We recently published a list of 12 Best Young Stocks To Buy and Hold For 10 Years. In this article, we are going to take a look at where Atlas Energy Solutions Inc. (NYSE:AESI) stands against other best young stocks to buy and hold for 10 years.
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.
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).
Aerial view of oil rig in the Permian Basin, illustrating the expansive operations in West Texas and New Mexico.
Atlas Energy Solutions Inc. (NYSE:AESI)
3-Year CAGR as of February 11: 85.14%
Number of Hedge Fund Holders: 11
Atlas Energy Solutions Inc. (NYSE:AESI) produces and sells mesh and sand proppant for well completion in the Permian Basin. It also provides related services, which include transportation, logistics, storage, and contract labor, primarily to oil and natural gas exploration and production companies.
The company’s core business is providing proppant (frac sand) and related logistics services, primarily in the Permian Basin. In Q3 2024, it sold 6 million tons of frac sand, which generated $145.3 million in revenue. The average selling price was $24.34 per ton. The logistics and delivery services brought in another $159.1 million. A major catalyst for the company’s future growth is the Dune Express. This innovative conveyor belt system is almost finished and will improve how sand is transported to well sites, reducing truck traffic and emissions.
For 2025, Atlas Energy Solutions Inc. (NYSE:AESI) has already secured contracts for over 60% of the Dune Express’s capacity, with a portion destined for the Delaware Basin. Its combination of high-quality sand reserves and advanced logistics, including the Dune Express, gives it a competitive edge in a market facing headwinds like lower rig counts and tighter spending by oil and gas companies.
ClearBridge Small Cap Value Strategy sees Atlas Energy Solutions Inc. (NYSE:AESI) as a well-positioned, low-cost proppant producer that benefits from rising energy prices. It stated the following regarding Atlas Energy Solutions Inc. (NYSE:AESI) in its first quarter 2024 investor letter:
“Rising energy prices helped to support the performance of exploration and production (E&P) companies Magnolia Oil and Gas and Matador Resources and increased demand for energy equipment services, lifting companies like Atlas Energy Solutions Inc. (NYSE:AESI). We continue to have high conviction in Magnolia and Matador due to their strong and demonstrated ability to generate incremental returns on investment capital. Meanwhile Atlas continues to benefit from being the premier lowest-cost producer of materials needed by E&Ps in the Permian Basin. Building on its already strong distribution network and proprietary technology, Atlas’s recent announcement of its intention to acquire competitor Hi-Crush will make it the largest producer in the country of proppant, a material mixed with fracturing fluid for shale production, and solidify its position as a premier industry logistics provider. Expanding its product volume while maintaining its current fixed cost structure should support long-term returns.”
Overall, AESI ranks 10th on our list of best young stocks to buy and hold for 10 years. While we acknowledge the growth potential of AESI, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AESI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.