In this article, we will be taking a look at the 11 best under the radar stocks to buy according to hedge funds. To skip our detailed analysis of current stock market trends, you can go directly to see the 5 Best Under The Radar Stocks To Buy.
Artificial Intelligence And The Stock Market
The stock market has been through a lot in the past few years, what with geopolitical tensions, interest rates and inflation, and a pandemic to boot, all being fast on its tail. Despite these significant challenges, the markets have managed to bounce back in 2023, with the S&P 500 having risen by 1.47 points or 0.032%, the Nasdaq Composite rising by 27.49 points or 0.20%, and the Dow Jones Industrial Average being up by 2.51 points or 0.007%, all on July 24. The success of the markets has largely been based on a larger narrative surrounding artificial intelligence (AI), specifically generative AI and other similar technology. Considering the wide-ranging impact of AI on the markets, investors and finance-minded individuals, in general, are looking at this technology as a way to make the most money they can while they still have the chance.
On July 10, CNBC quoted Matt Higgins, a self-made millionaire and the CEO of investment firm RSE Ventures, as commenting that “AI will be the greatest wealth creator in history.” According to Higgins, this technology has no regard for an individual’s background or anything else, giving the global public a chance to try their own hand at making money without any barriers holding them back. Higgins is also not the only person to believe in AI as a money-making technology, as people all across the world are becoming engaged in things like freelancing and entrepreneurship with the help of AI today. At the same time, investors are considering this technology as the turning point in the business journeys of many companies. AI is presenting all sorts of possibilities to a variety of companies today, allowing them to innovate and come up with different products and services that can get them back in demand with consumers and investors alike. This is why many stocks that have remained under the radar for investors for a long time are now beginning to make a name for themselves again.
How Are Overlooked Stocks Playing The AI Boom?
Many companies, like Deere & Company (NYSE:DE), Humana Inc. (NYSE:HUM), and UnitedHealth Group Inc. (NYSE:UNH), have been using AI to their advantage. These moves have started to garner support for these companies in light of their stellar financial profiles and their efforts to play the AI boom in their favor. Deere & Company (NYSE:DE), for instance, has been using AI to track plants across different weather, soil types, and sun exposure to see the impact of these different conditions on plants for its agricultural operations. The company’s latest earnings report from the second quarter also showed that it beat EPS estimates by $1.18 with its $9.65 EPS, while its revenue of $16.08 billion also beat estimates by $1.21 billion. Humana Inc. (NYSE:HUM) has a similar story with a $9.38 EPS in the first quarter beating estimates by $0.18, and revenues of $26.74 billion, also beating estimates by $344.84 million, while the company is also engaged in AI operations.
Stocks like these have solid profiles, and their recent ventures in the AI space are making professionals consider them to be some of the best under-the-radar stocks to buy if you’re looking to pick up stocks that can play the AI boom. Considering the immense growth potential companies like these seem to have, they may even be considered to be some of the best undervalued stocks to buy now or some of the top undervalued stocks in the S&P 500 overall. Keeping this in mind, we have compiled a list of 11 such stocks below.
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology
We first picked 25 stocks named by other sources online as some of the top under-the-radar stocks on the market today. We then shortlisted 11 stocks from this list by using Insider Monkey’s hedge fund data for the first quarter, based on which stocks had the most hedge fund investors. They are ranked based on this metric as well, from the lowest to the highest number of hedge fund investors.
Best Under The Radar Stocks To Buy According To Hedge Funds
11۔ Fox Corporation (NASDAQ:FOXA)
Number of Hedge Fund Holders: 32
Fox Corporation (NASDAQ:FOXA) is a communication services and broadcasting company based in New York. The company operates through its Cable Network Programming, Television, and Other, Corporate, and Eliminations segments. It offers live news, sports coverage, and entertainment.
Analysts today consider Fox Corporation (NASDAQ:FOXA) a stock with significant underappreciated upside potential. Benjamin Swinburne, an analyst at Morgan Stanley, holds an Equal Weight rating on the stock as of June 6. The analyst also has a price target of $36 on the shares.
There were 32 hedge funds long Fox Corporation (NASDAQ:FOXA) in the first quarter, with a total stake value of $422.1 million.
10۔ Rockwell Automation Inc. (NYSE:ROK)
Number of Hedge Fund Holders: 34
An Overweight rating was maintained on shares of Rockwell Automation Inc. (NYSE:ROK) on July 12 by Joshua Pokrzywinski at Morgan Stanley. The analyst also raised his price target on the stock from $335 to $340.
