In this article, we discuss the 5 growth stock picks by hedge funds. If you want to read our detailed analysis of these stocks, go directly to Growth Stock Portfolio: 10 Stock Picks By Hedge Funds.
5. Activision Blizzard, Inc. (NASDAQ:ATVI)
Number of Hedge Fund Holders in Q2: 78
Number of Hedge Fund Holders in Q1: 76
Activision Blizzard, Inc. (NASDAQ:ATVI) is a California-based firm that develops and publishes interactive entertainment content. It is placed fifth on our list of 10 growth stock picks by hedge funds.
On September 29, investment advisory Jefferies kept a Buy rating on Activision Blizzard, Inc. (NASDAQ:ATVI) stock with a price target of $120. Andrew Uerkwitz, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 78 hedge funds in the database of Insider Monkey held stakes worth $3.5 billion in Activision Blizzard, Inc. (NASDAQ:ATVI), up from 76 in the preceding quarter worth $3.7 billion.
In its Q1 2021 investor letter, Cooper Investors, an asset management firm, highlighted a few stocks and Activision Blizzard, Inc. (NASDAQ:ATVI) was one of them. Here is what the fund said:
“The portfolio established a position in video game publisher Activision Blizzard. As a watchlist company we have followed Activision for several years. As a reminder the role of the watchlist is to allow us to focus on a select group of companies where we seek to observe important signals around either value latency, industry trends or management behaviour that portend attractive investment propositions.
Technology can often play a disruptive role in content, however video games are a clear beneficiary of technology, both in terms of more immersive and realistic gaming experiences as well as the monetisation opportunities this creates.
In order to benefit from these trends, video game publishers must be owners of unique IP. Activision Blizzard fits this bill perfectly boasting a portfolio which includes franchises such as Call of Duty, World of Warcraft and Diablo just to name a few.
The business is run by CEO Bobby Kotick, who together with Chairman Brian Kelly purchased the foundation assets for the company for US$400k in the early 1990s. Today Activision has a market capitalisation of over US$70bn. Over the last few years Bobby and his management team have refocused resources onto their best IP, with the goal of capitalising on the aforementioned industry tailwinds.
We saw the benefits of this in 2020 with the release of Call of Duty Mobile and Free-to-Play versions (with in game micro transactions) complimenting the traditional core console game. Engagement increased materially and due to the very favourable economics of content publishing, Operating Income more than doubled for the Call of Duty Franchise. Even adjusting for the impact of lockdowns, this is a phenomenal outcome.
Activision has 3-4 key pieces of IP with which they plan to repeat this playbook over the next couple of years. If they can replicate the success of Call of Duty, even in part, we see material upside to the free cash flow power of the business. Further, revenue sources are broadening which will move the profile away from a traditional lumpy annual release cycle of the old video game model towards one of a more recurring nature. This will transition Activision from a publishing to a services business, likely attracting a higher multiple than the current mid-low 20x FCF which is broadly in line with the market. To summarise, we see significant value latency and a pathway to double digit returns over the medium term.”
4. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders in Q2: 82
Number of Hedge Fund Holders in Q1: 72
AbbVie Inc. (NYSE:ABBV) is an Illinois-based firm that makes and sells pharmaceutical products. It is ranked fourth on our list of 10 growth stock picks by hedge funds.
On September 8, investment advisory JPMorgan maintained an Overweight rating on AbbVie Inc. (NYSE:ABBV) stock with a price target of $140, noting that a recent pullback in the share price of the firm was a buying opportunity for investors.
At the end of the second quarter of 2021, 82 hedge funds in the database of Insider Monkey held stakes worth $5.3 billion in AbbVie Inc. (NYSE:ABBV), up from 72 in the preceding quarter worth $5.9 billion.
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders in Q2: 86
Number of Hedge Fund Holders in Q1: 80
NVIDIA Corporation (NASDAQ:NVDA) is placed third on our list of 10 growth stock picks by hedge funds. The firm operates as a visual computing firm specializing in semiconductors. It is headquartered in California.
On October 5, investment advisory KeyBanc maintained an Overweight rating on NVIDIA Corporation (NASDAQ:NVDA) stock and raised the price target to $260 from $245. John Vinh, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 86 hedge funds in the database of Insider Monkey held stakes worth $9 billion in NVIDIA Corporation (NASDAQ: NVDA), up from 80 the preceding quarter worth $6 billion.
