In this article, we shared the 10 best new stocks to buy now.
Let’s face it: investing isn’t as easy as it seems, especially in the age of meme stocks, outrageous speculations and soaring valuations. The market is seething with enthusiasm despite the scarcity of fundamentals to back the overconfidence. The Dow Jones Industrial Average recently crossed 32000 for the first time. The unexplainable exuberance in the market caused several famous investors and billionaires to warn that stocks are overvalued and too much hype is making it difficult for average investors to make rational decisions. Billionaire Lee Cooperman of Omega Advisors recently said in an interview that the market is overvalued and the process of correct “won’t be pleasant.”
The famous “Buffett Indicator” (market cap of U.S. stocks/dollar value of GDP) symbolizing the investment philosophy of legendary investor Warren Buffett, is also indicating that the market is overvalued.
“Emperors With No Clothes”
Speaking of the Oracle of Omaha, here is what the 90-year-old billionaire said in his recent letter to investors:
“Investing illusions can continue for a surprisingly long time. Wall Street loves the fees that deal-making generates, and the press loves the stories that colorful promoters provide. At a point, also, the soaring price of a promoted stock can itself become the “proof” that an illusion is reality. Eventually, of course, the party ends, and many business “emperors” are found to have no clothes. Financial history is replete with the names of famous conglomerateurs who were initially lionized as business geniuses by journalists, analysts and investment bankers, but whose creations ended up as business junkyards.”
The Risk of Investing in New Stocks
Investing in new stocks is risky, but comes with huge benefits if executed correctly. A study from Dimensional Fund Advisors showed that the first-year performance of more than 6,000 US IPOs from 1991 to 2018 underperformed industry benchmarks. But we have examples of new stocks like Uber (NYSE:UBER), Airbnb, Lyft, Facebook and several others which gained a huge value after listing on the public markets, thanks to their solid products and services.
The Benefits of Investing in New Stocks
Buying a new stock can offer a huge potential for delivering capital gains. For instance, because of the COVID-19 pandemic, the digital car-buying platform Vroom saw a strong demand. The company first went public in June 2020 at $22 per share. The stock soared more than 100% on its first trading day with a close of $47 per share.
It’s not easy to beat the market, and as evident from Berkshire’s latest returns data, even the smart money is struggling. Investors should tread the markets with caution as volatility and uncertainty is making it difficult to make the right decisions. Even the smart money is struggling. 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 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 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 16. 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 and industry outlook in mind, let’s start our list of the 11 best new stocks to buy now.
10. Sotera Health Company (NASDAQ:SHC)
No of HFs: 27
Total Value of HF Holdings: $321 Million
We start the list of 11 best new stocks to buy now with Sotera Health Company. The company was founded in 1978 and began trading on the Nasdaq Global Select Market in November 2020. As of March 1, SHC shares trade at around $27. Shares in the company fell 4% over the last twelve months. On January 11, the company announced its preliminary fourth-quarter net revenue of approximately $216 million. Their full-year 2020 and earning release is scheduled to be reported before the market open on Tuesday, March 9, 2021.
9. Telos Corporation (NASDAQ:TLS)
No of HFs: 28
Total Value of HF Holdings: $183 Million
Telos Corporation provides cyber, cloud, and enterprise security solutions. Recently, the company was awarded a $13.5 million Federal Bureau of Investigation (FBI) contract for Enterprise Risk Management. The contract included options for the FBI to deploy the Xacta solution. One of the top hedge funds having stakes in TLS is Steven Ng and Andrew Mitchell’s Ophir Asset Management, which had 938,000 shares of the company, worth $30 million at the end of December 2020.
8. Array Technologies, Inc. (NASDAQ:ARRY)
No of HFs: 29
Total Value of HF Holdings: $564 Million
One of the global leaders for manufacturing solar tracking solutions, Array Technologies, Inc., is the 8th best new stock to buy now. There were 29 hedge funds in our database that hold a position in Array Technologies, Inc. by the end of December, compared to 0 funds in the third quarter. During the third quarter of 2020, the company reported a revenue of $139.5 million. The company will release its fourth quarter and full-year 2020 results after the market closes on March 9, 2020.
7. Maravai LifesSciences Holdings, Inc. (NASDAQ:MRVI)
No of HFs: 34
Total Value of HF Holdings: $614 Million
The 7th best new stock to buy now is Maravai LifesSciences Holdings, Inc. The life science company develops drug therapies, diagnostics, and novel vaccines. An insider purchased 35,000 shares at $26 in November 2020. The stock is up 23% since then. In November 2020, the company closed its initial public offering of 69 million shares of Class A common stock, including the underwriters’ option to purchase up to 9 million additional shares of Class A common stock, at a public offering price of $27 per share. The aggregate gross proceeds to Maravai from the offering were around $1.86 billion.
6. QuantumScape Corporation (NYSE:QS)
No of HFs: 35
Total Value of HF Holdings: $1.84 Billion
QuantumScape Corporation ranks 6th on our list of 11 best new stocks to buy now. QS develops and sells solid-state lithium-metal batteries for Electric Vehicles. At the end of the fourth quarter, 35 hedge funds in Insider Monkey’s database of 887 funds held stakes in QuantumScape Corporation, up from 14 funds a quarter earlier.
