In this article, we discuss Motley Fool’s high growth stock picks. If you want to see more stocks in this selection, check out Motley Fool’s 5 High Growth Stock Picks.
According to JPMorgan Chase & Co. strategists, the significant outperformance of cheaper, value stocks over growth stocks from the previous year is expected to reverse soon as the pace of economic recovery slows down. The value trade, which was a popular investment strategy in 2022, is beginning to lose its appeal. As a result, JPMorgan’s team led by Mislav Matejka suggested that investors may need to consider reducing their exposure to value stocks compared to growth stocks in the next one or two months. They recommend going “outright underweight value versus growth,” as stated in a note. Mislav Matejka further wrote in a note:
“Our core view is that in the second half, market will be moving back to the recession trade, but even if the opposite scenario gains traction, value might not be the best place to be.”
After significantly outperforming growth stocks last year by the largest margin since the dotcom bubble in 2000, the performance of value stocks has begun to slow down in comparison. Although value stocks received a boost from rising bond yields and inflation, investors are becoming more cautious due to concerns about a potential hawkish policy. This may lead to a decrease in support for the value trade as bond yields reach their peak. The current pace of economic activity is likely to reach its peak and could start to decline soon. Additionally, the stall in inflation expectations implies that the value factor may not perform as well relative to growth in the future.
Motley Fool Asset Management prioritizes investing in high-quality companies with strong growth potential. The company regularly evaluates its current portfolio holdings and adjusts them based on prevailing stock market trends, with the aim of optimizing gains and minimizing losses. Some of the top high growth stock picks of Motley Fool include Tesla, Inc. (NASDAQ:TSLA), Atlassian Corporation (NASDAQ:TEAM), and Amazon.com, Inc. (NASDAQ:AMZN). For more high growth stocks, investors can check out 11 High Growth International Stocks to Buy, 12 High Growth Software Stocks that are Profitable, and 12 High Growth Healthcare Stocks to Buy.
Our Methodology
We used Motley Fool Asset Management’s Q4 2022 13F portfolio for this analysis, selecting the stocks which display the highest 3-year revenue growth rate between 2020 and 2022 from the firm’s top 40 holdings. The list is ranked according to the revenue growth rate, from lowest to highest. We have also mentioned the hedge fund sentiment around the securities as of Q4 2022, which was assessed from Insider Monkey’s database of holdings of 943 elite funds.
Motley Fool’s High Growth Stock Picks
10. Mastercard Incorporated (NYSE:MA)
3-year Revenue Growth: 45.3%
Mastercard Incorporated (NYSE:MA) is an American multinational financial technology firm. Securities filings for the fourth quarter of 2022 reveal that Motley Fool Asset Management owned 96,997 shares of Mastercard Incorporated (NYSE:MA) worth $33.7 million, representing 3.80% of the total 13F portfolio.
On February 14, Mastercard Incorporated (NYSE:MA) declared a $0.57 per share quarterly dividend, in line with previous. The dividend is payable on May 9, to shareholders of record on April 7.
Mizuho analyst Dan Dolev on January 30 raised the firm’s price target on Mastercard Incorporated (NYSE:MA) to $405 from $380 and maintained a Buy rating on the shares following the “solid” Q4 results.
According to Insider Monkey’s fourth quarter database, 139 hedge funds were long Mastercard Incorporated (NYSE:MA), compared to 146 funds in the prior quarter. Charles Akre’s Akre Capital Management is the largest stakeholder of the company, with 5.86 million shares worth $2 billion.
Like Tesla, Inc. (NASDAQ:TSLA), Atlassian Corporation (NASDAQ:TEAM), and Amazon.com, Inc. (NASDAQ:AMZN), Mastercard Incorporated (NYSE:MA) is one of the top high growth stock picks of Motley Fool.
Baron FinTech Fund made the following comment about Mastercard Incorporated (NYSE:MA) in its Q4 2022 investor letter:
“Shares of global payment network Mastercard Incorporated (NYSE:MA) increased after reporting strong quarterly results, with 15% revenue growth and 13% EPS growth despite significant headwinds from currency movements and the suspension of operations in Russia. Payment volume grew 21% in local currency (excluding Russia) as consumer spending remained resilient and the international travel recovery continued as border restrictions were lifted. We continue to own the stock due to Mastercard’s long runway for growth and significant competitive advantages.”
