In this article, we discuss the 11 best young stocks to buy.
According to a report published by Wall Street Journal, in 2020, companies raised over $167 billion through 454 initial public offerings, with $67.3 billion raised in the fourth quarter. In 2019, 211 offerings raised over $62.3 billion, shattering the analysts’ expectations. Some of the notable companies that went public in 2020 include Airbnb, Inc. (NASDAQ: ABNB), Snowflake Inc. (NYSE: SNOW), DoorDash, Inc. (NYSE: DASH), and Palantir Technologies Inc. (NYSE: PLTR).
Investing in new companies comes with risks. But what makes a successful investor different from average investors is their ability to spot great companies in their initial stages. Famous stocks like Facebook, Inc. (NASDAQ:FB) and Apple Inc. (NASDAQ:AAPL) are two examples. The former is up about 186% over the last five years, while the iPhone maker has gained more than 400% in the same period.
Our Methodology:
Let’s analyze our list of the best young stocks to buy. The companies mentioned below went public in 2020 and 2021. We took into account long-term growth potential, analyst ratings, hedge fund sentiment and fundamentals while choosing these stocks.
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Why pay attention to hedge fund sentiment while choosing stocks?
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 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). 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.
Best Young Stocks To Buy Now
11. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 16
IPO Date: April 15, 2021
AppLovin Corporation (NASDAQ:APP) ranks eleventh on our list of the best young stocks to buy. The company raised $1.8 billion on its IPO in April 2021, with the share price rising 18.5%. AppLovin Corporation (NASDAQ:APP) gained 41.55% since its IPO.
Southpoint Capital Advisors is the largest shareholder of AppLovin Corporation (NASDAQ:APP) in Q2, with shares worth $263 million. Overall, 16 hedge funds tracked by Insider Monkey have positions in the company in Q2, valued at $987.9 million.
This October, Truist lifted its price target on AppLovin Corporation (NASDAQ:APP) to $100, while keeping a Buy rating on the shares. The firm’s analyst expects strong Q3 results, driven by software and consumer revenues.
Like Facebook, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Snowflake Inc. (NYSE:SNOW), and Airbnb, Inc. (NASDAQ:ABNB), investors and analysts are also paying attention to AppLovin Corporation (NASDAQ:APP) amid the company’s long-term growth potential.
10. Xpeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 19
IPO Date: August 27, 2020
Xpeng Inc. (NYSE:XPEV), a Chinese electric vehicle manufacturer, remains one of the best young stocks to buy. In September, the company reported vehicle deliveries of 10,412 units, with a 199% year-over-year growth. Recently, BofA lifted its price target on Xpeng Inc. (NYSE:XPEV) to $63, with a Buy rating on the shares. The firm’s analyst Hsun Lee also raised his revenue estimates for the company by 7%, 8%, and 10%, over the next three years, respectively.
Xpeng Inc. (NYSE:XPEV) went public on August 27, 2020, raising $1.5 billion. Coatue Management is the company’s largest shareholder, with shares worth $461 million. Overall, 19 hedge funds tracked by Insider Monkey have positions in Xpeng Inc. (NYSE:XPEV), the same as in the previous quarter. The total value of these stakes is $784.6 million. The stock gained 119.9% in the past year.
9. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders: N/A
IPO Date: July 28, 2021
Robinhood Markets, Inc. (NASDAQ:HOOD) launched its IPO on July 28, 2021, raising $2 billion. The company sold over 52 million shares, valued at $32 billion. Founded in 2013, Robinhood Markets, Inc. (NASDAQ:HOOD) remains one of the best young stocks to buy.
Robinhood Markets, Inc. (NASDAQ:HOOD) is an American financial services company that also deals in cryptocurrencies through its mobile app. In Q2 2021, the company reported revenue of $565 million, up 131.4% from the prior-year quarter. Monthly active users (MAUs) stood at 21.3 million, presenting a 109% year-over-year growth. This October, Mizuho lifted its price target on Robinhood Markets, Inc. (NASDAQ:HOOD) to $68, while keeping a Buy rating on the shares. The stocks returned 16.97% since its IPO.
Like Facebook, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Snowflake Inc. (NYSE:SNOW), and Airbnb, Inc. (NASDAQ:ABNB), Robinhood Markets, Inc. (NASDAQ:HOOD) is also one of the notable stocks in 2021.
8. Upstart Holdings, Inc. (NASDAQ:UPST)
Number of Hedge Fund Holders: 21
IPO Date: December 15, 2020
Upstart Holdings, Inc. (NASDAQ:UPST) presented a positive hedge fund sentiment in Q2, as the number of hedge funds tracked by Insider Monkey reported having stakes in the company stood at 21, up from 13 in the previous quarter. The total value of these stakes is over $2.13 billion.
