10 Best Up and Coming Stocks to Invest In

Published on July 30, 2021 at 9:35 am by Usman Kabir in Hedge Funds, News

In this article, we discuss the 10 best up and coming stocks to invest in.

The COVID-19 pandemic has transformed so many facets of life. Technology has played a key part in this change and firms working in the tech sector have naturally gained a lot in this process. This technology-enabled disruption is not new, but has been steadily chipping away at several industries for years. In the past decade, growth stocks – usually synonymous with the tech world – have outperformed value offerings. One indicator of this is the returns offered by the Russell 2000 Growth ETF that has gained 105% in the last five years.

This represents a 49 percentage points margin over the Russell 2000 Value ETF over the same time period. Tech firms are constantly evolving and this is one reason they never stop growing. It is also one of the reasons why there is a lot of competition in the sector, with startups constantly vying for relevance alongside industry giants. Some of the tech firms that investors should monitor in the coming months include Zendesk, Inc. (NYSE: ZEN), Five Below, Inc. (NASDAQ: FIVE), and Take-Two Interactive Software, Inc. (NASDAQ: TTWO), among others.

These firms have a competitive edge over peers in the marketplace they seek to serve, are future-focused, and have varied revenue streams that will stand them in good stead as the uncertainties associated with the Delta variant of the coronavirus unfold. They have also beaten market estimates on revenue and earnings per share and are expected to continue on an accelerated growth trajectory. More details about these companies and others like them are discussed in detail below.

Technology has affected the finance world as well. 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 May 29th 2021 our monthly newsletter’s stock picks returned 206.8%, vs. 91.0% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). 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 up and coming stocks to invest in. These were ranked keeping in mind analyst ratings, business fundamentals, and hedge fund sentiment.

Best Up And Coming Stocks to Invest In

10. Boxlight Corporation (NASDAQ: BOXL)

Number of Hedge Fund Holders: 3

Boxlight Corporation (NASDAQ: BOXL) is placed tenth on our list of 10 best up and coming stocks to invest in. The company’s shares have returned 28% to investors over the past six months. The firm is based in Georgia and markets education technology services. In earnings results for the first quarter, posted on May 13, the firm posted earnings per share of -$0.09, just missing estimates by $0.01. The revenue over the period was more than $33 million, up over 480% year-on-year and beating estimates by $2 million.

On July 1, investment advisory Alliance Global maintained a Buy rating on Boxlight Corporation (NASDAQ: BOXL) stock and raised the price target to $6 from $5.5, underlining that the firm was benefiting from a federal stimulus on education technology.

Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Boxlight Corporation (NASDAQ: BOXL) with 121,107 shares worth more than $306,000.

Just like Zendesk, Inc. (NYSE: ZEN), Five Below, Inc. (NASDAQ: FIVE), and Take-Two Interactive Software, Inc. (NASDAQ: TTWO), Boxlight Corporation (NASDAQ: BOXL) is one of the best up and coming stocks to invest in.

9. J & J Snack Foods Corp. (NASDAQ: JJSF)

Number of Hedge Fund Holders: 15

J & J Snack Foods Corp. (NASDAQ: JJSF) stock has returned 32% to investors over the past year. It is ranked ninth on our list of 10 best up and coming stocks to invest in. The firm is headquartered in New Jersey and markets nutritional snacks and beverages. On July 26, the firm posted earnings for the third quarter, reporting earnings per share of $1.52, beating market predictions by $0.74. The revenue over the period was $324 million, up more than 50% year-on-year and beating estimates by $13 million.

In earnings results for the third fiscal quarter, posted on July 26, J & J Snack Foods Corp. (NASDAQ: JJSF) reported earnings per share of $1.52, beating market predictions by $0.74. The revenue over the period was $324 million, up 51% year-on-year.

At the end of the first quarter of 2021, 15 hedge funds in the database of Insider Monkey held stakes worth $69 million in J & J Snack Foods Corp. (NASDAQ: JJSF), the same as in the previous quarter worth $76 million.

Alongside Zendesk, Inc. (NYSE: ZEN), Five Below, Inc. (NASDAQ: FIVE), and Take-Two Interactive Software, Inc. (NASDAQ: TTWO), J & J Snack Foods Corp. (NASDAQ: JJSF) is one of the best up and coming stocks to invest in.

