In this article, we will take a look at the 12 most promising stocks to buy according to hedge funds. To see more such companies, go directly to 5 Most Promising Stocks to Buy According to Hedge Funds.
Analysts and financial institutions are starting to release their 2024 market outlook reports and predictions and you will find all shades of optimism and pessimism there, highlighting how unpredictable financial markets have become amid volatility and ever-increasing moving parts. While JPMorgan’s report has spooked investors with its estimate of a significant decline in the S&P 500 index for 2024 amid macroeconomic fears and valuation concerns, there are some notable investors who believe the optimism that took over the markets in 2023 will continue to prevail in 2024. Among these optimists is BMO chief investment strategist Brian Belski, who believes the S&P 500 would end 2024 at 5,100, which shows a significant upside to the current levels.
Reasons behind Belski’s optimism are simple and straightforward. He believes falling inflation, a decline in interest rates and rising earnings will add tailwinds to the market in the upcoming year.
The analyst believes the bullish market trends in 2023 laid the foundation for a path towards “normalcy” and earnings growth, valuation trends, and price performance for the next three to five years.
Some analysts also believe the AI rally that boosted stocks like NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL) will spread in 2024 and buoy many other tech stocks.
In this optimistic backdrop, it’s time to see which stocks Wall Street analysts and hedge funds are betting on for significant gains both in the short and long term.
Photo by Marga Santoso on Unsplash
Methodology
For this article we first used a stock screener to identify all stocks which have Buy ratings from Wall Street analysts as well as price targets that show a 50% potential upside from their current levels. From a long list of stocks we got a result, we narrowed down to 12 of these stocks which have the highest number of hedge fund investors.
Most Promising Stocks to Buy According to Hedge Funds
12. Darling Ingredients Inc. (NYSE:DAR)
Number of Hedge Fund Holders: 35
Average Analyst Price Target: $71
Darling Ingredients Inc. (NYSE:DAR) has an average analyst price estimate of $71, while the stock is trading at $42 as of December 4. In November, Darling Ingredients Inc. (NYSE:DAR) posted third quarter results. GAAP EPS in the period came in at $0.77 missing estimates by $0.04.
As of the end of the third quarter of 2023, 35 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Darling Ingredients Inc. (NYSE:DAR). The biggest stakeholder of Darling Ingredients Inc. (NYSE:DAR) was Ian Simm’s Impax Asset Management which owns a $297 million stake in the company.
SouthernSun Small Cap Strategy made the following comment about Darling Ingredients Inc. (NYSE:DAR) in its Q3 2023 investor letter:
“Darling Ingredients Inc. (NYSE:DAR), the largest publicly traded company turning edible by-products and food waste into sustainable products and a leading producer of renewable energy, was one of the top detractors in the Small Cap strategy in the third quarter. The stock has been under increased pressure in recent weeks, as fears regarding new industry supply of renewable diesel and the lack of government support have increased. We have been owners of Darling for over 17 years, and the story has always been a bit complicated for short-term traders. Over time and through thoughtful leadership and capital allocation, the company has built a vertically integrated growth engine with attractive returns on capital while consolidating the industry and driving innovation. We expect EBITDA to grow year over year >50% in 2023 and continue to expand over the next 2-3 years as recent M&A and growth capex drive deleveraging and free cash flow. The company is currently constructing Sustainable Aviation Fuel (SAF) capacity expected to come online in 4Q24 and is evaluating further SAF expansion for the future, as growth and incentives in that market provide significant margin expansion and return on investment. With EBITDA approaching $2 billion next year and the enterprise value of the business at quarter end of ~$12.8 billion, the stock is trading at its lowest EV/EBITDA multiple since 2012. Other valuation methodologies suggest a similarly low multiple relative to history. We look for continued execution and strong fundamentals to trump headline noise over the coming years and produce a sufficient return for shareholders.”
11. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 37
Average Analyst Price Target: $24.73
Average analyst price estimate for KE Holdings Inc. (NYSE:BEKE) is $24.73, while the stock was trading at around $15.76. Last month KE Holdings Inc. (NYSE:BEKE) posted third quarter results. Adjusted EPS in the period came in at $0.26.
As of the end of the third quarter of 2023, 37 hedge funds out of the 910 funds had stakes in KE Holdings Inc. (NYSE:BEKE). The most significant stakeholder of KE Holdings Inc. (NYSE:BEKE) was Lei Zhang’s Hillhouse Capital Management which owns a $476 million stake in the company.
BEKE is a small name as compared to mature stocks like NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL) in which hedge funds have major stakes.
