In this article, we will take a detailed look at Top 10 Stocks to Buy According to Durable Capital Partners.
Durable Capital Partners is a Maryland-based hedge fund management firm founded in the second quarter of 2019 by Henry Ellenbogen. The firm primarily follows a long-term equity investment strategy, with a focus on early-stage and durable growth in small- and mid-cap equities across public markets. Ellenbogen, who serves as the Managing Partner and Chief Investment Officer, leads the firm’s investment approach.
Ellenbogen established Durable Capital Partners in 2019 and currently holds the roles of Managing Partner and Chief Investment Officer. Before founding Durable, he spent nearly two decades at T. Rowe Price Associates, Inc., where he served as Vice President and Chief Investment Officer for U.S. Equity Growth. During his tenure, he led the U.S. Small-Cap Growth Equity Strategy and managed the New Horizons Fund. Additionally, he was an active member of the U.S. Equity Steering Committee and the Corporate Governance Committee for U.S. Equity.
Between 2001 and 2019, Ellenbogen spearheaded private market investments in several high-profile companies. His leadership at the New Horizons Fund contributed to its recognition with multiple industry awards. Notably, the fund received Investor’s Business Daily’s Best Mutual Funds Award in 2018 across categories such as U.S. Diversified Equity Funds, Growth Funds, and Small-Cap Funds. Additionally, it earned the Thomson Reuters Lipper Fund Award for Best Small-Cap Growth Fund over a ten-year period (2017), a five-year period (2016), and both five- and ten-year periods (2013). Prior to his investment career, Ellenbogen served as Chief of Staff for U.S. Representative Peter Deutsch and gained experience as a Summer Associate at Goldman Sachs.
Academically, he graduated magna cum laude from Harvard College with a degree in History and Science. He later earned a J.D. from Harvard Law School and an MBA from Harvard Business School, where he was recognized as a Baker Scholar. Additionally, he has taught as an adjunct professor at New York University’s Graduate School of Politics. Ellenbogen is a member of the Barron’s Roundtable and contributes to the Investment Committee of the Smithsonian Institution. He also serves as Chairman of the Board for The Posse Foundation.
According to its most recent 13F filing for the fourth quarter of 2024, Durable Capital Partners reported $12.26 billion in managed 13F securities, with its top 10 holdings accounting for 47.59% of its portfolio.
A stock market data shown on a tablet. Photo by Burak The Weekender on Pexels
Our Methodology
The stocks discussed below were picked from Durable Capital Partners’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from over 1,000 hedge funds tracked by Insider Monkey in the fourth quarter of 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Top 10 Stocks to Buy According to Durable Capital Partners
10. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Holders as of Q4: 84
Durable Capital Partners’ Equity Stake: $440.93 Million
Carvana Co. (NYSE:CVNA), an online retailer specializing in used cars, is headquartered in Tempe, Arizona. Established in 2012, the company operates 39 car vending machines across the United States, providing a unique and automated car-buying experience. Carvana generates most of its revenue through retail vehicle sales, supplemented by earnings from wholesale transactions, financing solutions, and ancillary offerings such as vehicle service contracts (VSCs) and GAP waiver coverage. This diversified revenue model has contributed to the company’s rapid growth in the competitive online automotive marketplace.
In its latest earnings report, Carvana Co. (NYSE:CVNA) significantly outperformed market expectations. The company reported earnings per share of $0.56, far exceeding the consensus estimate of $0.31. Revenue for the quarter reached $3.55 billion, surpassing Wall Street’s forecast of $3.31 billion. Sales increased by 46% year-over-year, reflecting strong demand for Carvana’s services. Over the full year, the company recorded a record-breaking $13.67 billion in revenue, a 27% rise from $10.77 billion in 2023. Carvana sold 416,348 vehicles in 2024, marking a 33% increase compared to the previous year, while total gross profit per vehicle grew by nearly $1,400 to $6,908.
