In this piece, we will look at the 11 best long-term growth stocks to invest in. If you want to skip our introduction to the current drivers of stock market performance, then check out 5 Best Long term Growth Stocks To Invest In.
The year 2023 has proven to be dynamic for the stock market. In the initial half, the S&P 500 displayed a substantial gain of nearly 16.4%, with an 8% surge in the second quarter that challenged bearish sentiments. However, the third quarter presented a less favorable scenario for the market. Although July saw a 3.11% increase, August and September experienced declines of 1.77% and 4.87%, respectively. The overall Q3 decline for the S&P 500 amounted to 3.65%. While October witnessed an additional 2.20% decline, as of November 22, it has rebounded with a month-to-date increase of 7.52%.
According to a report from Bloomberg, Bank of America anticipates that the S&P 500 index will ascend approximately 10% from November 20 levels by the conclusion of 2024, reaching a record high of 5,000. According to the report, 2024 will be “a stock picker’s paradise". On the other hand, Goldman Sachs anticipates modest growth for the US economy in the coming year and does not foresee an impending recession. The financial institution projects that the S&P 500 index will reach 4700 by the end of 2024, reflecting a 5% gain over the next 12 months.
When delving into stock selection for long-term investment, a popular strategy investors make use of involves targeting growth stocks. Typically, growth stocks are identified by having share prices that command a significant premium over their earnings per share, provided the company is profitable. This valuation metric is known as the price-to-earnings ratio (P/E ratio), calculated by dividing the current share price by the firm's earnings per share over the last 12 months, the latest fiscal year, or projected earnings per share. A high P/E ratio, compared to industry benchmarks, suggests that investors are willing to pay more for the stock than the current earnings would justify. The underlying assumption is that the stock will experience future growth, thus validating the high price.
When considering a long-term investment horizon, the prospects for growth stocks appear robust. The compilation of our 11 long-term growth stocks is predominantly composed of companies within the technology sector. Notable entities on the list encompass Tesla, Inc. (NASDAQ:TSLA), MercadoLibre, Inc. (NASDAQ:MELI), and technology behemoths such as NVIDIA Corporation (NASDAQ:NVDA), Uber Technologies, Inc. (NYSE:UBER), and Adobe Inc. (NASDAQ:ADBE), among others.
11 Best Long Term Growth Stocks To Invest In
A close-up of a portfolio of stocks, emphasizing the broad equity portfolio of the company.
Our Methodology
For the following list, we compiled a list of stocks that recorded a P/E ratio greater than 50. The list of companies was narrowed down further based on the number of hedge funds holding stakes in them according to Insider Monkey’s hedge fund data for the third quarter. The stocks are ranked based on this metric, from the lowest to the highest number of hedge funds holding stakes in them.
Palantir Technologies Inc. (NYSE:PLTR) is a software company specializing in the development of data fusion platforms. The company enables both machine-assisted and human-driven data analysis. Its product platform comprises Palantir Gotham, Palantir Apollo, and Palantir Foundry.
Palantir Technologies Inc. (NYSE:PLTR) surpassed expectations in the third quarter with an adjusted EPS of $0.07, exceeding estimates by $0.01. The revenue for the period increased by approximately 16.8% year over year, reaching $558 million, outperforming estimates by $2.08 million. Looking ahead to the fourth quarter, Palantir Technologies Inc. (NYSE:PLTR) anticipates revenue in the range of $599 million to $603 million, surpassing the consensus estimate of $599.26 million.
As of the end of the third quarter of 2023, 31 hedge funds tracked by Insider Monkey had stakes in Palantir Technologies Inc. (NYSE:PLTR). The biggest stakeholder of Palantir Technologies Inc. (NYSE:PLTR) was D E Shaw which owns a $387.84 million stake in the company.
Much like Tesla, Inc. (NASDAQ:TSLA), MercadoLibre, Inc. (NASDAQ:MELI), NVIDIA Corporation (NASDAQ:NVDA), Uber Technologies, Inc. (NYSE:UBER), and Adobe Inc. (NASDAQ:ADBE), Palantir Technologies Inc. (NYSE:PLTR) is one of the best long-term growth stocks to invest in.
