In this article, we will talk about the 8 most profitable new stocks to invest in.
IPO Market to Bounce Back in 2025
Convergence of significant macroeconomic events anywhere around the globe usually ends up triggering market volatility. Last week was marked by critical factors, including a potential port strike and major jobs reports, and created a perfect storm for short-term fluctuations. Of course, that means that these developments influence investor sentiment and market dynamics significantly.
But even before the heightened uncertainty from last week, geopolitical tensions and recent political debates were already and are still influencing market reactions. Bond prices have fluctuated due to uncertainties. With elections approaching, further market fluctuations are expected. Investors should reassess their portfolios, especially those heavily concentrated in equities. As October began, Tiffany McGhee, CEO and CIO at Pivotal Advisors highlighted the macro events that may spark market volatility at this time. With the potential port strike and major job reports scheduled for release, Tiffany’s opinion was covered in our article on the 7 Cheap New Stocks To Invest In Now. Here’s an excerpt from it:
“Tiffany pointed out that the ongoing conflict in the Middle East and the recent vice presidential debate are critical factors influencing market reactions. She observed that bond prices experienced a sell-off earlier in the week but stabilized as investors sought safety amid rising geopolitical tensions. As the election approaches, she anticipates further short-term volatility due to these developments.
In terms of strategy, Tiffany encouraged investors to reassess their portfolios, particularly those with a heavy concentration in equities. With the S&P 500 up 20% year-to-date and sectors like technology and consumer discretionary having performed well, she suggested that now is an opportune time to take some profits off the table and consider reallocating those funds into different areas of the market.”
In short, Tiffany emphasizes strategic asset allocation and proactive management in capital markets to make informed investment decisions. Later on October 4, Ashley MacNeill, Vista Equity’s head of equity capital markets, joined CNBC’s ‘Squawk on the Street’ to discuss her opinion on the IPO market’s potential to bounce back in 2025, given all the market volatility for the rest of 2024.
Ashley McNeill explained that her responsibilities at Vista include not only taking companies private but also re-IPOing them and engaging with public investors to understand their preferences and concerns. McNeill acknowledged that the market has yet to see a significant number of IPOs. For the IPO market to regain momentum, she emphasized 3 critical factors: a lack of market volatility, stable market conditions, and a risk-on appetite from investors. Most importantly, she highlighted the need for corporations to provide consistency and clarity regarding their business plans and execution strategies. This clarity emerged in 2023, leading her to believe that 2025 could be a promising year for IPOs.
McNeill also discussed the current status of private markets, noting that many companies are choosing to remain private longer due to the availability of capital. She pointed out that approximately 45% of US venture capital-backed firms are poised to go public, which translates to over 350 firms potentially looking to tap into the market. This backlog suggests that if the market returns to normalcy, it could take a decade to clear.
When asked about Vista’s portfolio companies, McNeill noted their resilience in the current high-cost capital environment. The implementation of GenAI has been transformative for many of these companies, positioning software firms to leverage this technology effectively. She characterized the sentiment around software versus AI as one where software is expected to benefit from AI advancements. However, she cautioned that it takes time to realize the measurable impacts of GenAI. She thinks investors need to be patient and look for tangible improvements in business performance attributable to GenAI technology. Growth areas, according to McNeill, include enhancing margins and efficiency and forming partnerships that integrate AI into existing operations. Many software companies are beginning to collaborate more closely to harness this technology effectively.
As we understand the current market conditions, given the macroeconomic events and geopolitical tensions influencing investor sentiment, we are here with a list of the 8 most profitable new stocks to invest in.
Methodology
We used the Finviz to compile an initial list of the top stocks that went public in the last 2 years. From that list, we narrowed our choices to 20 companies with positive TTM net income. We then selected the 8 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 Q2 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Most Profitable New Stocks To Invest In
8. UL Solutions Inc. (NYSE:ULS)
TTM Net Income: $268 million
Number of Hedge Fund Holders: 30
UL Solutions Inc. (NYSE:ULS) is a global independent safety science company with more than a century of expertise in innovating safety solutions. It helps companies ensure that their products meet safety, quality, and sustainability standards. It’s known for its expertise in areas such as electrical safety, fire safety, and product performance while offering consulting services to help companies improve their overall safety and compliance programs.
The company serves over 80,000 customers globally, operating in 35 industries. In the second quarter of 2024, it made $730 million in revenue, while earning $0.44 per share. Revenue grew 6% year-over-year.
Industrial revenue increased by 7.5%. These gains were driven by value pricing initiatives, continued demand related to electrical products, renewable energy, and component certification testing, as well as increased laboratory capacity. Consumer revenue was up 4.2%, driven by electromagnetic compatibility testing and improved retail demand. Software and Advisory revenue was up 6.8% year-over-year, due to increased software and sustainability advisory revenue.