8. Redfin Corporation (NASDAQ: RDFN)

Number of Hedge Fund Holders: 18

Redfin Corporation (NASDAQ: RDFN) is a Washington-based real estate brokerage firm. It is placed eighth on our list of 10 best up and coming stocks to invest in. The company’s shares have returned 46% to investors over the past year. On June 11, Glenn Kelman, head of the company, said that the housing market in the United States would continue to feel the impact of a live-from-anywhere mentality following the COVID pandemic and a migration to low-tax, lower-cost parts of the country.

On June 3, investment advisory Stephens upgraded Redfin Corporation (NASDAQ: RDFN) stock to Overweight from Equal Weight with a price target of $71, appreciating the future-focused business model of the company.

At the end of the first quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $434 million in Redfin Corporation (NASDAQ: RDFN), down from 21 the preceding quarter worth $209 million.

In addition to Zendesk, Inc. (NYSE: ZEN), Five Below, Inc. (NASDAQ: FIVE), and Take-Two Interactive Software, Inc. (NASDAQ: TTWO), Redfin Corporation (NASDAQ: RDFN) is one of the best up and coming stocks to invest in.

7. Editas Medicine, Inc. (NASDAQ: EDIT)

Number of Hedge Fund Holders: 24

Editas Medicine, Inc. (NASDAQ: EDIT) is ranked seventh on our list of 10 best up and coming stocks to invest in. The stock has offered investors returns exceeding 38% over the course of the past year. The firm operates as a clinical stage genome editing firm. It is based in Cambridge. In earnings results for the first quarter, posted on May 5, the firm reported earnings per share of -$0.86 and a revenue of $6.5 million. The revenue was up 13% year-on-year and beat market predictions by $0.22 million.

On June 3, investment advisory Baird initiated coverage of Editas Medicine, Inc. (NASDAQ: EDIT) stock with an Outperform rating and a price target of $44, highlighting positive new developments for the firm as it seeks to get new drugs approved by the FDA.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm ARK Investment Management is a leading shareholder in Editas Medicine, Inc. (NASDAQ: EDIT) with 8.7 million shares worth more than $367 million.

Zendesk, Inc. (NYSE: ZEN), Five Below, Inc. (NASDAQ: FIVE), and Take-Two Interactive Software, Inc. (NASDAQ: TTWO) are some of the best up and coming stocks to invest in, just like Editas Medicine, Inc. (NASDAQ: EDIT).

6. Magnite, Inc. (NASDAQ: MGNI)

Number of Hedge Fund Holders: 25

Magnite, Inc. (NASDAQ: MGNI) is a California-based independent advertising platform. It is placed sixth on our list of 10 best up and coming stocks to invest in. The company’s shares have offered investors returns exceeding 431% over the course of the past twelve months. On June 7, the share price of the firm jumped close to 11% after investment advisory Truist upgraded the stock to Buy from Hold with a price target of $37, implying an upside potential of close to 16% for the shares.

On June 11, investment advisory Stephens maintained a Buy rating on Magnite, Inc. (NASDAQ: MGNI) stock with a price target of $48, underlining that the partnerships made by the firm could accelerate the spending towards the connected TV segment.

Out of the hedge funds being tracked by Insider Monkey, New York-based firm Renaissance Technologies is a leading shareholder in Magnite, Inc. (NASDAQ: MGNI) with 2 million shares worth more than $84 million.

Zendesk, Inc. (NYSE: ZEN), Five Below, Inc. (NASDAQ: FIVE), and Take-Two Interactive Software, Inc. (NASDAQ: TTWO) are some of the best up and coming stocks to invest in, alongside Magnite, Inc. (NASDAQ: MGNI).

In its Q1 2021 investor letter, Alger, an asset management firm, highlighted a few stocks and Magnite, Inc. (NASDAQ: MGNI) was one of them. Here is what the fund said:

“Magnite, Inc. was among the top contributors to performance. Magnite is an advertising technology company serving as a supply side platform for publishers. The platform helps publishers such as network television stations or cable news providers automate the sale of digital advertising inventory across different formats and channels, like desktop, mobile, video, audio, connected TV and over-the-top TV. Publishers monetize their digital advertising inventory by using Magnite’s platform to access a global market of ad buyers, including advertising agencies that use supply side platforms. Magnite also helps sellers decrease costs and protect their brands and user experience.

