Despite the tensions in the Middle East, markets were optimistic recently after dovish comments from two Fed officials who believe the rising bond yields in the US would result in an environment where the Fed might not need to keep raising interest rates. According to Andrew Ticehurst, a rates strategist at Nomura Holdings Inc., the Fed speakers were on the same page when it comes to bond yields and their effects. The analyst said that market pricing suggests that the Fed is not expected to increase rates this year. The market optimism is expected to stick until the end of the year, according to many analysts. The biggest growth driver could be strong earnings. Morgan Stanley’s Andrew Slimmon, who has been bullish on the stock market, said in an interview with Bloomberg that he expects a strong fourth quarter because the “pain” of staying out of the market will become acute and this will force retail and institutional investors to pile into stocks.
Another reason why Slimmon is bullish on the market is that he believes earnings growth rate will turn positive year over year later this year. The analyst said that the amount of money the US government is expected to dole out under IRA, CHIPS and infrastructure acts is huge and would come into effect in the fourth quarter of 2023. He said that this “huge” money circulation will have a positive effect on the stock market and not many analysts are currently appreciating this factor.
Slimmon said that this huge public spending will trick down to lower levels and could add to wage growth. What worries the analyst is that how the Fed would achieve its 2% inflation target in the presence of this potential wage growth. If the Fed is persistent on this 2% inflation target and government spending keeps wages up, we could end up in a vicious cycle where the Fed would be in a never-ending battle against an inflation that won’t go away.
Another Bloomberg report quoted Slimmon as saying:
“If you’re a portfolio manager, you’re seeing revisions are going up, and if you don’t own these stocks, it is painful every day. If you’re a strategist, you don’t have to get on the scale every day.”
Bears Retreating
Many famous analysts who were bearish on the market are now on a retreat and revising their estimates, a sign that the market could rebound and end the year on a positive note. For example, Bloomberg reported in September that Societe Generale’s Manish Kabra upped target for the S&P 500 index to 4,750 from 4,300. This is also much higher than the analyst’s original target of 3,800 which he set during the start of the year. Similarly, Piper Sandler & Co.’s Michael Kantrowitz and BNP Paribas SA’s Greg Boutle have also increased their price targets for the broader indices for 2023. Currently all eyes are on the Fed and even the slightest bit of hints that the Fed won’t continue on its path of rate hikes could redouble the current optimism and have bears go in a further retreat. However, what happens in 2024 is a different story. If the Fed is not able to control inflation, there won’t be any rate cuts and the economy could face increased inflation and rate hikes for a long period of time.
Best Aggressive Growth Stocks To Buy According to Hedge Funds
Luis Louro / shutterstock.com
Our Methodology
For this article, we first used a stock screener to identify all US companies with sales growth of over 25% over the past 5 years and PE ratios over 20. Filtering for high PE ratios and high sales growth gave us companies that are growing aggressively over the past few years. From these companies we selected 12 stocks with the highest number of hedge fund investors. We gauged hedge fund sentiment using Insider Monkey’s database of 910 hedge funds. Some top names include NVIDIA Corporation (NASDAQ:NVDA), ServiceNow, Inc. (NYSE:NOW) and Tesla, Inc. (NASDAQ:TSLA).
Best Aggressive Growth Stocks To Buy According to Hedge Funds
12. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC)
Number of Hedge Fund Holders: 59
Workspace and portable storage solutions company WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) ranks 12th in our list of the best aggressive growth stocks to buy according to hedge funds. Back in June Morgan Stanley published a list of companies it believed enjoy strong pricing power. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) made it to the list. Morgan Stanley said that WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) has strong pricing power due to spot market strength and “idiosyncratic levers.” Like WSC, hedge funds are also loading up on NVIDIA Corporation (NASDAQ:NVDA), ServiceNow, Inc. (NYSE:NOW) and Tesla, Inc. (NASDAQ:TSLA).
As of the end of the second quarter of 2023, 59 hedge funds out of the 910 hedge funds tracked by Insider Monkey reported having stakes in WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC).
Bernzott Capital Advisors US Small Cap Value Fund made the following comment about WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) in its Q1 2023 investor letter:
“WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC): Exited the position as a result of the company exceeding the upper end of our market cap restrictions due to stock appreciation.
