In this article, we will take a look at the 12 best Reddit stocks to invest in.
Reddit has emerged as an important platform for investors in the last couple of years. Leading subreddits like r/WallStreetBets, r/stocks, and r/investing boast 12.9 million, 4.8 million, and 2.1 million members, respectively, as of Q3 2022. Reddit has introduced thousands to the investing world, and the subreddits on the social news aggregation platform are actively used to discuss investment ideas that can provide a high return on investment (ROI). Reddit played an integral role in some of the most famous short squeezes of 2021. Investors looking to manipulate the market posted information on the social media platform, pushing the general public to acquire shares in the expectation of capital gains. This onslaught was driven by various objectives, including making profits and the need to pressure hedge funds into covering their short bets. Retail investors started purchasing “meme-stocks,” such as GameStop and AMC Entertainment, due to the information shared on Reddit. As a result, the stock prices skyrocketed, with GameStop increasing by more than 1000% within only two weeks. Stocks such as Visa Inc. (NYSE:V), Salesforce, Inc. (NYSE:CRM), and Tesla, Inc. (NASDAQ:TSLA) are among the best Reddit stocks gaining investor attention on the social media platform recently.
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Our Methodology
We have gone through leading Reddit forums such as r/WallStreetBets and r/stocks to compile the list of recently covered stocks and provided the investment thesis on these stocks. The companies shortlisted as the best Reddit stocks belong to different sectors, allowing investors to build a diversified portfolio that could withstand macroeconomic headwinds. We have also discussed the business fundamentals, expansion plans, and analyst ratings for each stock.
12 Best Reddit Stocks To Invest In
12. Lithium Americas Corp. (NYSE:LAC)
Number of Hedge Fund Holders: 9
Lithium Americas Corp. (NYSE:LAC) is a Vancouver, Canada-based lithium mining company with a presence in Argentina and the US. LAC is among the biggest lithium companies in the world.
Redditors consider Lithium Americas Corp. stock a strong play in the lithium market. Since the start of 2021, lithium has been one of the best-performing commodities, making Lithium Americas Corp. one of the best Reddit stocks to invest in. The commodity has a stellar outlook due to its use in electric vehicles (EVs), which is expected to provide support to pricing in the short term. Based on these circumstances, Matthew Key at B. Riley resumed coverage on Lithium Americas Corp. stock with a target price of $41 and a Buy rating on October 27. The analyst anticipates the demand and supply of lithium to find equilibrium in 2025 as new lithium projects start to come online gradually, playing in favor of Lithium Americas Corp..
Of the 895 hedge funds in Insider Monkey’s database, Lithium Americas Corp. was held by 9 hedge funds as of Q2 2022.
11. Amyris, Inc. (NASDAQ:AMRS)
Number of Hedge Fund Holders: 12
Amyris, Inc. (NASDAQ:AMRS) is an Emeryville, California-based renewable chemical company. The firm is leveraging the power of basic sugar plants and converting them into hydrocarbon molecules through fermentation.
Amyris, Inc. stock is gaining prominence on Reddit as it is bringing the power of consumer brands and biotech together. In a research note issued on September 19, Korinne Wolfmeyer at Piper Sandler increased the price target on Amyris, Inc. from $2.50 to $4. The target price reflects a potential upside of over 50% from the closing price as of November 4. The analyst anticipates the company’s Q3 2022 to be the most solid quarter on record. Furthermore, Ms. Wolfmeyer is also a fan of Amyris, Inc.’s “Fit to Win” strategy to overhaul the business and increase operational efficiency. The company is optimizing its packaging processes, which is expected to lower expenses by 30–40%. According to Amyris, this modification should lower the cost of goods sold by $5 million in the latter half of 2022 and by $30 million in 2023.
As of Q2 2022, Amyris, Inc. was held by 12 hedge funds.
10. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 16
SAP ranks 10th on our list of the best Reddit stocks to buy. SAP SE (NYSE:SAP) is a Walldorf, Germany-based software company that is a provider of enterprise software related to business operations and customer relations.
