In this article, we discuss the 11 best growth stocks to buy for the next 5 years. If you want to read about some more growth stocks, go directly to 5 Best Growth Stocks To Buy For the Next 5 Years.
High inflation and rising interest rates are expected to continue to weigh on future economic growth in the United States despite recent figures from the Department of Commerce that reflect a rebounding economy. Newly released GDP numbers show that the US economy grew at an annual rate of 2.6% in the third quarter, up from contractions witnessed in the first and second quarter of the year. The labor market remained robust, adding nearly 4 million jobs in the first nine months, while housing slumped as investment fell to record lows.
Mark Zandi, the chief economist at Moody's Analytics, told news platform NPR recently that the new figures should be treated with caution, highlighting that the GDP had gone “effectively nowhere over the last year” as it had gone up and down in the past few months. He added that even though it was up this quarter, in the “net-net, we're kind of treading water”. Consumer spending has remained sharp even as recession fears rise, rising at an annual rate of 1.4% in the most recent quarter.
In this macro environment, prominent growth stocks like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN) are trading at mouth-watering valuations. For those who cannot afford these pricier options, there are several other stocks in the growth sector that are priced relatively cheaper and have long-term growth catalysts. As the economy shows signs of rebounding and the Fed signals at slowing down rate hikes, it may be a prudent time to invest in these firms.
The companies that operate in the growth sector and have long term growth catalysts were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Best Growth Stocks To Buy For the Next 5 Years
11. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 57
Airbnb, Inc. (NASDAQ:ABNB) operates a platform that enables hosts to offer stays and experiences to guests worldwide. It is one of the best growth stocks to invest in. On October 3, Airbnb committed $5 million to provide temporary free housing to people displaced by Hurricane Fiona and Hurricane Ian in the US and the Caribbean.
On October 6, Jefferies analyst John Colantuoni maintained a Buy rating on Airbnb, Inc. (NASDAQ:ABNB) stock and lowered the price target to $138 from $140, highlighting the reduced estimates and price targets were consistent across the US internet in anticipation of a slowing macro environment.
Among the hedge funds being tracked by Insider Monkey, New York-based Renaissance Technologies is a leading shareholder in Airbnb, Inc. (NASDAQ:ABNB) with 5.6 million shares worth more than $499 million.
In its Q2 2022 investor letter, Brick By Brick Capital, an asset management firm, highlighted a few stocks and Airbnb, Inc. (NASDAQ:ABNB) was one of them. Here is what the fund said:
“What is millennial tech?
It is a term I have coined to describe the type of companies I research. It is a disruptive technology that is changing the status quo of a given industry. For example, Airbnb (NASDAQ:ABNB) with the lodging industry. This definition casts a wide net in terms of what sectors I look at, but it is very specific in terms of what type of companies I look at. I also believe focusing on these companies gives me an inherent edge over Wall St. as they are often older and disconnected from what is truly innovative (…read more)
10. Fiserv, Inc. (NASDAQ:FISV)
Number of Hedge Fund Holders: 59
Fiserv, Inc. (NASDAQ:FISV) provides payment and financial services technology worldwide. It is one of the top growth stocks to invest in. On October 19, Fiserv and IncumbentFI, a provider of processing services, partnered up to provide programmable payments capabilities to financial institutions, fintech and enterprise businesses. This allows cardholders to transform their card programs.
On August 11, Evercore ISI analyst David Togut upgraded Fiserv, Inc. (NASDAQ:FISV) stock to Outperform from In Line with a price target of $149, up from $101, noting that the company was embracing a new growth playbook, investing more, acquiring more and reducing free cash flow targets to sustain higher organic revenue.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in Fiserv, Inc. (NASDAQ:FISV) with 23.2 million shares worth more than $2 billion.
“While the threat of disruption risk to these established payment companies should not be taken lightly, it is important to note that many of these emerging disruptors are small relative to the massive global payments network and heavily reliant on the very payment infrastructure they are trying to disrupt. This led us to initiate a position in Fiserv, Inc. (NASDAQ:FISV), whose stock dropped to a level that embedded projections for negative long-term growth despite no current evidence of disruption. We think Fiserv will continue to grow despite perceived disruption risks given its scale and efficiency. Fiserv also owns cloud-based payments hardware and software system Clover, which is both bigger and faster growing than Square; this provides an additional degree of protection against further disruption risk."
9. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 60
Shopify Inc. (NYSE:SHOP) is an ecommerce company that provides an e-commerce platform and services. It is one of the elite growth stocks to invest in. On October 5, Shopify said that it has settled allegations by a group of major educational publishers that Shopify enables piracy on its platform. On October 19, Non-Fungible Tokens (NFTs) affiliated with the Tezos blockchain network were available on the Shopify platform.
On October 21, RBC Capital analyst Paul Treiber maintained an Outperform rating on Shopify Inc. (NYSE:SHOP) stock and lowered the price target to $55 from $60, noting that the expected Q3 revenue was above consensus estimates on stronger gross merchandise volume growth.
