In this article, we will take a look at the 11 best young stocks to buy and hold for 20 years. To skip our analysis of the recent market trends and market activity, you can go directly to see the 5 Best Young Stocks to Buy and Hold For 20 Years.
The global equity markets had one of their worst years in terms of initial public offerings (IPOs) in 2022. The markets are poised to repeat the same feat this year with year-to-date figures not showing much improvement. The global IPO market hit a peak in 2021 as a combined total of 2,436 IPOs during the year to raise gross proceeds of nearly $460 billion, according to an EY report. The very next year, IPO activity came crashing down as capital became expensive with rising interest rates and inflation. Last year, only $184 billion of gross proceeds were raised in 1,415 transactions.
During the first three quarters of 2023, global IPO volumes declined by a further 5% to 968 IPOs globally while gross proceeds, at $101 billion, plummeted 32% lower on a year-over-year basis. During the nine month period, emerging markets accounted for 77% of the global share by number and 75% by proceeds, according to the report.
The pipeline of high-quality companies considering a public listing in the next year or two remains strong, but trading performance of recent transactions may delay a broader rebound in IPO activity. The investor focus has shifted to companies with strong fundamentals and a path to profitability which has put a dampener on the IPO activity for growth companies.
The IPO market in the United States is showing signs of recovery with blockbuster IPOs during the year. The post-listing performance of stocks has also renewed some confidence for investors which has led to some secondary offerings by the IPO companies as well. This is expected to help renew investor confidence for further resuscitation of the IPO market in the country.
The list of latest blockbuster IPOs in the United States includes the debut of Arm Holdings plc (NASDAQ:ARM), one of the biggest semiconductor companies in the world with its semiconductor designs and technology used across most of the personal and enterprise computing devices worldwide. The chip designer raked in $4.87 billion for its parent company, at a valuation of $54.5 billion, in September.
Our list of 11 best young stocks to buy and hold for 20 years has also considered other factors of the selected stocks that can suggest positive prospects for these stocks in the future. These stocks have strong fundamentals as well as benefit from positive analyst and hedge fund sentiments. The list is heavily dominated by companies from the consumer cyclicals sector, including internet retail companies as well as household products providers. Notable names on the list include Arm Holdings plc. (NASDAQ:ARM), GE Healthcare Technologies, Inc. (NASDAQ:GEHC), and Kenvue, Inc. (NYSE:KVUE), among others.
Photo by Ruben Sukatendel on Unsplash
Methodology
We shortlisted stocks that started trading on the stock markets in the United States during the last 12 months. We further narrowed down our selection by removing microcap companies. We only retained stocks with positive analyst ratings, strong fundamentals, and other quality indicators. The remaining stocks were ranked based on Insider Monkey’s database of elite hedge funds, tracked as of the third quarter of 2023. The top 11 stocks based on hedge fund sentiment, ranked in the ascending order of hedge fund shareholders, have made to our list of 11 best young stocks to buy and hold for 20 years.
11. Nextracker Inc. (NASDAQ:NXT)
Number of Hedge Fund Holders: 26
Fremont, California-based Nextracker Inc. (NASDAQ:NXT) is a leading provider of intelligent solar tracker and software solutions used in utility-scale and distributed generation solar projects around the world. The IPO of the company was completed on February 9, 2023, by its parent company, global electronics manufacturing services provider Flex Ltd. (NASDAQ:FLEX).
On October 25, Nextracker Inc. (NASDAQ:NXT) announced that its parent company, Flex Ltd. (NASDAQ:FLEX), with ownership of 51.45% stake in the company, intends to spin-off all of its remaining interests in the company to the shareholders of Flex Ltd. (NASDAQ:FLEX). The transaction is expected to close in Q1 2024.
On the same day, Nextracker Inc. (NASDAQ:NXT) released its financial results for the three months ended September 29, 2023. Its revenue went up by 23% y-o-y to $573 million, it reported a net income of $81 million and a normalized EPS of $0.65. Both top and bottom-line figures surpassed consensus estimates, by $35.5 million and $0.29 respectively.
10. MasterBrand, Inc. (NYSE:MBC)
Number of Hedge Fund Holders: 26
Jasper, Indiana-based, MasterBrand, Inc. (NYSE:MBC) is the largest manufacturer of residential cabinets in North America. It offers a diversified mix of cabinets across price points, product types and channels through a distribution network of over 4,500 dealers, major retailers, and builders.
MasterBrand, Inc. (NYSE:MBC) was separated from Fortune Brands Innovations, Inc. (NYSE:FBIN) on December 15, 2022, through issuance of MasterBrand, Inc. (NYSE:MBC) shares for each share of Fortune Brands Innovations, Inc. (NYSE:FBIN) share. The stock has since gone up by nearly 37%.
On November 7, MasterBrand, Inc. (NYSE:MBC) released the financial results for Q3 2023. Its revenue decreased by 21% y-o-y to $677 million while net income increased by 14% y-o-y to $60 million. At $0.46, the normalized EPS for the quarter surpassed the consensus estimates by $0.12.
Like other stocks such as Arm Holdings plc. (NASDAQ:ARM), GE Healthcare Technologies, Inc. (NASDAQ:GEHC), and Kenvue, Inc. (NYSE:KVUE), the shares of MasterBrand, Inc. (NYSE:MBC) are among the 11 best young stocks to buy and hold for 20 years.
