In this article, we will take a look at the 10 best active stocks to buy now. You can skip our comprehensive analysis of these stocks and go directly to the 5 Best Active Stocks to Buy Now.
Although it is difficult to define active stocks in a technology-driven world where information is readily available and shares can be bought and sold with a single touch on the mobile phone, they are nonetheless a good indicator of the buzz in the stock market at any given point in time. Big companies with many outstanding shares and high trading volumes usually dominate active stock lists. Most of these companies tend to be in the technology sector where relentless innovation drives the shares of the firms in the industry up and down on a regular basis.
However, it is not only innovation which leads to active interest in technology stocks. Any information which has the potential to affect the firm is taken into account by investors of the modern era. Take the example of technology giant Microsoft Corporation (NASDAQ: MSFT) that has been trading heavily and remains on investors’ radar ever since Bill and Melinda Gates announced that they would end their marriage. Uncertainty regarding their divorce settlement has led to active interest in Microsoft Corporation (NASDAQ: MSFT) stock.
Elsewhere, information is still key, but of a different nature. Facebook, Inc. (NASDAQ: FB) has also been trading at high volumes on the back of strong quarterly results and increased sales of digital advertisements as businesses turn towards marketing for a boost in sales in the post pandemic economy. Facebook, Inc. (NASDAQ: FB) is also cooperating with news publishers to pay them for featuring their content on its platform, a product that is rumored to rival a similar undertaking by tech giant Google in recent months.
Another interesting mention in the active stocks list is NVIDIA Corporation (NASDAQ: NVDA), a company that markets hardware products for use in a range of electronic devices. Amid a global chip shortage due to the supply chain constraints as a result of the pandemic, NVIDIA Corporation (NASDAQ: NVDA) has seen stock price surge in recent weeks and has been one of the most active stocks on the market. NVIDIA Corporation (NASDAQ: NVDA) has strong growth fundamentals and is expected to post record revenue numbers in this quarter.
Industry benchmarks for defining the exact trading volume of active stocks are still debated over hotly in the investor community. According to some market experts, if a stock is trading at one or two million shares per day, it should be considered an active stock. However, this has proved to be a broad definition since, on average, more than 250 stocks in the US trade more than five million shares per day. Usually, big firms in the S&P 500 dominate this category, and more than 20% of the S&P 500 comprises just five big technology firms. That’s why you will see a lot of famous companies in our list of best active stocks to buy now.
In an era of meme stocks and soaring valuations, investors should consider carefully where they place their money. The past few years have proven that market dynamics can change in the blink of an eye. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of the 10 best active stocks to buy now.
Best Active Stocks to Buy
10. Square, Inc. (NYSE: SQ)
Number of Hedge Fund Holders: 89
Square, Inc. (NYSE: SQ) is a San Francisco-based company that facilitates digital payments. It was founded in 2009 and is ranked tenth on our list of 10 best active stocks to buy now. Square stock is one of the most active ones on the market and has also offered investors returns exceeding 162% over the past year. The company markets hardware and software products that make it easier for businesses to process online payments, including point of sale systems and card readers, among a host of other products.
On May 17, Square, Inc. (NYSE: SQ) announced that it would be offering $2 billion principal amount of senior notes in two series in a private placement. The proceeds from the raised money would be used for general corporate purposes, the company said.
At the end of the fourth quarter of 2020, 89 hedge funds in the database of Insider Monkey held stakes worth $8.8 billion in the firm, up from 73 the preceding quarter worth $6.5 billion.
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown
from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square, Inc. (NYSE: SQ)’s future value will be from its Cash App business.”
9. Alibaba Group Holding Limited (NYSE: BABA)
Number of Hedge Fund Holders: 156
Alibaba Group Holding Limited (NYSE: BABA) is a multinational technology company based in China. It is owned by billionaire Jack Ma and was founded in 1999. It is ranked ninth on our list of 10 best active stocks to buy now. The firm operates one of the biggest ecommerce platforms in the world, and also has stakes in several other businesses. Alibaba stock is one of the most active stocks on the market with a high trading volume. The firm has commerce, cloud computing, digital media, and innovation departments.
On May 13, Alibaba Group Holding Limited (NYSE: BABA) posted mixed quarterly results for the last three months of 2020, reporting a 64% year-on-year revenue growth and adjusted earnings per share that fell just short of market estimates.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in the firm with 13.9 million shares worth more than $3.1 billion.
“In the case of Alibaba, two significant news events impacted the company’s shares in the last few months of 2020. First, the Chinese government intervened to halt–for an undetermined period of time–Ant Group’s IPO. Alibaba owns 33% of Ant Group, and Ant Group’s “Alipay” application facilitates financing and payments around the Alibaba ecosystem. Second, rumors of Chinese regulatory oversight in the internet space were solidified at the end of 2020 when China’s State Administration for Market Regulation announced an investigation under the nation’s AntiMonopoly Law. In combination, these events contributed to a selloff in BABA shares that resulted in a roughly 30% decline from highs in late October 2020.
We view Alibaba as arguably one of the most dominant businesses in the world.
