Upstart Holdings, Inc. (UPST): Among Billionaire Quants' Two Sigma's Stock Picks with Huge Upside Potential

We recently published a list of Billionaire Quants’ Two Sigma’s 10 Stock Picks with Huge Upside Potential. In this article, we are going to take a look at where Upstart Holdings, Inc. (NASDAQ:UPST) stands against other billionaire quants’ two sigma’s stock picks with huge upside potential.

Two Sigma Advisors is one of the leading players in the quantitative hedge fund space, according to Archive Market Research’s analysis. The quant fund operates as an investment management company and was founded in 2001 by David Siegel, a computer scientist, and John Overdeck, a mathematician. The fund manages $60 billion worth of assets as of April 2025.

Quant funds and their multi-strategy counterparts often do well in the market. A Reuters analysis found that many quant hedge funds posted double-digit growth in 2024. This growth happened despite “negative drivers” in sectors like energy, metals, and European equities. Two Sigma, alongside quant funds like D.E. Shaw and Citadel, also managed solid performance last year.

The hedge fund’s Spectrum Fund returned 10.9% and 14.3% for the Absolute Return Enhanced Fund. But one might argue that for a hedge fund that relies on complex algorithms to make investment decisions, the asset manager should have beat the market. For context, the S&P 500 finished 2024 with a total gain of 25.0%.

READ ALSO: Billionaire Ray Dalio’s Bridgewater’s 10 Stock Picks with Huge Upside Potential and Billionaire Mario Gabelli’s 10 Large-Cap Stock Picks with Huge Upside Potential.

In August last year, the billionaire founders of the hedge fund exited from active management because they couldn’t resolve tension between them.

“Over the past year and a half, we and our senior management team have dedicated significant effort to securing the long-term success and stability of Two Sigma. Throughout this process, our own roles have been a central consideration. Today, we are confident that stepping back from our day-to-day management roles is the right decision at this time,” the co-founders said in a letter to investors.

But recent reports indicate that Overdeck is returning to active management. “John has determined now is the right time for him to return to this role in order to progress certain priorities and decisions he believes are important to the future of Two Sigma,” Two Sigma said in a letter. Siegel chose to remain outside of the fund’s top ranks but had “full confidence” in Scott Hoffman, one of the Co-CEOs who took over last year.

It is good news that Two Sigma won’t be held back by feuding management because they need it to navigate a challenging market. According to a Reuters analysis, the risk of recession is alarming, even though it may not be as clear-cut. The report quoted Zurich Insurance Group’s chief market strategist, Guy Miller, who said that the risk of a US recession is quite plausible. “Recession risks have risen markedly even if there are some deals struck on tariffs. The risk of a U.S. recession is 50-50, it’s that close.”

Our Methodology

We sifted through Two Sigma Advisors’ SEC Q4 2024 13F filings to create this list. We primarily targeted the fund’s most valuable equity holdings (excluding ETFs and options) and then ranked the picks based on analyst price targets as of May 8, 2025. We picked stocks with an upside potential of at least 30% and then selected the top 10. We have also added the broader hedge fund sentiment for the stocks, as of Q4 2024.

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).

Upstart Holdings, Inc. (NASDAQ:UPST)

Two Sigma Advisors Stake Value: $105,241,601

Upside Potential as of May 8: 40.16%

Number of Hedge Fund Holders: 39

Upstart Holdings, Inc. (NASDAQ:UPST) is a financial technology company. The company uses AI to make lending smarter and more inclusive. Its platform offers personal loans, automotive retail and refinance loans, and home equity lines of credit.

Upstart’s (NASDAQ:UPST) Q1 2025 revenue surged to $213 million, up 67% year-over-year. The company originated 240,706 loans during the quarter (up 102% year-over-year), with total originations exceeding $2.1 billion. Adjusted EBITDA reached $42.6 million, compared to a loss of $20.3 million in Q1 2024, and the adjusted EBITDA margin increased to 20% from -16% in the previous year.

On May 6, 2025, Upstart Holdings, Inc. (NASDAQ:UPST) announced a $1.2 billion forward-flow commitment with Fortress Investment Group. The latter has agreed to purchase up to $1.2 billion of consumer loans originated on the Upstart platform through March 2026. Additionally, on April 30, 2025, Lake Trust Credit Union, which serves 200,000 members across Michigan with over $2.5 billion in assets, announced its partnership with Upstart (NASDAQ:UPST) to offer personal loans to more consumers. Lake Trust began lending as a partner on the Upstart Referral Network in January 2025.

Despite these positive developments, Citi analysts recently reduced their price target for Upstart Holdings, Inc. (NASDAQ:UPST) to $83 from $108, while maintaining a Buy rating. The revision, Citi notes, is based on the “uncertainties related to the macroeconomic environment in the second half of 2025 and the current risk-averse sentiment in the market.”

Overall, UPST ranks 4th on our list of billionaire quants’ two sigma’s stock picks with huge upside potential. While we acknowledge the potential of UPST as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher 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 UPST but that trades at less than 5 times its earnings check out our report about this 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.