We recently published a list of 12 Best Multibagger Stocks to Buy in 2025. In this article, we are going to take a look at where Root, Inc. (NASDAQ:ROOT) stands against other best multibagger stocks to buy in 2025.
In the world of investing, the term “multibagger” refers to stocks that have the potential to deliver returns several times greater than the original investment. One key factor that can help identify potential multibaggers is momentum. Momentum investing focuses on capitalizing on the continuation of existing market trends. Investors using this strategy look for stocks that are experiencing upward price movements, often driven by strong earnings reports, positive news, industry tailwinds, or overall market sentiment. The idea is simple: “the trend is your friend,” and momentum can be a powerful force in identifying winners before they peak. The importance of momentum has been recognized by famous investors, but many of them emphasized the idea that it is crucial to catch momentum stocks early on. As Warren Buffett put it – “What the wise do in the beginning, fools do in the end”.
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The US market is close to entering a correction mode as the absolute magnitude of decline since the mid-February peak is approaching 10%. The current policies of the new US administration, such as tariffs, federal jobs cuts and cuts in some large-scale public projects, are causing havoc among investors as many are fearing a scenario in which the US economy enters stagflation – a period of high inflation among weak economic growth and unemployment. Some analysts have pointed out that sectors reliant on government contracts, such as infrastructure and defense, are already experiencing heightened volatility as a result of these policy shifts. In a recent interview with Maria Bartiromo on Fox News, the President himself refused to rule out a recession in the current year and claimed that the economy is in “a period of transition” and that tariffs might fuel inflation at some point. With consumer confidence showing early signs of weakening, as signaled by recent business surveys, some economists argue that the Federal Reserve may be forced to intervene sooner than expected to stabilize the markets. This idea was already supported by the President, who at some point expressed the opinion that interest rates in the US economy are higher than they should be.
The aforementioned developments have caused a market selloff, particularly in previously high-momentum stocks such as the Magnificent 8, which have benefited from the AI megatrend and were responsible for most of the market returns last year. Prior to that, many previously well-performing stocks, such as government contractors, had already lost their momentum following the election results, while some of the few well-performing healthcare stocks were hit by Medicare/Medicaid reimbursement threats. Likewise, the energy sector remained somewhat out of favor – despite volume tailwinds from Trump 2.0, the expectation of lower oil prices amid a weaker economy has put downward pressure on stock prices in the sector. The key takeaway for investors is that one should look for multibaggers that haven’t yet lost their momentum during the market dip in the last month. These are often lower-capitalization companies that are underfollowed by analysts and operate in high-growth markets.
Our Methodology
To compile our list of multibagger stocks, we used Finviz to filter the companies that have delivered at least 200% stock price return in the last twelve months. Then we compare the list with our proprietary database of hedge funds ownership as of Q4 2024 and include in the article the top 12 names with the highest number of hedge funds that own the stock.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An experienced insurance agent explaining the benefits of an insurance product to a customer.
Root, Inc. (NASDAQ:ROOT)
Number of Hedge Fund Holders: 16
Stock Price Return in the last twelve months: 224%
Root, Inc. (NASDAQ:ROOT) is a technology-driven insurance company that uses data science and telematics to offer personalized auto, home, and renters insurance. It leverages mobile app-based driving behavior analysis to determine premiums, aiming to provide fairer pricing based on individual risk rather than traditional demographic factors. ROOT operates primarily in the US, selling policies directly to consumers through its digital platform. The company focuses on automation, AI-driven underwriting, and customer-centric technology to streamline the insurance process.
The year 2024 was a landmark for Root, Inc. (NASDAQ:ROOT), as the company marked its first full year of net income profitability with GAAP net income of $31 million and adjusted EBITDA of $112 million. ROOT achieved impressive operational metrics, including a gross combined ratio of 95% on $1.3 billion of gross premiums written, while growing policies in force by 21% YoY to more than 414,000. The company’s underwriting performance remained strong with a gross loss ratio of 59%, which the company believes is best-in-class. The company made significant strides in expanding its distribution channels, with partnership channel new writings more than doubling in 2024 and representing approximately one-third of overall new business in the fourth quarter.
Root, Inc. (NASDAQ:ROOT)’s technological advantage was demonstrated through its proprietary tech stack that enables seamless integration with partner platforms and its ability to maintain nimble pricing strategies. The company’s improved performance led to a reduction in run-rate interest expense by more than 50% and significantly reduced reinsurance costs. Looking ahead, management plans to continue its growth trajectory through national expansion, having recently launched in Minnesota and now reaching 76% of the US population. The company maintains a focus on disciplined underwriting while planning to reduce rates in select states due to favorable loss ratio trends, aiming to offer better savings to their best drivers. With a 224% stock price return in the last year, ROOT is one of the best multibagger stocks to buy in 2025.
Overall, ROOT ranks 11th on our list of best multibagger stocks to buy in 2025. While we acknowledge the potential of ROOT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ROOT 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.
