On January 29, Martín Escobari, the co-president and head of global growth equity at General Atlantic, joined CNBC’s ‘Fast Money’ to discuss the dealmaking and IPO outlook for 2025. He stated that they have been without an IPO market for three and a half years, the longest drought this century. The second longest was 18 months starting in March 2000 after the dotcom bubble. Martín Escobari mentioned that about 3000 companies are waiting to go public, which will create opportunities for growth equity due to pricing for private companies ready to go public but unable to access capital. Historically, he noted that three things are needed for the IPO market to open: at least 18 months of positive market performance, two years remaining, a low and relatively stable VIX, and a handful of IPOs to pop. He said that they bet that it will happen and the IPO market will be back roaring in 2025.
Regarding investor appetite, he expressed excitement about recent AI news and its impact. He noted that all of General Atlantic’s portfolio companies are using AI to cut costs and drive productivity, with a visible ROI. He believes that the next generation of AI is the application layer, with companies creating new services using AI models, proprietary data, and better software after five years of venture bets. He said that General Atlantic just made three major investments in AI and anticipates the next 2 or 3 years to be very exciting on the application layer. When asked about key metrics for companies going public, Escobari emphasized profitability as a key metric. He stated that they want companies going after vast markets, that are profitable, and whose profitability is defensible with a true competitive advantage, not just temporary profits from being a first mover. He believes investors want large markets and the defensibility of profits in addition to profits.
In this context, we’re here with a list of the 12 best young stocks to buy and hold for 10 years.
Methodology
We first used the Finviz stock screener to compile a list of the top stocks that went public in the last 3 years and had a 3-year compound annual growth rate of over 15%. 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 Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Best Young Stocks To Buy and Hold For 10 Years
12. Life360 (NASDAQ:LIF)
3-Year CAGR as of February 11: 51.24%
Number of Hedge Fund Holders: 10
Life360 (NASDAQ:LIF) operates a technology platform for locating people, pets, and things. Its services, offered through the Life360 mobile app and platform, include location coordination, safety features, and emergency assistance. It also provides Tile tracking devices and Jiobit wearable locators.
In mid-January, the company’s stock jumped 7% after UBS upgraded it to Buy from Neutral. UBS is bullish on Life360’s (NASDAQ:LIF) ad revenue growth potential and predicts that it will exceed market forecasts. A few reasons behind this stance include the company’s ad technology, its user data, and accelerating MAU (Monthly Active Users) growth. UBS also increased its price target from $52 to $55. The company delivered a 623% return to shareholders over the past five years. This is likely linked to strong revenue growth of 38% per year over the same five-year period.
The company achieved record Q3 2024 results driven by subscription and advertising growth. MAUs increased 32% year-over-year to 76.9 million, and Paying Circles grew 35% with an additional 159,000. Subscription revenue rose 27% to $71.8 million. Its advertising business, including its Uber partnership, showed promise, which indicated that advertising, with the help of Life360’s (NASDAQ:LIF) contextual data, could become a significant revenue source alongside subscriptions.
11. SoundHound AI Inc. (NASDAQ:SOUN)
3-Year CAGR as of February 11: 49.21%
Number of Hedge Fund Holders: 11
SoundHound AI Inc. (NASDAQ:SOUN) develops independent voice AI solutions and enables businesses to create conversational experiences. Its offerings include the Houndify platform for building voice assistants, SoundHound Chat AI for integrating real-time data, and SoundHound Smart Answering for customer service. It also provides various AI technologies like speech recognition, natural language understanding, and custom domains.
Fueled by surging enterprise AI demand, revenue for the company grew 89% year-over-year in Q3 2024, exceeding $25 million. The company’s AI-powered customer service solutions, which are integrated into hundreds of enterprise brands, now handle an annualized run rate of over 6 billion queries. This is more than double compared to the previous year. Additionally, as February began, SoundHound AI Inc. (NASDAQ:SOUN) introduced Brand Personalities for its in-car voice assistant. This allows automakers to customize the assistant’s persona to match their brand. This feature lets OEMs create seasonal personalities for different models or sub-brands.
Earlier in mid-December 2024, Wedbush analyst Dan Ives had reiterated his Outperform rating on the company and raised the price target to $22. This came from his optimism about the company’s growth prospects due to its position to capitalize on the increasing enterprise AI demand and its success in capturing market share.