On September 24, UL Solutions Inc. (NYSE:ULS) and Eyesafe teamed up to create a program that verifies the effectiveness of blue light and privacy screen protectors. This program helps consumers choose products based on science-backed claims and provides a standardized measurement system (RPF) for easy comparison.
The company’s strong reputation for rigorous standards and comprehensive services positions it as a leader in the industry. As safety regulations tighten across sectors like consumer electronics, automotive, and industrial, the demand for UL Solutions Inc.’s (NYSE:ULS) certification and testing services is likely to increase significantly. Its pricing power, recent investments, and focus on emerging trends like energy transition and sustainability make it a compelling investment choice.
Conestoga Capital Advisors stated the following regarding UL Solutions Inc. (NYSE:ULS) in its Q2 2024 investor letter:
“UL Solutions Inc. (NYSE:ULS): Based in Northbrook, IL, UL Solutions is a leading global business services company focused on independent testing, inspection and certification. For Conestoga, ULS is one of the very few initial public offerings we have participated in but the strong brand recognition, strong business model and operating history made it a fit for the Conestoga small cap portfolio. The company has historically grown revenues between 6%-8%, and we believe ULS has attractive margins and free cash flow.”
7. CAVA Group Inc. (NYSE:CAVA)
TTM Net Income: $42.6 million
Number of Hedge Fund Holders: 33
CAVA Group Inc. (NYSE:CAVA) is a fast-casual restaurant chain specializing in Mediterranean cuisine offering a variety of dishes, including bowls, salads, and pita sandwiches, made with fresh, high-quality ingredients. It’s known for its healthy and flavorful menu options, as well as its vibrant and inviting atmosphere. It has been expanding rapidly in recent years and is considered a rising star in the fast-casual restaurant industry.
The company’s same-store sales were up 14.40% year-over-year in Q2 2024. Despite industry challenges, it maintained strong profitability, with a 27% profit margin in this quarter. Overall revenue surged 35.05% to $233.50 million, driven by a 9.5% increase in customer traffic.
It greatly expanded its US presence, opening 18 new restaurants in Q2. With plans for 54-57 more, the company’s growth is impressive. The recent launch of grilled steak has driven sales, and its expansion into Chicago has been successful. CAVA Group Inc. (NYSE:CAVA) offers high-quality, affordable Mediterranean cuisine.
On October 3, CAVA Group Inc. (NYSE:CAVA) introduced a new limited-time flavor of pita chips: Garlic Ranch. This new flavor joins the original pita chips and was to be available nationwide starting October 7. The company is also launching a new loyalty program and a new chef-curated steak bowl.
Analysts predict that this company will achieve an impressive 18.6% increase in earnings next year. This forecast reflects its strong market position and appeal to health-conscious consumers. The strategic focus on customer loyalty, operational efficiency, and team development positions it for continued growth and success.
Next Century Growth Small Cap Strategy stated the following regarding CAVA Group, Inc. (NYSE:CAVA) in its first quarter 2024 investor letter:
“CAVA Group, Inc. (NYSE:CAVA) is a fast casual restaurant chain serving authentic Mediterranean cuisine, featuring customizable bowls and pitas. CAVA currently owns and operates >300 stores, and the company targets a 15% plus new store growth rate. The intermediate goal is to have 1,000 stores by 2032 with plenty of opportunity to grow beyond that level. The company already delivers solid restaurant level margins >20% and they believe 3-5% same store sales growth is achievable over time. As the business matures, they should be able to leverage G&A expense which should lead to strong earnings growth over many years.”
6. Birkenstock Holding (NYSE:BIRK)
TTM Net Income: $118.7 million
Number of Hedge Fund Holders: 33
Birkenstock Holding (NYSE:BIRK) manufactures and sells footwear products, making sandals, shoes, closed-toe silhouettes, skincare products, and accessories. It’s famous for its unique footbeds, which are designed to provide comfort and support. It has a strong following and is considered a premium footwear brand.
It added 7 new stores in the third fiscal quarter of 2024, bringing the total to 64. The membership program grew by 36% to 6.9 million members. These engaged members spend more frequently and over 25% more per transaction than non-members. The company’s online members grew 30% in FQ3.
The company achieved strong 19% revenue growth in FQ3 2024 compared to the year-ago period, driven by B2B and D2C business growth, by 23% and 14% respectively. The Americas segment revenue was up 15%, while Europe saw 19% growth. The APMA was again the fastest-growing segment in the third quarter of fiscal 2024, with revenue growth of 41%.
Consumers’ shift towards in-person shopping led to increased sell-through rates and reorders. The B2B business grew significantly, with ~90% of growth coming from existing doors. Wholesale doors remain crucial brand touchpoints, and it continues to expand its retail footprint selectively. Its digital business and membership program are also thriving, along with its iconic styles.
