In this article, we discuss the 5 best growth stocks to buy according to hedge funds. If you want to read our detailed analysis of these stocks, go directly to the 11 Best Growth Stocks To Buy According To Hedge Funds.
5. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders in Q2: 135
Number of Hedge Fund Holders in Q1: 130
Uber Technologies, Inc. (NYSE:UBER) is placed fifth on our list of 11 best growth stocks to buy according to hedge funds. The firm markets proprietary technology applications and is headquartered in California.
On September 22, investment advisory JPMorgan reiterated an Overweight rating on Uber Technologies, Inc. (NYSE:UBER) stock with a price target of $72. Doug Anmuth, an analyst at the advisory, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Altimeter Capital Management is a leading shareholder in Uber Technologies, Inc. (NYSE:UBER) with 24 million shares worth more than $1.2 billion.
RiverPark Advisors, LLC, in its Q4 2020 investor letter, mentioned Uber Technologies, Inc. (NYSE:UBER). Here is what the fund has to say in its letter:
“UBER was also a strong contributor, as shares rallied following the approval of California’s Proposition 22 by voters, allowing the company’s California-based drivers to remain independent contractors (rather than become more expensive employees). We believe this news is not just about the 10%-15% of Uber’s revenue tied to California, but the influence this will have on other states reassessing driver pay. UBER also reported strong third quarter results with Delivery Gross Bookings growing 135% year-over-year which nearly fully offset a reduction in Mobility Gross Bookings, which were down 50% year over year. Total Gross Bookings for the quarter were down only 10% year over year as compared with down 35% last quarter.
Despite the COVID disruption, UBER remains the undisputed global leader in ride sharing (44% of the Company’s third quarter revenue), with greater than 50% share in every major region in which it operates. The company is also a leader in food delivery (46% of revenue), where it is number one or two in the more than 25 countries in which it operates. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its more than 100 million users (by comparison, Amazon Prime has 130+ million members) and penetrate new markets of on-demand services, such as grocery delivery, truck brokerage and worker staffing for shift work. At its current $96 billion market capitalization, UBER trades at only 6x next year’s revenue from its two core businesses. Additionally, the company has substantial, seemingly unrecognized, value in its several nascent development businesses and another $12 billion in equity stakes in synergistic businesses around the world.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders in Q2: 138
Number of Hedge Fund Holders in Q1: 127
Apple Inc. (NASDAQ:AAPL) is a California-based technology firm with a large stake in the consumer electronics business. It is ranked fourth on our list of 11 best growth stocks to buy according to hedge funds.
On September 29, investment advisory UBS maintained a Buy rating on Apple Inc. (NASDAQ:AAPL) stock with a price target of $175. David Vogt, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 138 hedge funds in the database of Insider Monkey held stakes worth $145 billion in Apple Inc. (NASDAQ:AAPL), up from 127 in the preceding quarter worth $131 billion.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
3. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders in Q2: 146
Number of Hedge Fund Holders in Q1: 135
Alibaba Group Holding Limited (NYSE:BABA) is a China-based diversified technology company. It is placed third on our list of 11 best growth stocks to buy according to hedge funds.
On October 1, investment advisory KeyBanc maintained an Overweight rating on Alibaba Group Holding Limited (NYSE:BABA) stock but lowered the price target to $200 from $250. Hans Chung, an analyst at the advisory, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE:BABA) with 14 million shares worth more than $3.2 billion.
In its Q1 2021 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE:BABA) was one of them. Here is what the fund said:
“Alibaba also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba is the second largest position in the Portfolio.”
2. Facebook, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders in Q2: 266
Number of Hedge Fund Holders in Q1: 257
Facebook, Inc. (NASDAQ:FB) is ranked second on our list of 11 best growth stocks to buy according to hedge funds. The firm operates as a technology company and is headquartered in California.
On September 30, investment advisory RBC Capital initiated coverage of Facebook, Inc. (NASDAQ:FB) stock with an Outperform rating and a price target of $425, noting that the growth of the firm depended on its deepening relationship with over 3 billion users.
At the end of the second quarter of 2021, 266 hedge funds in the database of Insider Monkey held stakes worth $42 billion in Facebook, Inc. (NASDAQ:FB), up from 257 in the preceding quarter worth $40 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Facebook, Inc. (NASDAQ:FB) was one of them. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders in Q2: 271
Number of Hedge Fund Holders in Q1: 243
Amazon.com, Inc. (NASDAQ:AMZN) is placed first on our list of 11 best growth stocks to buy according to hedge funds. The firm operates as a diversified technology company and is headquartered in Washington.
On October 5, investment advisory JPMorgan maintained an Overweight rating on Amazon.com, Inc. (NASDAQ:AMZN) stock with a price target of $4,100, noting that the concerns around the firm and price pullbacks made for a “compelling” investment opportunity.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN) with 3.8 million shares worth more than $13 billion.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
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