Is PayPal Holdings Inc. (NASDAQ:PYPL) the Best Stock Under $100 to Buy According to Hedge Funds?
We recently published a list of the 12 Best Stocks Under $100 to Buy According to Hedge Funds. In this article, we are going to take a look at where PayPal Holdings Inc. (NASDAQ:PYPL) stands against other stocks under $100 to buy according to hedge funds.
On April 21, Chris Davis of Davis Advisors appeared on 'The Exchange' on CNBC to talk about selectivity in today's market. Davis pointed out that putting companies in groups like the MAG7 covers their underlying businesses, which can have different fundamentals and therefore prospects. For this reason, he acknowledged that he owns certain stocks from MAG7 but not all. Davis also clarified that his overall focus is on value and growth, which leads him to a diverse set of holdings and not just tech, such as financials and healthcare names. He then argued that the market is shifting back toward selectivity and active management. He suggested that active management is positioned for a resurgence because the indexes have become highly concentrated and richly valued.
Davis acknowledged that while he cannot predict the market's short-term movements, the present environment is ideal for stock pickers who can identify resilient businesses that are trading at reasonable valuations. He sees this as an opportunity for active management to outperform, as investors move away from momentum-driven index investing toward a more selective approach. He noted the growing popularity of actively managed ETFs as evidence that investors are beginning to act on this shift away from index concentration. He also believes that within the MAG7, only a few companies are truly well-positioned. Similarly, within the S&P 500, only 5% to 10% of companies possess the resiliency and durability needed for such volatile times.
Davis laid out what he sees as the major transitions shaping the current investment environment. First, he described the shift from nearly 15 years of free money to a more normal interest rate environment. Second, he pointed to the end of a multi-decade era of globalization, which was replaced by deglobalization, rising nationalism, and geopolitical tensions. Third, he highlighted the impact of AI. He said that these transitions are occurring against a backdrop of market complacency, with high valuations and concentrated growth expectations.
We first used the Finviz stock screener to compile a list of the top stocks that were trading under $100 as of April 22. We then selected the 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey's database which tracks the moves of over 1000 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A consumer in a cafe paying for goods using a mobile payment app.
Share Price as of April 22: $60.28
Number of Hedge Fund Holders: 94
PayPal Holdings Inc. (NASDAQ:PYPL) is a technology platform that enables digital payments for merchants and consumers worldwide. It operates a two-sided network at scale that connects merchants and consumers. It provides payment solutions under the PayPal, PayPal Credit, Braintree, Venmo, Xoom, Zettle, Hyperwallet, Honey, and Paidy names.
PayPal has more than $11 billion in cash and assets on its balance sheet, along with ~$5 billion in annual free cash flow. The company now has 432 million active accounts in 200+ countries. In 2024, PayPal's branded checkout segment saw consistent quarterly growth in transaction margin dollars, with US growth particularly accelerating in Q4.
Upgraded checkout experiences, which are now live for more than 25% of US traffic, reduce latency by 40% when fully implemented and boost conversion rates by 1%. Fastlane, which is PayPal Holdings Inc.'s (NASDAQ:PYPL) streamlined checkout feature, also reached around 2,000 merchants and attracted 75% new or re-engaged PayPal users. Guidance for 2025 suggests that the company now has a focus on becoming a commerce platform and expanding into B2B bill pay.
Wedgewood Partners stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q1 2025 investor letter:
'PayPal Holdings, Inc. (NASDAQ:PYPL) was a leading detractor from performance for portfolios during the quarter. The Company's branded checkout grew by a healthy +6% while total payment volumes grew by +7% during the Company's most recent quarter. PayPal also outlined several reinvestment initiatives across its platform that continue to accelerate its branded checkout volume growth back to double digits. In addition, the Company has authorized nearly $20 billion in share repurchases which represents nearly a third of its market cap as of quarter end. We continue to hold PayPal as one of our largest active weights in portfolios.'
Overall, PYPL ranks 11th on our list of the best stocks under $100 to buy according to hedge funds. While we acknowledge the growth potential of PYPL, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than PYPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
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