In this piece, we will take a look at the 13 most promising stocks to buy according to hedge funds. If you want to skip our overview of the latest stock market news, then you can take a look at the 5 Most Promising Future Stocks To Buy.
Investing, for the most part, is all about the future. Each day thousands of investors flock to the stock market to try their hand at fate and become rich. At the same time, investing comes in all flavors which are geared to low and high risk appetites as well as short, medium, or long term horizons. For investors seeking to cash out on the short term, technical trading, and share price movements are their friends. Others who are focused on a longer horizon often look at the fundamentals of a particular stock and/or the broader economic environment and trends to try and see which way the market will head.
Speaking of which, 2023 has been all about the future as well. Investors entered the year worrying about the future and they'll leave it worrying about the future as well. At the start of 2023, the only future that anyone could think about was one that involved a recession. 2022's tail end had seen analysts far and wide warn about a recession in the wake of rapid interest rate hikes by the Federal Reserve. Then, investors caught wind of the advanced nature of large language models (LLM) based artificial intelligence (A.I.) software shown off by the San Francisco, California based ChatGPT. Worried that they would miss out on future growth in the A.I. industry, investors piled billions into the technology sector - a decision that sent the shares of graphics processing unit (GPU) designer NVIDIA Corporation (NASDAQ:NVDA) soaring by a whopping 244% year to date.
Now, as 2023 is behind us, investors are still worried about the future. This future involves the Federal Reserve and its decisions to reduce interest rates. These future decisions are based on future data, and the only thing anyone can do is to see what the tea leaves in the present are saying. The leaves are all for the bulls right now, as multiple economic indicators in America are pointing towards a better future. Inflation is coming down after more than a year of devastation and the economy is ticking along - in a perfect mix of circumstances to achieve the Fed's hallowed 'soft economic landing' where the economy simply slows down instead of contracting in response to rapid interest rate hikes.
The latest bit on the inflationary front came in the form of the Commerce Department's Personal Consumption Expenditures (PCE) price index. The PCE, particularly core PCE, is the Fed's preferred inflation indicator, and core and non core PCE readings for November 2023 showed that 3.2% and 2.6% on an annualized basis. Investors were joyous as this showed that prices fell for the first time in more than two years, which cemented their conviction that interest rate cuts are on the horizon - in the future of course.
Speaking of the future, the present is great for the stock market too. The flagship U.S. stock index, the S&P 500, is up by 4.5% in December as the euphoria about the future translates into present market value. This is giving rise to further optimism about a Santa Claus rally, according to data compiled by Reuters. Reuters compiled data from the Stock Trader's Almanac since 1969 to show that on average, the S&P 500 has gained 1.3% during the last five days of December and the first two days of January.
So, amidst an optimistic end to 2023, what stocks should one take a look at when it comes to the future? We've compiled some today, and the top picks are Lantheus Holdings, Inc. (NASDAQ:LNTH), JD.com, Inc. (NASDAQ:JD), and Alibaba Group Holding Limited (NYSE:BABA).
13 Most Promising Future Stocks To Buy According To Hedge Funds
A senior executive at Sprott Asset Management USA Inc. contemplating market changes and his future investments.
Our Methodology
To make our list of the most promising future stocks to buy according to hedge funds, we made a list of 40 stocks with market capitalization greater than $300 million, significant average analyst share price percentage upside, and an average rating of Buy or better. They were then ranked according to their number of hedge fund investors as of Q3 2023 and the most promising future stocks are as follows.
For these stocks we have also mentioned hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
13 Most Promising Future Stocks To Buy According To Hedge Funds
R1 RCM Inc. (NASDAQ:RCM) is a large American technology company headquartered in Murray, Utah. The firm provides hospitals and medical establishments with the ability to manage their financial operations. December 2023 shaped up to be a crucial month for the firm as it diversified its operational portfolio by acquiring a hospital operations technology provider for a $678 million price tag.
As 2023's Q3 ended, 26 out of the 910 hedge funds part of Insider Monkey's database had bought and owned R1 RCM Inc. (NASDAQ:RCM)'s shares. It joins JD.com, Inc. (NASDAQ:JD), Lantheus Holdings, Inc. (NASDAQ:LNTH), and Alibaba Group Holding Limited (NYSE:BABA) in our list of the most promising future stocks to buy according to hedge funds.
