We recently published a list of Billionaire David E. Shaw’s 10 Small-Cap Stock Picks with Huge Upside Potential. In this article, we are going to take a look at where Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) stands against other billionaire David E. Shaw’s small-cap stock picks with huge upside potential.
David E. Shaw is one billionaire investor whose record speaks for itself on Wall Street. Having founded D.E. Shaw & Co., L.P. in 1988 with $28 million in capital, the fund has grown to become one of the most successful and biggest, with a 13F portfolio worth $136.27 billion.
Amid the growth, Shaw’s hedge fund D E Shaw has also returned significant returns to shareholders. The fund’s flagship Composite fund has achieved an annualized net return of 12.7% since inception in 2001, as the Oculus Fund has averaged 13.7% annually since 2004 and has never had a negative year.
Shaw’s hedge fund was one of the earliest to leverage complex trading algorithms, followed by some form of human-run investing. Consequently, the multi-strategy fund remains the rage on Wall Street, given its solid returns over the years and the growing trend of returning gains to investors.
READ ALSO: Billionaire Paul Tudor Jones’ 10 Stocks Picks with Huge Upside Potential and Billionaire Quants’ Two Sigma’s 10 Stock Picks with Huge Upside Potential.
Composite hedge fund gained 18% in 2024, with Oculus outperforming the overall market, soaring 36% and recording its best gain since inception. The better-than-expected returns come on Shaw and the other fund managers deploying systematic and computer-driven trading strategies to identify stocks trading at discounted valuations before they explode. Following the impressive performance in 2024, reports emerged that the hedge fund was planning to return billions of dollars to external clients, as has been the trend.
Amid the impressive performance last year, D.E. Shaw & Co. finds itself at a crossroads as the overall stock market has turned bearish. Major US indices have pulled back by about 6% from record highs amid recession concerns and deteriorating macroeconomics attributed to the US trade war.
The US Federal Reserve holding interest rates unchanged, waiting to see the impact of President Donald Trump’s trade policy, continues to rattle sentiments in the equity market. The Federal Reserve held its benchmark rate unchanged at between 4.25% and 4.5%, much to the anguish of Trump. In its statement, the Fed noted the uncertainty around the economic outlook.
“Uncertainty about the economic outlook has increased further,” the statement said. “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have raised.”
Acknowledging that tariffs could worsen inflation and hinder economic expansion, the statement introduces the likelihood of a stagflation scenario, a phenomenon that has been largely missing from the US economy since the early 1980s. Decision-makers have mostly concurred that the central bank is currently well-placed, as the economy is performing reasonably well at this time, to exercise patience while fine-tuning monetary policy.
Amid the economic uncertainty, focus in the equity markets is slowly shifting towards small-cap stocks with significant upside potential. That’s partly because large-cap stocks are under pressure after skyrocketing to record highs, resulting in valuations above historical norms. Billionaire David E. Shaw’s portfolio boasts of solid small-cap stocks with tremendous upside potential.
Our Methodology
We combed D. E. Shaw’s SEC Q4 2024 13F filings to identify Billionaire David E. Shaw’s 10 Small-Cap Stock Picks with Huge Upside Potential. We then settled on stocks with less than $10 billion in market cap and analyzed why the stocks stand out, as solid investments well poised to generate significant long-term value. Finally, we ranked the stocks in ascending order based on the stocks upside potential.
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 luxurious cruise ship overlooking a stunning horizon, highlighting the variety of its itineraries.
Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH)
D. E. Shaw’s Equity Stake: $115.57 Million
Market Capitalization as of May 9: $7.82 Billion
Stock Upside Potential as of May 9: 40.17%
Number of Hedge Fund Holders: 58
Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) is a cruise company that operates the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands. Its brands provide accommodations, multiple dining venues, bars and lounges, a spa, a casino, retail shopping areas, and entertainment choices. While the stock is down by about 35% year to date due to weakening cruise demand, it is still one of billionaire David E. Shaw’s 10 small-cap stock picks with tremendous upside potential.
Despite the lower demand, Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) is not planning to offer discounts to attract more ticket sales for its cruises. Instead, it prioritizes strong pricing in anticipation of normalizing demand. Additionally, it is accelerating cost-saving initiatives to maintain profitability. It has already identified about $300 million in potential efficiencies.
The Miami-based operator delivered disappointing first-quarter 2025 results as revenues fell 3% year over year on softening demand to $2.13 billion compared to $2.15 billion a year ago. Adjusted earnings per share came in at $0.07, missing estimates of $0.09. Nevertheless, Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) maintained its outlook for 2025, anticipating adjusted EPS of $2.05, increasing about 13% year-over-year.
However, on May 1, BofA Securities cut Norwegian Cruise Line Holdings Ltd.’s (NYSE:NCLH) price target from $23.00 to $20.00, keeping a Neutral rating due to declining future bookings, economic uncertainty, and weaker travel demand.
Overall, NCLH ranks 6th on our list of billionaire David E. Shaw’s small-cap stock picks with huge upside potential. While we acknowledge the potential of NCLH 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 NCLH 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.
