A decade ago who could have thought that the launch of a single generative AI tool would send trillion-dollar companies in the world scrambling to catch up and give rise to new innovative startups within a matter of months that would question the very existence of monopolies and market leaders of our age. That's exactly what happened after ChatGPT was launched. Search. Software development. Design. Video editing. Customer support. Research. There's a long list of domains and areas set to be disrupted because of the AI race that started after the release of ChatGPT from OpenAI. That's the power of innovation and that's how human societies move forward.
The Big Ideas 2024 report from Cathie Wood's ARK Invest says that real economic growth in the world over the past 125 years came in at 3%, but this could rise to 7% in the next seven years because of the robotic revolution and AI causing a jump in worker productivity.
But how to be there at the right time and place to profit from these innovation booms? For an average investor, the best way to have exposure to disruptive innovation is to simple invest in the companies that are working on futuristic technologies.
But while it sounds very easy to guess what the next big thing would be in rough and generic terms, to pinpoint the companies that would stand out in the competition is tough. A BlackRock report titled "Own the Future of Innovation" gave an example to explain this phenomenon:
Number of Hedge Fund Investors: 57
Digital marketing platform company HubSpot Inc (NYSE:HUBS) ranks 16th in our list of the best future stocks to buy for the long term. The stock is part of the Goldman Sachs Future Tech Leaders Equity ETF portfolio.
As of the end of the fourth quarter of 2023, 57 hedge funds out of the 933 funds tracked by Insider Monkey had stakes in HubSpot Inc (NYSE:HUBS). The biggest stakeholder of HubSpot Inc (NYSE:HUBS) during this period was Henry Ellenbogen's Durable Capital Partners which owns a $653 million stake in HubSpot Inc (NYSE:HUBS).
Earlier this month HubSpot posted Q4 results. Adjusted EPS in the quarter came in at $1.76, beating estimates by $0.21. Revenue jumped 23.9% year over year to $581.91 million.
Artisan Small Cap Fund made the following comment about HubSpot, Inc. (NYSE:HUBS) in its Q3 2023 investor letter:
“We ended our investment campaigns in HubSpot, Inc. (NYSE:HUBS), Envista and Generac during the quarter. We first invested in HubSpot in February 2016 when it was a $1.1 billion company. After an extremely successful multiyear investment campaign, the company has outgrown our small-cap mandate, and we have exited the position.”
Number of Hedge Fund Investors: 57
Software project management company Atlassian Corp (NASDAQ:TEAM) shares have gained about 24% over the past one year. The stock recently fell after Atlassian Corp (NASDAQ:TEAM) gave weak guidance but several Wall Street analysts defended the stock, saying it's a long-term buy. Jefferies analyst Brent Thill said:
"While investors debate the next leg of growth for TEAM, we believe TEAM is a great long-term growth franchise with multiple long-term growth levers."
Insider Monkey's database of 933 hedge funds shows that 57 hedge funds had stakes in Atlassian Corp (NASDAQ:TEAM) as of the end of the last quarter of 2023.
Artisan Mid Cap Fund made the following comment about Atlassian Corporation (NASDAQ:TEAM) in its Q3 2023 investor letter:
“Among our top contributors were Argenx, Atlassian Corporation (NASDAQ:TEAM) and Global Payments. Atlassian is a leading provider of team-collaboration software tools. The stock outperformed based on solid financial results. Revenue growth is stabilizing (after a period of slowing in 2022), and operating margins are expected to expand in the coming years after a period of heavy reinvestment. Recent earnings results topped analyst expectations, and the company offered solid guidance, including 25% to 30% growth within its strategically important cloud business for its 2024 fiscal year. While operating margin guidance of 18.5% in 2024 was a modest disappointment, it is being driven by a final investment push, and the company expects 2024 to be the peak year for spending. One notable area of investment is generative artificial intelligence, where management is focused on getting these tools integrated into its products to drive additional value for customers which, if executed well, could drive future price increases.”
Number of Hedge Fund Investors: 62
Mongodb Inc (NASDAQ:MDB) shares have shot up by about 118% over the past one year. The stock recently skyrocketed after Betaville "uncooked alert" said a company might be interest in buying MondoDB.
Baird listed Mongodb Inc (NASDAQ:MDB) as its top software stock pick for 2024 in January.
A total of 62 hedge funds out of the 933 funds in Insider Monkey's database had stakes in Mongodb Inc (NASDAQ:MDB).
Number of Hedge Fund Investors: 62
Massachusetts-based semiconductor company Analog Devices, Inc. (NASDAQ:ADI) is one of the best future stocks in the Goldman Sachs Future Tech Leaders Equity ETF portfolio. Analog Devices, Inc. (NASDAQ:ADI) recently increased its dividend by 7% and also posted fiscal Q1 results. Adjusted EPS in the quarter came in at $1.73, beating estimates by $0.02. Revenue fell 22.8% year over year to $2.51 billion, beating estimates by $10 million.
A total of 62 hedge funds out of the 933 hedge funds tracked by Insider Monkey had stakes in Analog Devices, Inc. (NASDAQ:ADI). The biggest stakeholder of Analog Devices, Inc. (NASDAQ:ADI) was David Blood and Al Gore's Generation Investment Management which owns an $864 million stake in Analog Devices, Inc. (NASDAQ:ADI).