Intellia Therapeutics, Inc. (NASDAQ:NTLA) is an American biotechnology company that develops treatments for cancer, eye diseases, and other ailments. Its stock has been on an upward rise these past couple of weeks after Intellia Therapeutics, Inc. (NASDAQ:NTLA)'s treatment for a skin disease moved forward with European regulators.
By the end of 2023's September quarter, 27 out of the 910 hedge funds covered by Insider Monkey's research were the firm's shareholders. Catherine D. Wood's ARK Investment Management was Intellia Therapeutics, Inc. (NASDAQ:NTLA)'s biggest hedge fund investor in our database as it owned 9.9 million shares that are worth $314 million.
Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is a California based biotechnology company focusing on developing treatments for genetic diseases. The firm's shares have been posting double digit returns as of late, despite the fact that it has agreed to pay $6 million after action from the Justice Department.
For their third quarter of 2023 shareholdings, 27 out of the 910 hedge funds surveyed by Insider Monkey had bought and owned Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) 's shares. The firm's largest hedge fund shareholder as of the same quarter was Panayotis Takis Sparaggis's Alkeon Capital Management since it held a $69.2 million stake.
H World Group Limited (NASDAQ:HTHT) is a Chinese hospitality that manages more than a dozen properties. Turmoil in China's real estate sector coupled with a slowing economy has led Benchmark Company to issue multiple Buy recommendations for the shares in 2023. Overall, the firm has missed analyst EPS estimates in just one out of its four latest quarters, and the latest quarter saw it tout strong RevPAR growth despite economic troubles.
After scanning 910 hedge fund portfolios covering their shareholdings during the previous quarter, Insider Monkey discovered that 28 were H World Group Limited (NASDAQ:HTHT)'s shareholders.
Li Auto Inc. (NASDAQ:LI) is a Chinese electric vehicle manufacturer headquartered in Beijing, China. It is one of several firms that are part of the Asian economic giant's highly competitive and colorful electric vehicle industry which stands as one of the most advanced in the world.
As September 2023 ended, 28 hedge funds out of the 910 surveyed by Insider Monkey had invested money into the company. Li Auto Inc. (NASDAQ:LI)'s biggest investor among these is Jim Simons' Renaissance Technologies courtesy of its $324 million investment.
Royalty Pharma plc (NASDAQ:RPRX) is a New York based biotechnology firm with a diverse portfolio of therapies and treatments that target a variety of rare and often deadly diseases. Despite a timid year for high growth industries such as biotechnology, the firm has managed to keep on track with analyst estimates. Additionally, Morgan Stanley appears to be quite confident about the stock market, as it has reiterated an Overweight rating for the shares six times since April 2023.
By the end of this year's third quarter 31 out of the 910 hedge funds part of Insider Monkey's database were the firm's shareholders. Royalty Pharma plc (NASDAQ:RPRX)'s biggest stakeholder among these is Phill Gross and Robert Atchinson's Adage Capital Management due to its $267 million investment.
Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is a contract oil and gas drilling services provider. Barclays, RBC Capital, Piper Sandler, and Raymond James all maintained Strong Buy, Overweight, or Outperform ratings on the shares during November 2023.
Insider Monkey scoured through 910 hedge fund portfolios for their Q3 2023 shareholdings and discovered 33 Patterson-UTI Energy, Inc. (NASDAQ:PTEN) stakeholders. Stephen Feinberg's Cerberus Capital Management owned the largest stake which was worth $188 million
6. Liberty Live Group (NASDAQ:LLYVA)
Number of Hedge Fund Investors During Q3 2023: 34
Liberty Live Group (NASDAQ:LLYVA) is a sizeable holding company with stakes in crucial firms operating in sports, entertainment, clean energy, investment, and other industries. It's one of the freshest mega listings on the NASDAQ stock exchange, with the shares commencing trading after a reclassification of Liberty Media Corporation in three tracking stocks in August 2023.
Lantheus Holdings, Inc. (NASDAQ:LNTH), JD.com, Inc. (NASDAQ:JD), Alibaba Group Holding Limited (NYSE:BABA), and Liberty Live Group (NASDAQ:LLYVA) are some future stocks that hedge funds are piling into.