The Trade Desk, Inc. (NASDAQ:TTD) is a multinational technology company based in the United States, specializing in real-time programmatic marketing automation technologies, products, and services. The company's focus is on personalizing digital content delivery to users and persists in garnering backing for Unified ID 2.0 (UID2), the industry-wide protocol aimed at preserving pertinent advertising while safeguarding user privacy.
The Trade Desk, Inc. (NASDAQ:TTD) announced its Q3 2023 earnings per share of $0.33, surpassing the consensus analyst forecast of $0.29. Adjusted EBITDA experienced a 22.6% year-over-year growth, reaching $199.5 million, exceeding the previous guidance of $185 million. Revenues showed a 25% year-over-year increase, totaling $493.27 million, which exceeded analyst estimates of $486.91 million. Additionally, the company's customer retention remained consistently high, staying above 95% for the 10th consecutive quarter.
As of September 2023, 39 out of the 910 hedge funds polled by Insider Monkey had bought the firm’s shares. Ken Griffin's Citadel Investment Group is The Trade Desk, Inc. (NASDAQ:TTD)’s biggest hedge fund investor through its $250.6 million stake.
ClearBridge Mid Cap Growth Strategy made the following comment about The Trade Desk, Inc. (NASDAQ:TTD) in its Q2 2023 investor letter:
“We initiated a new position in The Trade Desk, Inc. (NASDAQ:TTD), the leading trading platform for advertisers to buy programmatic ad space, such as the banner ads on a website or the commercials played while streaming TV. Programmatic ads are secularly taking share from traditional forms of advertising, and much like financial trading platforms, The Trade Desk enjoys meaningful network effects that makes it the clear leader in the space. The stock sold off entering 2023 as investors worried over macro pressures on ad budgets, and we capitalized on this opportunity to buy a well-entrenched compounder in a large, growing market.”
Established in 1999, Mercadolibre, Inc. (NASDAQ:MELI), headquartered in Buenos Aires, Argentina, stands as Latin America's premier e-commerce technology company, functioning via its core platforms, MercadoLibre.com and MercadoPago.com. It offers solutions for individuals and businesses engaged in online buying, selling, advertising, and payment transactions. On November 2, Wedbush analyst Scott Devitt reaffirmed an 'Outperform' rating for Mercadolibre, Inc. (NASDAQ:MELI) shares and sustained a price target of $1500.
As of Q3 2023, Mercadolibre, Inc. (NASDAQ:MELI) shares were held by 76 prominent hedge funds, valued at more than $3.38 billion, according to Insider Monkey data on 910 hedge funds. Generation Investment Management was the largest hedge fund shareholder with ownership of 480,480 shares valued at $609.19 million.
DexCom, Inc. (NASDAQ:DXCM), headquartered in San Diego, California, is a medical devices company specializing in the development and marketing of Continuous Glucose Monitoring (CGM) systems. These systems are designed for ambulatory use by individuals with diabetes and are utilized by healthcare providers in the treatment of people with diabetes.
Following the release of its earnings report on October 27, DexCom, Inc. (NASDAQ:DXCM) witnessed a significant surge in its shares. The report indicated the resilience of the market for "continuous glucose monitoring devices" despite the adoption of Ozempic, with this resilience expected to persist. The company demonstrated robust sales growth, experiencing a notable 26% year-over-year increase, reaching $975 million, surpassing the estimated $940 million. Furthermore, profit margins expanded at a rate exceeding expectations, resulting in earnings of $0.50 per share, well above the projected $0.34.
Among the 910 hedge funds included in Insider Monkey’s Q3 2023 database, 78 invested in DexCom, Inc. (NASDAQ:DXCM). Millennium Management, led by Israel Englander, emerged as the largest investor, holding 2.78 million shares valued at $259.5 million.