SAP SE is on the radar of the Reddit community due to its solid fundamentals. The company was able to surpass Q3 2022 forecasts due to the strong performance of the cloud business. Toby Ogg at JPMorgan increased the price target on SAP SE from $115.09 to $116.09 in a note issued to investors on October 26. The target price reflects an upside of 18.75% from the closing price as of November 4.
SAP SE is amongst the best Reddit stocks as experts view SAP SE’s backlog strength for cloud computing services as encouraging. Cloud migration activity has been gaining pace, leading investors to believe that SAP SE stock offers significant upside even in an economic environment with limited growth prospects. The stock also offers an annual forward dividend yield of 2.16% as of November 4.
Polen Capital shared its outlook on SAP SE in its Q3 2022 investor letter. Here’s what the firm said:
“SAP SE (NYSE:SAP) is Europe’s largest software company and the global leader in enterprise resource planning (ERP) software. ERP is a software category that is particularly critical to business functions, and, therefore, has high retention rates even in times of economic stress. For the past several years, SAP has been going through several transitions, including moving to cloud-based SaaS (Software as a service) solutions and an initiative to better integrate its various software solutions. In recent quarters, we have seen increasing evidence that both transitions are being successfully executed, and the result should be a faster-growing, more consistent, higher margin, and more advantaged business. As investment costs from these transition programs wane, and as the benefits of higher growth continue, we expect that earnings will grow at a double-digit rate from next year (2023) onwards. In light of this, we believe the valuation is very attractive for longterm investors.”
9. FIGS, Inc. (NYSE:FIGS)
Number of Hedge Fund Holders: 21
FIGS, Inc. (NYSE:FIGS) is a Santa Monica, California-based healthcare apparel company known for its scrubs that come in a wide range of colors and styles. These scrubs are very popular amongst healthcare professionals, as evident on Reddit.
Lauren Schenk at Morgan Stanley considers FIGS, Inc. one of the best-positioned stocks in the small-to-mid-cap companies’ category. Since the start of the COVID-19 pandemic, the adoption of scrubs has gained pace among healthcare professionals. Some experts have compared the rise of FIGS, Inc. in the healthcare sector with the emergence and dominance of Crocs in the footwear segment. The healthcare sector is expected to show resilience in economic recessions, making companies like FIGS, Inc. an attractive investment idea.
Baron Funds shared its bullish long-term outlook on FIGS, Inc. in its Q3 2022 investor letter. Here’s what the firm said:
“Within our Disruptive Growth group, some companies depreciated in value. New position FIGS, Inc. (NYSE:FIGS) declined about 15%. The relatively new direct-to-consumer producer of health care apparel has declined along with the broader group of young, high-growth, publicly traded companies. Investors have continued to shun newer business models that they perceive to be riskier. The company has declined over 80% from its highs achieved in late 2021. The recent volatility created an opportunity for us to initiate and build a position in a company that we believe can continue to grow revenue above 20% annually while also expanding margins. Its superior product is competing against brands that lack investment capabilities to improve their offerings. We believe Figs could command a meaningful share of the $79 billion global health care apparel market and eventually develop products for other professions.”
8. W.W. Grainger, Inc. (NYSE:GWW)
Number of Hedge Fund Holders: 30
GWW ranks 8th on our list of the best Reddit stocks to invest in. W.W. Grainger, Inc. (NYSE:GWW) is a Lake Forest, Illinois-based industrial supply company.
Reddit users find the company’s online channel user-friendly and efficient. W.W. Grainger, Inc. differentiates itself from Home Depot and other similar retailers by catering to the needs of businesses that use purchase orders instead of credit card receipts. On October 17, Stephen Volkmann at Jefferies resumed coverage on W.W. Grainger, Inc. stock with a target price of $600 and a Buy rating. The analyst thinks that W.W. Grainger, Inc.’s growth strategy is coming to fruition and the valuation also appears to be reasonable. Volkmann believes that the company’s scale expansion and digital strategy will help capture greater market share and aid in maintaining a healthy top line in an uncertain macroeconomic environment.
