12 Best-Performing Growth Stocks in 2023

Published on November 16, 2023 at 10:59 am by Fahad Saleem in Hedge Funds, News

In this article, we will take a look at the 12 best-performing growth stocks in 2023. To see more such companies, go directly to 5 Best-Performing Growth Stocks in 2023.

Investors recently cheered the latest inflation report that showed the Federal Reserve’s persistent rate hikes might finally be showing their results. While markets roared and gained immediately after the report, investor sentiment moderated later as some analysts advised caution and recommended not to be overly optimistic.

UBS in its 2024-2026 market outlook report said that the factors that kept the markets resilient and supported growth in 2023 might not be there in 2024. However, UBS expects the Fed to cut interest rates by as much as 275 basis points in 2024. UBS believes the rate cuts would be to “first to prevent the nominal funds rate from becoming increasingly restrictive as inflation falls, and later in the year to stem the economic weakening.”

If we take a long-term investment horizon, the outlook for growth stocks looks strong. If doubts around the economy clear and dark clouds of recession recede in the coming weeks, growth stocks could rebound in the coming months and years. Penn Capital Management CIO Eric Green recently said while talking to Yahoo Finance that he believes small-cap stocks are already priced for recession. Green was talking in the context of the latest rally in consumer discretionary stocks especially after a strong CPI report.

For this article we used a stock screener to find stocks that have gained at least 50% year to date through November 13, have positive EPS growth this year, have QoQ sales growth of over 25% and recorded over 25% in sales growth over the past 5 years. Fromthe resultant dataset we picked stocks with the highest year-t0-date stock performance. Some top names in the list include DraftKings Inc. (NASDAQ:DKNG), NVIDIA Corporation (NASDAQ:NVDA) and Bit Digital, Inc. (NASDAQ:BTBT).

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Best-Performing Growth Stocks in 2023

12. ACM Research, Inc. (NASDAQ:ACMR)

YTD Performance Through November 13: +75%

Semiconductor company ACM Research, Inc. (NASDAQ:ACMR) ranks 12th in our list of the best-performing growth stocks in 2023. As of November 13 ACM Research, Inc. (NASDAQ:ACMR) has gained about 75% year to date. Earlier this month ACM Research, Inc. (NASDAQ:ACMR) posted Q3 results. Adjusted EPS in the quarter came in at $0.57, beating estimates by $0.23. Revenue in the quarter jumped about 261.% year over year to $168.57 million, beating estimates by $1.01 million. Like DraftKings Inc. (NASDAQ:DKNG), NVIDIA Corporation (NASDAQ:NVDA) and Bit Digital, Inc. (NASDAQ:BTBT), ACM Research, Inc. (NASDAQ:ACMR) is a top-performing growth stock this year.

11. Rover Group, Inc. (NASDAQ:ROVR)

YTD Performance Through November 13: +95%

Online pet services platform company Rover Group, Inc. (NASDAQ:ROVR)’s shares have gained about 95% year to date through November 13. Rover Group, Inc. (NASDAQ:ROVR) earlier this month posted strong Q3 results. Revenue in the quarter jumped about 30% on a YoY basis.

White Falcon Capital Management made the following comment about Rover Group, Inc. (NASDAQ:ROVR) in its Q3 2023 investor letter:

“Rover Group, Inc. (NASDAQ:ROVR) has surpassed Tech Resources to become a top 5 position in the portfolio. Rover, a pet care marketplace, is a prime example of a business that’s poised for success in virtually any economic environment. It reported a set of fantastic earnings due to which its stock gained 50% and has not given up much of that gain in the recent pullback. This is a position that has been in the portfolio since September 2022 but we added to the position as we gained conviction in the thesis.

Operating as a marketplace, Rover earns a “take rate” or a kind of “toll” on every transaction occurring within its platform. In the face of inflation, as pet sitters request higher prices for their services, Rover’s revenues naturally grow because its share of the transaction value increases. In addition, Rover is a category disrupter due to which its revenue growth is likely to be much higher than the average stock – it is taking share from friends and family as well as kennels. Finally, networks like Rover get more valuable over time due to which they have to spend less to attract more users on their platform. This results in operating leverage due to which its earnings are poised to grow even faster than revenues.