Looking ahead to 2025, Carvana Co. (NYSE:CVNA)’s management has expressed confidence in continued growth, anticipating an increase in both retail unit sales and overall earnings. However, the company provided limited specifics in its forward guidance, which may have contributed to a 10% drop in its stock price during after-hours trading. The decline also appears to be a result of profit-taking by investors following an impressive run in the stock.
Carvana Co. (NYSE:CVNA)’s strong financial performance, marked by record revenue growth, rising vehicle sales, and expanding gross profit per unit, demonstrates its ability to scale efficiently and capture market share in the booming online used car industry.
Recurve Capital stated the following regarding Carvana Co. (NYSE:CVNA) in its Q4 2024 investor letter:
“One year is too short a time frame to evaluate anything and we will never be perfect, but overall, nailing Carvana Co. (NYSE:CVNA) mattered much more than anything else.
We assess our portfolio management performance by looking at the breadth of participation across the portfolio and by comparing our actual results to two parallel scenarios: (1) our performance relative to an equal-weight portfolio of the same positions, and (2) our performance relative to the actual portfolio assuming no further trading over the evaluation period. Encouragingly, our actual performance has been better than both alternate scenarios across substantially all evaluation periods. The primary exception is at the end of 2022, when an equal-weight portfolio would have produced better forward returns by having significantly more exposure to Carvana at its record-low prices. These analyses give me comfort that we add value through our active management and optimization of the portfolio.
We care most about portfolio-level returns which largely depend on slugging percentages, but we also know that having a consistent batting average is important. As shown in the chart below, the median position in our portfolio returned +35% in 2024 on a total return basis (including dividends), below our actual performance but nicely above the returns for the major indices. Carvana’s excellent performance in 2024 pulled our actual performance well above the median, but that was our intention given our large position size. We had healthy contributions across the portfolio, but we also benefited from great slugging percentages in 2023 and 2024…” (Click here to read the full text)
9. FirstService Corporation (NASDAQ:FSV)
Number of Hedge Fund Holders as of Q4: 19
Durable Capital Partners’ Equity Stake: $465.99 Million
FirstService Corporation (NASDAQ:FSV), a publicly traded Canadian real estate services company based in Toronto, specializes in residential property management and essential property services. The company operates through two main segments: FirstService Residential, which focuses on property management, and FirstService Brands, which provides a range of property services through both franchised and company-owned operations. These two platforms serve as the primary revenue drivers for the company, positioning it as a leader in the real estate services industry across North America.
On February 25, 2025, FirstService Corporation (NASDAQ:FSV) reported strong financial results for the fourth quarter and full year ended December 31, 2024. Fourth-quarter revenue reached $1.37 billion, reflecting a 27% year-over-year increase. Adjusted EBITDA rose by 33% to $137.9 million, while Adjusted EPS grew 21% to $1.34. Operating earnings for the quarter climbed to $89.6 million, significantly surpassing the $48.1 million reported in the same quarter of the previous year. Additionally, diluted EPS saw a sharp rise to $0.71 per share, compared to $0.14 a year earlier. For the full year 2024, the company posted $5.22 billion in consolidated revenue, marking a 20% increase from 2023. Adjusted EBITDA improved by 24% to $513.7 million, and Adjusted EPS reached $5, up 7% from the prior year. Operating earnings also saw strong growth, increasing from $244.9 million in 2023 to $337.5 million in 2024, with diluted EPS rising from $2.24 to $2.97.
CEO Scott Patterson expressed satisfaction with the company’s performance, highlighting the team’s focus on driving profitable growth and improving margins. He emphasized that FirstService Corporation (NASDAQ:FSV)’s strong momentum and operational execution position it well for a successful 2025. A breakdown of revenue by segment showed that FirstService Residential contributed $521.3 million in fourth-quarter revenue, reflecting a 5% increase from the prior year, while FirstService Brands generated $844.1 million, representing an impressive 45% growth year-over-year. These figures underscore FirstService Corporation (NASDAQ:FSV)’s continued expansion and financial strength, reinforcing its outlook for sustained growth in the coming year.