Upstart Holdings, Inc. (NASDAQ:UPST), one of the best young stocks to buy, provides a cloud-based AI lending platform to improve credit access. This September, Piper Sandler lifted its price target on Upstart Holdings, Inc. (NASDAQ:UPST) to $300, with an Overweight rating on the shares, highlighting the company’s consumer loan segment.
Founded in 2012, Upstart Holdings, Inc. (NASDAQ:UPST) went public on December 15, 2020, and raised $180 million. The company’s shares jumped 47% on the first trading day.
Vulcan Value Partners mentioned Upstart Holdings, Inc. (NASDAQ:UPST) in its Q2 2021 investor letter. Here is what the firm has to say:
“During the quarter, we purchased Upstart Holdings Inc. Upstart is an artificial intelligence (AI) and cloud-based lending platform. The company uses AI models to underwrite superior loans with lower interest rates, lower default rates, higher approval rates, and increased underwriting automation. Consumers can access Upstart-powered loans through its banking partners’ websites; however, most of its loans are underwritten on Upstart.com. Upstart has a fee-based revenue model and retains only a small portion of the loans, while the majority of the loans end up on the balance sheets of its partner banks or are sold into the capital markets. We believe Upstart’s technology is superior to the FICO score, which is ubiquitous within the consumer credit markets. With an excellent product and a large total addressable market, we believe that Upstart’s prospects are bright.”
7. Amplitude, Inc. (NASDAQ:AMPL)
Number of Hedge Fund Holders: N/A
IPO Date: September 28, 2021
Amplitude, Inc. (NASDAQ:AMPL) went public on September 28, through a direct listing and raised $1.77 billion. The shares rose 9% on the first trading day.
Amplitude, Inc. (NASDAQ:AMPL), one of the best young stocks to buy, is a product analytics platform that helps a wide range of businesses to track visitors using collaborative analytics. In Q2 2021, the company reported revenue of $39.3 million, up 66% from the prior-year quarter. Amplitude, Inc. (NASDAQ:AMPL) gained 16.49% since its IPO.
6. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 26
IPO Date: September 23, 2020
Palantir Technologies Inc. (NYSE:PLTR) gained 8% on October 6 after it won an $823 million contract from the U.S. army. A software company specializing in big data analytics, Palantir Technologies Inc. (NYSE:PLTR) delivered a 152.4% return to shareholders in the past year.
ARK Investment Management is the largest shareholder of Palantir Technologies Inc. (NYSE:PLTR) in Q2, with shares worth $808.7 million. As of Q2 2021, 26 hedge funds tracked by Insider Monkey were bullish on Palantir Technologies Inc. (NYSE:PLTR), compared with 32 in the previous quarter. The total value of these stakes is over $1.3 billion.
This August, Wolfe Research raised its price target on Palantir Technologies Inc. (NYSE:PLTR) to $25 while keeping a Peer Perform rating on the shares. In Q2 2021, Palantir Technologies Inc. (NYSE:PLTR) posted an EPS of $0.04, beating the estimates by $0.01. The company’s revenue for the quarter stood at $375.6 million, showcasing a 49.1% year-over-year growth.
Guardian Fund released its second-quarter 2021 investor letter and mentioned Palantir Technologies Inc. (NYSE: PLTR) in it. Here is what the firm has to say:
“The success of the private sector to innovate in order to help people through the lockdowns and to produce vaccines at record speed at scale has been impressive. The fact that almost every public institution was struggling to be effective no matter how hard some of the people worked, shows the fundamental need of the public sector to become data-driven and invest in data infrastructure.
Government institutions have to partner with enterprises such as Palantir to become digitalnative. The public sector will always struggle to attract the most talented engineers as compensations cannot be justified with tax money and therefore this must be a partnership with specialized private enterprises. This is a great opportunity for Palantir especially as it has already shown to be capable of working with demanding and complex public institutions entrusting it to work on the most critical and sensitive matters.
The news section of Palantir’s website gives insight in where new business is coming from. The main opportunity is in enterprise software and the faster onboarding time and increased self-service of clients is a positive sign. We believe Palantir is becoming one of the more important global software companies.
In addition, Palantir has quietly become a significant investor, investing well over USD 200 million in eight companies. Thereby, it is following the lead of companies like Tencent, Alphabet, and Shopify of establishing valuable investment portfolios.”
5. DoorDash, Inc. (NYSE:DASH)
Number of Hedge Fund Holders: 45
IPO Date: December 9, 2020
DoorDash, Inc. (NYSE:DASH), one of the best young stocks to buy, went public in December 2020, raising $3.37 billion in its IPO. On its first trading day, the stock reached $189.51 per share from $182 per share. This gain in the share price of DoorDash, Inc. (NYSE:DASH) was because of the increased demand for online delivery services during the pandemic.