Rover is expected to produce $230 mn in revenues in 2023. At an average cost per share of $4.25 we bought Rover with a market capitalization of $775 million and an EV of $525 mn. Rover is currently at adj EBITDA margin of 15% and, with scale, should be able to move up to 30% in adj EBITDA margin. At that rate, it should have a ‘look-through’ adj EBITDA of $70 mn in 2023, essentially meaning that we underwrote this investment at 7.3x adj EBITDA. The stock is now ~50% higher than our cost base. However, its fundamentals are improving at an even faster pace. Next year, in 2024, according to consensus estimates, Rover is expected to do $300 mn in revenues. Due to this, Rover is now trading at 10x our estimate of $90 in ‘look-through’ adj EBITDA for 2024. We believe this is a very cheap multiple for a high quality and growing business. In Appendix A to this letter, we detail our thesis on Rover (ROVR)… ” (Click here to read the full text)

10. FTAI Aviation Ltd. (NASDAQ:FTAI)

YTD Performance Through November 13: +139.89%

FTAI Aviation Ltd. (NASDAQ:FTAI) supplies high quality CFM56 engines, modules, and materials. FTAI Aviation Ltd. (NASDAQ:FTAI) has gained about 130% year to date through November 13. As of the end of the second quarter of 2023, 33 hedge funds tracked by Insider Monkey had stakes in FTAI Aviation Ltd. (NASDAQ:FTAI).

In October FTAI Aviation Ltd. (NASDAQ:FTAI) posted Q3 results. GAAP EPS in the quarter came in at $0.33, missing estimates by $0.08. Revenue in the period jumped about 26.4% year over year to $291 million, missing estimates by $4.74 million.

Diamond Hill Small Cap Fund made the following comment about FTAI Aviation Ltd. (NASDAQ:FTAI) in its Q3 2023 investor letter:

“Other top individual contributors in Q3 included Centrus Energy, Live Oak Bancshares and FTAI Aviation Ltd. (NASDAQ:FTAI) infrastructure company. FTAI Aviation is effectively commercializing its solutions to service CFM56 engines quickly and cheaply — a valuable customer proposition in a service capacity-constrained world.”

9. Applied Digital Corporation (NASDAQ:APLD)

YTD Performance Through November 13: +154.89%

Applied Digital Corporation (NASDAQ:APLD) is one of the best-performing growth stocks in 2023. Applied Digital Corporation (NASDAQ:APLD) is gaining value because of its involvement in the AI industry. In its October earnings call Applied Digital Corporation (NASDAQ:APLD) talked about its partnership with Character.AI, a startup in which Alphabet is planning to invest.

“In July, we activated the first cluster of GPUs for Character.AI and since then have made meaningful progress receiving our second cluster of GPUs in September with the expectation of receiving additional GPUs this month. Since our last earnings announcement, we have added two additional AI cloud customers. Both customers have an established user base and are growing quickly. These customer agreements have a similar structure to our first two. They also include significant prepayments to fund a large portion of the capital requirements for purchasing the GPUs. This brings our total annual contract value of AI cloud services contracts at full capacity to approximately $378 million. In addition to substantial prepayments we received from customers, we are using vendor financing and actively exploring other tailored financing options to support the capital requirements for the 34,000 GPUs we have on order to support our cloud service.

We remain on track for delivery of the majority of these GPUs by April of next year. Our established partnerships with leading OEMs like Super Micro, Hewlett Packard Enterprise and Dell, combined with our recent Elite Partner status in NVIDIA’s Partner Network, provide us with visibility into the delivery time line, ensuring timely receipt of these GPUs. As previously mentioned, we will initially provide this service from our 9-megawatt HPC Jamestown facility, along with third-party colocation space, as we continue to execute on the element of our dedicated next-gen HPC data centers. The pipeline of opportunities for our AI cloud service business remains robust.”

