In this article, we will take a look at the 12 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.
5. DraftKings Inc. (NASDAQ:DKNG)
YTD Performance Through November 13: +207.55%
DraftKings Inc. (NASDAQ:DKNG) shares jumped earlier this month on the back of a strong Q3 earnings report and an upbeat guidance. DraftKings Inc. (NASDAQ:DKNG)’s EPS in the September quarter came in at -$0.61, beating estimates by $0.09. Revenue in the quarter increased by about 57.4% year over year.
Baron Discovery Fund made the following comment about DraftKings Inc. (NASDAQ:DKNG) in its Q1 2023 investor letter:
“We re-initiated a position in former Fund holding DraftKings Inc. (NASDAQ:DKNG), a leading online sportsbook, digital casino, and daily fantasy sports operator. DraftKings’ mobile applications offer consumers the ability to wager on a wide variety of sporting events and play hundreds of real-money casino games. The company has spent the past three years building a proprietary technology stack that improves the customer experience and delivers best-in-class breadth of bet types (such as parlays, same-game parlays, and player props). State-level online sports betting (OSB) and iCasino legalization, along with a multi-year consumer adoption timeline in active states, has supported a 90% revenue growth rate for DraftKings since 2020. The opportunity for OSB legalization remains significant, with under 50% of the U.S. population currently having legal mobile sports betting. We expect 65% to 80% of the population will eventually have access to OSB. ICasino is currently legal in just seven states representing roughly 13% of the population. ICasino product adoption in legalized states has been robust, with the average user spending twice as much as a sports bettor. While the pace of legalization for iCasino has been slower, we believe additional states will pass regulation in the coming years.
As U.S. states began to legalize sports betting, the DraftKings management team moved quickly to build widespread brand awareness. DraftKings is the #2 operator in both OSB and iCasino by a wide margin, and has demonstrated improving market share trends across almost all states. When a new state legalizes sports betting, DraftKings has a first mover advantage as many of its customers are converted from the DraftKings daily fantasy sports offering. The quality of their sportsbook product along with increasingly targeted promotional spending results in strong customer retention and high lifetime values. In states where iCasino is legal, DraftKings can cross-sell OSB customers. DraftKings’ scale and product advantages are creating a flywheel that will enable the company to continue to out-invest the competition in acquisition marketing, retention, and research and development. The high barriers to entry are resulting in a consolidated industry that will eventually lead to a highly profitable business. This is evidenced by older-vintage state contribution margins that are already approaching 40%. Longer term, we believe DraftKings can generate EBITDA margins between 20% and 30% with strong free-cash-flow conversion.”
4. NVIDIA Corporation (NASDAQ:NVDA)
YTD Performance Through November 13: +230.74%
Thanks to the AI-led rally, NVIDIA Corporation (NASDAQ:NVDA) is one of the best-performing stocks of 2023 as it enjoys a near dominance in the AI chips industry for now. NVIDIA Corporation (NASDAQ:NVDA) has gained about 230% in the year through November 13.
Recently, analysts at Barclays said they see more AI-related upside in NVIDIA Corporation (NASDAQ:NVDA) shares. As of the end of the second quarter of 2023, 175 hedge funds had stakes in NVIDIA Corporation (NASDAQ:NVDA). The biggest stakeholder of NVIDIA Corporation (NASDAQ:NVDA) was Rajiv Jain’s GQG Partners which owns a stake worth about $6 billion in the company.