Lululemon Athletica Inc. (NASDAQ:LULU) ranks 11th in our list of the best aggressive growth stocks to buy according to hedge funds. In September, HSBC praised Lululemon Athletica Inc. (NASDAQ:LULU) and gave it a Buy rating and a $500 price target.
HSBC said that Lululemon Athletica Inc. (NASDAQ:LULU) shares are barely above the 2020 levels even when the company’s business is significantly bigger and the growth prospects are strong.
“We have decided to initiate coverage as the name seems to gather more interest and we believe the equity story sits at the cross-roads of many business models,” HSBC said.
Kinsman Oak Capital Partners made the following comment about Lululemon Athletica Inc. (NASDAQ:LULU) in its first quarter 2023 investor letter:
“What is relatively new, however, is that we are beginning to see substantial write-downs and impairment charges. For instance, Lululemon Athletica Inc. (NASDAQ:LULU) is already exploring a sale of Mirror, the struggling fitness technology company it bought less than three years ago for half a billion dollars. Lululemon executives recently announced a $433 million impairment charge on the business (-89%). That is not an insignificant amount of money.”
Apollo Global Management, Inc. (NYSE:APO) ranks 10th in our list of the best aggressive growth stocks to buy according to hedge funds. According to Yahoo Finance data, Apollo Global Management, Inc. (NYSE:APO) was expected to see sales growth of a whopping 300% in the September quarter. For the whole year this growth was expected to come in at 23% while it would stand at about 12% next year.
As of the end of the second quarter of 2023, 62 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Apollo Global Management, Inc. (NYSE:APO). The biggest stakeholder of Apollo Global Management, Inc. (NYSE:APO) during this period was
Baron FinTech Fund made the following comment about Apollo Global Management, Inc. (NYSE:APO) in its second quarter 2023 investor letter:
“Tighter lending standards by banks may create more opportunities for private credit providers, such as Apollo Global Management, Inc. (NYSE:APO), Ares Management, Blackstone, and KKR. These lenders operate outside of the banking system to make loans to mostly privately held, middle-market companies. Instead of relying on bank deposits that can be withdrawn daily and are susceptible to runs and repricing, non-bank lenders fund loans using committed capital from investment vehicles, life insurance policies, and annuities that is more stable with a more predictable cost. This enables better asset-liability duration matching and reduces risk for multi-year loans against illiquid assets. Private credit is one of the fastest-growing segments in the lending landscape with close to $1.3 trillion in assets under management, having tripled in the last 10 years and expected to exceed $2 trillion in five years, according to Moody’s Corporation. As banks tighten credit standards and potentially face more onerous regulations, non-bank lenders will likely capture additional market share with attractive risk-adjusted returns. Jamie Dimon noted on JPMorgan’s recent earnings call that higher bank capital requirements is “great news” for private credit lenders who will be “dancing in the streets” as commercial lending moves out of the banking system. We expect Apollo Global will continue to benefit from growth in the private credit market.”
KKR & Co. Inc. (NYSE:KKR) is expected to see sales growth of a whopping 36% in 2024, according to analyst data tracked by Yahoo Finance. Earlier this month Wolfe Research assigned an Outperform rating to KKR & Co. Inc. (NYSE:KKR). Wolfe analyst Steven Chubak said KKR & Co. Inc. (NYSE:KKR)’s flagship fundraising cycle is expected to provide an over 20% increase to run-rate management fees.
As of the end of the second quarter of 2023, 62 hedge funds tracked by Insider Monkey had stakes in KKR & Co. Inc. (NYSE:KKR).
Greenhaven Road Capital made the following comment about KKR & Co. Inc. (NYSE:KKR) in its second quarter 2023 investor letter:
“KKR & Co. Inc. (NYSE:KKR) – The firm has been growing AUM in the mid-teens for decades. They are adding new products to appeal to the large pots of money directed by insurance companies, while also building out their offerings and personnel to go after high-net-worth investors, which currently make up less than 5% of AUM. In the short term, there will be fewer realizations (sales of companies), which will impact short-term distributable earnings, but as one of the handful of global private equity companies with a stellar brand and track record, it is highly likely with each passing day that more assets are raised. In the meantime, they have over $100B in “dry powder” that will be called from investors and invested/added to fee-paying AUM when KKR believes the time is right.”
