We recently compiled a list of the 12 best stocks to buy according to hedge funds. XPeng Inc. (NYSE:XPEV) These are the best EV stocks to buy right now.
Despite the concerns surrounding the market over the past few years, the overall market has performed exceptionally well, with the S&P 500 hitting a new all-time high of over 5,300 points by mid-May. Bearish sentiment has been swept across the market since 2022, and even after a phenomenal performance in 2023, many analysts have retracted their statements and now expect a brighter future. At the end of 2024, UBS and BMO expect the index to reach 5,600, Wells Fargo predicts it will be at 5,535 at the end of the year, and even one of the most bearish analysts, Morgan Stanley's Mike Wilson, has raised his target from his previous 4,500 to 5,400.
Interest Rate Forecast
Interest rate hikes and cuts have been a big topic in the market for the past few years. In 2023, many analysts expected up to six cuts in 2024, but the expectations have faded over time due to better-than-expected inflation data. At the Federal Reserve's May 1 meeting, Chairman Jerome Powell expressed reluctance to give a specific time frame for a rate cut decision, saying the Fed needs more data before taking any action. However, the chairman suggested that the chances of a rate hike are extremely low. Some experts believe that there may not be a rate cut this year, as we mentioned in our previous article on the best soap and cleaning supplies stocks.
According to CME's FedWatch tool, 98.9% of the market expects interest rates to remain unchanged at the June Fed meeting, while 1.1% believe the Fed may raise rates by 25 basis points (bps). Morgan Stanley predicts that the 25 basis point cut will begin in September as the Fed may feel confident enough to start cutting rates once inflation starts to fall. According to the FedWatch tool, 51.6% of the market does not expect a rate cut in September, 42.8% expect a 25 basis point cut, 5% expect a 50 basis point cut and 0.6% believe rates will be 25 basis points higher than the current 5.25%-5.5%.
Markets may rise amid tightening policy
Recently, the market has seen another pullback, with the overall market shrinking by 1.5% between May 27 and 30. However, some experts still expect an upswing and believe the market is in a healthy state.
On May 29, Jim Paulsen, former chief investment strategist at Leuthold Group and Wells Capital Management, told CNBC he was optimistic about the economy and stressed that it is resilient despite challenges such as previous recession predictions and an inverted yield curve. He pointed to the strength of corporate balance sheets, overall economic health, liquidity, and recent strong earnings reports. He also acknowledged that tightening policies such as rising yields, a stronger dollar, lower budget deficit-to-GDP ratios, slower monetary growth, and shrinking balance sheets will ultimately slow the economy and keep inflation in check. Paulsen predicts inflation will fall below 3%, creating favorable conditions for markets and signaling the possibility of further increases. He further noted that inflation is certainly declining compared to 9% in 2022, adding that he doesn't believe the Fed's 2% inflation target is necessary to “keep things rolling.”
Michael Fossart – YhXlYJYlr3c – unsplash
Our Methodology
For this article, we used Yahoo Finance's stock screener to identify over 400 stocks with year-over-year revenue growth of 40% or more and market caps over $300 million. We then narrowed the list to 12 stocks with rising hedge fund sentiment, positive analyst sentiment, and consistent revenue growth between Q4 2023 and Q1 2024. We listed the most promising stocks in ascending order of hedge fund sentiment.
Hedge fund data comes from Insider Monkey's database of 919 elite hedge funds as of Q1 2024. Why are we interested in stocks where hedge funds are concentrated? The reason is simple: our research shows us that we can outperform the market by mimicking the top holdings of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks each quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points (see details here).
Is XPeng Inc. (NYSE:XPEV) the most promising stock?
XPeng Inc. (NYSE:XPEV)
Q3 2023 YoY revenue growth: 25%
Q4 2023 YoY Revenue Growth: 154%
Q1 2024 YoY revenue growth: 62.3%
Number of hedge fund holders: 16
XPeng Inc. (NYSE:XPEV) is a Chinese company that designs, develops, manufactures, and sells smart electric vehicles. Sixteen hedge funds held shares in XPeng Inc. (NYSE:XPEV) worth $194,903,000 in the first quarter. Of these, Millennium Management was the company's largest shareholder. The firm increased its stake in the company by 578% in the first quarter to 10.7 million shares, worth $82.178 million.
On May 21, XPeng Inc. (NYSE:XPEV) reported its first quarter earnings. Non-GAAP EPADS beat expectations by $0.03 to -$0.21. Revenue beat expectations by $6008 to $910 million, up 62.3% year-over-year. XPeng Inc. (NYSE:XPEV) also released its outlook for the second quarter of 2024, predicting significant delivery and revenue growth, with deliveries expected to be between 29,000 and 32,000 units and total revenues expected to be between RMB 7.5 billion and RMB 8.3 billion (as of May 30, RMB 1 = US$0.14). This optimistic outlook reflects the company's confidence that ongoing strategic and organizational transformation will enable it to make significant progress in sales volumes, margins, and cash flow.
XPeng Inc. (NYSE:XPEV) has a strong financial foundation, with RMB 41.4 billion in cash as of the end of the first quarter of 2024. This liquidity allows the company to invest in strategic initiatives, ensuring long-term growth and stability. The company plans to invest in advanced driver-assistance systems (ADAS) and smart EV platforms to take the lead in their respective markets. In addition, the company aims to expand its overseas sales network to more than 20 countries and significantly expand its international footprint through strategic partnerships in Western Europe, Southeast Asia, the Middle East, and Australia.
XPeng Inc. (NYSE:XPEV) made it into our list of best stocks to buy now, coming in at number 10. However, it's the only electric vehicle manufacturer on the list. To find other promising stocks that hedge funds and analysts love, check out our free report. Hedge funds pick the 12 best stocks to buy.
We believe AI stocks have great potential to deliver higher returns in a shorter time frame. If you're looking for AI stocks with better prospects than NVIDIA but trading at less than 5x stock price, check out our report on the cheapest AI stocks.
Read next: Michael Burry is selling these stocks and Jim Cramer is recommending these stocks.
Disclosures: None. This article was originally published on Insider Monkey.
