is one of the few of its kind in the industry that make and sell pods used by diabetics. As opposed to traditional insulin delivery systems which rely on needles, Insulet Corporation (NASDAQ:PODD)’s pods allow diabetics to continuously measure their sugar levels and autonomously administer insulin as needed. This creates catalysts and risks for the firm. On the former front, it means the firm enjoys a large competitive moat since its products are uncommonly manufactured. Yet, this creates the risk of Insulet Corporation (NASDAQ:PODD) being left behind if a rival introduces a superior product since the firm does not have any other products through which it generates sales. For its stock, the reliance on pods and diabetics means that Insulet Corporation (NASDAQ:PODD)’s shares are sensitive to product updates and regulatory approval. This was also the case in August when the stock soared by 27% after the FDA approved Insulet Corporation (NASDAQ:PODD)’s latest Omnipod, the Omnipod 5.
ClearBridge Investments mentioned Insulet Corporation (NASDAQ:PODD) in its Q3 2024 investor letter. Here is what the fund said:
“As long-term investors, we are well-positioned to take advantage of short-term volatility in our portfolio holdings. Shares of insulin pump maker Insulet Corporation (NASDAQ:PODD), for example, went through a similar downdraft last year on fears that GLP-1 therapeutics would severely impact usage of its products. Our in-depth analysis, stress testing for a slowdown in growth of the diabetes patient population, convinced us that the market was giving little to no credit for the company’s Type 2 diabetes opportunity, giving us confidence to add to the position. The stock is impressively up more than 75% from 2023 lows as other investors have come to appreciate Insulet’s valuation had gotten overly penalized.”
9. Axon Enterprise, Inc. (NASDAQ:AXON)
Growth Investment Ratio: 172%
Number of Hedge Fund Holders: 36
Axon Enterprise, Inc. (NASDAQ:AXON) is a non-lethal defense equipment provider and software company. The firm primarily makes and sells TASER guns that are used by law enforcement officials to subdue suspects and civilians for defense purposes. It also provides cartridges used in TASER guns and software products to law enforcement agencies for data analysis. As a result, Axon Enterprise, Inc. (NASDAQ:AXON) has a diversified income statement that relies on price-favored hardware sales and margin-heavy software. As of H1 2024, 59% of the firm’s revenue came from hardware sales while the remainder was through software. Within hardware, Axon Enterprise, Inc. (NASDAQ:AXON) also benefits from recurring sales through its cartridges. The law enforcement exposure of its business also hedges against economic cycles, and it requires Axon Enterprise, Inc. (NASDAQ:AXON) to stay on top of its game by launching upgrades to ensure rivals cannot steal market share. A catalyst for the stock could be the incoming Trump Administration’s greater focus on border control to drive the demand for Axon Enterprise, Inc. (NASDAQ:AXON)’s products.
Baron Funds mentioned Axon Enterprise, Inc. (NASDAQ:AXON) in its Q3 2024 investor letter. Here is what the firm said:
“Axon Enterprise, Inc. (NASDAQ:AXON) is the leading provider of tasers, body cameras, software, and other solutions for law enforcement. Shares rose following an exceptionally strong second quarter earnings report, highlighted by revenue growth of over 25% for the 10th straight quarter. This was led by nearly 50% growth in Axon’s software business. Axon introduced Draft One software for law enforcement officers, which leverages generative AI and body-worn camera audio to produce high-quality draft report narratives in seconds, freeing up 20% to 25% of an officer’s day. This product showcases the many potential generative AI use cases in Axon’s business. International bookings were up 100%, driven in part by growing interest in Draft One and the Taser 10 product. Run by a visionary founder with a best-in-class team, the company is continually pushing new and innovative products in the pursuit of becoming the de-facto public safety ecosystem. We believe Axon will become a much larger company over time.”
8. The AES Corporation (NYSE:AES)
Growth Investment Ratio: 182%
Number of Hedge Fund Holders: 46
The AES Corporation (NYSE:AES) is a Virginia-based utility with nearly 35 GW of power generation capacity and a customer base exceeding 2.6 million customers. The firm generates electricity through a diversified mix of sources which include conventional and renewable sources. It benefits from the fact that as of H1 2024, 72% of its $6 billion revenue came from non-regulated power supplies. This means that The AES Corporation (NYSE:AES) is able to self-set power rates and can operate without being left at the mercy of regulators. One key way in which the firm has managed to differentiate itself from other utilities is through its renewable power generation. The AES Corporation (NYSE:AES) supplies renewable energy to some of America’s biggest data center operators such as Amazon and Google. In Q3 alone, the firm signed 2.2 GW of long-term renewable power generation for data centers. In today’s AI-driven era, these could create sizable catalysts for The AES Corporation (NYSE:AES), but the firm could suffer from headwinds faced by the broader renewable power generation sector.