Third Avenue Management shared its stance on W.W. Grainger, Inc. in its Q1 2022 investor letter. Here’s what the firm said:
“Held in the Fund since 2019, Grainger plc (“Grainger”) is a UK-based real estate operating company that is the leading owner, manager, and developer of multi-family properties in the supply-constrained markets of the UK (where the multi-family business is more commonly referred to as the private-rental sector or “PRS”). At the end of the 2021 calendar year, the company owned a portfolio of 7,100 PRS units that were 95.0% leased with two-thirds of the value in the greater London area and the remaining one-third in the other UK regions.
In addition to its stabilized portfolio of “market-rate” PRS properties, Grainger also owns a portfolio of approximately 2,500 “rent-controlled” units dating back to its roots as a more diversified residential company (Grainger was founded in 1912). Due to the regulated nature of these properties, only about 8-10% of the units can be disposed of each year. However, the proceeds from these sales, as well as the earnings the company retains as an operating company as opposed to a REIT, are being utilized to build out its strategic development pipeline with planning for almost 8,400 additional PRS units- including 3,000 very well-located units through its joint venture with the Transport for London (TFL).
Despite being well-capitalized with a loan-to-value ratio of approximately 30% alongside prospects to self-finance its development pipeline that is expected to increase its recurring cash flows by more than 90% through 2025, Grainger’s common stock continues to trade at a discount to its stated NAV (which is provided annually based upon third-party appraisals under International Financial Reporting Standards). This inefficiency may very well relate to Grainger’s status as an operating company, not a REIT, which leaves the company out of certain Real Estate indices and mandates. It is not inconceivable, though, that as the company further builds out its stabilized PRS portfolio it may ultimately elect REIT tax status, serving to boost its annual dividend and widening its potential investor base. Should such a modification not materialize, and the price- to-value gap remain, there would also likely be a great deal of strategic interest in the platform given Grainger’s scale in this emerging asset class within the UK.”
7. Domino’s Pizza, Inc. (NYSE:DPZ)
Number of Hedge Fund Holders: 32
DPZ ranks 9th on our list of the best Reddit stocks to buy now. Domino’s Pizza, Inc. (NYSE:DPZ) is an Ann Arbor, Michigan-based, globally renowned pizza restaurant chain. The company operates in 90 countries and has more than 19,000 restaurants.
The Reddit community believes that the company will do well during a recession as pizza provides an affordable fast-food option during inflationary times and is a cheaper option compared to other quick-service restaurants. Andrew Strelzik at BMO Capital gave Domino’s Pizza, Inc. stock an Outperform rating with a target price of $400 in a research note issued on October 14. The analyst thinks that the concern in the pizza category is overblown and anticipates a favorable demand forecast for Domino’s Pizza, Inc..
Domino’s Pizza, Inc. offers an annual forward dividend yield of 1.32% as of November 4. The company’s Carryout and Delivery business are expected to provide more opportunities for growth. In Q3 2022, the company’s carryout same-store sales in the US observed a rise of 19.6% compared to the same period last year. Over the past three years, Domino’s Pizza, Inc.’s US carryout same-store sales have recorded a rise of 55%.
6. Pinduoduo Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 41
Pinduoduo Inc. (NASDAQ:PDD) is a Shanghai, China-based platform that connects farmers directly to consumers and provides a social e-commerce shopping experience.
Pinduoduo Inc. is the biggest agriculture-focused technology platform in the world that receives wide coverage on Reddit due to its ingenious business model. The company has the second-highest market share in the e-commerce sector, just behind Alibaba. Pinduoduo Inc. reported a 36% YoY rise in revenue in Q2 2022 due to strong sales during the Chinese mid-year shopping festival.
On October 27, Jiong Shao at Barclays upgraded Pinduoduo Inc. stock from an Equal Weight to an Overweight rating and also increased the target price from $66 to $70. The target price reflects a potential upside of over 31.8% from the closing price as of November 4.
Pinduoduo Inc. is considered among the best Reddit stocks due to the company’s attractive valuation. At a current P/E ratio of 22, Pinduoduo is trading considerably behind Amazon’s high trailing P/E ratio of 107 and behind Alibaba at 30. Analysts think that the stock is trading at a discount of 36% to its fair value.
