In this article, we will look at the 15 most promising QQQ stocks according to hedge funds. If you want to explore similar stocks, you can also take a look at 5 Most Promising QQQ Stocks According to Hedge Funds.
The Invesco QQQ Trust (NASDAQ:QQQ) is an exchange-traded fund that tracks the performance of the Nasdaq-100 Index. The fund is designed to provide investors with exposure to the largest and most actively traded stocks on the NASDAQ. The Invesco QQQ Trust (NASDAQ:QQQ) is one of the most popular ETFs in the United States and has become a mainstay in many investors’ portfolios. This is due to the fund’s long track record of strong performance. Over the past decade, the Invesco QQQ Trust (NASDAQ:QQQ) has outperformed the S&P 500 nine out of ten times.
Overall, the Invesco QQQ Trust (NASDAQ:QQQ) is a great option for risk averse investors looking to gain exposure to the Nasdaq-100 Index. It is a low-cost, liquid, and diversified ETF that has consistently provided strong returns over time. However, for investors that have a higher risk tolerance, investing in individual QQQ stocks can lead to potentially higher returns.
Investing in stocks that make up the Invesco QQQ Trust (NASDAQ:QQQ) can provide investors with the opportunity to benefit from individual company performance without the risk of being exposed to the broader market. However, investors should be mindful of the risks associated with investing in individual stocks. As with any investment, investors should do their due diligence and consider factors such as a company’s financial performance, competitive landscape, business model, and management among many others.
With the ever-changing stock market, it can become overwhelming for individual investors to identify the best stocks to invest in. Thankfully, hedge funds have the expertise and resources to identify the most promising stocks. We have compiled a list of the most promising QQQ stocks that hedge funds are piling into.
Some of hedge funds’ most promising QQQ stock picks include Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT). Let’s now discuss these stocks, among others, in detail.
Our Methodology
We sifted through holdings of the Invesco QQQ Trust (NASDAQ:QQQ) and sourced the hedge fund sentiment for each stock from Insider Monkey’s database. As of the fourth quarter of 2022, Insider Monkey tracks roughly 940 elite money managers.
We narrowed down our selection to stocks that were the most widely held by hedge funds. Finally, we ranked our picks in ascending order of the number of hedge funds that have positions in them. Along with each stock, we have mentioned the hedge fund sentiment, analyst ratings, and top shareholders.
Most Promising QQQ Stocks According to Hedge Funds
15. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 85
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leading cybersecurity company that provides various information security services for enterprise, cloud, and government sectors. The company provides endpoint protection, cloud security, network security, and advanced threat prevention among others. As of February 21, Palo Alto Networks, Inc. (NASDAQ:PANW) has gained 20.54% year to date.
On February 21, Palo Alto Networks, Inc. (NASDAQ:PANW) reported earnings for the fiscal second quarter of 2023. The company reported an EPS of $1.05 and outperformed EPS estimates by $0.27. The company’s revenue for the quarter amounted to $1.66 billion, up 25.68% year over year and ahead of Wall Street consensus by $5.54 million.
This February, Goldman Sachs analyst Gabriela Borges started coverage of Palo Alto Networks, Inc. (NASDAQ:PANW) with a Buy rating and a $205 price target.
At the close of Q4 2022, 85 hedge funds were long Palo Alto Networks, Inc. (NASDAQ:PANW) and disclosed positions worth $3.27 billion in the company. Of those, Ken Griffin’s Citadel Investment Group was the largest investor and held a stake worth $363.7 million. Palo Alto Networks, Inc. (NASDAQ:PANW) is one of the most promising QQQ stocks to buy now according to hedge funds.
