In this article, we discuss the 5 cheap growth stocks to buy today. If you want to read our detailed analysis of these stocks, go directly to the 10 Cheap Growth Stocks to Buy Today.
5. UpHealth, Inc. (NYSE:UPH)
Number of Hedge Fund Holders: 12
Real-Time Share Price as of December 12: $2.45
UpHealth, Inc. (NYSE:UPH) is a digital healthcare provider. As a new variant of COVID-19 prompts further lockdowns, digital health firms are gaining traction once again. UpHealth is one of these companies and could benefit from the situation.
UpHealth, Inc. (NYSE:UPH) posted earnings for the third quarter on November 10, reporting earnings per share of $0.28 and a revenue of $49 million. Lake Street analyst Frank Takkinen has a Buy rating on the stock with a price target of $6.
At the end of the third quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth $4 million in UpHealth, Inc. (NYSE:UPH), the same as in the preceding quarter worth $10 million.
4. Pixelworks, Inc. (NASDAQ:PXLW)
Number of Hedge Fund Holders: 12
Real-Time Share Price as of December 12: $4.70
Pixelworks, Inc. (NASDAQ:PXLW) markets semiconductor and software solutions. The firm stands to benefit from increased government spending and new tax breaks as Washington seeks to decrease American reliance on Chinese chip makers in the coming months and years.
Needham analyst Rajvindra Gill recently initiated coverage of Pixelworks, Inc. (NASDAQ:PXLW) stock with a Buy rating and a price target of $7, underlining that the firm had room to grow over the next few months and could sign on tech giant Huawei as a customer.
At the end of the third quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth $27 million in Pixelworks, Inc. (NASDAQ:PXLW), up from 10 in the previous quarter worth $9 million.
3. United Microelectronics Corporation (NYSE:UMC)
Number of Hedge Fund Holders: 13
Real-Time Share Price as of December 12: $11.33
United Microelectronics Corporation (NYSE:UMC) owns and runs a semiconductor wafer foundry. Global semiconductor sales have been steadily climbing as the world becomes more reliant on electronics devices. United Microelectronics stands to benefit from this shift to digital.
On December 6, United Microelectronics Corporation (NYSE:UMC) announced sales numbers for the month of November, reporting that net sales over the period had reached NT$19.6 billion, up more than 33% year-on-year.
At the end of the third quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $151 million in United Microelectronics Corporation (NYSE:UMC), up from 10 in the preceding quarter worth $141 million.
2. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 37
Real-Time Share Price as of December 12: $17.68
StoneCo Ltd. (NASDAQ: STNE) provides financial technology solutions. With the rise of fintech and crypto, companies like StoneCo have become the fastest growth-drivers of the modern economy in the past few years and look set to continue this streak for a long time.
StoneCo Ltd. (NASDAQ: STNE) posted earnings for the third quarter in mid-November, reporting a revenue of R$1.4 billion, up more than 57% compared to the revenue over the same period last year.
At the end of the third quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in StoneCo Ltd. (NASDAQ:STNE), down from 44 the preceding quarter worth $2.7 billion.
In its Q2 2021 investor letter, JDP Capital Management, an asset management firm, highlighted a few stocks and StoneCo Ltd. (NASDAQ:STNE) was one of them. Here is what the fund said:
“StoneCo (NYSE: STNE) has been in our portfolio since early 2019 and has appreciated 225% since. In the first half of 2021 the stock was down nearly 20% and was a drag on the fund’s performance.
Stone is a leading fintec company in Brazil that provides back-office software, loans and other financial services to small and medium sized businesses (SMBs). We have discussed Stone in past letters and the company’s “ladder up” from a card processor to a supplier of enterprise software used to sell financial products on top of such as working capital loans.
The company generates a lot of cash that it reinvests to acquire or build new financial products for its customer base. Since we invested, the company has grown the number of SMB clients by 3x, revenue by 2.3x, and net income by 2.2×11.
