In this piece, we will look at the 11 best long-term growth stocks to invest in.
The year 2023 has proven to be dynamic for the stock market. In the initial half, the S&P 500 displayed a substantial gain of nearly 16.4%, with an 8% surge in the second quarter that challenged bearish sentiments. However, the third quarter presented a less favorable scenario for the market. Although July saw a 3.11% increase, August and September experienced declines of 1.77% and 4.87%, respectively. The overall Q3 decline for the S&P 500 amounted to 3.65%. While October witnessed an additional 2.20% decline, as of November 22, it has rebounded with a month-to-date increase of 7.52%.
According to a report from Bloomberg, Bank of America anticipates that the S&P 500 index will ascend approximately 10% from November 20 levels by the conclusion of 2024, reaching a record high of 5,000. According to the report, 2024 will be “a stock picker’s paradise”. On the other hand, Goldman Sachs anticipates modest growth for the US economy in the coming year and does not foresee an impending recession. The financial institution projects that the S&P 500 index will reach 4700 by the end of 2024, reflecting a 5% gain over the next 12 months.
When delving into stock selection for long-term investment, a popular strategy investors make use of involves targeting growth stocks. Typically, growth stocks are identified by having share prices that command a significant premium over their earnings per share, provided the company is profitable. This valuation metric is known as the price-to-earnings ratio (P/E ratio), calculated by dividing the current share price by the firm’s earnings per share over the last 12 months, the latest fiscal year, or projected earnings per share. A high P/E ratio, compared to industry benchmarks, suggests that investors are willing to pay more for the stock than the current earnings would justify. The underlying assumption is that the stock will experience future growth, thus validating the high price.
When considering a long-term investment horizon, the prospects for growth stocks appear robust. The compilation of our 11 long-term growth stocks is predominantly composed of companies within the technology sector. Notable entities on the list encompass Tesla, Inc. (NASDAQ:TSLA), MercadoLibre, Inc. (NASDAQ:MELI), and technology behemoths such as NVIDIA Corporation (NASDAQ:NVDA), Uber Technologies, Inc. (NYSE:UBER), and Adobe Inc. (NASDAQ:ADBE), among others.
A close-up of a portfolio of stocks, emphasizing the broad equity portfolio of the company.
Our Methodology
For the following list, we compiled a list of stocks that recorded a P/E ratio greater than 50. The list of companies was narrowed down further based on the number of hedge funds holding stakes in them according to Insider Monkey’s hedge fund data for the third quarter. The stocks are ranked based on this metric, from the lowest to the highest number of hedge funds holding stakes in them.
11. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 31
P/E Ratio: 296.75
Palantir Technologies Inc. (NYSE:PLTR) is a software company specializing in the development of data fusion platforms. The company enables both machine-assisted and human-driven data analysis. Its product platform comprises Palantir Gotham, Palantir Apollo, and Palantir Foundry.
Palantir Technologies Inc. surpassed expectations in the third quarter with an adjusted EPS of $0.07, exceeding estimates by $0.01. The revenue for the period increased by approximately 16.8% year over year, reaching $558 million, outperforming estimates by $2.08 million. Looking ahead to the fourth quarter, Palantir Technologies Inc. anticipates revenue in the range of $599 million to $603 million, surpassing the consensus estimate of $599.26 million.
As of the end of the third quarter of 2023, 31 hedge funds tracked by Insider Monkey had stakes in Palantir Technologies Inc.. The biggest stakeholder of Palantir Technologies Inc. was D E Shaw which owns a $387.84 million stake in the company.
Much like Tesla, Inc., MercadoLibre, Inc., NVIDIA Corporation, Uber Technologies, Inc., and Adobe Inc., Palantir Technologies Inc. is one of the best long-term growth stocks to invest in.
10. The Trade Desk, Inc. (NASDAQ:TTD)
Number of Hedge Fund Holders: 39
P/E Ratio: 220.34
The Trade Desk, Inc. (NASDAQ:TTD) is a multinational technology company based in the United States, specializing in real-time programmatic marketing automation technologies, products, and services. The company’s focus is on personalizing digital content delivery to users and persists in garnering backing for Unified ID 2.0 (UID2), the industry-wide protocol aimed at preserving pertinent advertising while safeguarding user privacy.