Read the full earnings call transcript here.

As of the end of the second quarter of 2023, 26 hedge funds reported owning stakes in Applied Digital Corporation (NASDAQ:APLD), much higher than 11 funds in the previous quarter.

8. Talkspace, Inc. (NASDAQ:TALK)

YTD Performance Through November 13: +157.25%

Online therapy company Talkspace, Inc. (NASDAQ:TALK) ranks 8th in our list of the best-performing growth stocks in 2023. Talkspace, Inc. (NASDAQ:TALK) has gained about 160% year to date through November 13. Talkspace, Inc. (NASDAQ:TALK)’s revenue in the third quarter jumped about 31% on a YoY basis. Talkspace, Inc. (NASDAQ:TALK) also upped its revenue guidance for full-year 2023.

7. Oscar Health, Inc. (NYSE:OSCR)

YTD Performance Through November 13: +189.02%

Oscar Health, Inc. (NYSE:OSCR) shares have gained about 189% year to date through November 13. Earlier this month Oscar Health, Inc. (NYSE:OSCR) posted Q3 results. GAAP EPS in the period came in at -$0.29, above estimates by $0.16. Revenue in the quarter increased by 47.2% year over year to $1.44 billion, beating estimates by $10 million.

Longleaf Partners Small-Cap Fund made the following comment about Oscar Health, Inc. (NYSE:OSCR) in its Q3 2023 investor letter:

“Oscar Health, Inc. (NYSE:OSCR) – Health insurance and software platform Oscar Health was the top detractor in the quarter but remains the top performer for the year. Oscar declined in the quarter as venture capital investors that funded the business’ early days reduced their investment. However, nothing fundamentally changed or negatively impacted the value of the business, and Oscar reiterated guidance. CEO Mark Bertolini is focused on closing the significant price-to-value gap. We had trimmed our position in Oscar on the back of strong performance in the first half but added again in the quarter as price declined.”

6. Duolingo, Inc. (NASDAQ:DUOL)

YTD Performance Through November 13: +197.39%

Duolingo, Inc. (NASDAQ:DUOL) has gained about 198% year to data as of November 13. Duolingo, Inc. (NASDAQ:DUOL) posted strong Q3 results, crushing past estimates. GAAP EPS in the three-month period ending September 30 was $0.06, beating estimates by $0.18. Revenue jumped about 43% year over year to $137.6 million, beating estimates by $5.47 million.

Paid subscribers as of the end of the third quarter were 60% higher than the subscriber count seen in the third quarter of last year.

Artisan Small Cap Fund made the following comment about Duolingo, Inc. (NASDAQ:DUOL) in its second quarter 2023 investor letter:

“We initiated new GardenSM positions in Duolingo, Inc. (NASDAQ:DUOL), SPX Technologies and Smartsheet. Duolingo is an app-based learning platform that currently derives most of its revenues from subscriptions to its language learning app. However, it has expanded into new education verticals with the launch of Duolingo ABC, an early childhood education app, and elementary math. The company uses an ad[1]supported freemium model, and it is the most downloaded language learning app in most countries outside China. Duolingo has differentiated itself with a unique gamified approach that is at the core of its user engagement strategy while its machine learning algorithms leverage monthly users and daily tracking events to improve the overall learning experience and adapt personalized learning pathways for each user.”

Like DraftKings Inc. (NASDAQ:DKNG), NVIDIA Corporation (NASDAQ:NVDA) and Bit Digital, Inc. (NASDAQ:BTBT), DUOL is one of the best-performing growth stocks in 2023.

Click to continue reading and see 5 Best-Performing Growth Stocks in 2023.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on May 1, 2024 at by Inan Dogan, PhD

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A New Dawn is Coming to U.S. Stocks

Published on May 2, 2024 at by Insider Monkey Staff

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Click to continue reading…

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