3 stocks that hedge fund managers envy

The stock market’s brilliance over the past year has surprised many. Normally up to the task, various hedge funds were left on the sidelines, unprepared for year-over-year stock price increases.

Many stocks have achieved impressive year-over-year returns and are outperforming the market to some degree. Sure, many of them have run the course, but there are still some momentum plays left.

With that in mind, I decided to pick three best-in-class stocks that hedge funds would envy. I thoroughly believe my pick is a momentum play. Therefore, there is consistency between retrospective and prospective returns.

Without further ado, here are three market hitters to consider.

Chipotle Mexican Grill (CMG)

Source: Retail Photographer / Shutterstock.com

Bill Ackman’s Pershing Squared reported bullish outlook for second half of 2022, but most hedge funds were looking to the past CMG (New York Stock Exchange:CMG) Stock price before the latest increase. CMG stock is up nearly 80% year-over-year and ranks near the top of the list of momentum stocks. The stock’s relative strength index is above 80, meaning there are question marks regarding CMG’s sustainability. However, I think there is more room to roam. Here’s why:

Chipotle’s same-store sales continue to show strong growth. The company’s fourth quarter results showed same-store sales of 8.4% compared to the same period last year, an 80 basis point expansion in operating margins and improved shareholder value. Despite battling declining consumer confidence, Chipotle’s sales growth remains impressive, giving it room to open up to 315 new restaurants in 2024. Additionally, Chipotle’s labor costs are expected to decline given the slowdown in global inflation year over year. At its core, Chipotle is a story of profit expansion.

Investors are concerned about Chipotle’s price multiple. For example, CMG’s GAAP price-to-earnings ratio is 65.52x. However, earnings per share are expected to expand by more than 18% through December. Therefore, it’s safe to say that CMG stock represents a long-term growth opportunity.

Netflix Inc. (NFLX)

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Netflix (NASDAQ:NFLX) stock price has doubled in the past year. Indeed, we have to admit that the rally in broad-based high-beta stocks played a big role. But key metrics point to NFLX’s enduring growth.

evercore (New York Stock Exchange:EVR) recently touted Netflix as a top contender with momentum. More specifically, Evercore’s Mark Mahaney says, “Subscription and ad-based video-on-demand continue to drive Netflix’s incrementality and are increasingly becoming a means of customer churn prevention in the U.S. ” states.

I agree with Mr. Mahaney’s outlook. However, additional factors are also worth noting. Netflix’s strong brand name has influenced its entry into emerging markets such as Asia, Latin America, and Africa. For example, Netflix is ​​predicted to capture 39% of the African market by 2026, adding diversity to its revenue mix. This will allow Netflix to gain scale and deflect increased competition in developed markets.

Netflix released a respectable fourth quarter earnings report that beat revenue estimates by $120 million. Although earnings were 11 cents per share lower, Netflix’s forward price-to-earnings ratio of 1.23 is at a five-year discount. As such, I classify his NFLX stock as a growth at a fair price (GARP) opportunity.

Limbach Holdings (LMB)

Source: shutterstock.com/CC7

Linbach Holdings (NASDAQ:left handed) is a little-known building systems solutions company with immense potential. LMB stock has increased more than 1.6 times year-on-year, but the scary thing is that the stock price is still undervalued. LMB stock has a price-to-earnings ratio of just 0.14x and a price-to-sales multiple of just 0.93x. Additionally, LMB stock has a put/call ratio of 0.43, meaning that options traders prefer LMB stock.

Now that we’ve touched on Limbach’s quantitative data points, let’s dive into some basic aspects.

The company recently released a comprehensive earnings report. Limbach’s fourth-quarter sales exceeded expectations by $13.32 million, and earnings per share beat target by 4 cents.

Additionally, investors can expect increased production capacity in the coming year due to Limbach’s recent acquisitions. industrial air Annual revenue is expected to increase by $30 million. Growth through Limbach’s acquisition strategy paves the way for sustainable shareholder value creation and adds to the attractiveness of the company’s stock.

In short, Limbach has solid fundamentals, favorable valuation criteria, and sound technical characteristics. I agree with LMB stock!

On the date of publication, Steve Booyens held an indirect long position. NFLX. The opinions expressed in this article are those of the writer and are subject to InvestorPlace.com Publishing Guidelines..