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“NVIDIA Corp. is the dominant supplier of Graphics Processing Units (GPUs) worldwide. NVIDIA’s GPUs are at the intersection of a number of important computing trends including the movement to the Cloud, artificial intelligence, autonomous vehicles, edge computing, gaming, and more. We previously owned NVIDIA and sold it in the third quarter of 2020 as the price to value gap closed and our margin of safety was reduced. As with all our MVP companies, we continued to follow NVIDIA closely. Since that time, NVIDIA reported excellent results and its value has compounded rapidly. The technology selloff at the beginning of the year negatively affected the stock price while our estimate of NVIDIA’s value per share increased. This happy combination of events created a margin of safety and an opportunity to once again add NVIDIA to the portfolio.”
2. Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders in Q2: 87
Number of Hedge Fund Holders in Q1: 86
Expedia Group, Inc. (NASDAQ:EXPE) is ranked second on our list of 10 growth stock picks by hedge funds. The firm owns and operates an online travel platform. It is headquartered in Washington.
On September 13, investment advisory Goldman Sachs initiated coverage of Expedia Group, Inc. (NASDAQ: EXPE) stock with a Buy rating and a price target of $185, noting that the internet sector had ample opportunity for secular revenue growth in the coming months.
At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $5.9 billion in Expedia Group, Inc. (NASDAQ:EXPE), up from 86 in the previous quarter worth $6.1 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Expedia Group, Inc. (NASDAQ:EXPE) was one of them. Here is what the fund said:
“Several of our better performers in the first quarter were purchased while their business models were under stress from COVID restrictions or the macro environment the pandemic created. What gave us confidence in purchasing Expedia were the actions the company took to extend out their balance sheets until travel resumed. It should benefit as a broader vaccination rollout prompts cruise lines to resume operations and consumers to start traveling again and are positioned to deliver better margins and gain pricing power as the economy normalizes due to the cost controls implemented during the downturn.”
1. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders in Q2: 87
Number of Hedge Fund Holders in Q1: 79
Thermo Fisher Scientific Inc. (NYSE:TMO) is ranked first on our list of 10 growth stock picks by hedge funds. The company makes and sells life sciences tools. It is headquartered in Massachusetts.
On September 23, investment advisory Cowen maintained an Outperform rating on Thermo Fisher Scientific Inc. (NYSE:TMO) stock and raised the price target to $655 from $560, underlining the stock as one for a long-term investment.
At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $7.3 billion in Thermo Fisher Scientific Inc. (NYSE:TMO), up from 79 in the preceding quarter worth $6.2 billion.
In its Q2 2021 investor letter, DEVON Equity Management, an asset management firm, highlighted a few stocks and Thermo Fisher Scientific Inc. (NYSE:TMO) was one of them. Here is what the fund said:
“The broad response to the COVID pandemic from the healthcare, pharmaceutical, and life science industries has been nothing short of incredible.
Whilst Vaccine makers understandably garner the highest profile, Thermo Fisher (6.2% of NAV) should be considered one of the outstanding performers, reflected in their ‘COVID related revenue’ hitting US$9.4bn in the 12 months since March 2020 (we appreciate measuring ‘contribution’ to the pandemic by ‘dollars’ generated is a little crude – but ultimately it does tell us something).
Ever the short-termist, Mr Market has looked to the inevitable slowdown in COVID related revenue uneasily – questioning whether it might mean a decline in Earnings come 2022. These concerns resulted in TMO shares declining 5% since their November 2020 peak, the worst performer of our Top 10 holdings.
Fortunately, we look at the COVID dynamic for Thermo in the diametrically opposite fashion.
We think Thermo’s response to COVID has bolstered their competitive positon in multiple verticals, and meaningfully enhanced the long term earnings potential of the company:
Firstly, Thermo came from ‘also-ran’ to leading player in diagnostic testing in 6 months. In ordinary times, this might be expected to take 5+ years. As demand for COVID testing inevitably declines, the capacity Thermo built during 2020 will be filled with demand from non-COVID diagnostic tests, a fast growing area before the pandemic with improved prospects in light of the role testing is playing in the COVID response.
Secondly, Thermo invested heavily…”[read the entire letter here]
You can also take a peek at 10 Stocks Reddit is Piling Into Before Earnings and 10 Best One Dollar Stocks to Buy Now.
