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In this article, we discuss the 14 best growth stocks to buy according to hedge funds. If you want to read about some more growth stocks, go directly to 5 Best Growth Stocks to Buy According to Hedge Funds.
The Federal Reserve in the United States recently released a policy statement in which it hiked interest rates by 0.75 percentage points, raising them to their highest level since 2008. The move is part of a larger plan by the central bank to push up borrowing costs in a bid to cool the economy and bring down price inflation. The latest increases have brought the benchmark lending rate to 4%, further battering growth stocks at the market as investors flee from riskier bets towards safe havens in the value sector.
Some of the top growth stocks that have seen their share price decline as inflation heats up and rates rise include Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN). These stocks have declined by 39%, 34%, and 45% year-to-date respectively. However, the underlying fundamentals of the firms remain solid, creating attractive valuations in the growth domain that shrewd investors can take advantage of to reap the rewards as the market recovers from the present crisis.
Our Methodology
We scanned the database of 895 hedge funds maintained by Insider Monkey and picked the 14 most popular growth stocks among these elite funds.
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Best Growth Stocks to Buy According to Hedge Funds
14. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, computing and networking solutions. It is one of the best growth stocks to invest in. On October 18, Nvidia and Oracle, a multinational computer technology corporation, expanded their existing partnership to take artificial intelligence to another level. Oracle will add tens of thousands of GPUs including its A100 and upcoming H100 to its cloud capacity.
On October 18, Deutsche Bank analyst Ross Seymore maintained a Hold rating on NVIDIA Corporation (NASDAQ:NVDA) stock and lowered the price target to $140 from $165, noting that the company’s Q3 earnings yield more pervasive signs of weakness and downside risk to 2023 estimates.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in NVIDIA Corporation (NASDAQ:NVDA) with 17.7 million shares worth more than $2.7 billion.
Just like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA) is one of the best growth stocks to buy now according to hedge funds.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them was large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA Corporation (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…(read more)
13. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 87
Advanced Micro Devices, Inc. (NASDAQ: AMD) operates as a semiconductor company worldwide. On October 18, Deutsche Bank analyst Ross Seymore maintained a Hold rating on Advanced Micro Devices, Inc. (NASDAQ:AMD) stock and lowered the price target to $70 from $80, highlighting that fears of fundamental deterioration are leading to very bearish investor positioning into the Q3 results for semiconductors.
At the end of the second quarter of 2022, 87 hedge funds in the database of Insider Monkey held stakes worth $4.8 billion in Advanced Micro Devices, Inc. (NASDAQ: AMD), compared to 83 in the previous quarter worth $6.9 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Advanced Micro Devices, Inc. (NASDAQ: AMD) was one of them. Here is what the fund said:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global fabless semiconductor company focusing on high-performance computing technology, software, and products. AMD designs leading high-performance central and graphics processing units (known as CPUs and GPUs) and integrates them with hardware and software to build differentiated solutions for customers.
AMD has been gaining meaningful share in personal computing and server end markets over the past several years driven by the performance of its processors and technology and strong execution against its technology roadmap, and we believe share gains will continue over the coming years from a combination of AMD’s continued advancements and Intel’s stumbles in developing its leading-edge technology (…read more)
12. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 90
Palo Alto Networks, Inc. (NASDAQ:PANW) provides cybersecurity solutions worldwide. It is one of the top growth stocks to invest in. On October 20, Palo Alto Networks stated that it is in negotiations to acquire Cider Security, which develops AppSec operating systems. On October 12, the firm revealed the general availability of Cortex XSIAM, an automated security platform which is used to automate the Security Operations Platform.
On October 19, Baird analyst Shrenik Kothari assumed coverage of Palo Alto Networks, Inc. (NASDAQ:PANW) with an Outperform rating and $220 price target, noting that the reputational damage and business-disruption have upped the stakes and raised the priority profile for security.
At the end of the second quarter of 2022, 90 hedge funds in the database of Insider Monkey held stakes worth $3.7 billion in Palo Alto Networks, Inc. (NASDAQ:PANW), compared to 87 in the preceding quarter worth $3.9 billion.
11. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 92
Adobe Inc. (NASDAQ:ADBE) operates as a diversified software company worldwide. On October 18, Adobe announced that it had released a new set of software tools which are designed to make it easier to create three-dimensional digital objects for marketing campaigns for video games and metaverse. On October 20, Adobe said that the Lightroom software was now using artificial intelligence to make the process of editing photos faster and more efficient.