7. Eli Lilly and Company (NYSE:LLY)
Growth Investment Ratio: 194%
Number of Hedge Fund Holders: 100
Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical giant that has been at the center of industry and Wall Street euphoria surrounding weight loss drugs. These have pushed its stock to new heights, with the shares up 370% since 2021 start. Eli Lilly and Company (NYSE:LLY) has benefitted from its tight focus on the obesity, weight loss, and cancer segments of the pharmaceutical industry. These are among some of the fastest-growing areas in the sector. Yet, Eli Lilly and Company (NYSE:LLY)’s massive success with its weight loss drugs has also created a conundrum for the firm. With the first weight-loss drug patents set to expire soon, the firm might have to compete with low-cost generics soon. This will force it to stay on its toes and potentially reduce prices to stay competitive. The increased competition also increases the pressure on Eli Lilly and Company (NYSE:LLY) to introduce new drugs. Investor jitters surrounding competition were clear in August when the shares dropped by 19% after Roche and Viking presented favorable alternatives. Eli Lilly and Company (NYSE:LLY) is currently developing Orfoglipron, which will be easier to produce and lower manufacturing costs.
Baron Funds mentioned Eli Lilly and Company (NYSE:LLY) in its Q2 2024 investor letter. Here is what the fund said:
“In biopharmaceuticals, we remain bullish on the market opportunity for new diabetes and obesity medicines. In June at a medical meeting, the principal investigators of the SURMOUNT-OSA trial presented the full data which demonstrated that Eli Lilly and Company’s Tirzepatide reduced obstructive sleep apnea in adults with obesity by up to 62.8%, and up to 51.5% of participants met the criteria for disease resolution. This impressive data set paves the way for Tirzepatide to be used as a treatment for obstructive sleep apnea in overweight and obese individuals.”
6. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
Growth Investment Ratio: 196%
Number of Hedge Fund Holders: 59
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is a Massachusetts-based biotechnology company that develops treatments for fibrosis, sickle cell disease, thalassemia, and other ailments. It is operationally profitable, which means that Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)’s hypothesis is based on its ability to maintain share with existing drugs and the ability to launch new treatments to grow revenue. On the former front, the firm is quite vulnerable as it depends to a large extent on its cystic fibrosis treatment TRIKAFTA to generate revenue. As of H1 2024, 92% of Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)’s revenue came through the cystic fibrosis treatment. Consequently, not only does the firm have to ensure that the fibrosis drug does not face competition from rivals, but it also has to maintain a robust pipeline to reduce income statement risk. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)’s CASGEVY is the world’s first gene-editing-based therapy for sickle cell disease and is in the early commercial stages. The firm also has kidney disease, diabetes, and neuropathy treatments in phase three trials.
PGIM Jennison mentioned Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) in its Q2 2024 investor letter. Here is what the fund said:
“Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is a commercial stage biopharmaceutical with a core franchise of small molecule CFTR modulators for cystic fibrosis (CF), a genetic and progressively fatal respiratory disease. Vertex has built a unique and unrivaled market position as the dominant market leader in CF, having created and expanded the market into a nearly $10B franchise and growing. Later this year, we expect them to receive approval for their next-gen CF triple therapy, which we think will drive top-line growth and margin expansion in 2025 onwards. Vertex is also developing an acute and chronic pain franchise. Vertex reported positive Phase 3 data in acute pain and Phase 2 data in chronic pain earlier this year; the FDA filing in acute pain has been completed, and pending approval, Vertex expects to launch in acute pain in early 2025. Beyond CF and pain, Vertex has focused its pipeline around genetically driven diseases with the potential for a transformative clinical benefit. It currently spans 5 disease verticals: sickle cell/beta thalassemia, type 1 diabetes, APOL-1 kidney disease, IgA nephropathy (from the recent acquisition of Alpine Immune Sciences), and alpha-1 antitrypsin disease. Vertex has had a strong start to the year and has delivered positively on several clinical trial readouts, as well as beat Q1 revenue estimates and maintained what was a better than expected ’24 guidance. Vertex has a busy catalyst calendar in 2H24 which include next-gen CF approval, acute pain approval for their first-in-class pain drug, and additional data sets in chronic pain.”