Magnite receives ad inventory from sellers and optimizes publishers’ revenue yields by processing the highest buyer bids. Currently, Magnite keeps approximately 14% of ad spend as revenue (i.e. take rate) and passes on the remainder of the ad spend to publishers. Magnite’s clients include many of the world’s leading publishers of websites and mobile applications and the company believes that its platform reaches approximately 1 billion individuals globally. Shares of Magnite outperformed in the first quarter due to stronger-than-expected fourth quarter results driven by a rapid recovery in digital advertising. Additionally, the company acquired SpotX, its largest competitor in connected TV. The combination makes Magnite the industry’s largest independent supply side platform and a much larger connected TV player. We believe connected TV is the most exciting part of the digital ad market and is in the early days of growth, including capturing market share from linear TV.”

5. Upwork Inc. (NASDAQ: UPWK)

Number of Hedge Fund Holders: 32

Upwork Inc. (NASDAQ: UPWK) stock has returned 301% to investors over the past year. It is ranked fifth on our list of 10 best up and coming stocks to invest in. The firm owns and operates an online talent marketplace. It is headquartered in California. On May 18, the share price of the firm jumped close to 3% after it announced the launch of a new product, named Talent Scout, that would connect businesses with pre-vetted expert talent selected by specialized recruiters from the company. The new product is initially available in select countries only.

On July 1, investment advisory BTIG reiterated a Buy rating on Upwork Inc. (NASDAQ: UPWK) stock and raised the price target to $76 from $65, underlining that the new growth plans by the firm would drive revenue increases in the coming quarters.

At the end of the first quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $530 million in Upwork Inc. (NASDAQ: UPWK), down from 34 in the preceding quarter worth $548 million.

In its Q4 2020 investor letter, Spree Capital Advisers, an asset management firm, highlighted a few stocks and Upwork Inc. (NASDAQ: UPWK) was one of them. Here is what the fund said:

“Early in the fourth quarter we meaningfully increased our position size in Upwork (UPWK). Upwork is a global employment marketplace that enables businesses to vet, hire, and manage talent as part of their distributed workforce. Upwork facilitates labor and demand side connectivity on a global scale by providing the infrastructure to create trust and to streamline talent sourcing, contracting, analysis and payment. Freelancers benefit from having a reputation ranking system that feeds their marketing channels, allowing them to have access to quality, flexible work and on time compensation. Businesses on the demand side benefit by having extensive access to specialized talent, enabling faster and more cost effective hiring, and by having the strategic optionality inherent in the ability to flex a portion of their workforce based on changing demand requirements.

Labor markets have long had unnecessary frictional inefficiencies driven by regional talent imbalances and long-term trends of increased specialization of labor and declining labor mobility. Meanwhile, innovations in communication and global connectivity have transformed the way work gets done. Knowledge workers seek the flexibility and geographic advantages of on demand work, but the barrier to adoption has historically been established habits and work standards on the demand side. The Covid-19 global pandemic has broken down those barriers. We see three steps in the path to enterprise usage and shareholder value creation…” (Click here to see the full text)

4. Marvell Technology, Inc. (NASDAQ: MRVL)

Number of Hedge Fund Holders: 33

Marvell Technology, Inc. (NASDAQ: MRVL) is placed fourth on our list of 10 best up and coming stocks to invest in. The company’s shares have returned 67% to investors over the past twelve months. The firm makes and sells integrated circuits technology. On June 7, the firm posted earnings for the first quarter, reporting earnings per share of $0.29, beating market predictions by $0.02. The revenue over the period was more than $830 million, up over 20% year-on-year and beating estimates by close to $15 million.

On July 6, investment advisory KeyBanc maintained an Overweight rating on Marvell Technology, Inc. (NASDAQ: MRVL) stock and raised the price target to $65 from $60, highlighting the strengthening enterprise demand for 5G in the ratings update.

At the end of the first quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $683 million in Marvell Technology, Inc. (NASDAQ: MRVL), down from 40 in the preceding quarter worth $556 million.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Marvell Technology, Inc. (NASDAQ: MRVL) was one of them. Here is what the fund said:

“We also purchased Marvell Technology Group, in the IT sector, a semiconductor maker with exposure to the fast growing 5G and data center markets whose shares sold off in the latest rotation out of growth stocks. Marvell just acquired data center supplier Inphi, a name we have held in other ClearBridge portfolios, which should increase the chipmaker’s cross-selling opportunities in a strong demand environment for chips.”

3. Take-Two Interactive Software, Inc. (NASDAQ: TTWO)

Number of Hedge Fund Holders: 41

Take-Two Interactive Software, Inc. (NASDAQ: TTWO) stock has returned 8% to investors over the past year. It is ranked third on our list of 10 best up and coming stocks to invest in. The company markets interactive entertainment solutions. It is based in New York. On July 1, the firm announced that it had purchased Dynamixyz, a facial animation services firm focusing on video. The financial terms of the deal were not disclosed. The new would work with the publishing and studio labels of Take-Two.