Madison Investments U.S. Equity Strategy stated the following regarding Analog Devices, Inc. (NASDAQ:ADI) in its fourth quarter 2023 investor letter:
“In the semiconductor industry, demand is closely tied to the economic cycle, and industry order patterns are magnified by its complex supply chain. Furthermore, it’s a capital and technology intensive industry, resulting in frequent overcapacity and product obsolescence. For these reasons, we shied away from any investment in the industry for many years. However, several years ago, we felt that segments of the industry had developed strong enough moats to merit investment under the right conditions. We made one investment (Analog Devices, Inc. (NASDAQ:ADI) in Large Cap) that we thought was compelling, but it wasn’t until late 2021 when the semiconductor industry entered a severe downturn, that we began purchasing semiconductor stocks in earnest. Our view on the cycle risk was simple – the long-term growth outlook was tremendous given the proliferation of electronics and software in everyday objects, and the downturn had already begun, and a healthy amount of it was known. We ignored the near-term outlook for profits, assuming they would be down substantially. It turned out that the downturn was more severe than most other investors or industry observers had forecasted. Thus, semiconductor stocks in general remain depressed, and our investments have so far shown mixed results.
Number of Hedge Fund Investors: 62
Texas-based cybersecurity technology company Crowdstrike Holdings Inc (NASDAQ:CRWD) ranks 12th in our list of the best future stocks to buy according to hedge funds. Last month, Raymond James started covering the stock with a Moderately Aggressive Risk/Wealth Accumulation suitability rating. Raymond James set a $330 price target on the stock. As of February 26 the stock was trading at around $311.
Of the 933 funds tracked by Insider Monkey, 62 hedge funds had stakes in Crowdstrike Holdings Inc (NASDAQ:CRWD).
Baron Fifth Avenue Growth Fund stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its fourth quarter 2023 investor letter:
“Improving unit economics: Many of our companies were able to significantly expand margins during 2023 even though revenue growth decelerated for some of them, showcasing the power of their capital-light, recurring revenue business models, and their increased focus on efficiency. Another example is the cybersecurity platform, CrowdStrike Holdings, Inc. (NASDAQ:CRWD), which is expected to increase its operating margins from 15.9% in 2022 to 20.8% in 2023 as a result of growing efficiencies, while the company’s platform offering is resonating with an increasing number of customers (for example, deals with eight or more modules grew 78% year-over-year in the last quarter), which is a tailwind to sales productivity.”
Number of Hedge Fund Investors: 64
Computer networking solutions company Arista Networks Inc (NYSE:ANET) is one of the top future stocks to invest in for long term. Earlier this month Arista Networks Inc (NYSE:ANET) reported fourth quarter results. Adjusted EPS in the quarter came in at $2.08, surpassing estimates by $0.37. Revenue jumped 20.3% year over year to $1.54 billion, meeting estimates.
Of the 64 hedge funds that had stakes in Arista Networks Inc (NYSE:ANET) as of the end of the fourth quarter of 2023, Steve Cohen's Point72 Asset Management had the biggest stake in Arista Networks Inc (NYSE:ANET), worth $196 million.
Madison Mid Cap Fund stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its fourth quarter 2023 investor letter:
“The top five contributors for the quarter were Gartner, Dollar Tree, Arista Networks, Inc. (NYSE:ANET), Glacier Bancorp, and Ross Stores. Arista Networks continues to produce robust revenue growth, as its emerging Enterprise business is offsetting slowing demand from their core ‘Cloud Titan’ customers. While sales in relation to AI are trickling in, most of the benefit is still to be realized.
Number of Hedge Fund Investors: 64
Online food ordering and delivery platform company DoorDash Inc (NASDAQ:DASH) ranks 10th in our list of the best future stocks to buy for long term. The stock recently jumped after Morgan Stanley gave bullish comments for the stock and said there's a buying opportunity around DoorDash Inc (NASDAQ:DASH) after the latest pullback after earnings miss.
Morgan Stanley's Brian Nowak said:
"While the pullback was driven by investor concerns surrounding investment levels, competitive dynamics and forward guidance achievability, we have confidence in DASH's forward GOV and EBITDA growth."
Insider Monkey's database shows that 64 hedge funds had stakes in DoorDash Inc (NASDAQ:DASH) as of the end of the fourth quarter of 2023.
Number of Hedge Fund Investors: 66
Fintech products and services company Fidelity National Information Servcs Inc (NYSE:FIS) is a key part of the Goldman Sachs Future Tech Leaders Equity ETF. In January, Mizuho Securities added Fidelity National Information Servcs Inc (NYSE:FIS) to its USA's top picks for the fintech payment sector for 2024.
As of the end of the fourth quarter of 2023, 66 hedge funds had stakes in Fidelity National Information Servcs Inc (NYSE:FIS).
