11 Best Up and Coming Stocks To Invest In

In this article, we will be taking a look at the 11 best up and coming stocks to invest in.

The July Rate Hike

On July 26, the US Federal Reserve raised interest rates once again, this time by 25 basis points. The 0.25% hike has brought interest rates up to about 5.25% to 5.50%, which is the highest level of interest rates in over 22 years. The decision to hike rates this month was unanimous at the Fed, and it was also signaled that the public can expect to see even further rate hikes up ahead this year. Considering this hike, the investing community continues to be plagued with inflation-related concerns and what the current interest rate levels will mean for businesses and consumers heading into the second half of the year. For many, the jump to such a high level of interest rates is proving to be a source of market uncertainty and turbulence, while others are holding on to the belief that the Fed will manage to bring inflation down to a maximum rate of 2% in the long run, as has been affirmed in the Federal Open Market Committee statement.

In light of this hike, in a CNBC interview on July 26, David Kelly from JPMorgan Asset Management made the following comments on how he views stocks progressing in the market over the next six months and beyond:

“I look at valuations a lot and I do worry about the mega-cap stocks that have really led this charge. But overall I think it good be pretty good because the key point is, eventually inflations gonna get back down to where we were in the last decade, it’s gonna get back down to 2%. Eventually, the Fed’s gonna have to react to a recession and cut rates back down again and so you get back to a slow growth, low inflation environment in which companies are very good at maintaining margins. I mean that’s the other message that we’ve seen from the earnings reports so far this month. You know, there’s a problem with revenues, but they’re doing a great job at maintaining margins. I think US companies can do well in a cold climate, and I think the stock market is taking comfort from that.”

Navigating The Market After The Hike

According to Kelly, it is becoming increasingly important to keep an eye on stock valuations heading into the second half of the year to ensure one does not end up with overpriced stocks in the event of a market correction. For him, the choice sectors to keep an eye on include industrials and financials. Overall though, Kelly’s opinion seems to be that even in the event of a recession, US companies can be expected to perform well enough to satisfy their shareholders.

Considering the above, it has become abundantly clear that investors today should really consider factors like stock valuations, potential impacts of the recent rate hike, higher prices, and much more when they are making their investments. Another factor that might be worth considering is the performance of companies that are steadily gaining popularity among the younger generations of consumers and investors today. These up-and-coming stocks, such as e.l.f. Beauty, Inc. (NYSE:ELF), Snowflake Inc. (NYSE:SNOW), and Lululemon Athletica Inc. (NASDAQ:LULU), are now offering products to a new cohort of consumers that are setting them apart from their competitors and increasing consumer engagement. Some may consider them to be some of the best stocks to invest in right now, and many of the names on our list below can be considered to be some of the best growth stocks for the next 10 years even. In light of imminent market uncertainty and recession-related concerns, we have thus compiled the list below to give investors today some more choices that may be beneficial additions to their portfolios. 

Our Methodology

We have selected stocks that have recently been gaining popularity among investors for our list below, using Insider Monkey’s hedge fund data for the first quarter. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number.

Best Up And Coming Stocks To Invest In

11. Teladoc Health, Inc (NYSE:TDOC)

Number of Hedge Fund Holders: 30

Teladoc Health, Inc (NYSE:TDOC) is a healthcare company based in Purchase, New York. It operates through its Integrated Care and BetterHelp segments. The company is steadily making a name for itself in the healthcare sector with its telehealth services, allowing patients to consult with medical professionals on its videoconferencing platform.

On July 26, Sean Dodge at RBC Capital reiterated an Outperform rating on shares of Teladoc Health, Inc. The analyst also maintains a price target of $35 on the stock.

There were 30 hedge funds long Teladoc Health, Inc at the end of the first quarter, holding $890.2 million shares in the company.

Like e.l.f. Beauty, Inc., Snowflake Inc., and Lululemon Athletica Inc., Teladoc Health, Inc is a stock that has become increasingly popular among individual investors and hedge funds alike this year.

