In this article, we will discuss the Stocks on The Rise: 8 Best Stocks to Invest in Now.
The market experts believe that Q3 2024 saw stocks experience increased volatility, witnessing rapid declines and then rebounding. As per the US Bank, a significant Q3 2024 trend is the rotation away from the tech sectors. All the investors continue to ask the same question: Will the rally in mega-cap stocks continue? JP Morgan believes that their outperformance has been noteworthy for quite some time. The investment firm stated that, from a research perspective, the valuations of the biggest stocks appear historically expensive, not just in the US but throughout the developed markets. Therefore, the investment firm’s expected return signals now favour the smaller market cap cohorts.
That being said, fundamentals for mega-cap stocks remain outstanding. Such giants have much higher profitability, lower debt, and improved earnings momentum. The bank believes that for investors who are worried about a slowdown, pivoting to mid/small caps remains difficult. On the other hand, investors seeing AI enthusiasm entering the speculative phase will find it easier to liquidate the winners. Therefore, the firm believes that the case for building mid/small cap exposure remains reasonable but not compelling.
Goldman Sachs increased its year-end target for the S&P 500 and expects more gains for the benchmark in 2025. These gains stem from the stocks, which continue to increase on the back of strong economic growth, lower Federal Reserve interest rates, and expansion of corporate earnings. The US stocks are expected to be aided by numerous tailwinds in the final months of the year, after the Fed’s pivot to rate cuts and the new fiscal stimulus from China. Both these measures improved the risk sentiments. Market experts believe that stocks should see support from the Q3 earnings season and expansion of corporate profits in the final 3 months as the economy continues to surpass expectations.
LSEG data demonstrates that collective S&P 500 earnings for Q3 2024 should grow 5% as compared to the previous year to ~$5.11 billion. This reflects a decline from the earlier projections of a $5.19 billion tally. Nonetheless, it still indicates strong momentum for this year and next, with Q4 profits anticipated to increase by ~12.5%.
Recently, Goldman trimmed its 2024 earnings growth forecast to 8.2% from 8.4%. However, the investment firm expects that earnings momentum will continue to build in the next year. The firm increased its profit growth projection by 5 percentage points to 11%. This upward revision to its 2025 EPS estimate revolves around increased margin expansion. The firm added that the broader macroeconomic backdrop is conducive to slight margin expansion.
Moreover, the firm increased its year-end S&P 500 target to 6,000 points, exhibiting a rise from the prior forecast of 5,600. The investment firm expects a P/E multiple of ~22x for the S&P 500, which remains in line with the company’s macro model of fair value. This will largely remain unchanged over the upcoming 3 months. For 2025, the bank expects the S&P 500 to increase by another ~300 points, to reach the year-end target of 6,300.
Market strategists believe that the momentum in the broader equities is likely to be aided by a blowout September 2024 jobs report, the start of the US Fed’s rate-cutting cycle, and China’s economic stimulus.
With this in mind, let us quickly look at the Stocks on the Rise: 8 Best Stocks to Invest in Now.
A close-up of a laptop monitor with stock market prices scrolling up and down.
Our methodology
To make a list of 8 Best Stocks to Invest in Now, we used stock screeners to find quality stocks that have gained at least 30% on a YTD basis, as of October 7. We also made sure that these stocks were popular among elite hedge funds. The stocks have been arranged in ascending order of their hedge fund sentiment, as of Q2 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Stocks On the Rise: 8 Best Stocks to Invest in Now
8) Caterpillar Inc. (NYSE:CAT)
% Gain on a YTD Basis: ~36%
Number of Hedge Fund Holders: 49
Caterpillar Inc. (NYSE:CAT) is engaged in designing, manufacturing, and marketing construction, mining, and forestry machinery.
Caterpillar Inc. (NYSE:CAT)’s growth story stems from the extensive breadth of products and intangible assets. The company’s commitment to shareholder returns is aided by a significant $20 billion share repurchase authorization. The power generation industry, mainly for data centers, should maintain a healthy demand for reciprocating engines and solar turbines. Moreover, Caterpillar Inc. (NYSE:CAT) expects growth in high-speed marine and rail services.
Caterpillar Inc. (NYSE:CAT) sold solar gas turbines for a data center in Ireland, which hints at strong demand for power generation. The company’s investments in new technologies and services are focused on supporting customers in achieving climate goals, which might place the company favorably as industries have been prioritizing sustainability.