The Trade Desk, Inc. announced its Q3 2023 earnings per share of $0.33, surpassing the consensus analyst forecast of $0.29. Adjusted EBITDA experienced a 22.6% year-over-year growth, reaching $199.5 million, exceeding the previous guidance of $185 million. Revenues showed a 25% year-over-year increase, totaling $493.27 million, which exceeded analyst estimates of $486.91 million. Additionally, the company’s customer retention remained consistently high, staying above 95% for the 10th consecutive quarter.
As of September 2023, 39 out of the 910 hedge funds polled by Insider Monkey had bought the firm’s shares. Ken Griffin’s Citadel Investment Group is The Trade Desk, Inc.’s biggest hedge fund investor through its $250.6 million stake.
ClearBridge Mid Cap Growth Strategy made the following comment about The Trade Desk, Inc. in its Q2 2023 investor letter:
“We initiated a new position in The Trade Desk, Inc., the leading trading platform for advertisers to buy programmatic ad space, such as the banner ads on a website or the commercials played while streaming TV. Programmatic ads are secularly taking share from traditional forms of advertising, and much like financial trading platforms, The Trade Desk enjoys meaningful network effects that makes it the clear leader in the space. The stock sold off entering 2023 as investors worried over macro pressures on ad budgets, and we capitalized on this opportunity to buy a well-entrenched compounder in a large, growing market.”
9. Mercadolibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 76
P/E Ratio: 79.09
Established in 1999, Mercadolibre, Inc., headquartered in Buenos Aires, Argentina, stands as Latin America’s premier e-commerce technology company, functioning via its core platforms, MercadoLibre.com and MercadoPago.com. It offers solutions for individuals and businesses engaged in online buying, selling, advertising, and payment transactions. On November 2, Wedbush analyst Scott Devitt reaffirmed an ‘Outperform’ rating for Mercadolibre, Inc. shares and sustained a price target of $1500.
As of Q3 2023, Mercadolibre, Inc. shares were held by 76 prominent hedge funds, valued at more than $3.38 billion, according to Insider Monkey data on 910 hedge funds. Generation Investment Management was the largest hedge fund shareholder with ownership of 480,480 shares valued at $609.19 million.
8. DexCom, Inc. (NASDAQ:DXCM)
Number of Hedge Fund Holders: 78
P/E Ratio: 125.18
DexCom, Inc. (NASDAQ:DXCM), headquartered in San Diego, California, is a medical devices company specializing in the development and marketing of Continuous Glucose Monitoring (CGM) systems. These systems are designed for ambulatory use by individuals with diabetes and are utilized by healthcare providers in the treatment of people with diabetes.
Following the release of its earnings report on October 27, DexCom, Inc. witnessed a significant surge in its shares. The report indicated the resilience of the market for “continuous glucose monitoring devices” despite the adoption of Ozempic, with this resilience expected to persist. The company demonstrated robust sales growth, experiencing a notable 26% year-over-year increase, reaching $975 million, surpassing the estimated $940 million. Furthermore, profit margins expanded at a rate exceeding expectations, resulting in earnings of $0.50 per share, well above the projected $0.34.
Among the 910 hedge funds included in Insider Monkey’s Q3 2023 database, 78 invested in DexCom, Inc.. Millennium Management, led by Israel Englander, emerged as the largest investor, holding 2.78 million shares valued at $259.5 million.
In its Q3 2023 “Baron Health Care Fund” investor letter, Baron Funds, an investment management company, made the following comments about DexCom, Inc.:
“DexCom, Inc. is a leading provider of continuous glucose monitoring technology (CGM) for people with diabetes. The stock declined after Novo Nordisk released SELECT trial results. The trial results have led to investor concerns that Wegovy and medications in the same class (Ozempic, Mounjaro, and other drugs in development) may be broadly reimbursed by payors and widely adopted. This has raised questions about the long-term impact of GLP-1 drugs on the size of DexCom’s addressable market and the terminal value of the stock as these new medications could slow the progression of diabetes for those who are pre-diabetic and reduce the need for insulin for those with Type 2 diabetes. We think GLP-1 drugs will be used in conjunction with CGM technology, which will remain a critical diabetes management tool. We continue to believe DexCom has an attractive long-term growth runway ahead.”
7. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 81
P/E Ratio: 75.82
Tesla, Inc., headquartered in Austin, Texas, is a multinational American company primarily engaged in automotive and clean energy. The company specializes in the design and manufacturing of electric vehicles, stationary battery energy storage solutions ranging from household to grid-scale, as well as solar panels, solar shingles, and related products and services.
In Q3 2023, Tesla, Inc. manufactured 430,488 vehicles and successfully delivered over 435,000 vehicles. The company operates six extensive manufacturing facilities globally, encompassing its initial plant in California and gigafactories located in Nevada, New York, Shanghai, Texas, and Berlin.
As of Insider Monkey’s third-quarter database, 81 hedge funds showed a bullish stance on Tesla, an increase from the 79 funds in the previous quarter.
Here’s what Baron Funds said about Tesla, Inc. in its Q2 2023 investor letter:
Many factors contributed to the strong performance of our largest Disruptive Growth position, Tesla, Inc. (NASDAQ:TSLA), in the period. Investors’ concerns regarding Tesla in 2022 continue to dissipate, and the company’s business has continued to grow materially, although at below peak margins. Tesla’s deliveries in China are recovering. The company’s newest factory in Texas has ramped production and should contribute to improved domestic sales and margins. U.S. government policies have lowered the cost to own Tesla vehicles, while also reducing the company’s battery production expenses.
We continue to believe that Tesla is only scratching the surface of its potential. We regard announced partnerships between Tesla and its competitors in the quarter as important. In early June, Tesla agreed to provide Ford Motors access to Tesla’s electric vehicle (EV) charging technology and network. Other traditional and pure EV manufacturers, including General Motors, Rivian, and Volvo, quickly followed suit. We expect additional charging partnerships to ensue. In our view, these relationships validate Tesla’s charging technology and infrastructure as superior to other standards. Consolidation around a single technology should accelerate charging infrastructure deployment, diminish the risk of Tesla’s technology becoming obsolete, and lessen a key concern of hesitant EV purchasers. EV adoption is at a tipping point. And Tesla, with its approximately 60% domestic market share of EVs, should be the most important beneficiary of this shift…” (Click here to read the full text).
6. ServiceNow Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 99
P/E Ratio: 87.14
As of Q3 2023, 99 out of the 910 hedge funds tracked by Insider Monkey were the firm’s investors. ServiceNow, Inc. (NYSE:NOW)’s biggest hedge fund stakeholder is Rajiv Jain’s GQG Partners due to its $831.6 million investment.
Here is what Baron Technology Fund has to say about ServiceNow, Inc. in its Q3 2023 investor letter:
“Despite near-term macro uncertainty, it’s important to frame that we find ourselves in the early innings of both the AI investment cycle and overall cloud penetration. We estimate cloud penetration to be between 25% and 30% versus the likely 70% to 75% level over time, if not even higher. AI deployments are literally just getting off the ground.Infrastructure and development platforms for securely storing and curating data, training and fine-tuning large-language and other AI models, and developing and delivering AI applications. Beneficiaries include Microsoft Azure and Amazon Web Services. Integration of generative AI capabilities, such as AI agents and copilots, directly into existing product offerings and customer workflows. Software vendors capitalizing on this opportunity includes ServiceNow, Inc.“
In addition to Tesla, Inc., MercadoLibre, Inc., NVIDIA Corporation, Uber Technologies, Inc., and Adobe Inc., ServiceNow, Inc. ranks as one of the best long-term growth stocks hedge funds love.
5. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 110
P/E Ratio: 964.59
Advanced Micro Devices, Inc. (NASDAQ:AMD), commonly abbreviated as AMD, is an American multinational semiconductor company based in Santa Clara, California, specializing in the development of computer processors and related technologies for business and consumer markets.
On November 13, investment advisory firm Roth MKM initiated coverage of Advanced Micro Devices, Inc. with a Buy rating and a price target of $125, emphasizing the company’s differentiated portfolio of high-performance compute and networking processors.