Birkenstock Holding’s (NYSE:BIRK) strong financial performance demonstrates its ability to deliver on promises. As it expands into new markets, it’s increasing its brand awareness and taking market share. It remains fully committed to its medium—and long-term targets, making it a great investment opportunity.
5. Knife River Corp. (NYSE: KNF)
TTM Net Income: $197.7 million
Number of Hedge Fund Holders: 37
Knife River Corp. (NYSE:KNF) is a construction materials and services company operating primarily in the western US. It specializes in aggregates, asphalt, ready-mix concrete, and construction. It also provides construction services, such as road construction, earthwork, and site development. The focus on the construction industry and its strong regional presence make it a significant player in its market.
This company uses a strategic plan under the name of EDGE to drive long-term profitable growth. It focuses on improving EBITDA margin through price optimization, cost control, and efficient execution. Additionally, the plan emphasizes discipline, growth, and excellence in all areas of the business.
It has several deals in its pipeline, ranging from small acquisitions to midsize bolt-on and new platforms. It has completed over 85 acquisitions. The experienced team positions it as the acquirer of choice in midsize high-growth markets.
In the second quarter of this year, the company expanded its teams to 10, focusing on all aspects of business. The PIT crews have visited 98 sites across 10 states, resulting in 1300 improvement opportunities (60% completed). Examples include new mining practices in Medford, Oregon ($1 million annual benefit), reconfigured sand washing equipment in Casper, Wyoming ($200,000 annual benefit), and reintroduced quarry byproduct in Portland, Oregon ($1.1 million annual benefit).
Revenue in Q2 2024 was $806.90 million, up 2.76% from a year-ago period. The company earned $1.37 per share in this quarter. Price increases, increased contracting services, and favorable market conditions drove revenue growth. Weather and lower input costs led to revenue declines in specific segments.
The company’s strong financial performance is driven by its strategic initiatives. With a strong balance sheet and positive market outlook, Knife River Corp. (NYSE:KNF) is well-positioned for continued growth and success.
Longleaf Partners Small-Cap Fund stated the following regarding Knife River Corporation (NYSE:KNF) in its fourth quarter 2023 investor letter:
“Knife River Corporation (NYSE:KNF) – Construction materials and contracting company Knife River was a top contributor for the year and for the quarter. We initiated the position this year after it was spun out of MDU Resources Group, a utility holding company in North Dakota. We were familiar with the business from previous work done on MDU. Knife River was the business that originally attracted us to MDU, and the spin gave us the opportunity to buy the best business as a standalone stock at a discount when utility shareholders focused on a steady dividend dumped it. The business had not been optimized for a long time under MDU but still delivered solid mid-single digit revenue growth over the prior decade. We believe CEO Brian Gray and his plan to improve cash flow represents an improvement over the previous path. Knife River reported strong results in its first two quarters, beating expectations and company guidance.”
4. Arm Holdings (NASDAQ:ARM)
TTM Net Income: $424 million
Number of Hedge Fund Holders: 38
Arm Holdings (NASDAQ:ARM) is a British semiconductor company that designs and licenses the architecture for microprocessors used in electronic devices like smartphones, tablets, and computers. Its technology is widely adopted by chip manufacturers due to its energy efficiency and performance. It has recently been gaining market share in automotive and cloud services.
The company’s partnership with Apple on the iPhone 16 has significantly boosted its stock price. Its leadership in mobile and AI technology is demonstrated by its Axion processor, Ethos-U85, and Windows on Arm. With a strong developer network and growing market presence, it is well-positioned as a foundational compute platform across various sectors. Its recent addition to the PHLX Semiconductor Sector Index reflects its rapid growth and diversification.
Its FQ1 2025 revenue reached a record $939 million, up 39% from the previous year. Licensing revenue grew 72%, and royalty revenue increased 17%. The adoption of Armv9 architecture and a recovering smartphone market drove royalty revenue growth. Smartphone royalty revenue increased over 50% compared to the prior year, even though unit sales only grew slightly. It has a dominant position in mobile applications, with a 99% market share.
The company is integrating its Kleidi AI acceleration technology with PyTorch and ExecuTorch to bring AI and machine learning workloads to Arm-based hardware, enabling Arm CPUs to run LLMs. Its latest processor design, v9, features significant upgrades that have doubled its take rate. Its strong market position, innovative technology, and strategic partnerships position it for continued growth.
3. Nextracker Inc. (NASDAQ:NXT)
TTM Net Income: $407.5 million
Number of Hedge Fund Holders: 39
Nextracker Inc. (NASDAQ:NXT) is the leading provider of intelligent, integrated solar tracker and software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world. It also sells software that allows the trackers to maximize output from solar arrays.