In its Q3 2023 “Baron Health Care Fund” investor letter, Baron Funds, an investment management company, made the following comments about DexCom, Inc. (NASDAQ:DXCM):
“DexCom, Inc. is a leading provider of continuous glucose monitoring technology (CGM) for people with diabetes. The stock declined after Novo Nordisk released SELECT trial results. The trial results have led to investor concerns that Wegovy and medications in the same class (Ozempic, Mounjaro, and other drugs in development) may be broadly reimbursed by payors and widely adopted. This has raised questions about the long-term impact of GLP-1 drugs on the size of DexCom’s addressable market and the terminal value of the stock as these new medications could slow the progression of diabetes for those who are pre-diabetic and reduce the need for insulin for those with Type 2 diabetes. We think GLP-1 drugs will be used in conjunction with CGM technology, which will remain a critical diabetes management tool. We continue to believe DexCom has an attractive long-term growth runway ahead.”
Tesla, Inc. (NASDAQ:TSLA), headquartered in Austin, Texas, is a multinational American company primarily engaged in automotive and clean energy. The company specializes in the design and manufacturing of electric vehicles, stationary battery energy storage solutions ranging from household to grid-scale, as well as solar panels, solar shingles, and related products and services.
In Q3 2023, Tesla, Inc. (NASDAQ:TSLA) manufactured 430,488 vehicles and successfully delivered over 435,000 vehicles. The company operates six extensive manufacturing facilities globally, encompassing its initial plant in California and gigafactories located in Nevada, New York, Shanghai, Texas, and Berlin.
As of Insider Monkey's third-quarter database, 81 hedge funds showed a bullish stance on Tesla (NASDAQ:TSLA), an increase from the 79 funds in the previous quarter.
Here’s what Baron Funds said about Tesla, Inc. (NASDAQ:TSLA) in its Q2 2023 investor letter:
Many factors contributed to the strong performance of our largest Disruptive Growth position, Tesla, Inc. (NASDAQ:TSLA), in the period. Investors’ concerns regarding Tesla in 2022 continue to dissipate, and the company’s business has continued to grow materially, although at below peak margins. Tesla’s deliveries in China are recovering. The company’s newest factory in Texas has ramped production and should contribute to improved domestic sales and margins. U.S. government policies have lowered the cost to own Tesla vehicles, while also reducing the company’s battery production expenses.
ServiceNow, Inc. (NYSE:NOW) is a Santa Clara, California-based American software company that creates a cloud computing platform designed to assist companies in managing digital workflows for enterprise operations. The company specializes in IT service management, IT operations management and IT business management.
As of Q3 2023, 99 out of the 910 hedge funds tracked by Insider Monkey were the firm’s investors. ServiceNow, Inc. (NYSE:NOW)’s biggest hedge fund stakeholder is Rajiv Jain’s GQG Partners due to its $831.6 million investment.
Here is what Baron Technology Fund has to say about ServiceNow, Inc. (NYSE:NOW) in its Q3 2023 investor letter:
“Despite near-term macro uncertainty, it’s important to frame that we find ourselves in the early innings of both the AI investment cycle and overall cloud penetration. We estimate cloud penetration to be between 25% and 30% versus the likely 70% to 75% level over time, if not even higher. AI deployments are literally just getting off the ground.Infrastructure and development platforms for securely storing and curating data, training and fine-tuning large-language and other AI models, and developing and delivering AI applications. Beneficiaries include Microsoft Azure and Amazon Web Services. Integration of generative AI capabilities, such as AI agents and copilots, directly into existing product offerings and customer workflows. Software vendors capitalizing on this opportunity includes ServiceNow, Inc.“
In addition to Tesla, Inc. (NASDAQ:TSLA), MercadoLibre, Inc. (NASDAQ:MELI), NVIDIA Corporation (NASDAQ:NVDA), Uber Technologies, Inc. (NYSE:UBER), and Adobe Inc. (NASDAQ:ADBE), ServiceNow, Inc. (NYSE:NOW) ranks as one of the best long-term growth stocks hedge funds love.
