In this piece, we will take a look at the 15 best innovative stocks to buy now. If you want to skip our introduction to what innovation is all about and why it's the most rewarded trait on the stock market, then you can take a look at the 5 Best Innovative Stocks to Buy Now.
Innovation is at the heart of human progress and share price growth. Firms that find unique solutions to business problems or customer needs end up improving their operational efficiency and creating new revenue streams. This leads to more return per dollar for a shareholder than would have been possible through other investment vehicles, in a self sustaining system that requires adept managers to dot all the i's.
When we look at some of the biggest companies in the world, such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:META), Tesla, Inc. (NASDAQ:TSLA), Intel Corporation (NASDAQ:INTC), and NVIDIA Corporation (NASDAQ:NVDA), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOG), one fact is clear. All of these companies created new manufacturing technology, platforms, products, and tools that were not present at scale in their industries.
Apple's example is worth a look here. Over the past decade, Apple's revenue has grown by 124%, providing its dividend shareholders with excellent value for their capital that is re-invested in the company through retained earnings. Apple had bled $1.8 billion in net losses during its fiscal years ending in the September of 1996 and 1997. Now, it's the world's most profitable non-state-owned company that generated $96.9 billion in profit during its previous fiscal year. Apple's success in the business world is attributed to its unique product design and the uncanny ability of its founder Steve Jobs to figure out key customer pain points before rival firms could catch on. The ability to design the right product and market it blends with the firm's complex supply chain that covers 50 countries and saw more than eight hundred independent assessments in 2022.
However, while Apple's shares and revenue are right at the top of the global food chain when it comes to innovation leading to triple digit growth, it is Tesla that is dominating the innovation space right now. The firm's revenue has grown by 826% on an absolute basis since 2010, since the market that it caters to is simply too big for Tesla to ever capture. Millions of cars roam the roads every day, and while it's easy to get an internal combustion (IC) car for low prices, a Tesla often costs tens of thousands of dollars. The lower cost market is a key Tesla objective, and its triple digit revenue growth is explained by the firm's innovation in manufacturing and mass producing a fundamentally different product in the market.
While most companies on our list so far are mega-cap stocks, the one firm that isn't is Intel. Intel is the world's biggest processor company that designs and manufactures its own chips. This has been the case for quite some time now, and despite multiple slippages over the past decade, Intel still dominates simply due to its early found ability to double computing power every new processor generation. This ability enabled it to cement a market share right when computers were becoming powerful, and today, Intel is a corporate giant that controls the majority of x86 processor markets.
Looking at these companies, it's clear that innovation is indispensable when aiming for success in the business world. Today, we'll look at which innovative companies are on hedge funds' radar and the notable picks are Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META).
15 Best Innovative Stocks to Buy Now
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Our Methodology
For our list of the best innovative stocks to buy, we ranked the top 30 holdings of the First Trust Innovation Leaders ETF (ILDR) by the number of hedge funds that had bought their shares as of Q3 2023 end. Out of these, the stocks with the highest number of hedge fund investors were selected.
For these stocks we have also mentioned hedge fund sentiment. Hedge funds' top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That's why we pay very close attention to this often-ignored indicator.
Arista Networks, Inc. (NYSE:ANET) is a hardware company that sells equipment used in networking and connectivity systems. Despite less than two weeks having passed in 2024, its shares are in for some great news as not only did Morgan Stanley keep an Overweight rating on the 2nd, but Melius Research also upgraded the rating to Buy from Hold six days later.
As of Q3 2023 end, 59 out of the 910 hedge funds part of Insider Monkey's database had bought and owned Arista Networks, Inc. (NYSE:ANET)'s shares. Steve Cohen's Point72 Asset Management was the biggest shareholder among these as it owned $314 million worth of shares.
Along with Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META), Arista Networks, Inc. (NYSE:ANET) is a top innovative stock with strong hedge fund interest.
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a software and data center services provider that allows customers to secure their technical workloads, manage data, and maintain records. It's one of the most strongly rated stocks on our list, and started off 2024 with an Outperform rating from Morgan Stanley. The shares are rated Strong Buy on average and the average share price target is $258.
During last year's third quarter, 69 out of the 910 hedge funds profiled by Insider Monkey were the firm's investors. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)'s largest hedge fund investor is Jim Simons' Renaissance Technologies due to its $279 million stake.
Workday, Inc. (NASDAQ:WDAY) is a cloud computing that allows businesses to maintain and manage their payroll and other records. 2023 was a great year for the stock as the shares gained more than 70% on the market. The gain is also unsurprising since Workday, Inc. (NASDAQ:WDAY)'s third quarter earnings released in November 2023 saw the firm not only beat analyst revenue and EPS estimates but also upgrade its subscription revenue guidance for the full fiscal year.