Here is what ClearBridge Investments had to say about Palo Alto Networks, Inc. (NASDAQ:PANW) in its fourth-quarter 2022 investor letter:
“Stock selection within the IT sector was the main detractor from relative performance during the period. In addition to rate hikes compressing the multiples of longerduration, high growth companies, recession concerns were also a headwind. IT companies which had proven resilient against customer budget reductions earlier in the year are starting to feel the impact of spending slowdowns as companies further scrutinize expenses in light of economic uncertainty. For example, Palo Alto Networks, Inc. (NASDAQ:PANW), which provides enterprise security solutions including next-generation firewalls and threat detection software, faced a challenging environment as customers delayed purchases and orders. However, we remain convinced of the company’s long-term growth prospects as an industry leader in a critical field and as digital attacks and ransomware continue to grow.”
14. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 91
Tesla, Inc. (NASDAQ:TSLA) is one of the most promising QQQ stocks to buy now according to hedge funds. At the end of the fourth quarter of 2022, Tesla, Inc. (NASDAQ:TSLA) was spotted on 91 investors’ portfolios that disclosed positions worth $5.93 billion in the company.
This February, Wells Fargo analyst Colin Langan reiterated his $150 price target and an Equal Weight rating on Tesla, Inc. (NASDAQ:TSLA). As of February 21, Tesla, Inc. (NASDAQ:TSLA) has gained 82.58% year to date.
As of December 31, Citadel Investment Group is the top investor in Tesla, Inc. (NASDAQ:TSLA) and has disclosed a position worth $926.2 million.
Here is what Worm Capital, LLC had to say about Tesla, Inc. (NASDAQ:TSLA) in its 2022 annual investor letter:
“Even as rates rose and the macro environment devolved, we believed Tesla, Inc. (NASDAQ:TSLA) was best positioned to grow and thrive, even through a period of extreme uncertainty. They are the market leader in rapidly growing end markets and have spent the past decade growing their competitive advantages and building out physical infrastructure with worldwide reach. While we believe we were right regarding the direction of fundamentals, this was overcome by a vast array of factors we didn’t anticipate that negatively impacted the price.
By and large, Tesla had amazing execution in 2022. They managed to achieve 40% YOY delivery growth. In addition, revenue growth should exceed 50% and profit growth should exceed 120% YOY once Q4 numbers are released. This was accomplished while navigating a myriad of difficulties including a prolonged shutdown at their most productive plant in Shanghai. They scaled two factories on different continents while maintaining industry-leading margins and continued to make advanced progress in transformational technologies that have fast future cash flow potential like AI, software, and manufacturing. Through all the noise a lot of remarkable progress was made…” (Click here to read the full text)
13. Intuit Inc. (NASDAQ:INTU)
Number of Hedge Fund Holders: 92
Intuit Inc. (NASDAQ:INTU) is an American software company specializing in business and financial management software. On January 4, KeyBanc analyst Josh Beck raised his price target on Intuit Inc. (NASDAQ:INTU) to $425 from $400 and maintained an Overweight rating on the shares.
Intuit Inc. (NASDAQ:INTU) was held by 92 hedge funds at the end of Q4 2022. These funds held collective positions worth $5.62 billion in the company, up from $5.11 billion in the preceding quarter with 86 positions. The hedge fund sentiment for the stock is positive and the stock is one of the most promising QQQ stocks according to hedge funds.
As of December 31, Durable Capital Partners is the most prominent shareholder in Intuit Inc. (NASDAQ:INTU) and has a position worth $681.6 million in the company.
Here is what Fundsmith had to say about Intuit Inc. (NASDAQ:INTU) in its 2022 yearly investor letter:
“Take the example of Microsoft and Intuit Inc. (NASDAQ:INTU). Microsoft shares are currently being valued at a P/E ratio of 25.0 times the consensus EPS estimate for the fiscal year ending June 2023. Meanwhile, Intuit is being valued at 28.4 times the non-GAAP consensus estimate for the fiscal year ending July 2023. Many investors and analysts may accept that Intuit is trading at a higher multiple given expectations of greater growth potential. However, Intuit removes share-based compensation from their non-GAAP EPS whereas Microsoft does not. Given that Intuit’s GAAP EPS guidance for the year ending 31st July 2023 is $6.92–$7.22, its non-GAAP guidance is $13.59–$13.89, and the consensus estimate for 2023 EPS is at $13.69, it seems clear that most sell-side analysts are accepting the company’s non-GAAP adjustments, which includes the removal of some $1.8bn of share-based compensation, in their estimates. If we include the impact of share-based compensation in Intuit’s 2023 EPS to make a more apples-to-apples comparison with Microsoft based upon GAAP EPS, Intuit’s 2023 EPS would be closer to $9, meaning that the shares would be trading at a multiple of about 43 times. I think investors and analysts may find a premium of 14% for Intuit over Microsoft (28.4 times versus 25.0 times) to be reasonable. I’m not so sure they are fully aware that Intuit shares are actually trading at a premium of 73% if share-based compensation is treated in the same manner between the two companies.