On October 19, RBC Capital analyst Matthew Swanson maintained an Outperform rating on Adobe Inc. (NASDAQ:ABDE) stock and lowered the price target to $395 from $425, noting that the initial look at FY23 guidance was in-line with new digital media revenue.
At the end of the second quarter of 2022, 92 hedge funds in the database of Insider Monkey held stakes worth $7.5 billion in Adobe Inc. (NASDAQ:ADBE), compared to 93 in the previous quarter worth $8.9 billion.
In its Q2 2022 investor letter, Aristotle Capital Management, LLC, an asset management firm, highlighted a few stocks and Adobe Inc. (NASDAQ:ADBE) was one of them. Here is what the fund said:
“We sold our position in Adobe Inc. (NASDAQ:ADBE) to reduce our weighting in the Information Technology sector. We continue to see risk in higher valuation technology names, such as Adobe, due to both slowing business trends and multiple compression. Adobe has exposure to both the SMB market segment as well as e-commerce, both areas which have shown pockets of weakness during the current earnings season.”
10. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 95
Netflix, Inc. (NASDAQ:NFLX) provides entertainment services. It offers TV series, documentaries, feature films, and mobile games across various genres and languages. It is one of the premier growth stocks to invest in. On October 19, Macquarie analyst Tim Nollen maintained a Neutral rating on Netflix, Inc. (NASDAQ:NFLX) stock and raised the price target to $285 from $230, highlighting that the company posted a good beat in Q3.
Among the hedge funds being tracked by Insider Monkey, Camas, Washington-based investment firm Fisher Asset Management is a leading shareholder in Netflix, Inc. (NASDAQ:NFLX) with 6.5 million shares worth more than $1.1 billion.
In its Q3 2022 investor letter, Ensemble Capital Management, an asset management firm, highlighted a few stocks and Netflix, Inc. (NASDAQ:NFLX) was one of them. Here is what the fund said:
“Netflix, Inc. (NASDAQ:NFLX) (+34.6%): After a punishing first half of the year when bearish investors came to believe that Netflix’s growth days were done for good, the company reported fewer subscriber losses than expected in the second quarter and guided for a return to at least modest subscriber growth in the third quarter. In addition, as more information about the company’s planned advertising-supported subscription tier has become available, investors began to express growing confidence in this tool to revitalize growth in 2023.”
9. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 97
PayPal Holdings, Inc. (NASDAQ:PYPL) operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. On October 20, PayPal Holdings revealed that it granted equity awards under its Inducement Incentive Plan to new employees who joined PayPal. On October 10, PayPal Holdings clarified that it will not fine customers for misinformation, noting that an earlier policy update where it said customers could have to pay $2,500 in damages was sent in error.
On October 12, Atlantic Equities analyst Kunaal Malde maintained an Overweight rating on PayPal Holdings, Inc. (NASDAQ:PYPL) stock and lowered the price target on PayPal to $110 from $120, noting that payments stocks are starting to discount due to modest economic downturn in 2023 forecasts.
Among the hedge funds being tracked by Insider Monkey, Camas, Washington-based investment firm Fisher Asset Management is a leading shareholder in PayPal Holdings, Inc. (NASDAQ:PYPL) with 17.3 million shares worth more than $1.2 billion.
In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“This quarter, we bought shares in PayPal (NASDAQ:PYPL), the payments platform. PayPal has been one of the more high-profile victims of the market’s brutal ruthlessness over the past few months, and the stock fell by over two-thirds between its peak in July to the beginning of March this year. As we progressed PayPal through the Mayar Checklist Process, we identified a business with a leadership position in a structurally growing market.
The company benefits from certain network effects and faces several competitive threats at the same time. As the business profited from the move to online retail during the pandemic, as well as from the stimulus cheques handed out in the US, the stock price soared to absurd levels. As so often happens, however, the market had overcorrected by February and this quarter was offering prospective shareholders prices that assumed essentially zero growth in the business. When life gives you irrational sellers, make lemonade!”
8. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 99
ServiceNow, Inc. (NYSE:NOW) provides enterprise cloud computing solutions that define, structure, consolidate, manage, and automate services for enterprises worldwide. It is one of the elite growth stocks to invest in. On October 6, ServiceNow revealed that it had won a blanket purchase agreement from the US Department of Health and Human Services. The agreement’s estimated value is $250 million for a five-year performance period through 2027. Under the agreement, ServiceNow will also partner up with Carahsoft to provide crucial functionality of HHS applications.
