In this article, we’re going to discuss the five highest growth companies hedge funds are buying. To see a more stocks and have a better understanding of what are high growth stocks, please see Top 10 High Growth Companies Hedge Funds Are Buying.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a gander at the top 5 high growth companies hedge funds are buying now:
5. Tesla Inc (NASDAQ:TSLA)
On the fifth spot is Tesla Inc (NASDAQ:TSLA), which has had a spectacular run and is on path for more growth. The company has recently announced an expansion to its Chinese factory in order to boost production capacity. The Gigafactory Shanghai was a major catalyst for the stock as it allowed the company to expand its production significantly and provided exposure to the largest market in the world. In its latest quarterly results, Tesla said its Shanghai factory can provide 250,000 Model 3 vehicles per year and Model Y production, which commenced at the end of 2020 is also ramping up to full capacity. In 2020, Tesla Inc (NASDAQ:TSLA)’s sales in China doubled to $6.6 billion and the country currently represents the company’s second-largest market after the US.
The number of funds tracked by Insider Monkey bullish on Tesla Inc (NASDAQ:TSLA) inched up by one to 68 in the last three months of 2020, while the total value of their positions appreciated to $12.31 billion from $8.18 billion during the same period. Here is what Baron Opportunity Fund said about Tesla in its 2020 Q4 investor letter:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, and energy storage solutions. The stock increased on strong financial results, including profitability that exceeded market forecasts and strong growth across different geographies and vehicle programs. Indeed, in the third quarter, Tesla delivered almost 140,000 total vehicles – with strong unit level economics of 27.7% GAAP automotive gross profit margins – and another quarter of GAAP profitability and strong free cash flow (almost $1.4 billion). Recently, Tesla announced a record of over 180,000 total vehicle deliveries for the fourth quarter, effectively hitting its goal of 500,000 deliveries for the calendar year, a projection given before the COVID pandemic. In addition, we believe newly released full selfdriving functionality should yield further improvements in unit economics and open exciting new growth opportunities. Lastly, Tesla joined the S&P 500 Index, a meaningful milestone that significantly expands the potential shareholder base.”
4. Square Inc (NYSE:SQ)
Then there’s Square Inc (NYSE:SQ), a fintech company behind the popular Cash App service that allows users to transfer money to one another via an app. Cash App has been a game changer for the company, recording revenue of $5.97 billion in fiscal 2020, out of which $4.57 billion was revenue from Bitcoin transactions. The company also added the possibility to buy stocks via Cash App last year, which will likely benefit the company’s growth. Moreover the application is currently only available in the US and UK, where it had 36 million monthly active users at the end of 2020 (up by 50% on the year), which means that the international expansion opportunity can be quite massive. Square Inc (NYSE:SQ) has also recently obtained an industrial banking charter, which will allow it to benefit more from providing lending services (currently it has to use a third-party bank for this).
There were 89 funds from our database long Square Inc (NYSE:SQ) at the of December, holding $8.82 billion worth of shares, which represents an increase from 73 investors with stakes worth $6.50 billion a quarter earlier. Here is what Avory & Co has to say about Square, Inc. in their recent Investor Letter:
“At Avory, this principle was tested. Take Square for example, a top holding for years and one of our top holdings heading into the COVID crisis. The implications for Square seemed dire at first glance as physical retailers using the Square point of sale were unequivocally going to struggle. However, those who actively research the company knew that Square had a pristine balance sheet reinforced by a $1B capital raise on March 2nd. The point-of-sale market was still in the early innings of going from legacy to 21stcentury technology. This meant a quicker displacement of legacy with Square well positioned given its financial strength and diversified customer base. This was not the same circumstance for a competitor like Toast, which laid off 50% of its workforce in April. Square’s software and entrepreneurial driven culture allowed the company to create new products like curbside pickup, ignite Cash App usage through a well-designed Payroll Protection Program, and sign-up new customers that were in dire need of digitizing their stores with Square Online. This type of execution from Square is nothing new and somewhat predictable to long-standing researchers of the company.
Now, making assumptions on Square’s potential is one thing, but tracking it in real time provides the data required to create conviction. Despite a large segment of Square customers struggling, Square’s fundamentals were drastically improving.”
3. Shopify Inc (NYSE:SHOP)
Shopify Inc (NYSE:SHOP) also saw an increase of bullish investors during the last three months of 2020, as 90 funds tracked by Insider Monkey disclosed owning $8.72 billion worth of shares, versus 81 funds and $7.52 billion at the end of September.
Shopify has been growing in the last several years as it profited from the surge in eCommerce that attracted many small businesses and saw another boost during the pandemic as more businesses had to expand their online presence. This year, the company also expects to increase its revenue, although it expects a lower rate than in 2020 due to vaccination rollout that will shift more spending towards offline shopping. However, Shopify Inc (NYSE:SHOP) also faces a looming threat from Amazon.com, Inc. (NASDAQ:AMZN), which has recently acquired Selz, another eCommerce platform that allows building online stores.
2. Twilio Inc (NYSE:TWLO)
Next in our top high growth companies hedge funds are buying is Twilio Inc (NYSE:TWLO), a cloud communications platform that allows programmatically perform phone calls, send and receive text messages and other communication functions. Twilio has recently announced the acquisition of Indian Communications-Platform-as-a-Service company ValueFirst. The value of the deal has not been disclosed, but it will benefit Twilio Inc (NYSE:TWLO) greatly as ValueFirst is one of the leading companies in its segment in India, one of the largest mobile markets in the world. In addition to getting new customers, Twilio will be able to take advantage of new product offerings and know-how to scale its operations, the company said.
Twilio Inc (NYSE:TWLO) saw the number of funds with long positions jump by 23 to 94 during the last quarter of 2020, while the aggregate values of their positions surged to $5.01 billion from $3.47 billion.
1. Sea Ltd (NYSE:SE)
Last but not least, Sea Ltd (NYSE:SE) tops our list of 10 high growth companies hedge funds are buying, as 115 investors tracked by Insider Monkey reported stakes worth $10.87 billion as of the of 2020, up from 95 funds holding $7.82 billion worth of shares a quarter earlier. Chase Coleman’s Tiger Global Management, Nitin Saigal’s Kora Management, and Philippe Laffont’s Coatue Management, are among the top shareholders of Sea Ltd (NYSE:SE).
Sea Ltd (NYSE:SE) is a Singapore-based consumer integrate company that operates Garena (a videogame publisher behind some of the most popular battle royale games like Free Fire and Arena of Valor), Shopee (an eCommerce platform that allows users to build online stores), and SeaMoney (eWallet, payment processing, and other financial products). Considering that the company operates in some of the most high-growing segments and has presence in one of the fastest-expanding Internet markets in the world, it’s not surprising that hedge funds have been fond of Sea Ltd (NYSE:SE). The company’s revenue has surged from $346 million in 2016 to nearly $4.38 billion last year, although it still has to turn profitable.
Please also see Cathie Wood’s Top 10 Stock Picks and 15 Largest AI Companies in the World.
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