In addition to Pinduoduo Inc., Redditors are also bullish on stocks such as Visa Inc., Salesforce, Inc., and Tesla, Inc..
5. Okta, Inc. (NASDAQ:OKTA)
Number of Hedge Fund Holders: 47
Okta, Inc. (NASDAQ:OKTA) is a San Francisco, California-based identity and access management corporation providing cloud-based software that aids companies in managing and securing user authentication into applications.
Investors think Okta, Inc. is one of the best Reddit stocks to invest in because it could be an acquisition target for a bigger cybersecurity company. Furthermore, the Reddit community thinks that Okta, Inc. stock is bottoming out and provides an attractive entry point to investors. On October 24, Michael Turits at KeyBanc gave Okta, Inc. stock an Overweight rating with a target price of $70. The analyst anticipates strong Q3 2022 results on the back of survey data obtained from 35 value-added resellers (VARs) and other channel partners. Furthermore, the survey data revealed a stable IT budget growth for 2023 as well. The raised global threat environment due to the tensions between Russia and Ukraine, China, and the US will keep cybersecurity spending strong moving forward, playing in favor of companies like Okta, Inc..
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 72
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Hsinchu, Taiwan-based designer and manufacturer of semiconductor chips.
The Reddit community is bullish on the stock as it is currently valued at the lower end of its historical range over the past ten years. The forward price-to-earnings ratio stands at 10.4, while the forward EV/EBITDA indicator is at 6.2, reflecting the lowest levels since 2016. Taiwan Semiconductor Manufacturing Company Limited has been termed as one of the best Reddit stocks due to the strong demand for the company’s offerings. Furthermore, the Reddit community thinks the current stock price has already factored in the geopolitical tension between the US and China regarding Taiwan. Meanwhile, Taiwan Semiconductor Manufacturing Company Limited is working on hedging the geopolitical risk by expanding its operations in Japan. In a research note issued on October 14, Bruce Lu at Goldman Sachs gave Taiwan Semiconductor Manufacturing Company Limited stock a target price of $89, along with a Buy rating.
Baron Funds shared its long-term bullish outlook on Taiwan Semiconductor Manufacturing Company Limited in its Q3 2022 investor letter. Here’s what the firm said:
“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited detracted from performance due to the global macroeconomic slowdown and softening demand for consumer electronics. We retain conviction that Taiwan Semi’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, and IoT, will allow the company to deliver strong revenue growth over the next several years.”
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 72
Tesla, Inc. is an Austin, Texas-based EV giant under the leadership of Elon Musk. The company is at the third position on our list of the 12 best Reddit stocks to invest in.
The Reddit community has taken note of the recent sell-off in Tesla, Inc., which provides an attractive entry point to investors. Following the sell-off, Ark Investment Management’s Cathie Wood has also taken fresh positions in the company during the last week. Ms. Wood and her team believe that Tesla, Inc. has the potential to increase its total addressable market (TAM) by ten times if they introduce cheaper vehicle models. During the Q3 2022 earnings call, Mr. Musk revealed that the company is working on developing a variant that would be half in price as compared to the Model 3 and Model Y. Ark Investment Management’s team highlighted that a vehicle worth $60,000 only addresses 5% of the automobile market in the US. In contrast, if the price of the vehicle is $30,000, it would cater to 50% of the US market.