Here is what Baron Global Advantage Fund has to say about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2023 investor letter:
“At the portfolio level, the positive fundamental trends we noticed in the second quarter continued into the third quarter as well – many of our companies are reporting stability or slight improvement in business trends. Weighted average 2023 revenue growth expectations for the portfolio were up 3.8% during the third quarter or up 0.8% if we exclude NVIDIA. We wrote at length about NVIDIA earlier this year, but it is worth mentioning that the company has continued to exceed its own projections and the Street’s most optimistic expectations. After raising its revenue and EPS guidance for 2023 by 40% and 69%, respectively, following its last quarter, NVIDIA increased it further by 26% and 35%, respectively, after reporting the most recent one. Consensus expectations now call for revenues to grow 94% this year, while earnings per share are expected to increase by 192%. You may have seen these kinds of growth rates before, but we doubt you saw them from a company generating $50 billion in revenues. The skeptics who continue to question and doubt the accelerating demand for Generative artificial intelligence forgot to tell NVIDIA about it. But we digress…back to the portfolio…profit expectations have risen even faster than revenues and were up 11% during the third quarter (or up 7.8% ex-NVIDIA) with margin expectations up 149bps (107bps ex-NVIDIA). So, broadly speaking, our companies are seeing improvement in overall business trends, which flow through to their bottom lines, driving higher margins. We are also starting to see the benefits of leaner cost structures and more disciplined capital allocation compared to two or three years ago when capital was both cheaper and more readily available.”
3. Augmedix, Inc. (NASDAQ:AUGX)
YTD Performance Through November 13: +240.38%
Medical documentation solutions company Augmedix, Inc. (NASDAQ:AUGX) ranks 3rd in our list of the best-performing growth stocks in 2023. Augmedix, Inc. (NASDAQ:AUGX) has gained about 240% year to date through November 13.
In a latest earnings call, Augmedix, Inc. (NASDAQ:AUGX) talked in detail about how generative AI helps its business:
“Generative AI supports our Live, Notes and especially our Go products. During the quarter, we hosted our inaugural AI Advisory Council meeting. This group includes distinguished academics, governance experts and customers and is already providing invaluable insight and guidance as we advance the development and use of generative AI in Augmedix’ solutions. Our AI Council recognizes the unique and delicate balance Augmedix has forged between technology and human within our particular field. Generative AI, in its current state, does a good job of summarizing the transcript of the patient encounter. However, comprehensive and accurate medical documentation requires historical patient data, physician preferences, structured data sets and independently derived models that service guardrails to supplement it.
And for more complex encounters, it may be necessary to provide the higher leverage of service inherent in our Live and Notes offerings. We believe this portfolio of solutions, all of which utilize the best generative AI can offer will be a winning formula in the burgeoning medical documentation market. At the same time, regulatory requirements and our customers demand compliant with rigorous data security standards. Augmedix recently achieved certified status by the HITRUST Alliance for information security. HITRUST’s Champion programs safeguard sensitive information and managed information risk for global organizations across all industries and throughout the third-party supply chain. This prestigious certification validates Augmedix’ commitment to safeguard sensitive patient information data.”
Read the full earnings call transcript here.
As of the end of the second quarter of 2023, 8 hedge funds had stakes in Augmedix, Inc. (NASDAQ:AUGX), as per Insider Monkey’s database of 910 hedge funds.
2. Bit Digital, Inc. (NASDAQ:BTBT)
YTD Performance Through November 13: +248.33%
Bit Digital, Inc. (NASDAQ:BTBT) shares have gained about 240% since the start of the year, thanks to an overall optimism in the crypto industry. Earlier this month Bit Digital, Inc. (NASDAQ:BTBT) said it produced 111.6 bitcoins in October, a 14% decrease compared to the prior month.
1. Myomo, Inc. (NYSE:MYO)
YTD Performance Through November 13: +316.50%
Wearable medical robotics company Myomo, Inc. (NYSE:MYO) shares have shot up about 300% since the start of the year through November 13. Earlier this month Myomo, Inc. (NYSE:MYO) posted strong Q3 results.
GAAP EPS in the third quarter came in at -$0.06, beating estimates by $0.03. Revenue jumped about 28.5% year over year to $5.1 million, beating estimates by $0.95 million.
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Disclosure: None. 12 Best-Performing Growth Stocks in 2023 is originally published on Insider Monkey.
