There are plenty of investors out there dreaming of hitting a home run with stocks in their portfolio (in this case a home run is defined as a stock that doubles or more after buying shares) and doing so in less time than the market average. The broader market averages an annualized return of roughly 10% over time, which means doubling your money would take roughly seven years on average.
These “home run” investment opportunities are hard to find, but they are out there and don’t require investors to take overly bold risks. Three Motley Fool contributors were asked to offer up suggestions on potential home run growth stocks and landed on Meta Platforms (NASDAQ: META), Nu Holdings (NYSE: NU), and SentinelOne (NYSE: S). All three have 100% investment upside moving forward.
Here is what you need to know about each.
Investing in companies with high switching costs is a great way to double your money
Jake Lerch (Meta Platforms): For investors looking to double their money, Meta Platforms has shown its potential to do so many times over. Just in the past 18 months or so, Meta’s shares have more than tripled in value. That’s because Meta has become one of the best companies in the world at converting revenue into profits and profits into shareholder returns.
Over the last 12 months, Meta generated a staggering $143 billion in revenue. Of that $143 billion, the company recorded $46 billion in net income — a 32% profit margin. Meta used some of that net income to strategically repurchase $25 billion worth of its stock in the last year, effectively reducing its shares outstanding by 1.4%. These buybacks bolster the value of the remaining shares in the market. Along with stock price appreciation, Meta now also pays a quarterly dividend, a move that diversifies its shareholder returns and enhances the attractiveness of its stock to a broader investor base.
Given the scale of its business — Meta’s user base is enormous, with over 3.2 billion daily active people using its platform — you would think that continued growth would slow. However, the company remains well-positioned to keep the revenue stream growing and profits going upward. One reason is that its platforms (Facebook, Instagram, and WhatsApp) benefit from elevated switching costs. Social media platforms have high switching costs because many users spend years — even decades — fine-tuning their preferences in these social media networks. They follow the feeds of family, friends, acquaintances, and celebrities; they seek out hobbyist communities and local businesses.
Recreating that established network elsewhere is tough. This can be a long process and most people aren’t willing to start over from scratch. That gives the established network an edge and ensures Meta is likely here to stay. For investors looking to double their money, that gives Meta an advantage it its growth efforts.
Growth investors need to stop overlooking this Brazilian fintech
Will Healy (Nu Holdings): This Latin American digital bank stock should at least double in value in the next few years, and not just because it is up by more than 80% over the last year.
Admittedly, the NuBank parent is not on the radar of most American investors. Although Warren Buffett’s team at Berkshire Hathaway holds a position, the company is largely unknown in the U.S., and winning with the stock requires investors to understand a different finance culture.
Unlike the U.S., Latin America remains a primarily cash-based society where hundreds of millions of adults lack a bank account or credit card. NuBank, which is the largest digital banking platform outside of Asia, is changing that. In one year, nearly 6 million Brazilians obtained their first credit card through Nu, adding them to the credit market. Nu just surpassed 100 million customers. As of the end of the first quarter of 2024, 92 million of those customers were in Brazil, which constitutes about 54% of the country’s adult population.
To maintain its rapid growth, Nu has expanded to Mexico and Colombia. The company has over 900,000 Colombian customers. Also, it added 1.5 million customers in Mexico in Q1 alone, taking its total to over 6.6 million. Such successes indicate its business model works in more than one country.
Naturally, the financials reflect this growth. Revenue was $2.7 billion in Q1, a 69% yearly increase. Operating expenses grew by only 48%, allowing net income to rise to $379 million, up from $142 million in the year-ago quarter.
Moreover, with the aforementioned gain over the last year, the fintech stock has come back from a poorly timed initial public offering in late 2021.
NU data by YCharts
Despite Nu’s rising stock price, investors are likely not too late. Its P/E ratio is about 45, a low level considering its massive growth. Additionally, since it appears to be repeating its success in Brazil in other countries, doubling its stock price could be just the beginning for Nu Holdings.
SentinelOne’s small size but bleeding-edge technology make it a wise bet for a double
Justin Pope (SentinelOne): Cybersecurity stock SentinelOne was a pretty easy choice. Cybersecurity is vital to enterprises and will arguably become even more important as artificial intelligence (AI) and other technology draw more companies to the cloud. According to research by Spherical Insights, the global cybersecurity market will grow by double-digit percentages annually to a $501 billion market by 2030. Today, SentinelOne’s trailing-12-month revenue is just $621 million, not even a percent of that.
How will SentinelOne make its presence felt? Well, it’s already starting to. SentinelOne uses AI to run its security platform. It proactively hunts for potential threats and often addresses them before they become an issue. Multiple third-party companies and testing agencies have praised SentinelOne’s technology. The company has also aggressively expanded outside its core endpoint security market, launching products for securing data warehousing, cloud, and identity. It’s also launching generative AI features to enhance its existing products.
The new products are helping fuel some of the best revenue growth you’ll find on Wall Street. Revenue grew 38% year over year last quarter, and SentinelOne’s profit margins are rapidly improving and headed toward profitability as the business grows.
S Free Cash Flow (% of Quarterly Revenues) data by YCharts
At the end of the day, SentinelOne is a small (but cutting-edge) player in a huge market. The company is worth “just” $6 billion in enterprise value and trades at its lowest valuation since going public. Strong revenue growth, an advanced, AI-powered product, and eventual profits should boost the stock to a potential double or more from today’s levels. It’s impossible to predict when it will happen, but it’s clear that there is much room to go up from here. That could mean big things for investors’ portfolios.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jake Lerch has no position in any of the stocks mentioned. Justin Pope has positions in SentinelOne. Will Healy has positions in Berkshire Hathaway and Nu Holdings. The Motley Fool has positions in and recommends Berkshire Hathaway and Meta Platforms. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
