3 Growth Stocks Hedge Funds Are Buying Now
Growth stocks are seeing healthy demand from hedge funds that are buying these companies to chase the next rally. These growth stocks, which refer to a company whose earnings are expected to continue growing faster than the overall market, have proven attractive to these sophisticated yet risk-tolerant investors. These savvy investors have scooped up valuable companies around the globe in the hopes of explosive returns.
Many growth stocks come from technology fields such as retail e-commerce, cloud computing solutions, and software development. Exposure to these fields allows them to ride on promising new trends and businesses for years. The growth stock investor has undoubtedly become an integral part of many species of hedge fund buyers, seeking a return by executing strategic foresight when taking on more risk than other, more conservative venture capitalists.
As is true with most growth stocks investment opportunities, the bigger the return, the higher the risk. However, growth stock hedge funds are buying appear poised to reap the accolades associated with being ahead of the curve if investors manage their equity allocations efficiently and avoid pitfalls moving forward.
Without question, growth stocks investments remain one of the few arenas where smart investor money can make a huge difference if one can identify profitable stories before they become widely talked about within financial circles. Therefore it goes without saying that if you’re looking for sturdy growth stock picks that have already been vetted by some of the smartest investors around today, consider growth stocks hedge funds are buying now to secure your future profits.
|DKS||Dick’s Sporting Goods||$119.16|
Snowflake (NYSE:SNOW) is a shining light in the tech sector world. But investors are not biting. The stock price of Snowflake, down 59% since January, is at a deep discount to its 52-week high. Despite Snowflake being a tech powerhouse and having excellent financials and solid forecasts for growth, the stock has come down hard this year due to macroeconomic concerns.
The answer lies not in something Snowflake has done wrong, or even something Snowflake can do to fix its current situation. With investor sentiment negative, you can’t expect the stock to deliver double-digit gains. After Snowflake’s explosive IPO, investors backpedaled on how good Snowflake’s horizon looked and nevertheless pulled back from the stock. But the value proposition of the business is too good to ignore.
Snowflake is a cloud-based platform that simplifies the process of data analytics. The company’s innovative architecture eliminates costly and complicated infrastructure while providing easy access to your information in one place – no more juggling between different tools.
The company’s product suite creates value as more customers use its services to exchange their information on a network-effect basis, increasing the amount of available relevant data shared among all users and creating new opportunities within business processes enabled by this technology.
In five years, annual revenues have quadrupled to nearly $2 billion. Management believes they can sustain an average annual growth rate of 30% for several more years. In the long run, Snowflake believes it can reach $10 billion in revenue by fiscal 2029.
Snowflake has an expansive market lead, which is likely to continue. The company’s business model incentivizes clients to stay with Snowflake. If recent numbers are any indication, the trend will stay the same for a while.
The travel recovery in recent months has been remarkable. But corresponding sector stock market performance is missing because people are cautious about investing due to worries over a possible recession. Airbnb (NASDAQ:ABNB) is a casualty of the grim outlook, with shares down almost 45%, a monumental haul under the circumstances.
Shares tanked during the pandemic because of the loss in business. However, through the “monthly stays” option, Airbnb managed to weather the storm somewhat. It reported a gross booking value of $46.88 billion in 2021 – a significant increase over the previous year when the pandemic hit it the hardest and caused much damage to its business. The company also caused a market stir by conducting an IPO during the pandemic. That helped the company raise $3.5 billion in proceeds, a massive haul under the circumstances.
More recently, Airbnb surprised investors with a record third-quarter profit of $1.21 billion. Bookings and average daily rates are up. And the company does not see any sustained decline in short-term rentals. This is music to the ears of investors looking for long-term picks among growth stocks hedge funds are buying.
In addition, Airbnb changed the way it operates to better suit user needs this year. Some changes include a new fee structure, house rules policy, and search function. These changes will allow the company to head into 2023 in a solid position.
Dick’s Sporting Goods (DKS)
Our final entry on this list of growth stocks hedge funds are buying is Dick’s Sporting Goods (NYSE:DKS). The reason to include this sporting goods retail company is that it is performing on the top line, despite macroeconomic pressures like inflation and high-interest rates.
It finished with record net sales of $2.96 billion. The figure translated to 7.7% growth and handily outperformed analyst estimates. The comparable store sales were up by 6.5%, attributable to a jump in transactions and high average tickets. In light of this strong performance, it hiked its EPS guidance, a rarity among retailers these days.
By the end of the quarter, Dick’s Sporting Goods had $1.44 billion in cash and cash equivalents. Using these resources, the retailer repurchased 4.4 million shares of stock for an aggregate of $361 million. In the year thus far, it has reduced its share count by 15%.
Apart from this, several new developments are happening at Dick’s Sporting Goods, which has excited their investors. In September, Nike (NYSE:NKE) revealed it would offer certain products exclusively through Dick’s Sporting Goods’ digital platform. In addition, exclusive workout events will be hosted at different retail locations shortly.
Earlier this year, DKS inked a partnership with Peloton (NASDAQ:PTON). Under the deal, DKS will be the first brick-and-mortar retailer to hold Peloton products outside of its stores.
With a strong quarter, strategic partnerships, and healthy returns to shareholders, there is much to like about Dick’s Sporting Goods right now.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
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