9. PHINIA Inc. (NYSE:PHIN)
Number of Hedge Fund Holders: 27
Auburn Hills, Michigan-based PHINIA Inc. (NYSE:PHIN) is a leader in premium fuel systems, electrical systems, and aftermarket products with a strong brand portfolio that includes Delphi, Delco Remy® and Hartridge. It offers fuel systems and aftermarket parts for combustion engines of commercial vehicles, industrial applications, and passenger vehicles.
On November 6, PHINIA Inc. (NYSE:PHIN) released the financial results for the third quarter of 2023. Its net revenues increased by 4% y-o-y to $896 million, while it generated a net income of $11 million. The company also declared a quarterly cash dividend of $0.25 per share.
In its Q3 2023 investor letter, Oakmark Funds, advised by Harris Associates, made the following comments about PHINIA Inc. (NYSE:PHIN):
“Existing portfolio holding BorgWarner spun-off its fuel systems and aftermarket business into a new publicly traded company named Phinia. Phinia is a well-managed business that trades for just a mid-single-digit multiple of our estimate of normal earnings. We continue to hold shares in the company given that it trades well below our estimate of intrinsic value.”
8. SharkNinja Inc. (NYSE:SN)
Number of Hedge Fund Holders: 27
Juno Beach, Florida-based SharkNinja Inc. (NYSE:SN), is a global product design and technology company that creates lifestyle solutions through innovative products for consumers around the world. The company is known for its brands, Shark and Ninja, with products across numerous household categories, including Cleaning, Cooking, Food Preparation, and Others.
On November 9, SharkNinja Inc. (NYSE:SN) released the financial results for Q3 2023. Its revenue increased by 13% y-o-y to $1.1 billion while net income decreased by 77% y-o-y to $19 million. At $0.95, the normalized EPS for the quarter surpassed the consensus estimates by $0.14.
On October 25, Goldman Sachs analyst Brooke Roach assumed coverage of SharkNinja Inc. (NYSE:SN) shares with a ‘Buy’ rating and a price target of $52. The target price represents a potential upside of 8.81% based on the share price on November 24.
As of Q3 2023, 27 hedge funds tracked by Insider Monkey held shares of SharkNinja Inc. (NYSE:SN). The total value of the shares held by these hedge funds was $667 million.
7. Knife River Corp. (NYSE:KNF)
Number of Hedge Fund Holders: 29
Knife River Corp. (NYSE:KNF) is a leading construction materials company with operations in 14 states across the United States. It mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mix concrete, asphalt and other value-added products.
On November 7, Knife River Corp. (NYSE:KNF) announced the pricing of a secondary public offering of 5.1 million of its common shares currently owned by its former parent, MDU Resources Group, Inc. The shares of the company to be offered at a public offering price of $54 per share.
Prior to that, Knife River Corp. (NYSE:KNF) released strong financial results for Q3 2023. The company generated a revenue of $1.1 billion and a normalized EPS of $2.65 which surpassed consensus estimates by a whopping $0.80.
Following the earnings release, DA Davidson analyst Brent Thielmann raised the price target on Knife River Corp. (NYSE:KNF) shares to $68 from $58 and maintained a ‘Buy’ rating.
Like other stocks such as Arm Holdings plc. (NASDAQ:ARM), GE Healthcare Technologies, Inc. (NASDAQ:GEHC), and Kenvue, Inc. (NYSE:KVUE), the shares of Knife River Corp. (NYSE:KNF) are among the 11 best young stocks to buy and hold for 20 years.
6. Structure Therapeutics, Inc. (NASDAQ:GPCR)
Number of Hedge Fund Holders: 29
Based in San Francisco, California, Structure Therapeutics, Inc. (NASDAQ:GPCR) is a clinical-stage global biopharmaceutical company developing novel oral small molecule therapeutics for metabolic and cardiopulmonary diseases.
On September 29, Structure Therapeutics, Inc. (NASDAQ:GPCR) announced positive results from the Phase 1b multiple ascending dose (MAD) study of its highly selective oral GLP-1 receptor agonist, GSBR-1290, in healthy overweight or obese individuals.
Concurrent to the announcement, Structure Therapeutics, Inc. (NASDAQ:GPCR) announced agreement for sale of ordinary shares equivalent to nearly 8.0 million American Depositary Shares through a private placement financing. The company anticipates $300 million gross proceeds from the financing which includes “significant participation from a number of large healthcare dedicated institutional and mutual fund investors.”
Structure Therapeutics, Inc. (NASDAQ:GPCR) intends to use the proceeds from the financing “to accelerate GSBR-1290 development and our earlier programs from our broad oral incretin franchise forward.”
On November 15, JMP Securities analyst Jonathan Wolleben raised the price target on Structure Therapeutics, Inc. (NASDAQ:GPCR) shares to $91 from $90 and maintained a ‘Market Outperform’ rating for the shares. The target price represents a potential upside of 76.63% based on the share price on November 24.
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Disclosure: None. 11 Best Young Stocks to Buy and Hold For 20 Years is originally published on Insider Monkey.