In the third quarter of 2023, there were 110 hedge funds with long positions in Advanced Micro Devices, Inc., down from 112 in the preceding quarter.
4. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 112
P/E Ratio: 55.74
Adobe Inc. is a versatile software company providing a range of products and solutions enabling individuals, teams, and enterprises to generate, publish, and promote content. Recognized as a leading choice for content creators, students, professionals, and consumers, Adobe Inc. also operates a Digital Experience segment, empowering brands and businesses to create, manage, implement, and monetize customer experiences.
On October 27, Oppenheimer analyst Brian Schwartz upgraded Adobe Inc. from Perform to Outperform, coupled with a revised price target of $660.00, signaling a positive perspective on Adobe Inc.’s performance and growth prospects.
112 out of the 910 hedge funds part of Insider Monkey’s third quarter of 2023 database had invested in the firm. Adobe Inc.’s biggest hedge fund investor in the September quarter was Ken Fisher’s Fisher Asset Management as it owned 4.5 million shares that are worth $2.3 billion.
Here is what Polen Global Growth has to say about Adobe Inc. in its Q3 2023 investor letter:
“Both Alphabet and Adobe’s businesses continue to perform well. With respect to Adobe, the most recent quarter delivered more of the same with constant currency revenue growing 13%, margin expansion, and over 2% of shares outstanding repurchased for non-GAAP earnings growth of over 20%. We believe its approach to GenAI through Firefly, which guarantees safe content because it trains on Adobe Stock, will continue to be attractive to enterprises. The counter to GenAI, and something we are keeping an eye on with Alphabet and Adobe, is that it requires heavy investment. While both businesses can leverage their scale and manage costs in other areas, we expect the investment in future growth through GenAI will weigh on company-wide margins over the near term.”
3. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 122
P/E Ratio: 140.34
Salesforce, Inc. (NYSE:CRM), headquartered in San Francisco, California, stands as an American cloud-based software company, specializing in customer relationship management. The company provides tailored software and applications designed for sales, customer service, marketing automation, e-commerce, analytics, and application development.
On August 30, Salesforce, Inc. unveiled its fiscal 2024 second-quarter results, reporting earnings of $2.12 per share—a significant 78% increase from the same quarter in the previous year. Fueled by an 11% rise in revenue, surpassing $8.6 billion, the company is scheduled to release its fiscal Q3 results on November 30 after the market closes. Salesforce, Inc. anticipates revenue between $8.70 billion and $8.72 billion, with diluted earnings per share ranging from $1.02 to $1.03. Analysts project a 53% growth in earnings for the full fiscal year.
Within Insider Monkey’s Q3 2023 database, 122 out of 910 hedge funds had invested in the company, with Ken Fisher’s Fisher Asset Management emerging as the largest shareholder, contributing to its $2.87 billion investment during the specified time period.
Harding Loevner talked about Salesforce, Inc. in its second-quarter 2023 investor letter. Here is what it said:
“Salesforce, Inc., a company we’ve owned since 2019, recently added ChatGPT-like capabilities onto its existing Al module, Einstein, to support its internal sales efforts and customer-facing software. For example, Einstein GPT can help generate marketing emails tailored to specific clients by using Salesforce’s customer database and past email correspondence to learn the most effective approach for each client. Einstein GPT is also different from off-the-shelf LLMS in three important ways: It keeps personal identifiable information private and secure, compared with external tools that retain anything a user enters. It employs the latest data in Salesforce’s system, as opposed to the sometimes-stale public data that train generic models. And generative Al capabilities can be integrated with other Salesforce offerings; the company has already introduced Slack GPT and Tableau GPT, Al-equipped versions of its workplace collaboration and analytics tools.”
2. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 146
P/E Ratio: 111.64
Headquartered in San Francisco, California, Uber Technologies, Inc. operates technology platforms that connect consumers with independent ride service providers. The company extends its services to various forms of transportation, such as public transit, bikes, and scooters. Additionally, Uber provides on-demand food delivery, freight services, business fleet solutions, and same-day delivery options. With a presence in over 70 countries, Uber serves more than 142 million monthly active platform consumers.