Here’s what Baron Funds said about Tesla, Inc. in its Q3 2022 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) makes fully electric vehicles (EVs), related software offerings, solar and energy storage products, and battery cells. After a tough second quarter that included a prolonged shutdown of one of Tesla’s key manufacturing facilities in Shanghai, the company demonstrated a significant 40% sequential increase in production volumes resulting in another quarterly record of production and deliveries. Despite the second quarter complexities, inflationary pressures, and production ramp-up of two new facilities (Berlin and Austin), the company exceeded Wall Street expectations in the second quarter. It maintained healthy 26% normalized gross margins, achieved industry-leading 18% adjusted operating income margins, and has generated over $14 billion of cash from operations over the past year. Moreover, due to Tesla’s high level of vertical integration and U.S. manufacturing capacity, the company is expected to be one of the key beneficiaries of the Inflation Reduction Act, qualifying for significant manufacturing and consumer-related incentives. We believe these incentives can add up to tens of billions of dollars over the coming decade, while also enhancing Tesla’s competitive advantage versus other automakers. The company also held its second artificial intelligence day, which presented continued advancements in its vehicle self-driving program and showcased its rapidly evolving humanoid robot developments (check out the Optimus videos on YouTube). We continue to believe Tesla is well positioned to benefit from complementary tectonic shifts in the automotive industry, including electrification, autonomous driving, and shared mobility. And, yes, Tesla is still effectively debt free, with over $18 billion of cash on its balance sheet, and investors are even speculating about a stock buyback, a far cry from worries of bankruptcy just a few years ago.”
2. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 116
Salesforce, Inc. is a San Francisco, California-based cloud-based provider of customer relationship management (CRM) software.
One of the reasons Salesforce, Inc. is considered one of the best Reddit stocks is because of the company’s $10 billion share buyback program. The Reddit community has taken note of the possibility that New York-based hedge fund Starboard Value LP would take a significant stake in the company in the near future. The hedge fund intends to find substantial value in Salesforce, Inc. after it has lost 40% of its value in the last year despite being a market leader. Furthermore, Salesforce, Inc. offers a long-term growth profile and an opportunity to expand margins. The hedge fund thinks that the stock price performance does not reflect the strong market leadership position of Salesforce, Inc..
Here’s what Oakmark Funds said about Salesforce, Inc. in its Q3 2022 investor letter:
“Salesforce, Inc. (NYSE:CRM) has become a dominant global player in sales, customer service, commerce and marketing software over the past 20 years. The company earns 80% gross margins and grows 20% organically. Plus, virtually all of its revenue is recurring. We see Salesforce as a great business that we’ve admired from afar for a long time. More recently, the organization has made some changes at the top that prompted us to take a closer look at the stock. New CEO Bret Taylor and CFO Amy Weaver are bringing a culture of financial discipline. We believe this renewed focus on profitability and capital return, combined with Salesforce’s strong underlying business characteristics, will yield strong results. The current valuation of 3.9x next year’s revenues represents a significant discount compared to publicly traded peers and recent private market values in the software space that have similar growth profiles. We view this discount as an opportunity to invest in a great business at a good value.”
Salesforce, Inc. was held by 116 hedge funds at the end of Q2 2022.
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 166
Visa Inc. is a San Francisco, California-based digital payments provider through its credit, debit, and prepaid cards.
The company’s Q4 2022 results were widely discussed on Reddit as it outperformed revenue and earnings estimates for the period. Revenue increased from $6.56 billion in Q4 2021 to $7.79 billion in Q4 2022, surpassing the analysts’ forecast of $7.75 billion. Meanwhile, the adjusted EPS of $1.93 was six cents higher than the consensus estimates. Redditors also positively welcomed the company’s 20% increase in dividends and the announcement of a $12 billion share buyback plan. Following the quarterly results, James Fotheringham at BMO Capital gave Visa Inc. stock an Outperform rating along with a target price of $241 in an update issued to investors on October 27. The analyst considers Visa Inc. stock as an integral holding because it provides safety against inflation and recession, making it one of the best Reddit stocks to invest in.
Here’s what RiverPark Funds said about Visa Inc. in its Q3 2022 investor letter:
“We reinitiated a small position in Visa, which we had previously owned for years (selling out of the position at higher levels in February). We continue to believe that the long-term secular growth trend towards digital payments remains intact and has been further enhanced by the COVID crisis. The growth in debit cards, contactless payments, e-commerce, and now, buynow-pay-later (BNPL), are all driving digital payment penetration, and we continue to be impressed with the long-term growth potential of V (and our other payment holdings Mastercard, Adyen, and PayPal).”
You can also take a peek at the Best Biotech Stocks Under $10 and the Best Lithium Stocks To Buy.
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This article is originally published at Insider Monkey.