Caterpillar Inc. (NYSE:CAT)’s strategic initiatives and healthy cash flow management continue to exhibit resilience. CFRA, a financial research firm, believes that the demand for capital equipment, like construction machinery, is expected to increase because of the expectations of rate cuts. The research firm expects that such an easing of monetary policy will positively impact end-market spending.
Bank of America increased the price objective on the shares of Caterpillar Inc: (NYSE:CAT) from $376.00 to $434.00, giving a “Buy” rating on 30th September. Diamond Hill Capital, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“Other bottom Q2 contributors included Caterpillar Inc. (NYSE:CAT) and Home Depot. Shares of heavy construction machinery manufacturer Caterpillar fell as dealer inventories have declined and the market wrestles with concerns construction activity may be decelerating.”
7) Alibaba Group Holding Limited (NYSE:BABA)
% Gain on a YTD Basis: ~41%
Number of Hedge Fund Holders: 91
Alibaba Group Holding Limited (NYSE:BABA) recently announced the plans to implement a technology service fee to enhance financials. The company also expects its loss-making businesses to break even in just 1 -2 years. In the near term, its growth is expected to stem from the Al-related product revenues in Alibaba Cloud. Alibaba Group Holding Limited (NYSE:BABA) expects that its revenue from external customers in Alibaba Cloud should return to double-digit growth in H2. Moreover, the technology service fee is expected to positively impact financials over the upcoming few months.
Alibaba Cloud’s development of open-source large language models focuses on providing developers with more control. Alibaba Group Holding Limited (NYSE:BABA) continues to emphasize the strategic focus on efficiency and monetization in a bid to reduce losses and achieve profitability in loss-making businesses. It continues to address the decline in FCF because of higher Al infrastructure spending and expects normalization as and when business size stabilizes.
Alibaba Group Holding Limited (NYSE:BABA) is expected to achieve a strong return on Al CapEx investments because of healthy demand and backlog. Therefore, the company’s commitment to innovation, mainly in Al, and its strategic measures to help SMEs and enhance unit economics should act as principal tailwinds.
Macquarie raised shares of Alibaba Group Holding Limited (NYSE:BABA) from a “Neutral” rating to an “Outperform” rating, setting a price target of $145.00.
O’keefe Stevens Advisory, an investment advisory firm, released its second-quarter 2024 investor letter. Here is what the fund said:
“We initiated two new positions during the quarter: Alibaba Group Holding Limited (NYSE:BABA) and Perrigo (PRGO). Both have seen their stocks decline over 70%+ from their all-time highs.
Alibaba is the largest e-commerce player in China, with 40% gross merchandise volume (GMV) market share through its Taobao and T-mall businesses. While the cloud computing business is relatively small, its 37% market share in China positions it well to capitalize on the increasing demand for AI-related products. In the most recent quarter, AI-related cloud revenue recorded triple-digit growth y/y, with the expectation that total cloud revenue will accelerate to double-digit growth in 2H 2025.
It’s rare to find a dominant market share business with significant tailwinds trading for ~10x adj. EPS. After accounting for their ~$60B net cash balance sheet, the stock is trading at 6-7x, which, we believe, is far too cheap. We understand this business would not trade at this price if it were a U.S. business. However, the valuation gap at a high single-digit P/E is pricing in a combination of the following risks – 1. China invading Taiwan. 2. Cash can never leave mainland China (disproven). 3. Increasing competition from Pinduoduo and Shien resulting in market share loss 4. China’s geopolitical tensions worsen. 5. Economic slowdown stemming from the recent housing market downturn. 6. VIE structure creates doubt over the actual ownership of the business. All risks have merit, with cash distribution restrictions at the lower end due to the recently announced dividend and special dividend. Cash returned to shareholders totaled $16.5B in FY24, up from $13.4B in FY23…” (Click here to read the full text)
6) Oracle Corporation (NYSE:ORCL)
% Gain on a YTD Basis: ~63%
Number of Hedge Fund Holders: 93
Oracle Corporation (NYSE:ORCL) provides products and services that address enterprise information technology environments worldwide.
Wall Street analysts expect Oracle Corporation (NYSE:ORCL) to be well-placed to achieve strong growth off the back of its cloud business, mainly in training large language models. Moreover, its fundamentals are supported by the switching costs associated with its business. Oracle Corporation (NYSE:ORCL) operates 85 cloud regions and it expects to expand further, with a target of more than 1,000 data centers. Experts are optimistic about the partnerships with AWS, Azure, and Google Cloud. These alliances should enhance Oracle Database’s growth.