8. Booking Holdings Inc. (NASDAQ:BKNG)
Number of Hedge Fund Holders as of Q4: 99
Durable Capital Partners’ Equity Stake: $468.50 Million
Booking Holdings Inc. (NASDAQ:BKNG) is a leading American travel technology company. On February 20, 2025, the company reported robust financial results for the final quarter of 2024, with revenue reaching $5.47 billion—an increase of 14% from the prior year. This figure exceeded analyst projections of $5.19 billion, reflecting Booking’s strong market position. The company also delivered adjusted earnings of $41.55 per share, significantly outperforming the consensus estimate of $36.70. Gross bookings for the quarter totaled $37.2 billion, surpassing analysts’ expectations of $34.5 billion. Both revenue and earnings per share displayed notable year-over-year growth, showcasing the company’s continued strength in the travel and hospitality industry.
Alongside its earnings announcement, Booking Holdings Inc. (NASDAQ:BKNG) unveiled a newly authorized $20 billion stock repurchase program, supplementing the $7.7 billion remaining from its previous buyback initiative as of year-end 2024. Looking ahead, the company anticipates revenue growth between 2% and 4% year-over-year in the first quarter of 2025, with gross bookings projected to rise by 5% to 7%. For the full year, Booking Holdings Inc. (NASDAQ:BKNG) expects both revenue and gross bookings to increase at a mid-single-digit percentage rate, while adjusted earnings per share are projected to grow in the low double digits. Following this strong financial performance, analysts at Jefferies and JPMorgan raised their price targets for Booking Holdings to $5,400 and $5,750, respectively, citing high travel demand and the company’s expanding investments in social media marketing.
Additionally, the company’s Board of Directors approved a quarterly cash dividend of $9.60 per share, marking a 10% increase from the previous dividend of $8.75. The dividend is set to be distributed on March 31, 2025, to stockholders recorded as of March 7, 2025. Institutional interest in Booking Holdings Inc. (NASDAQ:BKNG) has also grown, with Insider Monkey’s data showing that 99 hedge funds held stakes in the company at the end of Q4, representing a combined value of nearly $10.14 billion—up from 93 funds in the previous quarter. The increasing hedge fund investments reflect strong institutional confidence, reinforcing Booking Holdings’ position as a top stock to buy according to Durable Capital Partners.
7. Intuit Inc. (NASDAQ:INTU)
Number of Hedge Fund Holders as of Q4: 89
Durable Capital Partners’ Equity Stake: $528.27 Million
Intuit Inc. (NASDAQ:INTU), a global leader in financial software solutions, is a major player in the industry with a market capitalization of $165 billion. Headquartered in Mountain View, California, the company is renowned for its widely used financial products, including TurboTax, QuickBooks, and Credit Karma. Following the release of its fiscal Q2 2025 earnings report, Intuit’s stock surged 5% as it outperformed analyst expectations across key financial metrics. The company reported earnings per share (EPS) of $3.32, significantly exceeding analyst estimates of $2.58. Revenue for the quarter totaled $3.96 billion, surpassing projections of $3.83 billion and marking a 17% increase year-over-year. Management highlighted the company’s increasing use of artificial intelligence (AI) to enhance customer experience and operational efficiency. Additionally, the board approved a quarterly dividend of $1.04 per share, reflecting a 16% year-over-year increase, with payment scheduled for April 18, 2025.
For fiscal year 2025, Intuit Inc. (NASDAQ:INTU) maintained a positive outlook, forecasting revenue between $18.16 billion and $18.35 billion, representing a 12-13% increase. Operating income is expected to grow between 28% and 30%, while diluted EPS is projected to range from $19.16 to $19.36, reflecting a 13-14% rise. The company also provided Q3 2025 guidance, estimating revenue between $7.55 billion and $7.60 billion, with EPS forecasted between $10.89 and $10.95.
