In this article, we will discuss the 10 Best Upside Stocks to Buy According to Hedge Funds.
On June 22, Stephen Parker, JPMorgan Private Bank Co-Head of Global Investment Strategy, joined CNBC’s ‘Squawk Box’ to share his outlook on the current state of the market, which he believes is positioned for continued gains. He set a base case target for the S&P 500 at 7,800 by the end of the year, with a bull case target of 8,900. Parker noted that the rally seen throughout the year has been entirely earnings-driven and has consistently exceeded even the most bullish expectations. He expressed confidence that this earnings momentum will persist through year-end. While the base case target implies lower multiples from current levels, the bull case target of 8,900 is achievable if multiples remain constant while earnings growth continues as expected.
The primary driver of this market performance has been the earnings growth, particularly the boom in AI-related CapEx. Parker emphasized that for his bull case to manifest, the market needs to see a broadening of this growth. He pointed to expectations that 8 of the 11 sectors in the S&P 500 will deliver double-digit earnings growth. While he does not foresee a slowdown in the capex story, he noted that a major risk would be a shift away from fundamentals toward optimism, exuberance, or animal spirits. He clarified that he would become concerned if the market’s growth became driven more by rising multiples than by earnings results.
Our Methodology
We used screeners to identify stocks that have an upside potential of at least 40%, and limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment. These stocks are also popular among analysts and are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q1 2026.
Note: All data was sourced on June 22.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).
10 Best Upside Stocks to Buy According to Hedge Funds
10. Pegasystems Inc. (NASDAQ:PEGA)
Average Upside Potential: 100.28%
Number of Hedge Fund Holders: 41
Pegasystems Inc. (NASDAQ:PEGA) is one of the best upside stocks to buy according to hedge funds. On June 8, Pegasystems launched the Solution Designer Initiative to bridge the critical divide between business intent and technical execution. Building on the Pega Blueprint methodology, this program equips a new generation of practitioners with the skills to translate complex business goals into production-ready designs. By using Pega Blueprint AI, these professionals ensure that enterprise AI projects move from initial concepts to reliable, working software more efficiently.
The initiative supports practitioners of all levels through a comprehensive three-pillar framework. It provides free, skill-based credentials through Pega Academy, hands-on Blueprint Delivery workshops, and access to a global expert community. This approach emphasizes human expertise, ensuring that AI-driven transformation is guided by skilled leadership capable of aligning stakeholders and managing project outcomes from the first conversation.
This strategy aims to move organizations beyond mere AI experimentation toward sustainable, high-impact results. By integrating these trained designers with Pega’s new development environment, businesses can accelerate delivery cycles and improve software quality. Early adopters of this methodology have already reported substantial improvements, including faster discovery phases, reduced project rework, and quicker time-to-market for mission-critical applications.
Pegasystems Inc. develops, markets, licenses, and supports software that enables organizations to deploy, build, and change enterprise applications.
9. AppFolio Inc. (NASDAQ:APPF)
Average Upside Potential: 56.71%
Number of Hedge Fund Holders: 43
AppFolio Inc. (NASDAQ:APPF) is one of the best upside stocks to buy according to hedge funds. On June 16, AppFolio expanded its Performance Platform by integrating advanced agentic AI across leasing, accounting, and resident operations. By adding a secure connector to Anthropic’s Claude, the platform enables operators to trigger complex workflows while maintaining strict data governance. This unified, AI-native architecture focuses on achieving measurable outcomes rather than just automating tasks.
New AI “Performers” now handle time-consuming back-office work, including automated invoice coding, book closing, and 24/7 multilingual leasing support. Additionally, the new Resident Concierge streamlines move-ins with complimentary utility setup. These tools are built directly into the platform, ensuring intelligent workflows operate seamlessly within daily property management.
These enhancements allow teams to reduce manual intervention and improve compliance, particularly for affordable housing portfolios. Early adopters are leveraging these capabilities to capture more after-hours leads, increase showing bookings, and resolve resident inquiries faster. By delegating routine operations to governed AI agents, property managers can focus on strategic growth.