On June 24, investment advisory MoffettNathanson initiated coverage of Take-Two Interactive Software, Inc. (NASDAQ: TTWO) stock with a Buy rating and a price target of $214, underlining that the firm had the best IP collection of franchises in the country.

Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Take-Two Interactive Software, Inc. (NASDAQ: TTWO) with 755,464 shares worth more than $133 million.

In its Q1 2020 investor letter, Sextant Mutual Funds, an asset management firm, highlighted a few stocks and Take-Two Interactive Software, Inc. (NASDAQ: TTWO) was one of them. Here is what the fund said:

“We mentioned the Xbox, but gamers also need games. We invested in Take-Two last year on the thesis that gaming demonstrates attractive long-term growth opportunities and online distribution would reduce costs and improve margins. With a ready-made excuse to spend eight hours in front of a screen in the basement, such online game delivery must have helped Take-Two.”

2. Five Below, Inc. (NASDAQ: FIVE)

Number of Hedge Fund Holders: 43

Five Below, Inc. (NASDAQ: FIVE) is a Philadelphia-based specialty value retailer. It is placed second on our list of 10 best up and coming stocks to invest in. The company’s shares have offered investors returns exceeding 69% over the course of the past year. The firm has a market cap of over $10 billion and was founded in 2002. The company recently partnered with Instacart, the leading online grocery platform in North America. The move will help the firm expand reach in the region.

On June 3, investment advisory R5 Capital initiated coverage of Five Below, Inc. (NASDAQ: FIVE) stock with a Buy rating and a price target of $251.

Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Five Below, Inc. (NASDAQ: FIVE) with 807,965 shares worth more than $154 million.

In its Q4 2020 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and Five Below, Inc. (NASDAQ: FIVE) was one of them. Here is what the fund said:

“Throughout the year, we tried methodically to rebalance the portfolio between “stay at home” and “return to normal” whenever the market appeared too pessimistic or optimistic about the sustainability of recent, pandemic-driven trends. As the year went on, we found ourselves tilting more towards “return to normal.” We established a new position in US retailer Five Below, a discount chain built around a rather simple concept: fill nondescript big-box locations with as many as possible items priced under US$5 that can tickle the imagination of an American teen or tween. As “pre-2020” as that may sound, we were impressed by the company’s quick resumption of strong same-store sales growth after the lockdowns early in the year. Clearly, Five Below offers a value and entertainment proposition that e-commerce is not able to satisfy and which we can see ourselves “sitting” on potentially for years to come.”

1. Zendesk, Inc. (NYSE: ZEN)

Number of Hedge Fund Holders: 45

Zendesk, Inc. (NYSE: ZEN) is ranked first on our list of 10 best up and coming stocks to invest in. The stock has offered investors returns exceeding 51% over the course of the past twelve months. The firm markets software development services and is based in California. In earnings results for the first quarter, posted on April 29, the firm reported earnings per share of $0.17, beating market predictions by $0.05. The revenue over the period was close to $300 million, up over 25% year-on-year.

On May 27, investment advisory UBS upgraded Zendesk, Inc. (NYSE: ZEN) stock to Buy from Neutral and raised the price target to $190 from $171, noting that the firm was capable of returning to an over 30% growth profile.

At the end of the first quarter of 2021, 45 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in Zendesk, Inc. (NYSE: ZEN), down from 58 in the previous quarter worth $1.8 billion.

In its Q4 2020 investor letter, Wasatch Ultra Growth Fund, an asset management firm, highlighted a few stocks and Zendesk, Inc. (NYSE: ZEN) was one of them. Here is what the fund said:

“Zendesk, Inc. (ZEN) was also a top contributor. The company provides business software using the software-as-a-service (SaaS) model. Zendesk has experienced strong demand throughout the Covid19 pandemic from customers in e-commerce, as well as from other businesses with employees working from home. Additionally, demand from clients in the travel and hospitality industries has picked up as global economies have begun to reopen. Adjusted earnings per share rose 42% in the company’s most recent quarter on revenue growth of 24% compared to the same quarter a year ago. An improved sales outlook from Zendesk’s management also helped lift the stock.”

You can also take a peek at 10 Companies that Benefit From Crypto Mining and 15 Best Strong Buy Stocks to Invest In.

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10 Best Up and Coming Stocks to Invest In

Published on July 30, 2021 at 9:35 am by Usman Kabir in Hedge Funds, News