The pandemic’s impact on SMBs in Brazil has been severe, especially for the many retailers who are only now adopting an e-commerce strategy. In the first half of 2021 Stone increased loss provisions on its lending product, and overall growth has slowed somewhat. The stock’s decline earlier this year was not surprising, but investors are now ignoring progress that has enhanced Stone’s position for coming out much stronger when the recovery begins.
StoneCo Q1 2021 Earnings Call: “Based on (i) our learnings with lockdowns last year, (ii) recent client transactional data and (iii) learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccination scale (which we think will happen in the second half of 2021), the economic recovery will be fast and – although delayed – Brazil is moving in the right direction. For these reasons, we have made an informed decision to be ready for recovery by investing in growth…”
“…In the first quarter, we decided to increase our salesforce headcount by 24%, marketing investments by 33%, customer service and logistics headcount by 32% and technology headcount by 20% in order to be the fastest player when our economy comes back to normal levels.”
“I want to start our presentation by highlighting that Brazil went through a second wave of COVID in the first quarter of ’21, which imposed commerce restrictions in several cities throughout the country. Those restrictions were felt by our clients with average TVP reaching a low in the end of March…
…But similar to the behavior we saw in the comeback from the first lockdown in 2020, we already observed significant and quick recovery with average TPV in May achieving levels above January 2021. As Thiago mentioned, we expect that once vaccinations are scaled, the economy recovery of the country will be fast.”
In terms of COVID recovery opportunities within our portfolio, Stone might be the most “coiled” because the impact on Brazilian small businesses has been so traumatic. In addition, Stone is part of a much larger and fast-moving transition happening in Brazil around the digitalization of financial services. The speed of this transition is unique to Brazil because the Central Bank is actively trying to reduce the country’s previous dependency on a small handful of large banks. Important progress in the first half of 2021 included closing on the long-awaited acquisition of Linx, a mature provider of enterprise software with a large footprint across Brazil. The acquisition will provide Stone meaningful cross-selling opportunities and a more diversified customer base.”
1. Zynga Inc. (NASDAQ:ZNGA)
Number of Hedge Fund Holders: 52
Real-Time Share Price as of December 12: $6.24
Zynga Inc. (NASDAQ:ZNGA) provides social gaming services. Mobile gaming and social services related to these games have exploded in popularity in the past few years. Zynga has been a beneficiary of this growth and is a market-leader in this regard.
JPMorgan analyst David Karnovsky has an Overweight rating on Zynga Inc. (NASDAQ:ZNGA) stock with a price target of $10. In a recent investor note, the analyst highlighted the pipeline potential and upcoming acquisitions of the firm as growth catalysts for the long-term.
At the end of the third quarter of 2021, 52 hedge funds in the database of Insider Monkey held stakes worth $603 million in Zynga Inc. (NASDAQ:ZNGA), up from 49 in the previous quarter worth $1 billion.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Zynga Inc. (NASDAQ:ZNGA) was one of them. Here is what the fund said:
“We also added to our position in Zynga. Our multiyear investment campaign in Zynga has been based on a new management team’s ability to drive steady growth in the company’s base portfolio of games, expand margins, reinvigorate the new game development pipeline and use its strong balance sheet to acquire complementary games and studios. Shares have been pressured in recent quarters, presumably because of investor concerns about the company’s moderating growth rate and Apple’s pending new privacy policy which will make it more difficult for Zynga to both efficiently acquire new players and sell advertising in its games. We believe the company has multiple growth levers it can pull in the periods ahead, including the rollout of new games, acquisitions, further penetration into international markets and entry into new gaming categories, to name a few. Furthermore, our research suggests the Apple privacy policy change is manageable for larger mobile game developers such as Zynga. Given our strong conviction in the profit cycle, we used recent weakness to add to our position.”
You can also take a peek at 10 Penny Stocks Redditors are Buying in August and 10 Best Nickel Stocks to Buy Now.