Insider Monkey dug through 910 hedge fund holdings for 2023's September quarter and found that 77 had held a stake in Workday, Inc. (NASDAQ:WDAY). Andreas Halvorsen's Viking Global is the firm's biggest shareholder among these as it owns $1.1 billion worth of shares.
Datadog, Inc. (NASDAQ:DDOG) is a unique software company whose products enable users to operate, monitor, and maintain their cloud computing platforms. Its shares surged by 28% in November 2023 after a strong third quarter earnings report beat analyst estimates. Datadog, Inc. (NASDAQ:DDOG) posted 45 cents in EPS, nine cents higher than the analyst estimate.
For their third quarter of 2023 shareholdings, 83 out of the 910 hedge funds covered by Insider Monkey's research were the firm's investors. Datadog, Inc. (NASDAQ:DDOG)'s largest stakeholder out of these is Paul Marshall and Ian Wace's Marshall Wace LLP due to its $282 million investment.
Broadcom Inc. (NASDAQ:AVGO) is a specialized semiconductor designer that focuses on developing signals management and associated products. Its highly hyped VMware acquisition, which closed in November 2023, might have come at just the right time due to VMware's ability to consolidate multiple cloud platforms under a single roof that can create new opportunities in the A.I. era.
Insider Monkey scoured through 910 hedge fund portfolios for last year's third quarter and found that 87 had held a stake in Broadcom Inc. (NASDAQ:AVGO). Ken Fisher's Fisher Asset Management was the biggest investor courtesy of its $1.7 billion stake.
Oracle Corporation (NYSE:ORCL) is a major global enterprise resource planning software provider. While its latest quarterly results were disappointing on the cloud computing front, Oracle Corporation (NYSE:ORCL) started January 2024 on a strong note as it expanded its database collaboration with Microsoft to bring Microsoft Azure customers to its products as well.
During 2023's Q3, 88 out of the 910 hedge funds covered by Insider Monkey's research had invested in the firm. Oracle Corporation (NYSE:ORCL)'s largest hedge fund shareholder is Ken Fisher's Fisher Asset Management since it owns 18.7 million shares that are worth $1.9 billion.
ServiceNow, Inc. (NYSE:NOW) is a diversified American software company that enables businesses and other organizations to manage their daily work, information technology operations, and other areas. The shares are rated Strong Buy on average and analysts have set an average share price target of $701.
By the end of last year's third quarter, 99 out of the 910 hedge funds surveyed by Insider Monkey were ServiceNow, Inc. (NYSE:NOW)'s investors. Rajiv Jain's GQG Partners was the biggest investor due to its $831 million investment.
Number of Hedge Fund Investors During Q3 2023: 109
Thermo Fisher Scientific Inc. (NYSE:TMO) is an American scientific and medical research laboratory equipment and associated products provider. 2024 started on a disappointing note for the firm's investors as Bernstein downgraded the shares to Market Perform from Outperform. Year to date though the stock is up by a modest 2%.
As September 2023 ended, 109 out of the 910 hedge funds tracked by Insider Monkey's research were the firm's shareholders. Thermo Fisher Scientific Inc. (NYSE:TMO)'s largest investor is Chris Hohn's TCI Fund Management courtesy of its $1.6 billion stake.
Number of Hedge Fund Investors During Q3 2023: 146
Uber Technologies, Inc. (NYSE:UBER) is a well-known ride sharing services provider. 2024 is proving to be a very important year for the company after the Biden administration's latest rules for gig workers. These rules change the criteria that companies can use to classify workers as contractors, and they could require large players such as Uber Technologies, Inc. (NYSE:UBER) to shake up their way of doing business.
Insider Monkey scoured through 910 hedge fund holdings for their third quarter of 2023 shareholdings and found 146 Uber Technologies, Inc. (NYSE:UBER) investors. Brad Gerstner's Altimeter Capital Management was the biggest shareholder as it held a $613 million stake.
Number of Hedge Fund Investors During Q3 2023: 163
Alphabet Inc. (NASDAQ:GOOG) is one of the biggest technology companies in the world. After exiting 2023 with a multitude of legal woes involving its application store and search engine products, Alphabet Inc. (NASDAQ:GOOG) is starting 2024 by facing a jury in Boston to decide whether it had violated a computer scientist's patents in running A.I. workloads.
By the end of Q3 2023, 163 out of the 910 hedge funds covered by Insider Monkey's research had invested in the firm. Alphabet Inc. (NASDAQ:GOOG)'s largest investor is Ken Fisher's Fisher Asset Management as it holds $5.7 billion worth of shares.
Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META) are some best innovative stocks to buy.
