In this article, we shared the 10 best new stocks to buy now. You can skip our discussion of the current situation of the financial markets and go directly to 5 Best New Stocks to Buy Now.
Let’s face it: investing isn’t as easy as it seems, especially in the age of meme stocks, outrageous speculations and soaring valuations. The market is seething with enthusiasm despite the scarcity of fundamentals to back the overconfidence. The Dow Jones Industrial Average recently crossed 32000 for the first time. The unexplainable exuberance in the market caused several famous investors and billionaires to warn that stocks are overvalued and too much hype is making it difficult for average investors to make rational decisions. Billionaire Lee Cooperman of Omega Advisors recently said in an interview that the market is overvalued and the process of correct “won’t be pleasant.”
The famous “Buffett Indicator” (market cap of U.S. stocks/dollar value of GDP) symbolizing the investment philosophy of legendary investor Warren Buffett, is also indicating that the market is overvalued.
"Emperors With No Clothes"
Speaking of the Oracle of Omaha, here is what the 90-year-old billionaire said in his recent letter to investors:
"Investing illusions can continue for a surprisingly long time. Wall Street loves the fees that deal-making generates, and the press loves the stories that colorful promoters provide. At a point, also, the soaring price of a promoted stock can itself become the “proof” that an illusion is reality. Eventually, of course, the party ends, and many business “emperors” are found to have no clothes. Financial history is replete with the names of famous conglomerateurs who were initially lionized as business geniuses by journalists, analysts and investment bankers, but whose creations ended up as business junkyards."
The Risk of Investing in New Stocks
Investing in new stocks is risky, but comes with huge benefits if executed correctly. A study from Dimensional Fund Advisors showed that the first-year performance of more than 6,000 US IPOs from 1991 to 2018 underperformed industry benchmarks. But we have examples of new stocks like Uber (NYSE:UBER), Airbnb, Lyft, Facebook and several others which gained a huge value after listing on the public markets, thanks to their solid products and services.
The Benefits of Investing in New Stocks
Buying a new stock can offer a huge potential for delivering capital gains. For instance, because of the COVID-19 pandemic, the digital car-buying platform Vroom saw a strong demand. The company first went public in June 2020 at $22 per share. The stock soared more than 100% on its first trading day with a close of $47 per share.
It's not easy to beat the market, and as evident from Berkshire's latest returns data, even the smart money is struggling. Investors should tread the markets with caution as volatility and uncertainty is making it difficult to make the right decisions. Even the smart money is struggling. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context and industry outlook in mind, let’s start our list of the 11 best new stocks to buy now.
10. Sotera Health Company (NASDAQ:SHC)
No of HFs: 27
Total Value of HF Holdings: $321 Million
We start the list of 11 best new stocks to buy now with Sotera Health Company. The company was founded in 1978 and began trading on the Nasdaq Global Select Market in November 2020. As of March 1, SHC shares trade at around $27. Shares in the company fell 4% over the last twelve months. On January 11, the company announced its preliminary fourth-quarter net revenue of approximately $216 million. Their full-year 2020 and earning release is scheduled to be reported before the market open on Tuesday, March 9, 2021.
9. Telos Corporation (NASDAQ:TLS)
No of HFs: 28
Total Value of HF Holdings: $183 Million
Telos Corporation provides cyber, cloud, and enterprise security solutions. Recently, the company was awarded a $13.5 million Federal Bureau of Investigation (FBI) contract for Enterprise Risk Management. The contract included options for the FBI to deploy the Xacta solution. One of the top hedge funds having stakes in TLS is Steven Ng and Andrew Mitchell’s Ophir Asset Management, which had 938,000 shares of the company, worth $30 million at the end of December 2020.
8. Array Technologies, Inc. (NASDAQ:ARRY)
No of HFs: 29
Total Value of HF Holdings: $564 Million
One of the global leaders for manufacturing solar tracking solutions, Array Technologies, Inc., is the 8th best new stock to buy now. There were 29 hedge funds in our database that hold a position in Array Technologies, Inc. by the end of December, compared to 0 funds in the third quarter. During the third quarter of 2020, the company reported a revenue of $139.5 million. The company will release its fourth quarter and full-year 2020 results after the market closes on March 9, 2020.
7. Maravai LifesSciences Holdings, Inc. (NASDAQ:MRVI)
No of HFs: 34
Total Value of HF Holdings: $614 Million
The 7th best new stock to buy now is Maravai LifesSciences Holdings, Inc. The life science company develops drug therapies, diagnostics, and novel vaccines. An insider purchased 35,000 shares at $26 in November 2020. The stock is up 23% since then. In November 2020, the company closed its initial public offering of 69 million shares of Class A common stock, including the underwriters’ option to purchase up to 9 million additional shares of Class A common stock, at a public offering price of $27 per share. The aggregate gross proceeds to Maravai from the offering were around $1.86 billion.
6. QuantumScape Corporation (NYSE:QS)
No of HFs: 35
Total Value of HF Holdings: $1.84 Billion
QuantumScape Corporation ranks 6th on our list of 11 best new stocks to buy now. QS develops and sells solid-state lithium-metal batteries for Electric Vehicles. At the end of the fourth quarter, 35 hedge funds in Insider Monkey’s database of 887 funds held stakes in QuantumScape Corporation, up from 14 funds a quarter earlier.
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Disclose. None. 10 Best New Stocks to Buy Now is originally published on Insider Monkey.