Its multi-cloud strategy, which includes major partnerships, is anticipated to drive further growth in the database business. According to Wall Street, Al and healthcare innovations should play a critical role in Oracle Corporation (NYSE:ORCL)’s future growth. As of now, robust demand for cloud solutions, mainly in laaS, has been fueling revenue growth. Also, automation and efficiency improvements in database services continue to improve its gross margins.
Therefore, with significant investments in infrastructure and a strong emphasis on innovation and security, Oracle Corporation (NYSE:ORCL) has been positioning itself to address the increasing global demand for cloud and Al solutions. For Q2 2025, the company expects EPS to be between $1.42 and $1.46 in constant currency.
Melius raised Oracle Corporation (NYSE:ORCL) from a “Hold” rating to a “Buy” rating, setting a $210.00 price objective on 16th September.
Parnassus Investments, an investment management company, released the “Parnassus Value Equity Fund” second quarter 2024 investor letter. Here is what the fund said:
Oracle Corporation (NYSE:ORCL) stock surged in June after management forecasted double-digit revenue growth for fiscal year 2025, powered in part by growth in its cloud infrastructure business. Investor sentiment was further bolstered by the company’s announcement of a new partnership with ChatGPT-maker OpenAI and Microsoft and another with Google Cloud.
5) ServiceNow, Inc. (NYSE:NOW)
% Gain on a YTD Basis: ~31%
Number of Hedge Fund Holders: 97
Service Now, Inc. (NYSE:NOW) offers end-to-end intelligent workflow automation platform solutions for digital businesses.
Wall Street expects that ServiceNow, Inc. (NYSE:NOW)’s growth prospects are strongly backed by increased switching costs and integration depth. Moreover, its focus on enhancing productivity with the help of Al should further strengthen its prospects. In the recent earnings call, ServiceNow, Inc. (NYSE:NOW) highlighted that Al should have an $11 trillion impact on the economy, and market experts believe that the company remains at the forefront of this transformation. The company’s growth is expected to stem from increased enterprise investment in Al.
ServiceNow, Inc. (NYSE:NOW) continues to focus on developing domain-specific large language models in collaboration with NVIDIA and Hugging Face. Wall Street believes that the company is focused on dominating the enterprise software space by the end of the next decade. The recent innovations and strategic partnerships continue to position it for significant growth and transformation. ServiceNow and Microsoft announced a Now Assist and Copilot integration, focused on seamless enterprise experience.
On a GAAP basis, ServiceNow, Inc. (NYSE:NOW) expects subscription revenues in the range of $2,660 million – $2,665 million in Q3 2024, reflecting a YoY growth of 20% – 20.5%. Wells Fargo & Company upped its price target on the share of the company from $935.00 to $1,025.00, giving an “Overweight” rating on 7th October.
Lakehouse Capital, a Sydney-based investment manager, released its April 2024 investor letter. Here is what the fund said:
“US-based software company,ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
4) Eli Lilly and Company (NYSE:LLY)
% Gain on a YTD. Basis: ~51%
Number of Hedge Fund Holders: 100
El Lilly and Company (NYSE:LLY) discovers, develops, and markets human pharmaceuticals worldwide.
Market experts opine that the company’s long-term growth trajectory is expected to be aided by its patents, economies of scale, and a powerful distribution network. In Q2 2024, Eli Lilly and Company (NYSE:LLY) was able to achieve key pipeline milestones, including the approval of Kisunla for Alzheimer’s disease and the submission of tirzepatide for obstructive sleep apnea. The company has raised its full-year revenue outlook to between $45.4 billion – $46.6 billion. It continues to invest significantly in expanding manufacturing capabilities, with more than $18 billion committed to facilities.
Eli Lilly and Company (NYSE:LLY) remains confident in its supply outlook and the ability to meet increased demand. In H2 2024, the company plans to increase promotional channels and scale R&D. Wall Street analysts expect that its strategic investments in research and development, together with manufacturing capabilities, place it well for continued progress and market leadership.
Recently, Eli Lilly and Company (NYSE:LLY) announced a $4.5 billion investment to create the Lilly Medicine Foundry. This is a new center for advanced manufacturing and drug development. This will enable the company to develop innovative solutions to optimize manufacturing processes and improve capacity for clinical trial medicines, while, at the same time, reducing costs.