Broyhill Asset Management stated the following regarding Fidelity National Information Services, Inc. (NYSE:FIS) in its fourth quarter 2023 investor letter:
“Recent investments in this bucket include Ball Corp, Fidelity National Information Services, Inc. (NYSE:FIS), and Avantor. Fidelity National Information Services is a payment provider for financial institutions and merchants around the world. We took a hard look at the business around the time we established our investment in Fiserv, discussed in detail here. Thankfully, we decided to pass at the time in favor of what we believed to be a much better competitively positioned business with a much stronger track record of execution. Since then, issues at FIS have gone from bad to worse. The $48 billion acquisition of Worldpay in 2019, which took leverage up to 5.5x on the balance sheet, hasn’t turned out quite as well as Fiserv’s acquisition of First Data. Fast forward to today, and FIS is unwinding prior mistakes, selling off a 55% interest in the recently acquired business (meaning we now have a hard number for the remaining 45% they own), and using proceeds to take leverage back down to 2.5x post close while repurchasing at least $3.5B of stock through next year. As a result, shareholders will be left with a cleaner balance sheet and a simpler organizational structure, consisting primarily of their very defensive, very profitable core banking business, which traded down to a single-digit multiple vs historical averages for the industry closer to 20x.”
Number of Hedge Fund Investors: 68
Millions of small businesses and individuals use Shopify Inc (NYSE:SHOP) platform to make stores and sell their products online. The rising demand of ecommerce is expected to boost the stock in the future. That's why Shopify Inc (NYSE:SHOP) is a key part of Goldman Sachs Future Tech Leaders Equity ETF.
Hedge funds also love the stock, since 68 hedge funds tracked by Insider Monkey had stakes in Shopify Inc (NYSE:SHOP).
RiverPark Large Growth Fund stated the following regarding Shopify Inc. (NYSE:SHOP) in its fourth quarter 2023 investor letter:
“Shopify Inc. (NYSE:SHOP): Shopify shares were our top performer in the quarter following a strong 3Q earnings report that included better than expected revenue growth and substantial margin expansion. We wrote in October, after Shopify was our worst performer, that the stock had been volatile, despite the fact that the company’s underlying business has been “steadily improving following a post-Covid e-Commerce slowdown.” The most recent quarter, reported in early November, was a continuation of this steady recovery. Revenue growth of 25% was 3 percentage points better than investors expected and an acceleration over last year’s 3Q growth of 22%. More impressively, SHOP reported operating income margins of 16%, 600 basis points ahead of investor expectations. Free cash flow margins were also 16%, and the company guided 4Q free cash flow margins to the “high teens.” A combination of new merchants to the company’s platform, increased adoption of SHOP’s offerings by existing merchants, and e-commerce market share gains (SHOP merchants US sales on Black Friday grew 24% year over year vs US E-commerce in aggregate growing 7.5%) are driving this revenue growth and profitability.
Number of Hedge Fund Investors: 72
California-based software company Cadence Design Systems Inc (NASDAQ:CDNS) ranks seventh in our list of the best future stocks to buy for long term according to hedge funds. Cadence Design Systems Inc (NASDAQ:CDNS) in January increased its dividend by 6.4%.
A total of 72 hedge funds tracked by Insider Monkey had stakes in Cadence Design Systems Inc (NASDAQ:CDNS).
Number of Hedge Fund Investors: 72
Cloud-based monitoring and security solutions company Datadog Inc (NASDAQ:DDOG) is among the top 10 stocks in the portfolio of Goldman Sachs Future Tech Leaders Equity ETF. Datadog Inc (NASDAQ:DDOG) shares have gained about 12% year to date through February 26.
As of the end of the fourth quarter of 2023, 72 funds tracked by Insider Monkey had stakes in Datadog Inc (NASDAQ:DDOG).
Baird analyst William Power gave some positive comments on the stock after attending Datadog Inc's (NASDAQ:DDOG) investor day earlier this month. Power said:
"The company expects continued strong revenue growth, driven by its land and expand go-to-market motion, and raised its long-term adjusted operating margin target to 25%+ vs. the 23% in 2023. Notably, the company seems to be past our previous optimization concerns based on current trends."
The analyst has a Neutral rating and a $130 price target on the stock.
Baron Fifth Avenue Growth Fund stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its fourth quarter 2023 investor letter:
“Most of our portfolio companies have seen stabilization and modest improvements in short-term business fundamentals as the year progressed. More importantly in our view, many have been able to drive significant improvement in long-term Key Performance Indicators (KPIs) such as share gains, meaningful expansion of their total addressable market, and improvement in unit economics. These KPIs are significantly more important in driving the intrinsic values of our businesses, which we believe have increased noticeably during 2023. In the meantime, disruptive changes that we expect will benefit many of our businesses have also continued to pick up steam. Some examples include: • Market share gains: Many of our companies have been reporting on customer consolidation trends and rising win rates against competitors. In its their most recent quarterly conference call, Datadog, Inc. (NASDAQ:DDOG) described a customer who replaced seven different tool providers with the Datadog platform and another one who replaced a dozen different tools and moved to Datadog.”
Click here to continue reading and see 5 Best Future Stocks for the Long Term.
Suggested articles:
Disclosure: None. 16 Best Future Stocks For The Long Term is originally published on Insider Monkey.