9. Paylocity Holding Corporation (NASDAQ:PCTY)
3-year Revenue Growth: 51.8%
Paylocity Holding Corporation (NASDAQ:PCTY) provides cloud-based human capital management and payroll software solutions in the United States. In Q4 2022, Motley Fool reported owning 48,442 shares of Paylocity Holding Corporation (NASDAQ:PCTY) worth $9.4 million. It is one of the firm’s top high growth stock picks.
On February 2, Paylocity Holding Corporation (NASDAQ:PCTY) reported a Q2 non-GAAP EPS of $1.12, beating market estimates by $0.38. Revenue for the period increased 39.3% year-over-year to $273 million, outperforming Wall Street estimates by $13.32 million.
Bryan Bergin, an analyst at Cowen, increased the price target for Paylocity Holding Corporation (NASDAQ:PCTY) on February 3 from $231 to $265 and maintained an Outperform rating on the shares. According to the analyst, Paylocity Holding Corporation (NASDAQ:PCTY)’s momentum continued in the second quarter, with the company surpassing its guidance by a significant margin and providing strong guidance for 2023, which includes impressive profitability despite investments in growth.
According to Insider Monkey’s fourth quarter database, 33 hedge funds were long Paylocity Holding Corporation (NASDAQ:PCTY), compared to 32 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company.
ClearBridge Mid Cap Growth Strategy made the following comment about Paylocity Holding Corporation (NASDAQ:PCTY) in its Q4 2022 investor letter:
“Paylocity Holding Corporation (NASDAQ:PCTY) also held up well against broad customer spending slowdowns earlier in the year but saw its share price weaken on broader macro headwinds during the quarter. The company’s cloud-based human capital management and payroll software solutions help businesses manage through broad labor shortages and provide solutions to retain talent. However, as excess slack in the labor market has begun to be absorbed, investments in human resources solutions have declined. Additionally, we believe Paylocity continues to have a compelling long-term growth runway as it attracts new customers and gains market share against large, mature competitors.”
8. Salesforce, Inc. (NYSE:CRM)
3-year Revenue Growth: 54.9%
Salesforce, Inc. (NYSE:CRM) is a California-based customer relationship management technology firm. It is one of Motley Fool’s top high growth stock picks. The hedge fund raised its stake in Salesforce, Inc. (NYSE:CRM) by 209% in the fourth quarter of 2022, holding 70,533 shares worth $9.35 million. As of March 1, Wall Street analysts expect Salesforce, Inc. (NYSE:CRM) to report a profit, excluding one-time items, of $1.36 per share, on revenue of $7.99 billion. During the prior-year quarter, the company earned 84 cents a share, on $7.33 billion in revenue.
On February 24, BMO Capital analyst Keith Bachman raised the firm’s price target on Salesforce, Inc. (NYSE:CRM) to $185 from $172 and kept an Outperform rating on the shares ahead of its earnings. According to the analyst’s research note, continued strong margins may be a significant factor in driving the stock higher as growth stabilizes at a high-single-digit rate. Additionally, the firm believes that Salesforce, Inc. (NYSE:CRM)’s large size gives it an advantage over other SaaS vendors in terms of brand recognition, sales, and cost management.
According to Insider Monkey’s fourth quarter database, 117 hedge funds were bullish on Salesforce, Inc. (NYSE:CRM), and Harris Associates held the largest stake in the company, with 8.14 million shares worth $1 billion.
Aristotle Atlantic made the following comment about Salesforce, Inc. (NYSE:CRM) in its Q3 2022 investor letter:
“We sold Salesforce, Inc. (NYSE:CRM) to reduce our weighting in the Information Technology sector. Salesforce held their investor day, and the company reiterated their organic Fiscal Year 2026 revenue target of $50 billion. This target remains more back-end loaded based on current slowing macroeconomic conditions and requires new annual contract growth well ahead of what the company has been averaging for the past few years. We are skeptical that the company will be able to achieve this revenue target organically and see Merger & Acquisitions (M&A) being key to achieving the growth. While we believe Salesforce has shown good success in growing its non-CRM clouds, we do see more competitive pressures emerging for the Marketing and Customer Service Clouds, specifically on the pricing side during a global economic slowdown.”
7. Alphabet Inc. (NASDAQ:GOOG)
3-year Revenue Growth: 55.0%
Alphabet Inc. (NASDAQ:GOOG) is one of the top high growth stocks in Motley Fool Asset Management’s Q4 portfolio. The hedge fund owns 448,001 shares of the tech giant, worth nearly $40 million and representing 4.48% of the total 13F securities. The average 3-year revenue growth for Alphabet Inc. (NASDAQ:GOOG) between 2020 and 2022 came in at 55%.