On March 13, 2025, Mizuho Securities reiterated its Outperform rating on Intuit Inc. (NASDAQ:INTU), maintaining a price target of $765. Analysts noted that the stock is currently trading slightly below its Fair Value, with price targets ranging from $530 to $860. The reaffirmed confidence in the company followed a series of investor meetings with CEO Sasan Goodarzi, during which the strategic importance of Intuit’s AI-driven expert platform was emphasized. The discussions highlighted the company’s continued focus on innovation and the expanding role of artificial intelligence in enhancing its product offerings, reinforcing Intuit’s position as a top stock to buy according to Durable Capital Partners.
Parnassus Growth Equity Fund stated the following regarding Intuit Inc. (NASDAQ:INTU) in its Q3 2024 investor letter:
“Intuit Inc. (NASDAQ:INTU) shares fell despite the financial software company posting strong quarterly results. The company’s pricing-dependent long-term guidance concerned investors. However, we continue to believe Intuit’s customer growth and relevant platform will sustain its wide moat and long growth runway.”
6. Shift4 Payments, Inc. (NYSE:FOUR)
Number of Hedge Fund Holders as of Q4: 38
Durable Capital Partners’ Equity Stake: $532.48 Million
Shift4 Payments, Inc. (NYSE:FOUR) is a payment processing company headquartered in Allentown, Pennsylvania. Founded in 1999 by Jared Isaacman when he was just 16 years old, the company has expanded to serve over 200,000 businesses across industries such as retail, hospitality, leisure, and restaurants. The company specializes in innovative commerce solutions, offering both mobile payment software and hardware to streamline transactions for its clients.
On February 18, 2025, Shift4 Payments, Inc. (NYSE:FOUR) reported its fourth-quarter earnings for 2024, delivering results that exceeded market expectations. The company posted earnings per share (EPS) of $1.35, surpassing analysts’ estimates of $1.13. Revenue for the quarter reached $887 million, significantly outpacing the projected $406.93 million. Despite this strong performance, the company’s stock experienced an 8.87% drop in aftermarket trading, falling to $114.51 from its previous close of $121.28.
CEO Jared Isaacman emphasized Shift4’s dominance in key industries, stating that the company leads in hospitality, sports, and entertainment while ranking second in the restaurant sector. Additionally, President Carolyn Lauber highlighted the strategic significance of the Global Blue acquisition, describing it as a market-leading payment platform with a vast network of luxury brand partners worldwide. With a strong liquidity position and a current ratio of 2.98, Shift4 Payments, Inc. (NYSE:FOUR) is well-positioned to continue its growth trajectory, though market dynamics will play a crucial role in shaping its future performance.
Investors who acquired shares of Shift4 Payments, Inc. (NYSE:FOUR) over the past year are likely unfazed by the stock’s recent decline. Despite the downturn, the $11.3 million worth of shares purchased by insiders has appreciated significantly, now valued at $17.5 million. This increase indicates a strong return on their investment, reinforcing confidence in the company’s long-term potential. Shift4 Payments demonstrates strong growth potential, as evidenced by its impressive Q4 2024 earnings, which surpassed expectations, making it a good stock to buy.
5. Toast, Inc. (NYSE:TOST)
Number of Hedge Fund Holders as of Q4: 63
Durable Capital Partners’ Equity Stake: $562.94 Million
Toast, Inc. (NYSE:TOST), headquartered in Boston, Massachusetts, is a cloud-based restaurant management software company offering an integrated point-of-sale (POS) system designed for the food service industry. Operating on the Android platform, the company’s comprehensive management system includes devices such as the Flex terminal, Tap payment processor, Toast Hub, and receipt printer. Since its launch in March 2020, the company has expanded rapidly, serving a growing number of restaurant locations with its digital solutions tailored to streamline operations and enhance efficiency.