Truist Financial restated a “Buy” rating on the shares of Eli Lilly and Company (NYSE:LLY), issuing a $1,000.00 price objective on 25th June. PGIM Jennison Health Sciences Fund released its second quarter 2024 investor letter. Here is what the fund said:
“Eli Lilly and Company (NYSE:LLY) is a diversified biopharmaceutical company with core franchises in Diabetes, Obesity, Immunology, Neurodegeneration, and Oncology. The company is one of the two global leaders in diabetes with blockbuster products in Trulicity and recently launched Mounjaro (tirzepatide) to serve this large underserved market. To date, the Mounjaro launch is the strongest for any diabetes drug ever launched, which we attribute to off label usage in the obesity indication as well as on label use in diabetes. We believe the tirzepatide (the generic name for Mounjaro) franchise is also uniquely positioned to grow substantially from here thanks to its recent approval for obesity. To that note, in late 2023, Eli Lilly received approval for tirzepatide in obesity and is commercializing it for obesity under a new brand name, Zepbound. While still early in the launch, uptake has been extremely strong, exceeding that of both Wegovy and Mounjaro at the same timepoint in their launches. While Alzheimer’s Disease has been a tough market for drug developers, Eli Lilly has breakthrough designation from the food and drug administration (FDA) for donanemab and recently presented Phase III pivotal trial data that positions donanemab as the most efficacious drug in the class. In June, the FDA advisory committee voted unanimously in favor of donanemab as an effective treatment where the benefits outweigh the risks, praising the therapy as innovative. Donanemab was then approved under the brand name Kisunla in early July. Eli Lilly also has exciting franchises in dermatology, immunology, and oncology that are starting to add meaningfully to growth. With a proven history of strong commercial execution and one of the highest research and development (R&D) success rates in the industry, we see opportunity for continued success. With a lack of meaningful patent expirations for the rest of the decade. Eli Lilly is uniquely positioned amongst its larger-cap peers. Recent positive performance has been driven by the continued strong growth of Mounjaro and Zepbound, which led to a big guidance raise on the 1Q call, an unusual action for Eli Lilly this early in the year, which speaks to their confidence in the strong trends they are seeing.”
3) Netflix, Inc. (NASDAQ:NFLX)
% Gain on a YTD Basis: ~49%
Number of Hedge Fund Holders: 103
Netflix, Inc. (NASDAQ:NFLX) offers entertainment services. It provides TV series, documentaries, feature films, and games throughout various genres and languages.
Netflix, Inc. (NASDAQ: NFLX)’s growth trajectory is expected to seek support from its intangible assets and a network effect. Moreover, the company’s successful strategies in content development, market expansion, and product innovation should continue to fuel revenue growth in the near term. Netflix, Inc. (NASDAQ:NFLX) continues to focus on sustaining healthy revenue growth and margin expansion annually.
During the Q2 2024 earnings call, the company highlighted that live sports and events are valuable for member engagement, with exclusive events such as NFL games on Christmas Day. The company went on to say that generative Al is being integrated into the platform, with a focus on enhancing member experience and content discovery. Netflix, Inc. (NASDAQ:NFLX) has plans to spend $17 billion on content, targeting to thrill local and global audiences. It remains committed to improving its service in a bid to sustain revenue and profit growth.
Netflix, Inc. (NASDAQ:NFLX) has been prioritizing the achievement of critical-scale goals for the ads business by 2025. Therefore, its strategy and investments revolving around content, technology, and market expansion should continue to fuel growth. Market experts believe that, given its focus on scaling ads business, providing innovative experiences via Al, and targeting members through a diverse content slate, Netflix, Inc. (NASDAQ:NFLX) continues to position itself for long-term growth.
Analysts at KeyCorp increased the price objective on shares of Netflix, Inc. (NASDAQ:NFLX) from $735.00 to $760.00, giving an “Overweight” rating on 15 October. Polen Capital, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“Finally, we trimmed Netflix, Inc. (NASDAQ:NFLX) mostly due to valuation but also as a source of funds to add to the new position in Shopify. As a reminder, we added to our position in August 2022 amid broad concerns about the company’s ability to grow and monetize shared passwords. We expected Netflix to show progress in monetizing shared passwords, leading to robust free cash flow generation. This is now playing out and is appreciated by the market. Hence, given the balance of growth and valuation, we felt it was appropriate to reduce our exposure to a more normal weight.”
2) NVIDIA Corporation (NASDAQ:NVDA)
% Gain on a YTD Basis: ~165%
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) offers graphics and compute and networking solutions in the US, Taiwan, China, Hong Kong, and internationally.
NVIDIA Corporation (NASDAQ:NVDA) has been investing for over a decade in software in such a way that allows its hardware to outperform regular silicon. Such outperformance stems from software optimizations and acceleration libraries which are updated constantly. Moving forward, intangible assets associated with its graphics processing units, and switching costs involved around its proprietary software should continue to act as tailwinds.