On February 9, Wells Fargo analyst Brian Fitzgerald noted that the Bard rollout has been disappointing. However, there is an opportunity for investment in Alphabet Inc. (NASDAQ:GOOG) due to the excitement around Generation Artificial Intelligence (Gen AI), which has potential for deployment without disrupting search monetization. Additionally, Alphabet Inc. (NASDAQ:GOOG) is a leader in conversational AI technology and there is a misunderstanding of what drives search share. As a result, the firm recommends purchasing Alphabet Inc. (NASDAQ:GOOG) shares, assigning the stock an Overweight rating and a target price of $150.
According to Insider Monkey’s Q4 data, 152 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG), compared to 156 funds in the prior quarter. Chris Hohn’s TCI Fund Management is the largest stakeholder of the company, with 54.5 million shares worth $4.8 billion.
Diamond Hill Large Cap Strategy made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q4 2022 investor letter:
“Other bottom contributors included media and technology giant Alphabet Inc. (NASDAQ:GOOG), apparel and footwear company V.F. Corporation and utility operator Dominion Energy. We believe Alphabet’s shares underperformed on concerns of a weakening macroeconomic environment. The company also reported weaker-than-expected earnings and revenue for Q3 2022. Longer-term, we expect Alphabet’s search engine advertising, YouTube advertising and other initiatives to continue driving revenue growth. As such, we used the share price weakness this quarter to add to our position.”
6. NVIDIA Corporation (NASDAQ:NVDA)
3-year Revenue Growth: 61.7%
NVIDIA Corporation (NASDAQ:NVDA) is a California-based provider of graphics, semiconductors, and networking solutions in the United States, Taiwan, China, and internationally. In the fourth quarter of 2022, Motley Fool held 54,758 shares of NVIDIA Corporation (NASDAQ:NVDA) worth $8 million, representing 0.9% of the total securities. It is one of the premier high growth stock picks of the hedge fund.
During Nvidia’s fourth-quarter earnings report, CEO Jensen Huang openly expressed his belief in the significant role that artificial intelligence will play in NVIDIA Corporation (NASDAQ:NVDA)’s future. Huang stated that the AI market has reached a turning point and that NVIDIA Corporation (NASDAQ:NVDA) is currently the main operating system for AI systems.
On February 23, C.J. Muse, an analyst at Evercore ISI, increased the price target on NVIDIA Corporation (NASDAQ:NVDA) from $245 to $300 while maintaining an Outperform rating on the shares. This decision comes after NVIDIA Corporation (NASDAQ:NVDA) beat expectations for the January quarter and provided an even more positive outlook for the April quarter. The firm expects data center revenues to accelerate throughout the entirety of 2023, which should be positively received given concerns about decelerating data center demand and the potential for a total revenue guide down for April, the analyst wrote in a research note.
According to Insider Monkey’s fourth quarter database, 106 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA), compared to 89 funds in the earlier quarter.
Like Tesla, Inc. (NASDAQ:TSLA), Atlassian Corporation (NASDAQ:TEAM), and Amazon.com, Inc. (NASDAQ:AMZN), Motley Fool’s high growth stock picks include NVIDIA Corporation (NASDAQ:NVDA).
O’keefe Stevens Advisory made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2022 investor letter:
“The market and our portfolios had a challenging year as interest rates rose, and deteriorating fundamentals cut our largest position, NVIDIA Corporation (NASDAQ:NVDA), in half. Since our initial purchase in 2013, NVDA has seen its stock decline 50% one other time, back in 2018. The best-performing businesses and stocks do not go up and to the right. Mr. Market gets moody, and even one of the highest quality companies in the world is not immune. Drawdowns of this magnitude are challenging to stomach, even though the stock is up 50x in less than ten years. While we consider ourselves old school value investors, we continue to hold this fantastic company even though, optically, it does not appear cheap. Our confidence in Jensen remains, and while gaming is no longer in hyper-growth mode, the Data Center segment continues to grow. AI, Automotive, and other small but rapidly growing industries are the next leg of the story. Chris Mayer discusses the position in greater detail with commentary from our CIO, Peter O’Keefe. Click here to read the article.”
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Disclosure: None. Motley Fool’s High Growth Stock Picks is originally published on Insider Monkey.