We believe the company is also playing an integral role in China’s ambitions to reorient its economy from one that is export-driven to one that is domestically consumption-driven. Alibaba’s marketplaces—TaoBao and Tmall—in combination with its logistics capabilities may well provide the most efficient way to purchase and receive goods in many of China’s lower-tier cities. Important to the investment case, Alibaba Group Holding Limited (NYSE: BABA)’s core commerce business continues to compound at high rates while enjoying low total addressable market penetration and multiple competitive advantages, not the least of which consist of two-sided network
effects between merchants and consumers. At approximately 19x next twelve month’s earnings, we think Alibaba will provide a
favorable investment outcome even if it must pay fines or modify some business practices. We continue to expect earnings growth in excess of 20% over the next three to five years. Even if earnings growth were to fall to 15%, we think it would still result in a favorable outcome at the price at which we added to the position.”
8. Snowflake Inc. (NYSE: SNOW)
Number of Hedge Fund Holders: 54
Snowflake Inc. (NYSE: SNOW) is a California-based cloud computing firm founded in 2012. It is placed eighth on our list of 10 best active stocks to buy now. One of the products that the firm provides is Data Cloud, a platform that lets business users gather data at a single source to drive business insights, data-driven applications, and other uses. Snowflake stock is one of the most active on the market and has returned more than 10% to investors over the past week. The firm has a market cap of over $60 billion.
On May 14, investment bank Goldman Sachs upgraded Snowflake Inc. (NYSE: SNOW) stock to Buy from Neutral with a price target of $275 on the back of strong secular tailwinds that favored the company, including cloud adoption, big data, and secure data sharing.
At the end of the fourth quarter of 2020, 54 hedge funds in the database of Insider Monkey held stakes worth $7.7 billion in the firm, down from 59 in the preceding quarter worth $4.6 billion.
“We also established a position in Snowflake during the quarter. Snowflake offers cloud-based data storage and analytics, generally termed “data warehouse-as-a-service.” The data warehousing market—created by the massive, growing amount of user, customer, and account data and the need to search and analyze it—has historically stored its data on physical servers located on-premises. The cloud data platform market—storing data off-premises on cloud servers—is a relatively new $70 billion+ market. Significantly, incremental warehouse data capacity and renewals are expected to be driven by and to the cloud, with more than 75% of databases in the cloud by 2022.
Snowflake requires absolutely no infrastructure management from its users, is fully scalable for each customer, runs on Amazon, Microsoft, or Google cloud platforms, and most critically, Snowflake helps companies analyze their data. The company also has a unique, customer-aligned billing model based on usage. All of which has led to Snowflake being among the leaders of this highly fragmented market, posting 124% revenue growth last year. Snowflake Inc. (NYSE: SNOW)’s growth comes from the combination of more customers—which grew 73% last year—and customers buying more services—the company boasts an amazing 150%+ net customer retention. The company’s growing scale has also led to increasing gross margin and operating leverage, up 1,100 basis points and 8,200 basis points, respectively, over the past two years. The company has guided to FCF break-even this year, and with the company’s capital expenditure-light model—Snowflake uses the public cloud for hosting—we expect FCF to grow much faster than revenue growth, which we forecast to grow comfortably more than 50% per year for the next several years. Additionally, we have great confidence in the SNOW management team, which previously had an enormously successful run guiding one of our other core Cloud software holdings ServiceNow.”
7. The Boeing Company (NYSE: BA)
Number of Hedge Fund Holders: 55
The Boeing Company (NYSE: BA) is an Illinois-based aerospace company founded in 1916. It is ranked seventh on our list of 10 best active stocks to buy now. The company makes and sells commercial and defense aircraft to countries all over the world. Boeing has been hit hard by a slump in travel that led to reduced orders for new airplanes. However, as the vaccine rollout enables for a return to normal, the company is expected to make a strong comeback. Despite the slowdown, The Boeing Company (NYSE: BA) stock has returned more than 66% to investors in the past year.
Like Facebook, Inc. (NASDAQ: FB), NVIDIA Corporation (NASDAQ: NVDA) and Microsoft Corporation (NASDAQ: MSFT), Boeing is one of the most active stocks to buy now.
On May 13, luxury carmaker Rolls Royce announced that it was discussing partnering with The Boeing Company (NYSE: BA) on a new aircraft program. The share price of Boeing jumped more than 3% after the announcement.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in The Boeing Company (NYSE: BA) with more than 8 million shares worth more than $1.7 billion.
6. PayPal Holdings, Inc. (NASDAQ: PYPL)
Number of Hedge Fund Holders: 147
PayPal Holdings, Inc. (NASDAQ: PYPL) is a California-based financial services firm that facilitates online money transfers across borders. It was founded in 1998 and is ranked sixth on our list of 10 best active stocks to buy now. Some of the products offered by the firm include PayPal, PayPal Credit, Braintree, Venmo, Xoom, Hyperwallet, and iZettle, among others. PayPal Holdings, Inc. (NASDAQ: PYPL) is one of the most active on the market and has offered returns exceeding 67% to investors over the past twelve months.
On May 13, PayPal Holdings, Inc. (NASDAQ: PYPL) announced that it was deepening a partnership with Google for cloud services that would provide infrastructure and analytics to support transaction-processing growth for the payments firm. Like Facebook, Inc. (NASDAQ: FB), NVIDIA Corporation (NASDAQ: NVDA) and Microsoft Corporation (NASDAQ: MSFT), PayPal is one of the most famous stocks in the market.
At the end of the fourth quarter of 2020, 147 hedge funds in the database of Insider Monkey held stakes worth $15.9 billion in PayPal Holdings, Inc. (NASDAQ: PYPL), down from 150 in the preceding quarter worth $11.5 billion.
Click to continue reading and see 5 Best Active Stocks to Buy Now.
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Disclosure: None. 10 Best Active Stocks to Buy Now is originally published on Insider Monkey.