We recently compiled a list of the 15 Best Growth Stocks to Buy for the Next 5 Years. In this article, we are going to take a look at where Palo Alto Networks (NASDAQ:PANW) stands against the other growth stocks.
Kevin Mahn, President & CIO at Hennion & Walsh Asset Management, recently appeared on CNBC on January 6 to discuss the current market momentum and emphasize the need for investors to be selective in 2025 to find growth opportunities. He highlighted that while the MAG7 have led the market recently, their leadership may not continue. Mahn referenced historical data, noting that since 1950, there have been nine instances where the market rallied by 20% or more, with the market rising in eight of those cases. However, he pointed out that gains in the following year averaged only 3.6%, indicating a need for careful selection. He also acknowledged recent market trends, including a decline in the S&P 500’s performance and a potential shift in investor sentiment following events like the Santa Claus Rally.
He predicted a path of lower interest rates, expecting 50 basis points of cuts this year instead of the previously anticipated 100 basis points. Mahn suggested that this environment would create favorable conditions for stocks and bonds but urged investors to diversify beyond mega-cap tech stocks into sectors like biotech and aerospace. Earlier on January 3 as well, Mahn noted that after two consecutive years of gains, a third year of strong performance appears unlikely. He remarked that it seems the Grinch got in the way of the Santa Claus rally this year.
He also addressed concerns from investors tempted to time the market or sell their holdings. He warned against trying to time the market, describing it as often futile. Instead, he advocated for rebalancing portfolios to align with long-term goals and risk tolerance. He suggested that the economic landscape is changing, with lower interest rates and stagnant economic growth expected moving forward. Mahn advised investors to take profits from sectors that previously led the market and consider reallocating those funds into different areas poised for future growth. He highlighted biotech as a promising sector, noting bipartisan agreement on the need to lower drug prices. This shift could lead large-cap pharmaceutical companies to seek new revenue sources, making smaller biotech firms attractive.
Methodology
We first sifted through online rankings, and internet lists to compile a list of the top growth stocks to buy for the next 5 years. We then selected the stocks with high 5-year revenue growth and high analysts’ upside potential. From those we picked 15 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A cutting-edge computer lab full of IT experts monitoring the security of multiple systems.
Palo Alto Networks (NASDAQ:PANW)
Number of Hedge Fund Holders: 64
5-Year Revenue CAGR: 22.41%
Upside Potential as of January 15: 144.80%
Palo Alto Networks (NASDAQ:PANW) is a cybersecurity company. Its flagship product, Prisma Access, is a SASE platform that integrates network security functions like FWaaS, threat prevention, and DLP. It provides edge protection for applications, users, and devices. This means that it shields company computers and devices from online threats by combining various security features, like firewalls and data protection.
Citi reiterated a Buy rating on the company recently with a $216 price target, due to the increasing demand for cybersecurity solutions because of AI-powered threats. It uses AI-driven ‘Precisions AI’ for automated cyber defense, giving the company a competitive advantage. The cybersecurity market is thriving due to the accelerating adoption of AI, which is also fueling the sophistication of cyber threats.
Palo Alto Networks (NASDAQ:PANW) is focused on platformization. Gartner predicts that by 2028, 45% of organizations will use fewer than 15 cybersecurity tools and the demand for consolidated platforms will rise. This company’s platform strategy centers around AI and automation, using ‘Precision AI’ to analyze data from various security sources and automate threat responses. This approach is exemplified by XSIAM, which is an advanced security platform. It is effectively replacing legacy SIEM solutions and older security systems like QRadar. Platformization and AI-powered innovation will continue to drive sustainable growth for Palo Alto Networks (NASDAQ:PANW).
Overall PANW ranks 9th on our list of the best growth stocks to buy for the next 5 years. As we acknowledge the growth potential of PANW as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PANW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.