Market experts opine that, just like iOS, which locks customers into the iPhone since developers are making applications for the iPhone, NVIDIA Corporation (NASDAQ:NVDA) is also working on the same thing. The AI engineers have been learning the CUDA platform to program GPUs. This should assist in locking the people. NVIDIA Corporation (NASDAQ:NVDA) expects further growth, anticipating Q3 2024 revenue to touch $32.5 billion. The company expects continued expansion in its Hopper architecture and Blackwell products.
The company anticipates to ship several billion dollars in revenue from its Blackwell platform in Q4 2024. Also, NVIDIA Corporation (NASDAQ:NVDA) expects robust growth in the data center business next year. The company sees a strong opportunity in sovereign AI, with countries planning their own generative AI systems. Its strategic focus on Gen AI and enterprise AI should help create additional revenue streams.
JPMorgan Chase & Co. increased its price target from $115.00 to $155.00, giving an “Overweight” rating on 29th August. Vltava Fund, an investment management company, recently released its third-quarter 2024 investor letter. Here is what the fund said:
“Over the summer, we devoted a lot of time to studying the AI-related investment wave. This spans a wide range of sectors and our view could be very briefly summarised as follows: The first-tier beneficiaries are primarily companies in the semiconductor sector, NVIDIA Corporation (NASDAQ:NVDA) perhaps the most. That company is benefiting from the huge increase in investment by large technology companies to build enormous data centres. We know who NVIDIA’s customers are. They are companies like Meta, Alphabet, Amazon, and Microsoft. They are investing hundreds of billions of dollars into their AI capabilities. What is not entirely clear, however, is who are and will be the customers of NVIDIA’s customers, and, more importantly, when, and if, they will be able to come up with such huge demand for AI services that the profits from AI will justify and pay for the enormous investments all these companies have been making. The further we move away from the starting point that NVIDIA represents in our more broadly-reaching estimates, the lessreliable those estimates are.So far, we know just one thing for sure, and that is that investments in AI capabilities are ongoing and they are huge. They are not only bringing large demand to chipmakers and the semiconductor sector but to some other sectors as well. Indeed, building AI clusters also requires the construction of new semiconductor factories, new energy sources, and all the associated infrastructure. The numbers under consideration are incredibly high. It is possible that over the next decade the construction of AI centres will necessitate a 20% increase in US energy consumption. The investment required will be measured not in the hundreds of billions of dollars, but in an order of magnitude higher. Maybe two orders of magnitude.”
1) Meta Platforms, Inc. (NASDAQ:META)
% Gain on a YTD Basis: ~70%
Number of Hedge Fund Holders: 219
Given Meta Platforms, Inc. (NASDAQ:META)’s network effects regarding the massive user base, and its intangible assets consisting of a collection of data users have shared on the company’s sites and apps, it is well-positioned to sustain its growth trajectory. The company’s capability to profitably monetize its network via advertising should help it generate excess returns on capital for the foreseeable future. Meta Platforms, Inc. (NASDAQ:META)’s AI-powered products, such as Ray-Ban Meta Glasses and Quest 3 headset, continue to see healthy demand, exceeding the anticipations. Wall Street believes that its partnership with EssilorLuxottica should drive future generations of AI glasses.
Meta Platforms, Inc. (NASDAQ:META) continues to focus on AI to enhance user experiences and drive engagement. Also, it has plans to develop a unified recommendation system and AI-generated creative for advertisers. It plans to scale Gen AI training capacity and build infrastructure for directing training capacity. Overall, investments in the metaverse, AI, and digital advertising should act as tailwinds.
Meta Platforms, Inc. (NASDAQ:META) focuses on improving the shopping experience on platforms and monetizing assets such as Marketplace. It has been building out capacity for AI training and is considering expected use cases for data centers. Given its solid financial foundation and a strong focus on innovation, the company is well-placed to remain at the forefront of the tech sector.
Cantor Fitzgerald reiterated an “Overweight” rating on the shares of Meta Platforms, Inc. (NASDAQ:META), setting a $660.00 target price on 7th October. Rowan Street Capital released its second-quarter 2024 investor letter. Here is what the fund said:
“We are pleased to report that Meta Platforms, Inc. (NASDAQ:META), our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return.
We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that’s simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There’s no escaping it; it’s the “price of admission” the market demands. If you take a look at the chart below, you’ll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop…” (Click here to read the full text)
While we acknowledge the potential of META as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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