10. e.l.f. Beauty, Inc. (NYSE:ELF)

Number of Hedge Fund Holders: 30

Olivia Tong, an analyst at Raymond James, maintains an Outperform rating on e.l.f. Beauty, Inc. as of July 24. The analyst also raised her price target on the shares from $115 to $125.

Based in Oakland, California, e.l.f. Beauty, Inc. is a personal care products company. It offers cosmetic and skin care products under brands such as e.l.f. Cosmetics, Well People, and Keys Soulcare. The company and its products are highly popular among Gen Z consumers and investors today.

We saw 30 hedge funds holding stakes in e.l.f. Beauty, Inc. in the first quarter. Their total stake value in the company was $505.2 million.

Driehaus Capital was the largest shareholder in e.l.f. Beauty, Inc. at the end of the first quarter, holding 981,351 shares in the company.

Diamond Hill Capital made the following comment about e.l.f. Beauty, Inc. in its fourth-quarter 2022 investor letter:

“New positions initiated in Q4 included shorts International Business Machines (IBM), Acushnet Holdings (GOLF) and E.l.f. Beauty, Inc. (NYSE:ELF). Shares of value-oriented beauty brand ELF received a meaningful boost from normalizing beauty usage and spending in a post-COVID environment, which we believe has contributed to its premium multiple relative to competitors in the beauty space. As this temporary lift unwinds, we expect elf’s valuation to similarly return to a level better aligned with its product offerings.”

9. Crocs, Inc. (NASDAQ:CROX)

Number of Hedge Fund Holders: 31

Crocs, Inc. (NASDAQ:CROX) was seen in the portfolios of 31 hedge funds during the first quarter, with a total stake value of $1.1 billion.

An Outperform rating was reiterated on shares of Crocs, Inc. by Tom Nikic, an analyst at Wedbush, on July 24. The analyst also maintains a price target of $153 on the stock.

Crocs, Inc. is a footwear company based in Broomfield, Colorado. It designs and manufactures casual lifestyle footwear and accessories for customers across the globe. The company’s shoes have become rapidly popular among younger individuals, making it a top up-and-coming stock considering Gen Z consumer spending habits.

Here’s what Artisan Partners had to say about Crocs, Inc. in its first-quarter 2023 investor letter:

“We began new GardenSM positions in Crocs, Inc. (NASDAQ:CROX), Saia and Shift4 Payments during the quarter. Crocs designs, develops, manufactures and distributes casual footwear and accessories for men, women and children. The company invented the molded plastic Clog in 2002 and has turned it into a $3B global revenue base. We believe revenue growth will continue to surprise to the upside driven by expansion opportunities outside the US, demand from new product introductions (including from recently acquired Hey Dude) and a distribution push both within the direct-to-consumer and wholesale channels. Given the company is still small in terms of a global market share (its $4B in revenues puts them at 1% global market share of the footwear industry), we believe there is a long runway for growth and initiated a GardenSM position.”

8. Opendoor Technologies Inc. (NASDAQ:OPEN)

Number of Hedge Fund Holders: 32

Sylebra Capital Management held the most shares in Opendoor Technologies Inc. (NASDAQ:OPEN) at the end of the first quarter, amounting to 33.5 million shares in the company.

Opendoor Technologies Inc. is a real estate company based in Tempe, Arizona. It operates an e-commerce platform for residential real estate transactions in the US. The company’s utilization of technology and “iBuying” makes its operations smoother than conventional real estate companies, which has resulted in its popularity among investors surging.

As of July 13, JMP Securities analyst Nicholas Jones has a Market Outperform rating on shares of Opendoor Technologies Inc.. The analyst also maintains a price target of $5 on the shares.

Opendoor Technologies Inc. was spotted in the 13F holdings of 32 hedge funds during the first quarter. Their total stake value in the company was $165.8 million.

7. Zscaler, Inc. (NASDAQ:ZS)

Number of Hedge Fund Holders: 38

Zscaler, Inc. (NASDAQ:ZS) is an information technology company with cloud security operations. It is based in San Jose, California. The company offers the Zscaler Internet Access solution, which provides users, workloads, Internet of Things, and OT devices secure access to external applications. It is a unique cybersecurity company with a focus on cloud-based operations, making it an interesting investment for many individuals today.