On November 20, Uber Technologies Inc announced its intention to issue $1.2 billion in five-year convertible bonds, scheduled to mature in 2028 and targeted at qualified institutional buyers. The ride-sharing company specified that a portion of the funds would be allocated to cover expenses related to entering capped call transactions, with the goal of mitigating dilution during the conversion into equity. Uber further outlined that the remaining proceeds would be utilized for the repayment, redemption, or repurchase of outstanding debt, including $1 billion of 7.5% notes set to mature in 2025.
At the end of the third quarter of 2023, 146 hedge funds in the database of Insider Monkey held stakes worth $8.1 billion in Uber Technologies, Inc., up from 144 in the preceding quarter, with a total value of $7.66 billion.
Here is what RiverPark Advisors said about Uber Technologies, Inc. in its Q3 2023 investor letter:
“Uber Technologies, Inc.: UBER was the top contributor in the quarter following a better-than-expected 2Q23 earnings report and 3Q23 guidance. Gross bookings of $33.6 billion were up 16% year over year. Mobility gross bookings of $17 billion grew 25% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $16 billion were up 12% from last year. 2Q Adjusted EBITDA of $916 million, up $552 million year over year, significantly beat Street estimates of $845 million and the company generated $1.1 billion of free cash flow. Management guided to continuing growth in 3Q Gross Bookings (17%-20% growth) and Adjusted EBITDA (of $975-1,025 million).
UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. 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 130 million users (by comparison, Amazon Prime has 200 million members) and penetrate new markets of on-demand services, such as package and grocery delivery, travel, and worker staffing for shift work. Given its $4.3 billion of unrestricted cash and $4.4 billion of investments, the company’s enterprise value of $95 billion equates to just over 20x next year’s estimated free cash flow.”
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 180
P/E Ratio: 63.08
Headquartered in Santa Clara, California, Nvidia Corporation is an American multinational technology company incorporated in Delaware. Widely recognized for its expertise in integrated circuit development, Nvidia’s proficiency spans across a diverse range of devices, from electronic game consoles to personal computers (PCs).
On November 21, NVIDIA Corporation unveiled its financial results for the third quarter, which concluded on October 29, 2023. The company reported a revenue of $18.12 billion, marking a substantial increase of 206% compared to the same period last year and a notable 34% rise from the previous quarter. In terms of GAAP earnings per diluted share, the quarter recorded $3.71, reflecting a more than 12-fold increase from a year ago and a 50% uptick from the previous quarter. Non-GAAP earnings per diluted share were $4.02, indicating an almost 6-fold rise from a year ago and a 49% increase from the previous quarter.
Insider Monkey’s analysis of hedge fund portfolios for Q3 2023 revealed that 180 hedge funds had a stake in NVIDIA Corporation. Citadel Investment Group emerged as its largest stakeholder, holding approximately 21.85 million shares valued at about $9.5 billion in NVIDIA Corporation.
Baron Opportunity Fund made the following comment about NVIDIA Corporation in its Q3 2023 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading semiconductor company that sells chips and software for accelerated computing and gaming. Shares have nearly tripled year-to-date, as the company continues reporting unprecedented growth because of the acceleration in demand for its data center chips. After reporting revenue of $7 billion in the first quarter and providing guidance of $11 billion for the second quarter, NVIDIA reported second quarter revenue of $13.5 billion and guided for another step up in the third quarter to $16 billion, with its CFO declaring “[d]emand for our Data Center platform for AI is tremendous and broad-based across industries and customers.” We are at the tipping point of a new era of computing with NVIDIA at its epicenter. This is how CEO and founder Jensen Huang put it (during the company’s August 23 earnings call):
“[T]he easiest way to think about the demand is the world is transitioning from general purpose computing to accelerated computing…[W]hat you’re seeing companies do now is recognizing this…tipping point…recognizing the beginning of this transition, and diverting their capital investment to accelerated computing and generative AI…This isn’t a singular application that is driving the demand, but this is a new computing platform…a new computing transitioning that’s happening…A new computing era has begun. The simultaneously going through two platform transitions, accelerated computing and generative AI.””
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This article is originally published at Insider Monkey.