AppFolio Inc. provides industry-specific cloud-based business software solutions, data analytics, and services for the real estate industry. Its offerings include AppFolio Property Manager and AppFolio Investment Management, along with services designed to automate, enhance, and streamline workflows and processes for property management businesses.
8. Paylocity Holding Corporation (NASDAQ:PCTY)
Average Upside Potential: 47.55%
Number of Hedge Fund Holders: 44
Paylocity Holding Corporation (NASDAQ:PCTY) is one of the best upside stocks to buy according to hedge funds. On May 7, Paylocity reported strong FQ3 2026 results, with total revenue reaching $502.3 million, a 10.5% increase year-over-year. Recurring revenue grew 11.6% to $469.9 million, while GAAP net income rose to $111.3 million. Driven by these solid financials and consistent cash flow generation, the company raised its full-year guidance for both revenue and profitability.
The company is actively scaling its AI-driven HCM, Finance, and IT solutions, highlighted by the April 2026 acquisition of Grayscale Labs to support its recruiting automation capabilities. Paylocity also continues to prioritize shareholder returns, repurchasing $350 million in shares during the first nine months of the fiscal year and authorizing an additional $1 billion for future share repurchases.
Looking ahead, Paylocity projects steady growth for the remainder of fiscal year 2026, with total annual revenue expected to reach up to $1.76 billion. The company’s continued investment in R&D and strategic acquisitions remains central to its long-term strategy, ensuring its platform remains competitive by leveraging core employee data and expanded AI functionality.
Paylocity Holding Corporation is a US provider of cloud‑based payroll and human capital management/HCM software, offering unified HR, payroll, talent, time, benefits, and spend management solutions to help mid‑market organizations streamline workforce operations.
7. AECOM (NYSE:ACM)
Average Upside Potential: 48.12%
Number of Hedge Fund Holders: 49
AECOM (NYSE:ACM) is one of the best upside stocks to buy according to hedge funds. On June 22, AECOM was appointed to the UK Government Commercial Agency’s $4.7 billion Construction Professional Services 2/CPS2 framework. This 4-year agreement serves as a primary procurement route for public sector projects, including social infrastructure, energy, and defense. Having been a participant in the original 2021 iteration, AECOM significantly expanded its role by securing positions on nine framework lots, up from five in the previous version.
The new appointment allows AECOM to provide multidisciplinary technical and professional services across a wider range of sectors. Notably, the firm has gained access to newly established lots covering nuclear energy & flood risk, and asset management. These additions complement their existing commitments in general infrastructure, project management, and defense, positioning the company to support central government departments and local authorities on both standalone projects and long-term capital programs.
This expanded partnership underscores AECOM’s growth within the UK public sector market. By embedding wide-ranging expertise into the GCA’s newly integrated procurement structure, the firm aims to address pressing infrastructure challenges while delivering sustained value for taxpayers. The appointment solidifies AECOM’s (NYSE:ACM) role as a trusted partner in navigating the UK’s evolving built environment and large-scale public investment goals.
AECOM delivers expert infrastructure consulting services to commercial and government organizations. Its services portfolio includes advising and consultation, engineering solutions, construction, and management services. It provides these services to various segments, including transportation, water, energy, and more. It is also involved in developing and investing in real estate ventures.
6. Cognizant Technology Solutions Corporation (NASDAQ:CTSH)
Average Upside Potential: 69.35%
Number of Hedge Fund Holders: 50
Cognizant Technology Solutions Corporation (NASDAQ:CTSH) is one of the best upside stocks to buy according to hedge funds. On June 16, Cognizant and Rubrik (RBRK) expanded their alliance to help enterprises safely deploy autonomous AI at scale. As a launch partner for Rubrik Agent Cloud, Cognizant will integrate this solution as a governance layer within its Neuro AI and AI Factory platforms. This collaboration aims to address the critical need for oversight as AI agents increasingly handle sensitive tasks like writing code and managing data across enterprise systems.
The integration provides organizations with essential tools to manage agent behavior, including real-time policy enforcement, visibility into agent actions, and the ability to reverse unintended operations. By embedding these controls, Cognizant intends to give clients the confidence to transition AI agents from pilot programs into production environments, particularly within highly regulated industries such as healthcare, life sciences, and financial services.
