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 Reddit, Inc. (NYSE:RDDT) 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).

Reddit, Inc. (NYSE:RDDT)

3-Year CAGR as of February 11: 40.89% 

Number of Hedge Fund Holders: 52

Reddit, Inc. (NYSE:RDDT) operates a website that organizes digital communities based on specific user interests. These communities allow users to engage in conversations by sharing experiences, links, images, and videos.

The company made $315.1 million from its advertising segment in Q3 2024. That’s a 56% increase year-over-year. It’s getting more ad views because it has more users and its ads are placed more effectively, which is driven by something called the “conversation placement ads.” These ads appear within or alongside online conversations and potentially target users based on the context of those discussions. Its ads are also performing well across the entire “sales funnel,” which means that they’re effective at attracting users at different stages of the buying process, especially those closer to making a purchase.

Reddit, Inc. (NYSE:RDDT) is also working on making its ads better and easier for advertisers to use and offering unique ad formats. For example, the “conversation ads” have seen improvements in how often they lead to conversions. It’s also experimenting with putting ads in new places, like within the comments section, which could create more ad space.

JMP Securities is bullish on Reddit, Inc.’s (NYSE:RDDT) advertising business, maintaining an Outperform rating and raising the price target to $190 from $160. The positive outlook for its Q4 digital advertising revenue is based on a healthy advertising market driven by strong holiday consumer spending, increased political ad spending, and improved business confidence.

Overall, RDDT ranks 2nd on our list of best young stocks to buy and hold for 10 years. While we acknowledge the growth potential of RDDT, 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 RDDT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.