Among the hedge funds being tracked by Insider Monkey, St. Petersburg, Florida-based investment firm ARK Investment Management is a leading shareholder in Shopify Inc. (NYSE:SHOP) with 14.5 million shares worth more than $391.5 million.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE:SHOP) was one of them. Here is what the fund said:
“Shopify Inc. (NYSE:SHOP) is a cloud-based software provider offering an operating system for multi-channel commerce. Shares fell due to continued post-pandemic e-commerce normalization as economies reopen, concerns about competition following Amazon’s announcement of Buy with Prime, as well as the broader sell-off in growth stocks. We remain shareholders due to Shopify’s strong competitive positioning, innovative culture, and a long runway for growth as it currently addresses less than 1% of global commerce spend.”
8. JD.com, Inc. (NASDAQ:JD)
Number of Hedge Fund Holders: 62
JD.com, Inc. (NASDAQ:JD) provides supply chain-based technologies and services in China. It is one of the premier growth stocks to invest in. On June 29, JD.com stated that it renewed its strategic cooperation with Tencent, a Chinese multinational technology and entertainment conglomerate, for a period of three years. Tencent will continue to offer the company prominent Level 1 and level 2 access points on its Weixin platform to provide traffic support.
On October 11, Citi analyst Alicia Yap maintained a Buy rating on JD.com, Inc. (NASDAQ:JD) stock and lowered the price target to $85 from $91, highlighting that China's underlying economic activities and consumption willingness remain weak and the soft sentiment had led to decreasing Q4 earnings of the firm.
At the end of the second quarter of 2022, 62 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in JD.com, Inc. (NASDAQ:JD), compared to 59 in the previous quarter worth $5.4 billion.
In its Q3 2021 investor letter, Argosy Investors, an asset management firm, highlighted a few stocks and JD.com, Inc. (NASDAQ:JD) was one of them. Here is what the fund said:
“We sold JD.com, Inc. (NASDAQ:JD) as a result of the furor over Chinese stocks during the quarter. We had been concerned about China’s lack of respect for investor rights for some time, and Beijing has become significantly more aggressive in asserting itself of late. In addition, the legal structure Chinese companies use to come public in the U.S., a Cayman Islands shell corporation leaves American investors with an unsure path to recovering value should these companies cease to trade on U.S. exchanges. Because of the uncertainty, we exited our position in JD completely. We still love JD’s long-term prospects, but we cannot estimate the legal/regulatory risk associated with these companies anymore. More broadly, we are freeing up cash for some other positions we already own which have declined in this market, and after additional review, remain attractive.”
7. Zendesk, Inc. (NYSE:ZEN)
Number of Hedge Fund Holders: 63
Zendesk, Inc. (NYSE:ZEN) develops and provides software-as-a-service solutions for organizations. It is one of the prominent growth stocks to invest in. On October 13, Zendesk unveiled the launch of new AI solutions, Triage and Smart Assist, to empower businesses to triage customer support requests automatically and access valuable data at scale. Companies can see value in minutes by understanding intent and sentiment through account-specific and data-driven models.
Among the hedge funds being tracked by Insider Monkey, California-based investment firm Light Street Capital is a leading shareholder in Zendesk, Inc. (NYSE:ZEN) with 7.3 million shares worth more than $540 million.
“Zendesk, Inc. (NYSE:ZEN) provides customer support software solutions. After successfully navigating the early stages of the pandemic in 2020, the firm has seen its stock cool off on the threat of increased competition from low-cost alternatives. We do not believe that the competitive dynamics have been altered. In fact, the company’s annual revenue growth rate has accelerated in 2021 from the second half of 2020. The shares also currently trade at a deep discount to other cloud-based software vendors.”
6. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 63
Marvell Technology, Inc. (NASDAQ:MRVL) designs, develops, and sells analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits. It is one of the major growth stocks to invest in. On October 20, Marvell Technology stated that leading cable manufacturers were sampling to cloud data center operators their 100G/lane active cables which are powered by Marvell.
On October 18, Deutsche Bank analyst Ross Seymore maintained a Buy rating on Marvell Technology, Inc. (NASDAQ:MRVL) stock and lowered the price target to $55 from $65, noting that chances of fundamental worsening were leading to a very burdening investor positioning heading into semiconductors results in Q3.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in Marvell Technology, Inc. (NASDAQ:MRVL) with 4.9 million shares worth more than $214 million.
“Marvell Technology, Inc. (NASDAQ:MRVL) provides infrastructure semiconductor solutions. Investors have recently become concerned about the semiconductor cycle and how demand for Marvell’s products will fare in a slowing economic environment. We remain confident that the company’s portfolio of products is extremely important in parts of the data center server market, which remains healthy and possesses long-term secular trends. The company also has secured strong contract wins in upcoming global 5G wireless infrastructure build-outs, which are generally insulated from macroeconomic pressures. With supply chain issues easing, we believe Marvell remains in a strong position to post continued robust growth.”
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Disclosure. None. 11 Best Growth Stocks To Buy For the Next 5 Years is originally published on Insider Monkey.