Zscaler, Inc. had 38 hedge funds long its stock in the first quarter. Their total stake value in the company was $490.1 million.

On July 25, shares of Zscaler, Inc. were upgraded from Neutral to Buy by Gray Powell, an analyst at BTIG. The analyst also announced a price target of $185 on the stock.

Like e.l.f. Beauty, Inc., Snowflake Inc., and Lululemon Athletica Inc.,  Zscaler, Inc. is steadily gaining popularity among investors and hedge funds in 2023.

6. Align Technology, Inc. (NASDAQ:ALGN)

Number of Hedge Fund Holders: 39

ARK Investment Management was the most prominent shareholder in Align Technology, Inc. (NASDAQ:ALGN) at the end of the first quarter, holding 7,915 shares in the company.

Align Technology, Inc. is another healthcare company on our list. It is based in Tempe, Arizona. The company designs and manufactures Invisalign clear aligners and iTero intraoral scanners and services for orthodontists and general practitioner dentists internationally.

The company is working hard to offer an alternative to braces to today’s younger generations, which has really racked up its popularity among investors and consumers alike. Because of this, Align Technology, Inc. is an up-and-coming stock many investors are eyeing today.

A total of 39 hedge funds were long Align Technology, Inc. in the first quarter, with a total stake value of $1.2 billion.

This is what Polen Capital said about Align Technology, Inc. in its first-quarter 2023 investor letter:

“We initiated a position in Align Technology, Inc. (NASDAQ:ALGN), a global medical device company best known for its “Invisalign” clear aligners, having created the clear aligner category in 1999. Since that time, it has been a disruptor of the traditional use of wire and bracket braces to straighten teeth and treat malocclusions. While it is leader in the clear aligner category with roughly 85-90% market share, the bigger competition is taking share from wire and brackets and on that measure, it only has 10-15% share of the overall teeth straightening market. Over time, through innovation and vertical integration, the company has evolved to be able to treat over 90% of all cases. Further, it has done a great job deepening relationships with orthodontists and general practitioner dentists over time. All in all, we believe this is a business with a durable competitive advantage, operating in a large, growing and very attractive industry, led by a proven and long-term oriented management team, with a very long runway ahead of it to grow and compound at very attractive rates.”

5. Bill.com Holdings, Inc. (NYSE:BILL)

Number of Hedge Fund Holders: 45

Bill.com Holdings, Inc. (NYSE:BILL) is an application software company based in San Jose, California. The company is offering fintech solutions and financial automation software to small and medium enterprises.

Will Nance at Goldman Sachs holds a Buy rating and a $136 price target on shares of Bill.com Holdings, Inc. as of July 13.

Bill.com Holdings, Inc. was spotted in the portfolios of 45 hedge funds in the first quarter, with a total stake value of $1.1 billion.

This is what Artisan Partners said about Bill.com Holdings, Inc. in its first-quarter 2023 investor letter:

“We ended our investment campaigns in BILL Holdings, Inc. (NYSE:BILL, ZoomInfo Technologies and First Republic Bank during the quarter. BILL Holdings offers cloud-based applications that simplify, digitize and automate back-office accounts receivable and accounts payable processes for small and medium-sized businesses (SMBs). We view the company’s addressable market as large and its business model attractive. However, we are seeing pressure on SMB payments trends given the slowing economy. Also, we are concerned about Intuit’s expansion into accounts payable automation given a meaningful portion of BILL’s customers (and addressable market) use Intuit’s market-leading QuickBooks accounting software. With our conviction in the thesis wavering, we decided to harvest the position in favor of more compelling opportunities.”

4. MongoDB Inc. (NASDAQ:MDB)

Number of Hedge Fund Holders: 52

Our hedge fund data shows 52 funds long MongoDB Inc. (NASDAQ:MDB) in the first quarter, with a total stake value of $1.1 billion.

MongoDB Inc. is an information technology company based in New York. The company offers a developer data platform allowing users access to its software and data for their operations.

An Outperform rating was maintained on MongoDB Inc. shares by Patrick Walravens at JMP Securities on July 24. The analyst also has a $425 price target on the stock.