Recently, BofA lifted its price target on DoorDash, Inc. (NYSE:DASH) to $255, with a Buy rating on the shares. The firm’s analyst Michael McGovern sees growth in the company’s advertising revenue, which could reach $2 billion by 2026. In Q2 2021, DoorDash, Inc. (NYSE:DASH) reported revenue of $1.24 billion, up 83.7% from the prior-year quarter. The stock gained 54.5% in 2021.
Tiger Global Management LLC is the leading shareholder of DoorDash, Inc. (NYSE:DASH) in Q2, with shares worth $1.9 billion. Overall, 45 hedge funds tracked by Insider Monkey reported having stakes in the company in Q2, up from 38 in the previous quarter. The total value of these stakes is $9 billion.
4. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 46
IPO Date: April 21, 2021
UiPath Inc. (NYSE:PATH), an American software company, reported solid earnings in Q2 2021, with revenue reaching $186.2 million, up 64% from the prior-year quarter. The company posted an EPS of $0.02, beating the consensus by $0.07. Founded in 2005, UiPath Inc. (NYSE:PATH) remains one of the best young stocks to buy.
ARK Investment Management is the largest shareholder of UiPath Inc. (NYSE:PATH) in Q2, owning over 11.8 million shares, worth $806.7 million. In addition to this, 46 hedge funds tracked by Insider Monkey reported having stakes in the company as of the end of the second quarter.
UiPath Inc. (NYSE:PATH) went public in April 2021 and raised $1.34 billion. This September, Barclays lifted UiPath Inc. (NYSE:PATH) to Overweight, with a $71 price target.
ClearBridge Investments released its Q2 2021 investor letter and mentioned UiPath Inc. (NYSE: PATH) in it. Here is what the firm has to say:
“We participated in the IPO of UiPath, a developer of software for robotic process automation that uses AI, natural language processing and design to streamline complex processes across a variety of technology environments. The company is an industry leader with a superior solution for leveraging software to optimize workloads. Organizations around the world are beginning to understand the power of automation, with momentum picking up toward fully automating business processes, a $60 billion market today that could grow to $200 billion or more by 2030. UiPath has a unique pricing model, broad partner ecosystem and thoughtful management team supporting one of the strongest growth profiles in technology. Risks we are watching include a partial cloud transition ahead and increased competition from larger software platforms over time.”
3. Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Holders: 49
IPO Date: March 10, 2021
Roblox Corporation (NYSE:RBLX) is an American video game developer and ranks third on our list of the best young stocks. Matthew Thornton of Truist estimated the company’s booking in between the range of $219 million to $222 million in Q3. The firm lifted its price target on Roblox Corporation (NYSE:RBLX) to $103, while keeping a Buy rating on the shares.
Roblox Corporation (NYSE:RBLX) went public in March 2021 and raised $535 million in its IPO. As of Q2 2021, 49 hedge funds tracked by Insider Monkey have stakes in Roblox Corporation (NYSE:RBLX), valued at over $4.9 billion. In the previous quarter, 46 hedge funds had positions in the company, highlighting a positive hedge fund sentiment in Q2.
Roblox Corporation (NYSE:RBLX) gained 11.54% since its IPO.
Guardian Fund mentioned Roblox Corporation (NYSE:RBLX) in its Q2 2021 investor letter. Here is what the firm has to say:
“The wonder-tale stories of children’s books show us that there are infinite possibilities of stories and worlds. The metaverse, the idea that describes the shared 3D spaces in a virtual universe, is enabling people to create fiction. Over the past six months, we initiated a new investment in Roblox. The firm was founded in 1989 by David Baszucki and Erik Kassel when they programmed a physics lab where students could study how cars would crash.
Today, Roblox has become a leading platform with a mission to build a human co-experience that enables billions of users to play, learn, and build friendships in the metaverse. Recent advances in cloud computing, computing devices, and machine learning, enable the materialization of the metaverse. Take what we have in virtual reality today and fast-forward a few decades. Humans will be able to experience unimaginable things and in a couple of millennia virtual economies are likely to become bigger than the physical trade on planet Earth.
Over the first quarter of 2021, Roblox reported 140% revenue growth, 42.1 million daily active users, and 9.7 billion engaged hours. The opportunity for this platform is massive.”
2. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 58
IPO Date: December 9, 2020
Airbnb, Inc. (NASDAQ:ABNB), a vacation rental company, raised $3.5 billion on its IPO in December 2020.
Recently, Cowen lifted its price target on Airbnb, Inc. (NASDAQ:ABNB) to $220, while upgrading the stock to Outperform rating, highlighting a 33% growth in lodging from 24% pre-pandemic. In Q2 2021, Airbnb, Inc. (NASDAQ: ABNB) posted a gross booking value of $13.4 billion versus the estimates of $11.2 billion.