For the fourth quarter of 2024, Toast, Inc. (NYSE:TOST) reported strong financial performance, marking a record-breaking year for the company. As of December 31, 2024, annual recurring revenue (ARR) reached $1.6 billion, reflecting a 34% year-over-year increase. The total number of locations utilizing its platform grew by 26% to approximately 134,000, while gross payment volume (GPV) surged 25% to $42.2 billion. The company’s GAAP income from operations stood at $32 million for the quarter, a significant improvement from a $56 million loss in the prior year. Similarly, GAAP net income rose to $33 million, compared to a net loss of $36 million in the same period of 2023. Adjusted EBITDA soared to $111 million, nearly quadrupling from $29 million in the previous year’s quarter, demonstrating robust profitability.
For the full year 2024, Toast, Inc. (NYSE:TOST) maintained strong growth momentum, with GPV increasing 26% to $159.1 billion. The company’s subscription services and financial technology gross profit rose 34% to $1.4 billion and adjusted EBITDA jumped to $373 million from $61 million in 2023. Net cash from operating activities more than doubled to $360 million, while free cash flow surged to $306 million. Looking ahead to the first quarter of 2025, Toast anticipates continued strong performance, projecting non-GAAP gross profit between $385 million and $395 million and adjusted EBITDA in the range of $100 million to $110 million. With its expanding customer base and consistent financial improvements, Toast, Inc. (NYSE:TOST) is well-positioned for sustained growth in the restaurant technology sector.
4. Coupang, Inc. (NYSE:CPNG)
Number of Hedge Fund Holders as of Q4: 87
Durable Capital Partners’ Equity Stake: $629.42 Million
Based in Seattle, Washington, Coupang, Inc. (NYSE:CPNG) generates revenue primarily through its Product Commerce segment, which includes direct retail sales and marketplace fees, and its Developing Offerings, which encompass Coupang Eats, Coupang Play, Fintech, and Farfetch.
For the fourth quarter of 2024, Coupang, Inc. (NYSE:CPNG) reported total net revenues of $8 billion, marking a 21% year-over-year increase. Excluding Farfetch, revenue growth stood at 14% while gross profit surged by 48% year-over-year to $2.5 billion, with a gross profit margin of 31.3%, reflecting a 570-basis-point improvement. The company reported a net income of $131 million, while net income attributable to Coupang stockholders stood at $156 million. Diluted earnings per share (EPS) was $0.08, but it was adjusted to $0.04. The company’s adjusted EBITDA for the quarter was $421 million, with a 5.3% margin, increasing by 80 basis points year-over-year.
Segment-wise, the Product Commerce segment generated $6.9 billion in net revenue, reflecting a 9% year-over-year increase. Active customers in this segment grew 10% year-over-year, reaching 22.8 million. Gross profit from Product Commerce rose 31% year-over-year to $2.3 billion, with a gross profit margin of 32.7%. Product Commerce adjusted EBITDA stood at $539 million, improving by $95 million year-over-year, with a margin of 7.8%. Meanwhile, the Developing Offerings segment, which includes international operations, Coupang Eats, Play, Fintech, and Farfetch, saw net revenues of $1.1 billion, reflecting a 296% year-over-year increase. The Developing Offerings segment’s adjusted EBITDA remained negative at $118 million; however, this represented a $32 million year-over-year improvement, aided by a $30 million benefit from Farfetch’s consolidation.
Coupang, Inc. (NYSE:CPNG)’s continued revenue growth, margin expansion, and increasing customer base highlight its strong market position and potential for long-term profitability, making it fourth in the list of top stocks to buy according to Durable Capital Partners. Additionally, hedge fund participation increased, as 87 of the 1,009 hedge funds tracked by Insider Monkey had stakes in Coupang, Inc. (NYSE:CPNG) by the end of Q4 2024, collectively valued at nearly $4.75 billion, up from 56 funds in the previous quarter.