ClearBridge Investments made the following comments about MongoDB Inc. in its third-quarter 2022 investor letter:

“We made limited changes to the portfolio in the third quarter. New buys included embryonic positions in several rapid growers — MongoDB, Inc. (NASDAQ:MDB) and Clear Secure (YOU) — whose valuations have come in quite dramatically. MongoDB is a company we followed for many years before its 2017 IPO. The stock looks very attractive trading at a third of its recent peak in November 2021. The company’s database software is growing rapidly and taking share in a $50 billion plus global market.”

3. Snowflake Inc. (NYSE:SNOW)

Number of Hedge Fund Holders: 63

Ittai Kidron at Oppenheimer maintains an Outperform rating and a $220 price target on Snowflake Inc. shares as of July 17.

Snowflake Inc. operates a cloud-based data storage platform. It is based in Bozeman, Montana.

Snowflake Inc. had 63 hedge funds long its stock in the first quarter. Their total stake value was $5 billion.

Here’s what The Ithaka Group said about Snowflake Inc. in its first-quarter 2023 investor letter:

“Snowflake Inc. (NYSE:SNOW) is a dominant player in the Data Warehousing market, offering customers the ability to break down data silos and derive value from rapidly growing data sets through Snowflake’s analytical database product, the Data Cloud. The company’s base business is benefitting from a number of secular tailwinds, the three most prevalent being: 1) data-driven decision making, 2) cloud adoption, and 3) the exponential growth of corporate data. The company’s visionary management team, headed by industry veteran Frank Slootman, plans to capture its fair share of this growth through: 1) executing on its land and expand model, 2) acquiring new customers, 3) growing internationally, and 4) expanding its nascent partner network. The stock’s negative contribution in the quarter was due to the timing of Ithaka’s purchase (mid-February) and its small portfolio weighting (100bps).”

2. Lululemon Athletica Inc. (NASDAQ:LULU)

Number of Hedge Fund Holders: 64

Lululemon Athletica Inc. designs and retails athletic apparel, footwear, and accessories. It is a brand that has become highly popular among Gen Z consumers and investors this year.

Noah Zatzkin at Keybanc maintains an Overweight rating on Lululemon Athletica Inc. shares alongside a $425 price target as of July 25.

In total, 64 hedge funds held stakes in Lululemon Athletica Inc. in the first quarter, with a total stake value of $3.5 billion.

Kinsman Oak Capital Partners said the following about Lululemon Athletica Inc. in its first-quarter 2023 investor letter:

“What is relatively new, however, is that we are beginning to see substantial write-downs and impairment charges. For instance, Lululemon Athletica Inc. (NASDAQ:LULU) is already exploring a sale of Mirror, the struggling fitness technology company it bought less than three years ago for half a billion dollars. Lululemon executives recently announced a $433 million impairment charge on the business (-89%). That is not an insignificant amount of money.”

1. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)

Number of Hedge Fund Holders: 72

A Buy rating was reiterated on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) shares by Alex Henderson at Needham on July 14. He also maintained a $170 price target on the stock.

CrowdStrike Holdings, Inc. is another cloud-based cybersecurity company on our list. It uses big data and artificial intelligence to detect cyber threats and prevent them.

In the first quarter, 72 hedge funds were long CrowdStrike Holdings, Inc.. Their total stake value was $2.4 billion.

Artisan Partners mentioned CrowdStrike Holdings, Inc. in its first-quarter 2023 investor letter:

“Top contributors to performance for the quarter included graphics semiconductor company Nvidia, Southeast Asian e-commerce platform Sea, Latin American marketplace MercadoLibre, online travel marketplace Airbnb, and endpoint security company CrowdStrike Holdings, Inc. (NASDAQ:CRWD). CrowdStrike rebounded as its financial results eased demand-related concerns in its core endpoint business, while adoption in platform adjacencies continued to rise.”

See also 12 Under-the-Radar Stocks That Are on The Move and 10 Undervalued Canadian Stocks To Invest In.

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This article is originally published at Insider Monkey.