Bank of America named Rockwell Automation Inc. (NYSE:ROK) as an under-the-radar winner of the looming AI takeover just this July. The company is an electrical components and equipment corporation providing industrial automation and digital transformation solutions internationally. It works with a variety of AI-powered tools to analyze maintenance data, and it is based in Milwaukee, Wisconsin.
Rockwell Automation Inc. (NYSE:ROK) was spotted in the 13F holdings of 34 hedge funds in the first quarter. Their total stake value in the company was $399.3 million.
Bailard Inc held the most shares in Rockwell Automation Inc. (NYSE:ROK) at the end of the first quarter, amounting to 1,764 shares, making it the largest stakeholder in the company.
Artisan Partners made the following comment about Rockwell Automation Inc. (NYSE:ROK) in its first-quarter 2023 investor letter:
“Rockwell Automation, Inc. (NYSE:ROK) is a leading provider of industrial automation technology. The company has a strong brand, installed base and distribution network and is expanding its product offering to include more cloud-based software to complement its leading hardware business. In the coming years, we expect the company to benefit from an acceleration in US manufacturing investment to support customers’ nearshoring initiatives and in response to federal government incentive programs to manufacture energy transition products domestically. In addition, we expect Rockwell to experience revenue and margin tailwinds in 2023 from easing supply chain constraints, which limited its ability to meet customer demand in 2022.”
Like Deere & Company (NYSE:DE), Humana Inc. (NYSE:HUM), and UnitedHealth Group Inc. (NYSE:UNH), Rockwell Automation Inc. (NYSE:ROK) is an overlooked stock that is popular among hedge funds this year.
9. Equinix, Inc. (NASDAQ:EQIX)
Number of Hedge Fund Holders: 39
In the first quarter, 39 hedge funds were long Equinix, Inc. (NASDAQ:EQIX), with a total stake value of $1.4 billion.
Equinix, Inc. (NASDAQ:EQIX) is another stock Bank of America thinks will be an overlooked winner this year. It is a real estate company providing digital infrastructure to businesses, helping them gain access to the best places, partners, and more. The company is based in Redwood City, California.
As of June 26, Matthew Niknam, an analyst at Deutsche Bank, maintains a Buy rating on shares of Equinix, Inc. (NASDAQ:EQIX). The analyst also raised his price target on the stock from $775 to $780.
Baron Funds said the following about Equinix, Inc. (NASDAQ:EQIX) in its first-quarter 2023 investor letter:
“Technology-centric wireless tower and data center REITs that we believe have prospects for strong and enduring cash-flow growth driven by rising data consumption, the buildout of 5G, the growth in cloud computing, and other secular growth demand opportunities.
Examples: American Tower Corp. and Equinix, Inc. (NASDAQ:EQIX)
Equinix, Inc. is the premier global carrier and cloud-neutral data center operator with 250 data centers in 70 metropolitan areas and 30 countries.
Equinix is currently valued at only 20.5 times 2024 estimated cash flow versus private market data center transactions that have occurred at 25 to 30 times cash flow. The shares are valued at a small premium to REITs, despite superior and more durable cash-flow growth prospects.”
8. Interactive Brokers Group, Inc. (NASDAQ:IBKR)
Number of Hedge Fund Holders: 44
Orbis Investment Management was the most prominent shareholder in Interactive Brokers Group, Inc. (NASDAQ:IBKR) at the end of the first quarter, holding 7.2 million shares in the company.
Barclays analyst Benjamin Budish maintains an Overweight rating on shares of Interactive Brokers Group, Inc. (NASDAQ:IBKR) as of July 13. The analyst also raised his price target on the stock from $97 to $106.
Interactive Brokers Group, Inc. (NASDAQ:IBKR) is an investment banking and brokerage company based in Greenwich, Connecticut. The company is another one of Bank of America’s favored under-the-radar stocks this year in light of the Capitalise.ai product, which allows traders to automate trading strategies without coding.
Interactive Brokers Group, Inc. (NASDAQ:IBKR) was seen in the portfolios of 44 hedge funds in the first quarter. Their total stake value in the company was $2.2 billion.