Many investors and analysts, including us, look to cash flow metrics more than accrual profits. Unfortunately, share-based compensation may cause distortions in cash flow metrics as well, even when they follow GAAP. Under GAAP, share-based compensation is added back in the cash flow from operating activities, which in turn is used in the computation of free cash flow. ..” (Click here to read the full text)
12. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 94
On February 1, T-Mobile US, Inc. (NASDAQ:TMUS) reported earnings for the fourth quarter of fiscal 2022. The company reported an EPS of $1.59 and outperformed EPS estimates by $0.53. The company’s revenue for the quarter amounted to $20.27 billion.
On February 3, Citi analyst Michael Rollins raised his price target on T-Mobile US, Inc. (NASDAQ:TMUS) to $176 from $174 and maintained a Buy rating on the shares.
At the end of Q4 2022, 94 hedge funds were eager on T-Mobile US, Inc. (NASDAQ:TMUS) and held collective stakes worth $3.71 billion in the company. Of those, Warren Buffet’s Berkshire Hathaway is the largest shareholder in the company and has disclosed a position worth $733.8 million.
11. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 97
Advanced Micro Devices, Inc. (NASDAQ:AMD) is ranked eleventh among the most promising QQQ stocks according to hedge funds. At the end of Q4 2022, 97 hedge funds held stakes in Advanced Micro Devices, Inc. (NASDAQ:AMD). The total value of these stakes amounted to $5.70 billion. This is compared to 89 positions in the preceding quarter with stakes worth $4.99 billion. The hedge fund sentiment for the stock is positive.
On February 14, Benchmark analyst Cody Acree raised his price target on Advanced Micro Devices, Inc. (NASDAQ:AMD) to $103 from $93 and reiterated a Buy rating on the shares.
As of December 31, Citadel Investment Group is the largest shareholder in Advanced Micro Devices, Inc. (NASDAQ:AMD) and has a position worth $424.7 million.
Here is what L1 Capital International had to say about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its third-quarter 2022 investor letter:
“The share price of Advanced Micro Devices, Inc. (NASDAQ:AMD) was weak during the quarter and weakened further in early October when the pre-announced revenue was significantly below prior guidance, reflecting an acute slowdown in the PC market. Data centre related revenue grew strongly, albeit below our expectations, while gaming and embedded revenue was in line with our base case.
Geopolitical risks have increased for the semiconductor sector, with the U.S. Government announcing restrictions on the sale of certain technologies to China. Despite near term headwinds, AMD is well positioned for the medium term, with a technology lead over Intel in servers for data centres and rapidly gaining share in the PC/notebook sectors. Its gaming and embedded applications continue to grow strongly. AMD is a very capital light business, with manufacturing outsourced. After expending nearly $5b on research and development, AMD generates around $5b of free cashflow. With a net cash balance sheet, we expect management will accelerate buyback activity at a share price well below fair value.
The share price of our more cyclical businesses, in particularly the building products companies which have exposure to the U.S. residential, repair and renovation and infrastructure sectors, were broadly flat for the quarter. Rapidly escalating mortgage rates and rapidly reducing affordability will have a pronounced negative effect on near term new residential construction activity. We believe these cyclical pressures are well understood and are more than reflected in current share prices. Overall, we strongly believe share prices are overly reflecting near-term challenges and our portfolio of companies are now meaningfully undervalued.”
10. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 99
Wall Street sees upside to Adobe Inc. (NASDAQ:ADBE). On February 15, UBS analyst Karl Keirstead raised his price target on Adobe Inc. (NASDAQ:ADBE) to $400 from $350 and maintained a Neutral rating on the shares.
Adobe Inc. (NASDAQ:ADBE) was held by 99 hedge funds at the end of Q4 2022. These funds disclosed collective positions worth $8.38 billion in the company. This is compared to 93 hedge funds in Q3 2022 with collective stakes worth $6.74 billion. The hedge fund sentiment for Adobe Inc. (NASDAQ:ADBE) is positive.
As of December 31, Fundsmith LLP is the largest shareholder in Adobe Inc. (NASDAQ:ADBE) and has a position worth $709.8 million in the company.
Here is what Andvari Associates had to say about Adobe Inc. (NASDAQ:ADBE) in its fourth-quarter 2022 investor letter:
“Adobe Inc. (NASDAQ:ADBE) is one of several software companies we own. Its suite of creative products (Photoshop, Illustrator, Acrobat, Lightroom, etc.) are the industry standard for creative professionals. Adobe also has a suite of customer experience products that help other businesses sell more easily to consumers. All of Adobe’s products have high switching costs and sold on a subscription basis.
Adobe’s business qualities enable extremely high margins and predictable, recurring revenues. The company had revenues of $17.6 billion in its last fiscal year with operating margins in the mid-30s. The company has also grown revenues at double-digit rates every year since 2015. Despite a good record of investing in its businesses, it still has an excess of cash on its balance sheet. As such, Adobe has returned cash to shareholders in the form of share buybacks. Since 2015 the company has returned a total of $24.5 billion.”
9. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 106
Hedge funds are piling into NVIDIA Corporation (NASDAQ:NVDA). At the close of Q4 2022, 106 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA) and held collective stakes worth $6.08 billion in the company. This is compared to 89 hedge funds in the previous quarter with stakes worth $4.29 billion. The hedge fund sentiment for the stock is positive.
This February, BMO Capital raised its price target on NVIDIA Corporation (NASDAQ:NVDA) to $240 from $210 and maintained an Outperform rating on the shares.
As of December 31, Matrix Capital Management is the leading investor in NVIDIA Corporation (NASDAQ:NVDA) and has a position worth $741.3 million in the company. NVIDIA Corporation (NASDAQ:NVDA) is placed ninth on our list of the most promising QQQ stocks according to hedge funds.
Here is what O’keefe Stevens Advisory had to say about NVIDIA Corporation (NASDAQ:NVDA) in its fourth-quarter 2022 investor letter:
“The market and our portfolios had a challenging year as interest rates rose, and deteriorating fundamentals cut our largest position, NVIDIA Corporation (NASDAQ:NVDA), in half. Since our initial purchase in 2013, NVDA has seen its stock decline 50% one other time, back in 2018. The best-performing businesses and stocks do not go up and to the right. Mr. Market gets moody, and even one of the highest quality companies in the world is not immune. Drawdowns of this magnitude are challenging to stomach, even though the stock is up 50x in less than ten years. While we consider ourselves old school value investors, we continue to hold this fantastic company even though, optically, it does not appear cheap. Our confidence in Jensen remains, and while gaming is no longer in hyper-growth mode, the Data Center segment continues to grow. AI, Automotive, and other small but rapidly growing industries are the next leg of the story. Chris Mayer discusses the position in greater detail with commentary from our CIO, Peter O’Keefe. Click here to read the article.”
8. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 115
On February 9, PayPal Holdings, Inc. (NASDAQ:PYPL) posted earnings for the fourth quarter of fiscal 2022. The company reported an EPS of $1.24 and beat EPS estimates by $0.04. The company’s revenue for the quarter amounted to $7.38 billion.
On February 10, JPMorgan analyst Tien-tsin Huang raised his price target on PayPal Holdings, Inc. (NASDAQ:PYPL) to $103 from $95 and maintained an Overweight rating on the shares.
