In this article, we discuss the 12 Best Stocks to Buy in Falling Markets According to Hedge Funds.
Markets fell on Thursday, August 21, as investors were cautious ahead of Fed Chair Jerome Powell’s highly anticipated address at Jackson Hole. The Dow, S&P 500, and Nasdaq all fell slightly, driven down by increased concerns over hawkish comments that could dampen chances for a September rate decrease. With the likelihood of a cut falling from near certainty to just under 80%, traders chose to lock in profits and reduce risk exposure, especially since sparse summer trading volumes are expected to exacerbate any market fluctuations.
Beyond monetary policy, earnings from large merchants exacerbated the anxiety. Walmart’s earnings showed robust customer demand but fell short of profit projections. This raised concerns about growing prices and the overall impact of tariffs on household spending. Meanwhile, the decline of major technology companies reflected market concerns about stretched valuations and regulatory pressures. Together, these factors exacerbated the perception of fragility that pervades markets.
For investors, situations like this might be uncomfortable, but they also create opportunities. Falling markets frequently reveal whether companies have strong balance sheets, pricing power, and business structures that can withstand uncertainty. Historically, downturns have been ideal opportunities to buy such stocks at lower prices. With volatility expected to persist, investors looking for the best stocks to buy in declining markets may discover that discipline and patience are the keys to converting short-term turbulence into long-term rewards.
With this backdrop in mind, let us proceed to our list of the 12 Best Stocks to Buy in Falling Markets According to Hedge Funds.
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Our Methodology
To curate our list of the 12 Best Stocks to Buy in Falling Markets According to Hedge Funds, we used the Finviz screener to extract a list of stocks that have lost 15% or more over the past 12 months and are in the telecommunications, technology, or software infrastructure industries. Next, we ranked these stocks in ascending order based on the number of hedge funds holding stakes in the respective stocks as of Q1 2025. We assessed the hedge fund sentiment surrounding these stocks using Insider Monkey’s hedge fund database, which tracks over 1,000 hedge funds.
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. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
12. Tenable Holdings, Inc. (NASDAQ:TENB)
Decline in Share Price Over Past 12 Months: 28.47%
Number of Hedge Fund Holders: 44
Tenable Holdings, Inc. (NASDAQ:TENB) is one of the 12 Best Stocks to Buy in Falling Markets According to Hedge Funds.
Cantor Fitzgerald reaffirmed an ‘Overweight’ rating on Tenable Holdings, Inc. (NASDAQ:TENB) with a $42 price target on August 15, 2025, following the company’s stronger-than-expected second-quarter results. Revenue, billings, operating income, and free cash flow all exceeded expectations, thanks to momentum in the Tenable One platform and a shift toward proactive security solutions. Gross margins remained strong at 78%, with revenue rising 11.4% year on year.
Tenable Holdings, Inc. (NASDAQ:TENB) increased its full-year expectations, citing greater visibility in the federal and SLED sectors. The Tenable One platform now generates 40% of new business and 30% of total revenue. Analysts see the post-earnings slump as a potential entry point for long-term investors, despite the lack of immediate catalysts.
Tenable Holdings, Inc. (NASDAQ:TENB) offers cyber exposure management solutions that assist enterprises in identifying, assessing, and mitigating vulnerabilities in IT, cloud, OT, and identity environments worldwide. It is included in our list of the Best Bear Market Stocks.
11. Five9, Inc. (NASDAQ:FIVN)
Decline in Share Price Over Past 12 Months: 26.37%
Number of Hedge Fund Holders: 44
With a one-year share price decline and significant hedge fund interest, Five9, Inc. (NASDAQ:FIVN) secures a spot on our list of the 12 Best Stocks to Buy in Falling Markets According to Hedge Funds.
On August 1, 2025, Needham analyst Scott Berg reiterated his ‘Buy’ rating on Five9, Inc. (NASDAQ:FIVN) with a $40 price target, citing the company’s solid Q2 performance. Subscription revenue increased by 16%, driven by a 42% year-on-year increase in Enterprise AI sales, while Enterprise AI bookings tripled and new logo AI bookings doubled.
Despite some macroeconomic caution weighing on H2 projections, strong sales and rising market adoption support an optimistic outlook. Leadership changes, such as the retirement of the long-time CEO and the appointment of a new CFO, have not lowered confidence. Analysts believe Five9, Inc. (NASDAQ:FIVN) is well-positioned to benefit from the burgeoning agentic AI trend while maintaining its competitive advantage in intelligent contact center solutions.
Five9, Inc. (NASDAQ:FIVN) offers cloud-based AI-powered contact center software that enables seamless customer interactions across voice, chat, email, online, and social media channels worldwide. It is included in our list of the Best Bear Market Stocks.
10. EPAM Systems, Inc. (NYSE:EPAM)
Decline in Share Price Over Past 12 Months: 17.18%
Number of Hedge Fund Holders: 46
EPAM Systems, Inc. (NYSE:EPAM) is one of the 12 Best Stocks to Buy in Falling Markets According to Hedge Funds.
On August 18, 2025, TD Cowen upgraded EPAM Systems, Inc. (NYSE:EPAM) to ‘Buy’ from ‘Hold’ and increased its price target to $205, noting improved revenue momentum and the conclusion of post-Ukraine delivery restructuring. EPAM has now delivered three consecutive quarters of organic revenue acceleration, with Q3 growth likely to exceed 6% year on year, exceeding most large IT services peers. All regions and verticals are contributing, and headcount growth is expected to accelerate in H2.
With delivery operations stable, EPAM Systems, Inc. (NYSE:EPAM) is focusing on sales execution, client expansion, and margin improvement, with gross margins expected to recover to the low-30% range and EPS growth of around 13% per year from 2026-2027. TD Cowen believes EPAM’s risk-reward ratio is appealing in light of the sector’s weakness.
EPAM Systems, Inc. (NYSE:EPAM) offers global digital platform engineering, software development, cloud, artificial intelligence, and cybersecurity services across numerous industries. It is included in our list of the Best Bear Market Stocks.
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