5. Moderna, Inc. (NASDAQ:MRNA)
Growth Investment Ratio: 196%
Number of Hedge Fund Holders: 39
Moderna, Inc. (NASDAQ:MRNA) is the firm that rose to fame during the coronavirus pandemic due to its Spikevax vaccine. This also made its share price blossom, but since then, the firm has struggled in the market. Moderna, Inc. (NASDAQ:MRNA) continues to rely on respiratory vaccines to generate revenue. Its two largest revenue contributors are its coronavirus vaccine and its respiratory tract vaccine mRESVIA. As a result, Moderna, Inc. (NASDAQ:MRNA) has to aggressively invest in new vaccines to expand its portfolio. The investments grow its R&D expenditure and stress the bottom line to make the firm a loss-making entity. In fact, for the trailing twelve months as of Q2, Moderna, Inc. (NASDAQ:MRNA) spent as much in R&D as it earned since its $4.98 billion in revenue was nearly matched by $4.6 billion in R&D expenses. Yet, the drag from these on the stock can reverse, as was the case following Moderna, Inc. (NASDAQ:MRNA)’s Q3 results. These saw the firm’s shares soar by 5% after it reported a $13 million profit in contrast to analyst estimates of $753 million. However, longer-term concerns still linger as the stock is down by 11.7% since the earnings.
One key disease for which Moderna, Inc. (NASDAQ:MRNA) is developing a treatment is the norovirus. Also called viral gastroenteritis, here’s what the firm shared about the trials during its Q3 2024 earnings call:
“On Slide 22 is the design of our Phase III study for our norovirus vaccine candidate. As a reminder, norovirus is a gastrointestinal disease with high unmet need and no approved vaccines on the market. The Phase III study is designed to test the efficacy, safety and immunogenicity of our vaccine in 25,000 adults aged 18 and older. It is randomized one-to-one, observer blind, and placebo controlled.”
4. Intel Corporation (NASDAQ:INTC)
Growth Investment Ratio: 205%
Number of Hedge Fund Holders: 75
Intel Corporation (NASDAQ:INTC) is the beleaguered American chip manufacturing giant that has been one of the biggest stock stories of 2024 and for all the wrong reasons. Intel Corporation (NASDAQ:INTC)’s decision to suspend dividends and lay off thousands of employees earlier this year decimated investor sentiment. The firm is currently focusing on developing the 18A chip manufacturing node through which it aims to take process leadership away from the Taiwan Semiconductor Manufacturing Company (TSMC) and cater to the growing chip needs of the biggest companies in the world. 18A is dead at the center of Intel Corporation (NASDAQ:INTC)’s hypothesis, and the stock will respond based on developments regarding the technology’s execution milestones. Intel Corporation (NASDAQ:INTC)’s contract manufacturing subsidiary is another key part of its story, but since it was made into a subsidiary earlier, its impact is less pronounced.
ClearBridge Investments mentioned Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter. Here is what the fund said:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
3. The Boeing Company (NYSE:BA)
Growth Investment Ratio: 292%
Number of Hedge Fund Holders: 42
The Boeing Company (NYSE:BA) is another mega-American firm that has faced a lot of troubles in 2024. While Intel’s troubles are in the semiconductor industry and have not affected downstream players, the firm’s production woes in the aftermath of safety problems with its aircraft have disrupted the travel industry as well. The Boeing Company (NYSE:BA) has faced off with striking unions and regulators, the cumulative effect of which has led to delayed aircraft deliveries. As a result, the road is long and hard for the firm to regain its lost stature; a fact that’s also evident in its 44.9% year-to-date share price drop. Production efficiencies and safety overhaul coupled with satisfied employees are driving The Boeing Company (NYSE:BA)’s hypothesis and have the potential to affect its share price moving forward. In the meantime, multi-billion dollar orders such as a recent $2.6 billion Air Force contract for prototype aircraft should help the firm.
The Boeing Company (NYSE:BA)’s management commented on its production during the Q3 2024 earnings call. Here is what they said:
“The quarter ended with approximately 60 737-8s built prior to 2023, the vast majority for customers in China and India, down 30 from last quarter. Additional progress on shutting down the shadow factory has been impacted by the work stoppage, which will now extend into next year. On the -7 and -10, inventory levels remained stable at approximately 35 airplanes and the certification time lines remain unchanged. On the 787 program, we delivered 14 airplanes in the quarter. And as previously noted, we continue to work through production recovery plans on heat exchangers and delivery delays associated with seat certifications.
The program is currently producing at 4 per month and still plans to return to 5 per month by year-end. We ended the quarter with 30 airplanes in inventory built prior to 2023 that required rework, down 5 from last quarter. Our ability to finish the rework and shut down the shadow factory has also been impacted by the work stoppage and will now extend into next year. Finally, on the 777X program. As previously announced, the $2.6 billion pretax charge primarily reflects our latest assessment of the certification time lines to address the delays in flight testing of the 777-9 as well as anticipated delays associated with the IAM work stoppage. We’ll continue to follow the lead of the FAA as we progress through the certification process and now expect first delivery in 2026.