10. Insmed Incorporated (NASDAQ:INSM)
Number of Hedge Fund Holders: 38
Average Analyst Price Target: $41
Biopharma company Insmed Incorporated (NASDAQ:INSM) ranks 10th in our list of the most promising stocks to buy according to hedge funds. One-year average price estimate for the stock is $41. As of December 4 Insmed Incorporated (NASDAQ:INSM) was trading at around $26.5. Last month JPMorgan said it was bullish on Insmed Incorporated (NASDAQ:INSM) as it believes the stock to “work higher” on the back of recent study updates and ahead of “highly anticipated” data from its ASPEN study of brensocatib in the treatment of non-cystic fibrosis bronchiectasis.
As of the end of the third quarter of 2023, 38 hedge funds tracked by Insider Monkey were long Insmed Incorporated (NASDAQ:INSM).
9. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX)
Number of Hedge Fund Holders: 39
Average Analyst Price Target: $35.08
Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) ranks 9th in our list of the most promising stocks to buy according to hedge funds. Last month Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) posted Q3 results. GAAP EPS in the period came in at -$0.73, beating estimates by $0.07.
As of the end of the third quarter of 2023, 39 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX). The biggest stakeholder of Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) was Derrick Tang’s Kynam Capital which owns a $53 million stake in the company.
The company in its Q3 earnings call talked about important business updates and guidance:
“I would like to point out that our net loss for the Q3 was $51.1 million or $0.73 per share compared to a net loss of $35.4 million or $0.58 per share for the comparable period last year. The difference in our net loss was driven largely by an increase in employee related expenses and professional fees within both SG&A and R&D, combined with increased clinical and manufacturing expenses.
We ended the third quarter with $379.3 million in cash, equivalents, and short- and long-term investments, and 69.9 million shares in prefunded warrants outstanding. Our balance sheet is expected to provide runway into the second half of 2025, which allows us to appropriately invest to maximize the value of our pipeline and importantly, it also allows us to transition into a commercial stage organization in 2024. Looking ahead, I would like to provide financial guidance for the rest of this year. For the full year of 2023, the company expects research and development expenses to be $160 million to $165 million and total operating expenses to be $225 million to $230 million, both of which are inclusive of approximately $30 million of non-cash stock compensation expense.
Note that this is a reduction from our prior guidance of $160 million to $175 million for R&D expense and $225 million to $240 million for total operating expenses.”
Read the full earnings call transcript here.
8. Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX)
Number of Hedge Fund Holders: 39
Average Analyst Price Target: $39.40
One-year average price estimate of Wall Street for Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX) is $39.40, while the stock’s price as of December 4 was $14.
As of the end of the third quarter, 39 hedge funds had stakes in Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX).
7. Akero Therapeutics, Inc. (NASDAQ:AKRO)
Number of Hedge Fund Holders: 40
Average Analyst Price Target: $42.88
Akero Therapeutics, Inc. (NASDAQ:AKRO) ranks 7th in our list of the most promising stocks to buy according to hedge funds. One-year average analyst price estimate on Akero Therapeutics, Inc. (NASDAQ:AKRO) is $42.88.
As of the end of the third quarter of 2023, 40 hedge funds had stakes in Akero Therapeutics, Inc. (NASDAQ:AKRO), which makes treatments for non-alcoholic steatohepatitis (NASH). The biggest stakeholder of Akero Therapeutics, Inc. (NASDAQ:AKRO) was Panayotis Takis Sparaggis’s Alkeon Capital Management which owns a $191 million stake in the company.
6. BridgeBio Pharma, Inc. (NASDAQ:BBIO)
Number of Hedge Fund Holders: 41
Average Analyst Price Target: $46
One-year average price estimate for BridgeBio Pharma, Inc. (NASDAQ:BBIO) is $46, while the stock’s current price is around $30.94, as of December 4. In October, Cantor Fitzgerald started covering BridgeBio Pharma, Inc. (NASDAQ:BBIO) with an Overweight rating and a $50 price target.
Cantor’s analyst Josh Schimmer expects BridgeBio Pharma, Inc. (NASDAQ:BBIO) to generate over $5 billion in peak sales in 2030, mainly from its investigational therapy acoramidis.
As of the end of the third quarter of 2023, 41 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in BridgeBio Pharma, Inc. (NASDAQ:BBIO). The biggest stakeholder of BridgeBio Pharma, Inc. (NASDAQ:BBIO) was Andreas Halvorsen’s Viking Global which owns a $662 million stake in the company.
In addition to BBIO, hedge funds are also betting big on major stocks like NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL).
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Disclosure: None. 12 Most Promising Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.