These governance features ensure that all agent activity is recorded and held within defined guardrails, aligning with standards like the NIST AI Risk Management Framework. By enabling enterprises to track, scope, and roll back agent-initiated changes, the partnership offers a resilient approach to AI-driven IT operations. This enables companies to accelerate their AI adoption while maintaining full operational control and auditability over their automated workflows.
Cognizant Technology Solutions Corporation provides information technology, consulting, and business process outsourcing services. The company’s services include AI, application services, business process services, core modernization, and cloud solutions.
5. Resideo Technologies Inc. (NYSE:REZI)
Average Upside Potential: 53.48%
Number of Hedge Fund Holders: 51
Resideo Technologies Inc. (NYSE:REZI) is one of the best upside stocks to buy according to hedge funds. On June 16, Resideo Technologies announced the pricing of $400 million in senior notes due 2034, bearing an interest rate of 7.125%, in preparation for the planned spin-off of its ADI Global Distribution business. This offering is part of a broader financial strategy for ADI, which also includes the syndication of a $600 million senior secured term loan and a $500 million revolving credit facility.
These steps are designed to capitalize ADI as an independent entity ahead of the spin-off, which is expected to occur between mid-Q3 and mid-Q4 of 2026. Proceeds from the notes and the term loan will be primarily used to make a distribution to Resideo and to cover transaction-related expenses. The note proceeds will be held in escrow until the spin-off is finalized, at which point the debt will be assumed by an ADI subsidiary and guaranteed by ADI and its relevant subsidiaries. If the spin-off conditions are not satisfied by the end of 2026, the notes will be subject to a mandatory redemption at their issue price.
This financing initiative marks a key milestone in the separation of the two businesses. Once the spin-off is complete, ADI will operate as an independent entity with its own credit structure, while Resideo Technologies Inc. maintains its focus on global technology-driven sensing and control solutions.
Resideo Technologies Inc. makes smart home technology for comfort, energy management, and safety, including thermostats (Honeywell Home), smoke detectors, security systems, and water management, and also operates ADI Global Distribution, a major wholesale distributor of security, fire, and low-voltage products to professionals worldwide.
4. Dyne Therapeutics Inc. (NASDAQ:DYN)
Average Upside Potential: 90.73%
Number of Hedge Fund Holders: 51
Dyne Therapeutics Inc. (NASDAQ:DYN) is one of the best upside stocks to buy according to hedge funds. On June 17, Dyne Therapeutics expanded its senior secured term loan facility with Hercules Capital to up to $400 million, increasing financial flexibility. This amendment includes an immediate $50 million funding and provides additional tranches tied to specific clinical and regulatory milestones. These funds will support the advancement of the company’s lead candidates, z-rostudirsen for Duchenne muscular dystrophy and z-basivarsen for myotonic dystrophy type 1.
The expanded partnership strengthens Dyne’s balance sheet as it prepares for two potential US commercial launches over the next two years. By securing non-dilutive capital, the company aims to maintain momentum in its mission to deliver functional improvements for patients with rare neuromuscular diseases. The agreement reflects Hercules Capital’s continued support for Dyne’s clinical progress and transformative development stage.
To date, Dyne Therapeutics Inc. has borrowed a total of $200 million under the facility and maintains access to an additional $200 million in potential future funding. This arrangement provides the capital necessary to reach key milestones while optimizing the company’s financial position. The collaboration highlights a shared commitment to accelerating the delivery of innovative treatments to patients in need.
Dyne Therapeutics Inc. engages in developing innovative life-transforming therapies for genetically driven muscle diseases. It develops a broad portfolio of therapeutics for muscle diseases, including lead programs in myotonic dystrophy type 1, Duchenne muscular dystrophy, and facioscapulohumeral muscular dystrophy.