5. Vontier Corporation (NYSE:VNT)
No of HFs: 36
Total Value of HF Holdings: $590 Million
The worldwide industrial technology company Vontier Corporation ranks 7th in our list of best new stocks to buy now. The company provides services that focus on environmental sensors, fueling equipment, vehicle tracking, fleet management software solutions, and workflow software. As of March 1, VNT shares trade at $31. At the end of the fourth quarter, 36 hedge funds tracked by Insider Monkey held stakes in Vontier Corporation. During the fourth quarter of 2020, the company reported net earnings of $136.8 million, adjusted net earnings of $147.4 million, diluted net earnings per share of $0.81, and adjusted diluted net earnings per share of $0.87. The company also reported a 9.6% year-over-year jump in revenue.
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4. C3.ai, Inc. (NYSE:AI)
No of HFs: 37
Total Value of HF Holdings: $483 Million
The leading enterprise AI software provider C3.ai Inc. was founded in 2009 by CEO Thomas Siebel. The company first went public in December 2020. AI priced its IPO at $42 a share. As of March 1, AI shares trade at $112. They were recently awarded a broad-ranging omnibus US patent for an end-to-end enterprise AI solution. During the third quarter of 2020, AI reported revenue of $41.28 million.
sabrisy/Shutterstock.com
3. PROG Holdings, Inc. (NYSE:PRG)
No of HFs: 38
Total Value of HF Holdings: $374 Million
Ranking 3rd in our list of 10 best new stocks to buy now is Prog Holdings, Inc. PRG serves users in the United States. The company provides commercial equipment, finance, and leasing services. PRG only began trading on the New York Stock Exchange on December 1, 2020. As of March 1, The stock trades at $50 and offers a dividend yield of 0.36%. Shares of PRG rallied 50% over the last twelve months. At the end of the fourth quarter, 38 hedge funds in Insider Monkey’s database of 887 hedge funds held stakes in PRG, compared to 0 funds in the third quarter. At the end of the fourth quarter, PRG reported revenue of $605.7 million, diluted EPS of $0.62, and non-GAAP diluted EPS of $0.95.
2. DoorDash, Inc. (NYSE:DASH)
No of HFs: 38
Total Value of HF Holdings: $3.95 Billion
The food delivery service DoorDash, Inc. ranks 2nd on our list of best new stocks to buy now. As of March 1, DASH shares trade at $169. Shares of DASH rallied 18% over the last twelve months. Philippe Laffont’s Coatue Management is one of the top hedge funds having positions in DASH. The hedge fund had 8.7 million shares of the company, worth $1.24 billion, as of the end of the fourth quarter.
During the fourth quarter of 2020, DASH reported revenue of $970 million. The company is expecting continuous growth in marketplace gross orders as COVID-19 vaccines become available for general public.
Pixabay/Public Domain
1. Airbnb, Inc. (NASDAQ:ABNB)
No of HFs: 68
Total Value of HF Holdings: $1.61 Billion
Topping the list of best new stocks to buy now is Airbnb. ABNB is an online vacation rental marketplace based in San Fransisco, California. The company was founded in 2008 by Brian Chesky, Nathan Blecharczyk, and Joe Gebbia. According to a Pitchbook report, Airbnb, Inc. was one of the most valuable companies that came to the public markets in 2020. Amid the pandemic, ABNB reported only a 22% decline in revenue during the fourth quarter of 2020 compared to the same quarter of 2019. Shares of ABNB rallied 40% over the last 12 months. One of the biggest shareholders having stakes for Airbnb is Jim Davidson, Dave Roux, and Glenn Hutchins’ Silver Lake Partners which had 2.5 million shares of the company, worth $375 million.
Blue Hawk Investment Group mentioned ABNB in its Q4 2020 investor letter:
“We typically avoid new issues, with ABNB being a rare exception. ABNB fits right into our wheelhouse as a leader in a promising industry, with a disruptive business model, unique company culture, massive addressable market, and a name synonymous with a category (“got an Airbnb for the weekend”). Towards the end of the year, the narrative of the hot IPO/SPAC environment we found to be fitting, with exception. We believe grouping ABNB into this category is a mistake. The IPO was botched, but the mistake was the initial offering price being far too low in this case. We believe the reason for this initial mispricing was the proximity of the IPO to the vaccine effectiveness data release. The data turned out to be much better than anticipated, a blue-sky result, causing a drastic change in the outlook for travel and lodging, the industry in which ABNB operates. Bayes Theorem in action, people typically have a bias when incorporating new information, in that they do not adjust their view as quickly as they should, and the vaccine data release required an almost complete reversal of views.
Back to the company, we started buying on day one and continued to build a position into the $120s and $130s. A founder-led firm, we believe the company has an excellent management team, a very attractive growth profile with many levers at their disposal, and embedded optionality due to their attractive position in the travel ecosystem (and minimal reliance on Google). The most underappreciated aspect of the story is the attractiveness of the financial model. Not many IPOs come along that get us excited, but we believe the future is bright for this young company. We will reveal more details about our thesis in future letters.”
You can also take a peek at Billionaire Stan Druckenmiller’s Top 10 Stock Picks and Billionaire Julian Robertson On Interest Rates and His Top Stock Picks For 2021.
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This article is originally published at Insider Monkey.