The company grew revenue by 50.13% in FQ1 2025, marking 6 consecutive quarters of double-digit growth. US revenue was up 71%, and international grew 29%. The backlog increased to ~$4 billion. The company introduced new products like agri PV solutions and NX low carbon tracker.
Management has been working on enhancing its product portfolio and launched the NX HorizonTM Low Carbon Tracker in April 2024 this year. It announced orders for solar tracker solutions with 100% US domestic content. The company recently acquired Ojjo and Solar Pile International to offer a comprehensive solution for utility-scale projects.
Earlier this year, the company was selected to provide its NX Horizon-XTR tracker systems for the 1.17 GW Al Kahfah solar power project in Saudi Arabia to optimize energy output. It will also support the project with local partners in Saudi Arabia by providing raw materials and manufacturing support. This order brings the company’s total capacity of smart solar trackers in the Middle East, India, and Africa region to 10+ GW
The Biden administration’s tariffs on solar products have raised concerns about increased costs. Despite this, Nextracker Inc. (NASDAQ:NXT) remains a market leader with competitive products for utility-scale solar projects. This positions it well for future success.
2. Atmus Filtration Technologies Inc. (NYSE:ATMU)
TTM Net Income: $174.1 million
Number of Hedge Fund Holders: 44
Atmus Filtration Technologies Inc. (NYSE:ATMU) is a leading provider of filtration solutions for the industrial and commercial markets, offering filtration products and services like air filtration, liquid filtration, and gas filtration. Its products are used in many industries, including manufacturing, healthcare, and environmental protection.
Q2 2024 revenue was up 4.59% due to higher volumes (3%) and pricing (2%). The company benefited from lower commodity costs and strong execution. It’s improving product availability by building its own distribution network. Over 80% of products are now distributed through Atmus warehouses, and all products are expected to be distributed through this network by the end of this year. Freight activity remains soft, but strong performance in other areas offsets market weakness.
On August 7, Stephen Macadam, a Director at the company, purchased 8,250 shares of the company. He now owns a total of 32,083 shares. This was followed by another purchase of 5,849 shares by another Director, Gretchen Haggerty, on August 23. She now owns a total of 19,881.803 shares. Instances of insider buying improve investor trust in the company.
Atmus Filtration Technologies Inc. (NYSE:ATMU) continues to secure new vehicle platforms and is a leader in fuel filtration and crankcase ventilation. Its focus on aftermarket growth positions it for success. Its innovative and high-quality products are driving strong customer demand.
1. Sharkninja Inc. (NYSE:SN)
TTM Net Income: $245.7 million
Number of Hedge Fund Holders: 52
Sharkninja Inc. (NYSE:SN) is a leading manufacturer of innovative home appliances, including vacuum cleaners, robot vacuums, and kitchen appliances. It’s known for its high-quality products and innovative features. The products are designed to make household chores easier and more efficient.
The company’s strategic diversification into new product categories, like the Ninja SLUSHi and Shark FlexBreeze, has been well-received by consumers. The Ninja SLUSHi set a record as the fastest-selling new product on Sharkninja Inc.’s (NYSE:SN) D2C platform. It has also made strides in expanding its market share and diversifying its product offerings. In 2024, it ventured into 3 new subcategories, bringing its total to 34.
Sales increased 31% in Q1 2024, while earnings per share rose 34%. Food preparation appliances grew by 80%, cooking and beverage appliances grew by 18.2%, and cleaning grew by 20%. Domestic business surged 35%, and international business rose 46%, primarily due to Germany and France. The company’s international operations, particularly in EMEA, are experiencing substantial growth. There are promising prospects in Latin America, including upcoming launches in Brazil.
Sharkninja Inc. (NYSE:SN) is well-positioned for continued growth due to its innovative products, strong brand recognition, and expanding market presence. Its latest launch was on October 1, when Shark Beauty launched new multi-stylers, Shark FlexFusion and Shark FlexFusion Straight. The company’s strategic diversification, successful product launches, and solid financial performance demonstrate its ability to capitalize on market opportunities and drive long-term growth.
Ave Maria World Equity Fund stated the following regarding SharkNinja, Inc. (NYSE:SN) in its Q2 2024 investor letter:
“Top contributors to performance included SharkNinja, Inc. (NYSE:SN) and Taiwan Semiconductor Manufacturing Company Limited. SharkNinja, Inc. is a global product design and technology company focused on creating solutions that increase efficiency, convenience and enjoyment of consumers’ daily tasks and improve everyday lives. The company has built two billion-dollar brands, Shark and Ninja, and has a proven track record of establishing leadership positions by disrupting numerous household product categories, including cleaning, cooking, food preparation, home entertainment and beauty.”
While we acknowledge the growth potential of Sharkninja Inc. (NYSE:SN), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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