Of the 873 elite funds tracked by Insider Monkey, 58 hedge funds were bullish on Airbnb, Inc. (NASDAQ: ABNB) in Q2, up from 52 in the previous quarter. The total value of these stakes is $2.7 billion.
Worm Capital LLC recently released its second-quarter 2021 investor letter and mentioned Airbnb, Inc. (NASDAQ: ABNB). Here is what the firm has to say:
“Throughout the quarter, you may have noticed that we averaged into a significant position in Airbnb (ABNB). Though the stock has been a relative underperformer since its February highs, we are highly confident about the company’s prospects and its ability to generate meaningful compounded returns over time.
Some history: We have been following Airbnb’s journey for several years, long before the company went public earlier this year. (In fact, nine years ago, in November 2012, Eric profiled the company for Inc.: “Airbnb Is Changing Travel.”)
Whenever we underwrite a new investment, we look for a few key attributes that help us determine the potential long-term value of a business, as well as its risks. In particular, we focus on management (Are they founders? Do they have skin the game? Are they playing the long game?), addressable market size (How big is the opportunity?), its relative growth and creativity to expand (Are they constantly innovating to make the product better for their customers?), margin expansion (Where can we find operating leverage in the model?), its status in the industry (Are they the dominant player? Can they take market share from incumbents?), business risks (What are we missing? Are customers dissatisfied? What do employees say?) and probably a dozen more elements that are critical to our process. It’s only then do we take out the pencils do the valuation work.
In short, ABNB fulfills pretty much every element of a business model we’re attracted to: First, it’s highly scalable marketplace-based business model that unites buyer and seller with observable flywheel effects. (This is an important observation, in that the platform creates significant economic value for millions of hosts who rely on Airbnb, which in turn attracts new hosts who identify the opportunity, which creates more inventory, which turn attracts more travelers, which attracts more hosts, and soon.) Second, it has a global focus with significant opportunities to expand its operating leverage; Third, its management—which is still founder-led—stands out to us as long-term thinkers capable of handling crisis, which the team demonstrated throughout the pandemic by dropping operating costs and turning the business into a more efficient, lean organization. (Like Churchill said: “Never let a good crisis go to waste.”)..”
1. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 70
IPO Date: September 16, 2020
Snowflake Inc. (NYSE:SNOW), an American software company, tops our list of the best young stocks to buy now. Recently, the company announced the development of Financial Services Data Cloud, a new platform to help the finance sector to grow their businesses.
Snowflake Inc. (NYSE:SNOW) launched its IPO in December 2020 and raised over $3 billion. It is the first company to double its value on an opening day as the company’s share price reached $300 from $120 per share on its first trading day. This September, BTIG upgraded Snowflake Inc. (NYSE:SNOW) to Buy with a $353 price target. The stock gained 36.63% in the past year.
Altimeter Capital Management is the company’s leading shareholder, with shares worth over $6.03 billion. As of Q2 2021, 70 hedge funds tracked by Insider Monkey have positions in Snowflake Inc. (NYSE:SNOW), compared with 71 in the previous quarter. These stakes are valued at $12.5 billion.
RiverPark Funds released its Q1 2021 investor letter and mentioned Snowflake Inc. (NYSE: SNOW) in it. Here is what the firm has to say:
“We also established a position in Snowflake during the quarter. Snowflake offers cloud-based data storage and analytics, generally termed “data warehouse-as-a-service.” The data warehousing market—created by the massive, growing amount of user, customer, and account data and the need to search and analyze it—has historically stored its data on physical servers located on-premises. The cloud data platform market—storing data off-premises on cloud servers—is a relatively new $70 billion+ market. Significantly, incremental warehouse data capacity and renewals are expected to be driven by and to the cloud, with more than 75% of databases in the cloud by 2022.
Snowflake requires absolutely no infrastructure management from its users, is fully scalable for each customer, runs on Amazon, Microsoft, or Google cloud platforms, and most critically, Snowflake helps companies analyze their data. The company also has a unique, customer-aligned billing model based on usage. All of which has led to Snowflake being among the leaders of this highly fragmented market, posting 124% revenue growth last year. SNOW’s growth comes from the combination of more customers—which grew 73% last year—and customers buying more services—the company boasts an amazing 150%+ net customer retention. The company’s growing scale has also led to increasing gross margin and operating leverage, up 1,100 basis points and 8,200 basis points, respectively, over the past two years. The company has guided to FCF break-even this year, and with the company’s capital expenditure-light model—Snowflake uses the public cloud for hosting—we expect FCF to grow much faster than revenue growth, which we forecast to grow comfortably more than 50% per year for the next several years. Additionally, we have great confidence in the SNOW management team, which previously had an enormously successful run guiding one of our other core Cloud software holdings ServiceNow.”
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Disclosure. None. 11 Best Young Stocks To Buy Now is originally published on Insider Monkey.