Baron Fifth Avenue Growth Fund stated the following regarding Coupang, Inc. (NYSE:CPNG) in its Q4 2024 investor letter:
“Shares of Coupang, Inc. (NYSE:CPNG), Korea’s largest e-commerce platform, corrected 10.5% in the fourth quarter (even though they finished 2024 up 33.9%). While the company delivered solid quarterly results with 27% year-on-year revenue growth with Farfetch and other initiative losses narrowing significantly, its product commerce EBITDA margin missed expectations due to a temporarily elevated spending on technology and automation. Sluggish domestic consumption in Korea, with the e-commerce market experiencing flattish to negative growth, and political uncertainty stemming from President Yoon’s declaration of martial law and subsequent impeachment, further weighed on the stock. Despite these short-term challenges, we maintain a positive outlook on Coupang’s long-term market share expansion and margin growth trajectory, and view Coupang as one of the most competitively advantaged e-commerce businesses globally, with significant runway for both revenue and earnings growth.”
3. HubSpot, Inc. (NYSE:HUBS)
Number of Hedge Fund Holders as of Q4: 73
Durable Capital Partners’ Equity Stake: $672.61 Million
HubSpot, Inc. (NYSE:HUBS) is an AI-driven customer platform that provides businesses with software, integrations, and resources to enhance marketing, sales, and customer service. Its connected ecosystem helps companies grow by streamlining customer interactions and optimizing business operations.
HubSpot, Inc. (NYSE:HUBS) generates most of its revenue from subscription fees, accounting for 97.7% of total earnings, while a smaller share comes from professional services and other sources. On March 12, Barclays upgraded HubSpot’s stock rating to Overweight from Equal Weight, maintaining a price target of $815, citing factors such as pricing adjustments, an increase in core customers, and improved performance comparisons.
For the fourth quarter of 2024, HubSpot, Inc. (NYSE:HUBS) reported total revenue of $703.2 million, reflecting a 21% year-over-year increase on a reported basis and a 20% increase in constant currency. Subscription revenue reached $687.3 million, growing by 21%, while professional services and other revenue totaled $15.9 million, up 36%. Over the full year 2024, the company recorded a total revenue of $2.63 billion, marking a 21% increase compared to 2023. Subscription revenue grew by 21% to $2.57 billion, while professional services and other revenue climbed 24% to $58 million.
CEO Yamini Rangan highlighted HubSpot’s transformation in 2024, emphasizing the integration of AI across its platform and its impact on customer value. She expressed confidence in the company’s strategy heading into 2025, positioning HubSpot as a leading AI-first customer platform for scaling businesses.
Looking ahead, HubSpot, Inc. (NYSE:HUBS) projects revenue for the first quarter of 2025 between $697 million and $699 million, a 13% year-over-year increase. Non-GAAP operating income is projected between $98 million and $99 million, with an operating profit margin of 14%. The company expects earnings per share to range from $1.74 to $1.76, assuming approximately 54.1 million weighted average diluted shares outstanding.
HubSpot’s strong financial performance, continued revenue growth, and strategic investment in AI reinforce its position as a key player in the customer relationship management industry.
2. Duolingo, Inc. (NASDAQ:DUOL)
Number of Hedge Fund Holders as of Q4: 52
Durable Capital Partners’ Equity Stake: $751.98 Million
Duolingo, Inc. (NASDAQ:DUOL) is a US-based educational technology company specializing in learning applications and language certification. The platform offers courses in 43 languages, including widely spoken ones like English, French, and Spanish, as well as less common languages such as Welsh and Irish. In addition to language learning, Duolingo has expanded its offerings to include courses in music and math.
In the fourth quarter, Duolingo, Inc. (NASDAQ:DUOL) experienced a sharp decline in stock value after reporting earnings that fell short of market expectations. The company posted earnings of $0.28 per share on revenue of $209.6 million, missing analysts’ estimates of $0.48 per share, despite surpassing the revenue forecast of $205.5 million. Comparatively, in the same period the previous year, Duolingo earned $0.26 per share on revenue of $151 million.
Despite the earnings miss, the company outperformed projections in subscriber and user growth. By the end of 2024, Duolingo, Inc. (NASDAQ:DUOL) had 9.5 million paying subscribers, reflecting a 43% year-over-year increase. It also reported a rise in engagement, with 40.5 million daily active users and 116.7 million monthly active users, marking increases of 51% and 32%, respectively.