Year-to-date, 777X inventory spend has averaged a bit below $800 million per quarter. The cash profile will look similar to prior development programs with the year prior to first delivery, typically the largest use of cash driven by inventory build associated with the production ramp, which will unwind as deliveries commence.”
2. Incyte Corporation (NASDAQ:INCY)
Growth Investment Ratio: 379%
Number of Hedge Fund Holders: 35
Incyte Corporation (NASDAQ:INCY) is a mid-sized Delaware-based biotechnology company. The firm’s profit has turned into a loss in 2024 as of H1 due to higher research and development spending. Incyte Corporation (NASDAQ:INCY) relies to a large extent on its products to generate revenue. For the first six months of the year, out of its $1.9 billion revenue, 84% or $1.6 billion came through products sold. Within the $1.6 billion, 81% was generated by Incyte Corporation (NASDAQ:INCY)’s JAKAFI medicine for myelofibrosis. Consequently, JAKAFI is central to the firm’s hypothesis, and in Q3, Incyte Corporation (NASDAQ:INCY) reported that the medicine drove its 24% annual revenue growth to $1.1 billion. The firm also impressed investors by raising its full-year JAKAFI revenue guidance to a midpoint of $2.755 billion from an earlier $2.73 billion.
Another key factor that drives the hypothesis of biotechnology firms is their drug development portfolio. Here’s what Incyte Corporation (NASDAQ:INCY)s management had to say on this front during the Q3 2024 earnings call:
“I want to highlight 3 products that are expected to begin contributing to revenue in the near-term.
We anticipate that Niktimvo for third-line chronic GVHD, tafasitamab for follicular lymphoma and retifanlimab for SCAC could collectively generate $800 million or more in incremental revenues by 2029. We anticipate all 3 products to be available in 2025 and this incremental sales will be leveraging the current commercial infrastructure used for Monjuvi, Pemazyre and Jakafi. As illustrated on Slide 10, these 3 launches anticipated in 2025 will be followed by larger opportunities in 2026 and 2027, including povorcitinib CDK2 and tafasitamab in first-line DLBCL. Between 2027 and 2030, we have multiple programs that hold transformative potential with data for each anticipated in 2025.”
1. Western Digital Corporation (NASDAQ:WDC)
Growth Investment Ratio: 532%
Number of Hedge Fund Holders: 80
Western Digital Corporation (NASDAQ:WDC) is one of the oldest and most well-known data storage products companies in the world. It makes and sells computer storage devices such as solid-state drives and hard disk drives. Even though the booming artificial intelligence industry requires copious amounts of storage to operate, Western Digital Corporation (NASDAQ:WDC)’s shares are up by a modest 24% year to date. This is because while AI data centers have been building out slowly, demand from non-AI cloud and data center industries has remained muted in a tight economy constrained by limited spending and tight budgets. This drove a massive dip in Western Digital Corporation (NASDAQ:WDC)’s shares after its Q2 earnings. However, the Q3 report saw shares jump by 9% after catalysts from AI cloud data centers drove demand for the firm’s Flash and HDD products.
Western Digital Corporation (NASDAQ:WDC)’s management shared details about its AI exposure during the Q1 2025 earnings call. Here is what they said:
” Yeah, we feel really good about where the portfolio is. We’ve talked I think for a quarter or so now about this, our compute focused PCIe Gen 5 product that’s what was qualified by NVIDIA in their reference architecture that allows us to go to all the folks that are building those products for customers and be in a good position to have those conversations as we drive that product more broadly in the market. We also have a very deep engagement with one, well, a couple of large hyperscalers on that product as well. So to your point, we’ve got more confidence in the growth of the portfolio. It’s a very good demand environment. That’s I don’t think that’s new news for enterprise SSDs and it’s nice to have the portfolio where we can play into that.
And as you said we expect our mix of bits when we add it all up the end of fiscal year last quarter when we were having this conversation we thought it would be around 10%. Now we’re more in the 15% to 20% range. So demand keeps going up, the number of qualifications we’ve doubled in the last quarter. So the traction with the portfolio is good. It all aligns well with the AI Data Cycle we put out there both for the compute focused SSDs and then the high capacity data lake focused SSDs 30 and 60 terabytes. And again the traditional products that we were selling to the hyperscalers are also doing well also. So just I think that portfolio is something we’ve been working on for quite some time. As you know we got qualified before the downturn. We came out of it with a better portfolio.”
WDC is a stock investing heavily in growth according to Goldman Sachs. While we acknowledge the potential of WDC as an investment, our conviction lies in the belief that 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 WDC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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