While Sea Limited (NYSE:SE) growth has slowed down over the past one year, the company is expected to post sales growth of over 10% next year, according to data from Yahoo Finance. In August Sea Limited (NYSE:SE) posted second quarter results. GAAP EPS in the quarter came in at $0.54, beating estimates by $0.08. Revenue in the period jumped 5.2% year over year to $3.1 billion, missing estimates by $150 million.
Insider Monkey’s database of 910 hedge funds shows that 62 hedge funds had stakes in Sea Limited (NYSE:SE) as of the end of the second quarter of 2023. The biggest hedge fund stakeholder of Sea Limited (NYSE:SE) was Nitin Saigal and Dan Jacobs’ Kora Management which owns a $224 million stake in the company.
Sea Limited (NYSE:SE) talked in detail about the state of business and future expectations in Q2 earning call.
“…On the e-commerce side, regarding GMV and take rate, we see a sequential growth in GMV, and we did mention that we saw double-digit growth in order number quarter-on-quarter. So that’s an initial positive sign in relation to our ramp-up investments in Q2 already. Why we — in terms of take rates, as Tony probably already observed, we continue to see uptick in terms of advertisement and also so much spending on our platform, and therefore, the core marketplace revenue continues to grow as a result. But of course, there is some impact on the VAS revenue because of our ramp-up investment in logistics spending which affects due to GAAP accounting and netting off effects VAS GAAP revenue.
Hayden Capital made the following comment about Sea Limited (NYSE:SE) in its second quarter 2023 investor letter:
“Sea Limited (NYSE:SE): It’s been a tough stretch for SE’s stock price, as the company continues to adapt its strategy over the past year.
Chinese online retailer PDD Holdings Inc. (NASDAQ:PDD) ranks 7th in our list of the best aggressive growth stocks to buy according to hedge funds. Data from Yahoo Finance shows that PDD Holdings Inc. (NASDAQ:PDD) is expected to post sales growth of 50% this year, while next year this growth is expected to come in at 27%.
However, PDD Holdings Inc. (NASDAQ:PDD) shares are down following a short report from Grizzly Research. The report alleges PDD Holdings Inc. (NASDAQ:PDD)’s shopping app TEMU is a form of "malware/spyware.”
As of the end of the second quarter of 2023, 67 hedge funds tracked by Insider Monkey reported having stakes in PDD Holdings Inc. (NASDAQ:PDD).
Financial technology services company Fiserv, Inc. (NYSE:FI) ranks 6th in our list of the best aggressive growth stocks to buy now. Yahoo Finance data shows Fiserv, Inc. (NYSE:FI) is expected to experience sales growth of over 7% this year and the next year.
As of the end of the second quarter of 2032, 68 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Fiserv, Inc. (NYSE:FI). The biggest stakeholder of Fiserv, Inc. (NYSE:FI) was Natixis Global Asset Management’s Harris Associates which owns a $1.9 billion stake in the company. Like FI, hedge funds also like NVIDIA Corporation (NASDAQ:NVDA), ServiceNow, Inc. (NYSE:NOW) and Tesla, Inc. (NASDAQ:TSLA).
Vulcan Value Partners made the following comment about Fiserv, Inc. (NYSE:FI) in its second quarter 2023 investor letter:
“We purchased two new positions: Fiserv Inc. and SS&C Technologies Holdings Inc. Fiserv, Inc. (NYSE:FI), a company we have owned in the past, is a global payments solutions and financial services provider. Their business consists of three segments: merchant acceptance, payments processing, and core bank processing. Each of these segments provides essential products and services to the customers. Fiserv’s products have high switching costs, which aids in customer retention and increases the stickiness of their revenues. Currently, the company is generating over $3 billion of free cash flow annually, allowing management to invest in research and development, opportunistic M&A, and returning cash to shareholders. We are pleased to have the opportunity to purchase this company at a discount to our estimate of intrinsic value.”