Looking ahead, Duolingo, Inc. (NASDAQ:DUOL) anticipates strong revenue growth. The company projects first-quarter revenue of approximately $222 million, representing a 32.5% increase compared to the same period last year. For the full year, sales are expected to grow by 30%, reaching an estimated $970.5 million.
Meanwhile, Jefferies analyst John Colantuoni adjusted his price target for Duolingo’s stock from $370 to $360 while maintaining a Hold rating. He noted that while the company demonstrated impressive revenue growth, a weaker-than-expected margin outlook—attributed to investments in artificial intelligence and marketing during the first half of the year—raised concerns. Additionally, early signs indicate that Duolingo’s new Video Call feature is driving increased adoption of its premium Max subscription, but uncertainty remains regarding short-term margin performance.
Baron Opportunity Fund stated the following regarding Duolingo, Inc. (NASDAQ:DUOL) in its Q3 2024 investor letter:
“Duolingo, Inc. (NASDAQ:DUOL) is the world’s leading language learning app with over 100 million monthly active users, known for its effective gamification and high engagement. After monitoring the company over the past year and a half, we developed conviction to buy the stock for a few reasons. The company has maintained premium levels of user growth (daily average user growth of over 50%) and revenue growth (40%-plus), executed well against their product roadmap, gained early traction with new functionality, and maintained impressive 40%-plus incremental margins. We view the founder-led management team as best in class, technically capable (CEO and CTO both earned PhDs in machine learning from Carnegie Mellon University), and product focused. We initiated a position in the quarter as the share price fell to what we deemed attractive levels from a long-term valuation perspective, coupled with material catalysts on the horizon, particularly the broader launch of AI functionality (branded “Max”) that enables users to have real-time conversations with AI based characters and a substantial improvement of the company’s Advanced English offering. We believe that these two initiatives take Duolingo from more of a hobby app to a company that can address the broader market of 1.8 billion people learning English today. As these products roll-out in the coming quarters, we believe their adoption should drive the realization of higher pricing, faster revenue growth, lower churn, and continued margin improvement. We also believe there is additional optionality in newer products such as math and music, which are earlier in their product evolution.”
1. RBC Bearings Incorporated (NYSE:RBC)
Number of Hedge Fund Holders as of Q4: 22
Durable Capital Partners’ Equity Stake: $787.14 Million
A manufacturer and distributor of precision bearings and related products used in aircraft and mechanical systems, RBC Bearings Incorporated (NYSE:RBC)’s product portfolio includes plain bearings, roller bearings, ball bearings, and engineered components. For the third quarter of fiscal 2025, which ended on December 28, 2024, the company reported adjusted earnings of $2.34 per share, surpassing the consensus estimate of $2.20. This marks a 26.5% increase compared to the previous year’s adjusted earnings of $1.85 per share, driven by revenue growth.
The company generated $394.4 million in revenue for the quarter, reflecting a 5.5% year-over-year increase, though slightly below the consensus estimate of $401 million. At the end of the quarter, RBC Bearings Incorporated (NYSE:RBC) reported a backlog of $896.5 million, up from $864 million at the end of the second quarter of fiscal 2025.
RBC Bearings Incorporated (NYSE:RBC) operates in two primary segments: Aerospace/Defense and Industrial. In the third quarter, Industrial segment revenue reached $143.2 million, accounting for 63.7% of total revenue and reflecting a 2.7% year-over-year increase. The Aerospace/Defense segment contributed $149.1 million, or 36.3% of total revenue, representing a 10.8% increase from the previous year.
Looking ahead, the company projects fiscal fourth-quarter net sales between $434 million and $444 million, signaling a year-over-year growth of 4.9% to 7.3% compared to $413.7 million in the same period last year.
Overall, RBC Bearings Incorporated (NYSE:RBC) ranks first on our list of top 10 stocks to buy according to Durable Capital Partners. While we acknowledge the potential for RBC as an investment, our conviction lies in the belief that some 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 RBC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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