At the end of Q4 2022, PayPal Holdings, Inc. (NASDAQ:PYPL) was a part of 115 investors’ portfolios. The total stakes of these hedge funds amounted to $5.10 billion. As of December 31, Citadel Investment Group is the most prominent shareholder in the company and has a position worth $481 million.
Here is what RGA Investment Advisors had to say about PayPal Holdings, Inc. (NASDAQ:PYPL) in its fourth-quarter 2022 investor letter:
“PayPal Holdings, Inc. (NASDAQ:PYPL) suffered with the slowdown in e-commerce, yet still will have outgrown e-commerce when we see final 2022 numbers. Much like Amazon, PayPal invested far too aggressively on the expectation of sustained elevated growth rates in e-commerce and unfortunately, unlike with Amazon, PayPal’s investment was on ancillary product excursions from which the company is already retrenching. The good news is that with this retrenchment, the company should once again return to its recipe of healthy top line growth and incremental margin leverage, but rather than grow back into their old margin structure they will have to cost-cut their way there.”
7. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 117
Netflix, Inc. (NASDAQ:NFLX) is ranked seventh among the most promising QQQ stocks according to hedge funds. The stock was held by 117 hedge funds at the end of Q4 2022. The total stakes of these hedge funds amounted to $8.14 billion, up from $6.66 billion in the previous quarter with 115 positions. The hedge fund sentiment for Netflix, Inc. (NASDAQ:NFLX) is positive.
On February 6, Jefferies analyst Andrew Uerkwitz raised his price target on Netflix, Inc. (NASDAQ:NFLX) to $425 from $400 and reiterated a Buy rating on the shares.
As of December 31, Eagle Capital Management is the top investor in Netflix, Inc. (NASDAQ:NFLX) and has a position worth $1.51 billion in the company.
Here is what Bireme Capital had to say about Netflix, Inc. (NASDAQ:NFLX) in its fourth-quarter 2022 investor letter:
“Netflix, Inc. (NASDAQ:NFLX) appreciated 25% in the quarter, well off its lows but still down more than 50% on the year. Q3 results saw a return to subscriber growth, with the firm adding 2.4m and finishing at an all time high 223m subscribers. Netflix also debuted its much-anticipated advertising tier in November, pricing it at a 30% discount in the US. While it is still very early days, we think by 2028 Netflix’s ad-supported tier will have tens of millions of subscribers and generate $10+ billion in revenue at high margins. We expect earnings to exceed $30 per share by then, roughly triple what the company earns today.”
6. Activision Blizzard, Inc. (NASDAQ:ATVI)
Number of Hedge Fund Holders: 129
On February 6, Activision Blizzard, Inc. (NASDAQ:ATVI) reported strong earnings for the fourth quarter of fiscal 2022. The company reported an EPS of $1.87 and outperformed EPS estimates by $0.36. The company’s revenue for the quarter amounted to $3.57 billion, up 43.49% year over year and ahead of Wall Street consensus by $384.51 million.
This February, Deutsche Bank analyst Benjamin Soff raised his price target on Activision Blizzard, Inc. (NASDAQ:ATVI) and upgraded the stock to Buy from Hold.
Activision Blizzard, Inc. (NASDAQ:ATVI) is one of the most promising QQQ stocks according to hedge funds. At the end of Q4 2022, Activision Blizzard, Inc. (NASDAQ:ATVI) was a part of 129 investors’ portfolios that held collective positions worth $9.52 billion in the company. This is compared to 96 hedge funds in the previous quarter with positions worth $9.08 billion. The hedge fund sentiment for the stock is positive.
As of December 31, Berkshire Hathaway is the leading investor in Activision Blizzard, Inc. (NASDAQ:ATVI) and has a position worth $4 billion in the company.
Click to continue reading and see 5 Most Promising QQQ Stocks According to Hedge Funds.
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Disclosure: None. 15 Most Promising QQQ Stocks According to Hedge Funds is originally published on Insider Monkey.