3. Praxis Precision Medicines Inc. (NASDAQ:PRAX)
Average Upside Potential: 81.74%
Number of Hedge Fund Holders: 54
Praxis Precision Medicines Inc. (NASDAQ:PRAX) is one of the best upside stocks to buy according to hedge funds. On June 22, Praxis Precision Medicines received FDA Breakthrough Therapy Designation for elsunersen, an experimental treatment for seizures associated with SCN2A-DEE. This follows strong results from the EMBRAVE Part A trial, where the drug achieved a 77% sham-adjusted reduction in monthly seizures and was well-tolerated by pediatric patients.
The designation supports a streamlined, single-arm registrational pathway for the ongoing pivotal EMBRAVE3 study. By facilitating expedited development and regulatory review, this status aims to accelerate the delivery of elsunersen as the first disease-modifying therapy for patients with this rare genetic condition.
This achievement marks the third Breakthrough Therapy Designation for Praxis Precision Medicines Inc.’s (NASDAQ:PRAX) late-stage pipeline, validating its Solidus ASO platform. Developed alongside Ionis Pharmaceuticals and RogCon, elsunersen now holds multiple key regulatory designations in both the US and Europe, positioning it for rapid advancement toward potential approval.
Praxis Precision Medicines Inc. is a clinical-stage biopharmaceutical company engaging in the development of therapies for central nervous system disorders characterized by neuronal excitation-inhibition imbalance.
2. BridgeBio Pharma Inc. (NASDAQ:BBIO)
Average Upside Potential: 44.83%
Number of Hedge Fund Holders: 63
BridgeBio Pharma Inc. (NASDAQ:BBIO) is one of the best upside stocks to buy according to hedge funds. On May 27, BridgeBio Pharma announced that the FDA accepted its NDA for BBP-418, an oral therapy for limb-girdle muscular dystrophy type 2I/R9 (LGMD2I/R9), granting it Priority Review. With a target action date of November 27, the therapy could become the first approved treatment for any form of LGMD. The FDA is not currently planning an advisory committee meeting to discuss the application.
This milestone follows the Phase 3 FORTIFY trial, where BBP-418 showed strong efficacy across all pre-specified endpoints. While patients on the placebo declined in line with natural disease progression, those treated with BBP-418 showed consistent improvements, highlighting the therapy’s potential to stabilize or enhance muscle, ambulatory, and cardiopulmonary function in a patient population with significant unmet needs.
Already holding Orphan Drug, Fast Track, and Rare Pediatric Disease designations, BBP-418 is positioned to address a critical gap in care for approximately 7,000 individuals in the US and Europe. BridgeBio Pharma Inc. is currently coordinating with European regulators for an expedited approval path and plans to expand clinical studies for younger pediatric populations and other related dystroglycanopathies in the near future.
BridgeBio Pharma Inc. identifies and promotes novel medications to treat Mendelian diseases. Its development pipeline contains product candidates at various stages of development, from early discovery to late-stage development.
1. Cogent Biosciences Inc. (NASDAQ:COGT)
Average Upside Potential: 53.74%
Number of Hedge Fund Holders: 77
Cogent Biosciences Inc. (NASDAQ:COGT) is one of the best upside stocks to buy according to hedge funds. On June 12, Cogent Biosciences presented promising preclinical data at the 2026 EHA Congress for its novel inhibitor, CGT1145, which targets the JAK2 V617F mutation. This candidate is designed to be a best-in-class therapy, showing over 100-fold selectivity for the mutant protein compared to wild-type JAK2 and other isoforms. These properties suggest a potential to treat myeloproliferative neoplasms/MPNs more effectively while reducing the off-target side effects often seen with currently approved treatments.
The data indicates that CGT1145 exhibits high oral bioavailability and could potentially induce molecular remission by eradicating disease-propagating cells. By addressing the primary mutational driver of these conditions with improved hematological tolerability, the program aims to offer a significant advancement over existing JAK inhibitors.
Cogent Biosciences Inc. is currently advancing the development of this program and remains on schedule to submit an Investigational New Drug (IND) application later in 2026. This progress underscores the company’s commitment to developing precision therapies for patients with genetically defined diseases, particularly in the MPN space where JAK2 V617F remains a prevalent and critical target.
Cogent Biosciences Inc. is a biotechnology company that develops precision therapies for genetically defined diseases.
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