On October 19, Morgan Stanley analyst Keith Weiss maintained an Overweight rating on ServiceNow, Inc. (NYSE:NOW) stock and lowered the price target to $540 from $556, noting that software valuations are near trough levels due to macro and currency headwinds.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in ServiceNow, Inc. (NYSE:NOW) with 1.5 million shares worth more than $693.9 million.
In its Q2 2022 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and ServiceNow, Inc. (NYSE:NOW) was one of them. Here is what the fund said:
"ServiceNow, Inc. (NYSE:NOW) is an enterprise software company that helps its corporate customers integrate all of their various software products into a unified platform. Their products are a key element in driving the digital transformation nearly every large company is undergoing. At the recent JP Morgan investor day, CEO Jamie Dimon explained that while the company could reduce expenses if needed should the economy slow, their spending on digital transformation would continue as this spending was critical to the company managing costs and maximizing revenue over time. As an example of this type of spending, Dimon specifically pointed to ServiceNow, calling out that the company’s products now oversaw the single largest collection of JP Morgan data and highlighted that working with them had saved JP Morgan $50 million over the past few years. (click here to read more…)
7. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 106
Alibaba Group Holding Limited (NYSE:BABA) through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses. On October 21, GoTo, Indonesia's largest tech company, said it was in talks with Alibaba and SoftBank for a controlled sale of $1 billion of their stocks to avoid a potential stock crash. On October 20, Transfer Shipping, an affiliate of Alibaba, said it was planning to order five newbuilds 8,000 teu vessels for the AliExpress transpacific service.
On October 3, Barclays analyst Jiong Shao maintained an Overweight rating on Alibaba Group Holding Limited (NYSE:BABA) stock and lowered the price target to $135 from $161, noting that the company's shares are significantly cheaper than their intrinsic values due to recent Chinese yuan weakness for the target cut.
Among the hedge funds being tracked by Insider Monkey, Camas, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE:BABA) with 14.5 million shares worth more than $1.6 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE:BABA) was one of them. Here is what the fund said:
“Alibaba Group Holding Limited (NYSE:BABA) is the largest retailer and e-commerce company in China. Alibaba operates shopping platforms Taobao and Tmall and owns 33% of Ant Group, which operates Alipay, China’s largest third-party online payment provider. Shares of Alibaba rose during the quarter, driven by an increasing focus on improving capital allocation, an improving regulatory environment, and government stimulus targeting Chinese consumers. We retain the conviction that Alibaba will benefit from rapid growth in cloud services, logistics, and retail.”
6. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 116
Salesforce, Inc. (NYSE:CRM) provides customer relationship management technology that brings companies and customers together worldwide. It is one of the major growth stocks to invest in. On September 25, Salesforce India announced that it was adding 2,500 more employees to its workforce. The company will increase its number of employees to 10,000 in India by January 2023. On October 18, Salesforce said it is seeking to unify the automobile supply chain with its Automotive Cloud, which is built on Driver 360.
On October 20, Piper Sandler analyst Brent Bracelin maintained an Overweight rating on Salesforce, Inc. (NYSE:CRM) stock and lowered the price target to $175 from $200, noting that software valuations might be nearing a bottom but fundamentals were not changing.
At the end of the second quarter of 2022, 116 hedge funds in the database of Insider Monkey held stakes worth $7.9 billion in Salesforce, Inc. (NYSE:CRM), compared to 114 in the preceding quarter worth $9.9 billion.
In addition to Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), Salesforce, Inc. (NYSE:CRM) is one of the best growth stocks to buy now according to hedge funds.
In its Q3 2022 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Salesforce, Inc. (NYSE:CRM) was one of them. Here is what the fund said:
“Salesforce, Inc. (NYSE:CRM) has become a dominant global player in sales, customer service, commerce and marketing software over the past 20 years. The company earns 80% gross margins and grows 20% organically. Plus, virtually all of its revenue is recurring. We see Salesforce as a great business that we’ve admired from afar for a long time. More recently, the organization has made some changes at the top that prompted us to take a closer look at the stock. New CEO Bret Taylor and CFO Amy Weaver are bringing a culture of financial discipline. We believe this renewed focus on profitability and capital return, combined with Salesforce’s strong underlying business characteristics, will yield strong results. The current valuation of 3.9x next year’s revenues represents a significant discount compared to publicly traded peers and recent private market values in the software space that have similar growth profiles. We view this discount as an opportunity to invest in a great business at a good value.”
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Disclosure. None. 14 Best Growth Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.