Here’s what LVS Advisory said about Interactive Brokers Group, Inc. (NASDAQ:IBKR) in its second-quarter 2023 investor letter:
“We also modestly added to our position in Interactive Brokers Group, Inc. (NASDAQ:IBKR) in the mid-$70s. We initiated our Interactive Brokers position last summer and published a write-up in September 2022. Interactive Brokers continues to trade at a discounted multiple as investors are skeptical that the company will continue to sustain the current level of net interest income beyond the near future. However, recent reports showing strength in the US economy and labor market suggest that interest rates won’t be cut in the near term. The company publishes monthly KPI metrics and investors appear to be ignoring recent strength in trading volume and margin loans. The current market environment of rising stock prices and elevated interest rates is a goldilocks environment for the company. With this last buy, we have now reached our limit of investing 10% of our portfolio at cost in the stock and can no longer increase the holding size.”
7. LPL Financial Holdings Inc. (NASDAQ:LPLA)
Number of Hedge Fund Holders: 52
LPL Financial Holdings Inc. (NASDAQ:LPLA) is another investment banking and brokerage company on our list. It is based in San Diego, California. The company offers an integrated platform of brokerage and investment advisory services to independent financial advisors and others in the US.
Our hedge fund data for the first quarter shows 52 hedge funds long LPL Financial Holdings Inc. (NASDAQ:LPLA), with a total stake value of $2 billion.
Devin Ryan, an analyst at JMP Securities, reiterated a Market Outperform rating on shares of LPL Financial Holdings Inc. (NASDAQ:LPLA) on July 10. The analyst also maintains a price target of $290 on the shares. LPL Financial Holdings Inc. (NASDAQ:LPLA) is also among Bank of America’s top under-the-radar stock picks, considering its ‘Advisor Sleeve’ AI and machine learning technology.
This is what Baron Funds said about LPL Financial Holdings Inc. (NASDAQ:LPLA) in its first-quarter 2023 investor letter:
“LPL Financial Holdings Inc. (NASDAQ:LPLA) is the largest independent broker-dealer in the U.S. Following a strong run in 2022, the stock detracted in the quarter. The weakness was largely driven by turmoil in the banking industry after the failure of SVB, which caused investors to sour on financial stocks in general. We believe LPL is immune from most of the issues facing banks. LPL is not a bank itself, has a relatively small balance sheet, and has a low-risk, short-duration securities portfolio. The banking crisis has caused investors to take a more dovish view on the path of interest rates, which is a headwind to LPL’s earnings as the economics on a large portion of client cash is tied to floating rates. However, we believe the company has an attractive growth profile even in a lower interest rate environment.”
6. Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 62
A total of 62 hedge funds were long Expedia Group, Inc. (NASDAQ:EXPE) in the first quarter. Their total stake value in the company was $2.1 billion.
Expedia Group, Inc. (NASDAQ:EXPE) is a consumer discretionary company operating in the hotels, resorts, and cruise lines industry. It operates as an online travel company internationally, and it is based in Seattle, Washington.
An Overweigh rating was reiterated on shares of Expedia Group, Inc. (NASDAQ:EXPE) by Mario Lu, an analyst at Barclays, on July 13. The analyst also raised the firm’s price target on the stock from $113 to $137.
Bailard Inc was the largest shareholder in Expedia Group, Inc. (NASDAQ:EXPE) at the end of the first quarter, holding 36,102 shares in the company.
Here’s what Aristotle Atlantic Partners, LLC said about Expedia Group, Inc. (NASDAQ:EXPE) in its first-quarter 2023 investor letter:
“Expedia Group, Inc. (NASDAQ:EXPE) provides online travel services for leisure and small business travelers. The company offers a wide range of travel shopping and reservation services, as well as provides real-time access to schedule, pricing and availability information for airlines, hotels and car rental companies. Expedia serves customers worldwide.
We see Expedia benefiting from the growth of booking travel online, both for leisure and in corporate travel. The company also benefits from rapid growth in alternative accommodations, vacation home rental, through VRBO. The main sources of revenue and profitability are from hotel and vacation home rental. Additionally Expedia has exposure to airline ticket sales and automobile rentals. Post the COVID-19 pandemic, Expedia’s debt has been reduced and share repurchase has resumed and we would expect a dividend to be reinstated.”
Like Deere & Company (NYSE:DE), Humana Inc. (NYSE:HUM), and UnitedHealth Group Inc. (NYSE:UNH), Expedia Group, Inc. (NASDAQ:EXPE) is an under-the-radar stock that many elite hedge funds have been piling into in 2023.
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Disclosure: None. 11 Best Under The Radar Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.