We recently published an article titled Billionaire Steve Cohen’s 10 Mid-Cap Stock Picks with Huge Upside Potential. In this article, we are going to take a look at where DraftKings Inc. (NASDAQ:DKNG) stands against Steve Cohen’s other mid-cap stock picks with huge upside potential.
Steven Cohen has established himself as a leading figure in the hedge fund industry. His career began with the founding of S.A.C. Capital Advisors in 1992. In 2014, he transitioned his investments to Point72 Asset Management, where he serves as Chairman and CEO. Point72 leverages Cohen’s expertise in active trading while integrating cutting-edge advancements in technology, data analytics, and artificial intelligence, positioning itself at the forefront of modern finance. The firm employs a discretionary investment approach across multiple strategies, including long/short equities, global macroeconomic investing, systematic trading, and venture capital & growth equity. As of January 1, 2025, Point72 manages approximately $36.9 billion in assets and has a workforce of 2,800 employees worldwide. The firm has a good performance history, with the fund’s top 50 stocks boasting a three-year annualized return of 14.47%.
The U.S. economy plays a pivotal role in shaping the stock market and hedge fund performance, with macroeconomic trends influencing investor sentiment, capital flows, and risk management strategies. The current economic uncertainty facing the US economy continues to worry investors. Last week, according to the National Bureau of Economic Research, the US economy’s GDP for the first quarter of 2025 contracted by 0.3%, a sharp contrast to the previous quarter’s 2.4% growth. While a recession is officially confirmed only after consecutive quarters of negative GDP growth, many market analysts caution that the economy is on the brink of one.
Economic data released over the past few days provided some clarity to investors. Investor sentiment was boosted by Friday’s employment data, which showed the U.S. unemployment rate holding steady at 4.2%, suggesting that the labour market remains resilient despite growing macroeconomic headwinds. This week, the Federal Open Market Committee voted unanimously to maintain the Fed rate between 4.25% to 4.5%. Federal Reserve Chair Jerome Powell reassured investors that the central bank is prepared to wait for greater clarity before adjusting interest rates, citing persistent uncertainty stemming from President Trump’s escalating tariff agenda.
Given the heightened volatility, investors focus on a balanced portfolio to mitigate risks. In the long run, hedge funds thrive on inefficiencies, volatility, and sector rotations, adjusting their portfolios to exploit divergences between economic fundamentals and market behaviour. As the U.S. economy evolves, hedge funds continuously recalibrate their strategies to align with changing market conditions and investor expectations. This strategy is applied by Point72 Asset Management through its discretionary investment approach to give higher returns to its shareholders.
One approach to achieving a balanced portfolio is through mid-cap stocks, which offer a compelling blend of growth potential and relative stability. Unlike large corporations, mid-cap companies are often more agile in adapting to shifting economic conditions, enabling them to foster innovation and expansion at a faster pace. Mid-Cap stocks are past the uncertainty associated with early-stage start-ups, thus offering ample room for growth and higher returns compared to large-cap companies, which tend to have slower growth trajectories. Mid-cap companies also have the potential to evolve into large-cap firms over time, allowing investors to benefit from significant capital appreciation. According to S&P Global, the mid-cap S&P index has consistently outperformed the large-cap broader index since 1994, delivering an annualized return of 12% compared to the latter’s 11%.
Our Methodology:
For this article, we examined Point 72’s Q4 2024 13F filings to identify billionaire Steve Cohen’s 10 Mid-Cap stock picks with huge upside potential. Our focus was on stock with a market cap ranging between $10 billion and up to $40 billion. We then picked stocks that had the best upside potential, based on analyst rankings.
At Insider Monkey, we are obsessed with 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).
A woman at a betting table paying out customers who won their sports bets.
DraftKings Inc. (NASDAQ:DKNG)
Upside Potential: 57.84%
Market Cap: $17.12 billion
DraftKings Inc. (NASDAQ:DKNG) operates as a global digital sports entertainment and gaming company. DKNG provides online sports betting, along with iGaming, or online casino products, and also engages in the design and development of sports betting and casino gaming software.
In its earnings report for the final quarter of 2024, DraftKings Inc. (NASDAQ:DKNG) announced revenue of $1.39 billion. This amount, while marking a 13.5% year-on-year (YoY) increase, fell short of analysts’ forecasts by $1.31 million.
Despite this, there were significant positives. DraftKings Inc. (NASDAQ:DKNG)’s client base grew by an impressive 42.25% YoY, driven by a substantial spike in customer acquisition on Super Bowl Sunday. On this day, DKNG’s app became the #1 most downloaded app, highlighting its popularity during the biggest betting event of the year. Reflecting this optimism, 63% of Wall Street analysts recommend a “Strong Buy” for the company’s stock, projecting an upside of 57.84%. Point72 Asset Management owned more than 5.3 million shares in DKNG, representing 0.43% of the fund’s portfolio. It is currently valued at $199.4 million. The fund increased its position in the company by 80% during the quarter.
Overall DKNG ranks 1st on our list of Steve Cohen’s mid-cap stocks with huge upside potential. While we acknowledge the potential of DKNG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than DKNG but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.