Ultimate Guide to Find the Next Nvidia

If you're lamenting a missed opportunity with Nvidia(NVDA), which has surged over 2,000% in the past five years, don't be too hard on yourself. Remember, Nvidia isn't the only star in the investment universe. There are numerous other stocks, known as multi-baggers, that have also significantly multiplied their original value—like the quadrupling four-baggers or the quintupling five-baggers.

For those eager to discover the next big multi-bagger, there’s promising news. The team at Jenga Investment Partners has done heavy lifting for you. They've meticulously analyzed a decade of market data, starting from 2012, to pinpoint characteristics shared by top-performing companies.

From their study of 446 stocks that soared more than 1,000% during that time, they've revealed six key insights that distinguish these market leaders, offering a valuable roadmap for investors looking to replicate such success.

6 Key Insights to Find the Next Nvidia

Growth Isn't the Only King: Contrary to popular belief, explosive growth isn't a prerequisite for outstanding performance. Surprisingly, about 72% of the companies (279 out of 446) experienced less than 20% annual revenue growth over ten years, and a third of these companies saw both revenue and operating profits grow at rates below 20% annually. This challenges the conventional wisdom that higher growth rates are essential for significant success.

Margins Take Precedence: Interestingly, 367 out of 446 companies were operationally profitable back in 2012, challenging the notion that only fast-growing, unprofitable companies can be market leaders. Margin expansion, or the trend of earning more than what is spent, proved crucial for profitability. In 2012, 48% of these companies had an earnings before interest and taxes (EBIT) margin of 10%, which impressively rose to 85% by 2021.

The Reality of Valuation Inflation: While buying an excellent company at a low valuation is ideal, many top-performing stocks initially had significant multiples. A whopping 91% saw their enterprise-value-to-revenue (EV/R) multiples increase, and 72% experienced expansion in their enterprise-value-to-EBIT (EV/EBIT) multiples. However, banking solely on valuation expansion for investment decisions is risky, especially in overheated markets.

The Advantage of Being Small: It is much easier for a small company to grow from $10 million to $100 million than for a giant to expand from $100 billion to $1 trillion. Thanks to the leverage of smaller bases and more expansive growth opportunities, 63% of the market's significant gainers were "nano caps", a substantial figure given that they made up just 46.5% of the broader market in 2012.

Geographical Standouts: Certain regions have shown remarkable stock performances over the decade. Countries like India, Japan, Sweden, Germany, and Israel led the way. Notably, Sweden, with its comparatively smaller market size, had 20 companies delivering returns over 1,000%. While Sweden’s group of overachievers might be smaller than China’s 34 high-flyers, on a relative scale, Sweden punches well above its weight.

Sectoral Hotspots: The tech, healthcare, and materials sectors are where much of the action is, outperforming relative to their presence in public markets. Conversely, the energy, utilities, and real estate sectors have not kept pace in this dynamic race.

This analysis provides insightful guidelines for investors looking to identify potential high performers in various markets and sectors, challenging some traditional investment assumptions along the way.

3 Stocks That Could be the Next Nvidia

These stocks typically have strong ties to the semiconductor and AI industries. As demand for advanced computing solutions—from data centers to gaming and machine learning models—continues to rise, the quest for the next market leaders becomes more urgent. With the stock market priming for the next bull cycle, these companies are poised at the cutting edge, leading the charge in refining modern technology.

Now, let's explore the promising up-and-coming stocks that could be the next Nvidia!

Advanced Micro Devices (AMD)

Overview: AMD is recognized for its strong performance in the semiconductor industry, particularly in GPUs and CPUs. It has been making significant strides in AI technology.

Recent Performance: AMD shares have seen substantial growth, with a 30% increase year-to-date in 2024. The company's involvement in AI technology and its competitive positioning against Nvidia make it a strong candidate.

Marvell Technology (MRVL)

Overview: Marvell(MRVL) is known for its semiconductor products that serve data storage, communications, and consumer semiconductor markets. It's increasingly focusing on AI capabilities, particularly in data centers.

Growth Factors: Marvell's involvement in providing custom silicon solutions to major cloud companies and its strategic positioning in the AI market contribute to its potential. The stock rose by 53.1% over the past year, reflecting its growing influence in AI sector.

Micron Technology (MU)

Overview: Micron(MU) is a leader in memory and storage solutions and is poised to benefit significantly from the AI-driven demand for high-bandwidth memory.

Market Position: The company's stock has increased by 58.9% over the past year. Micron's role in AI, where its memory solutions are critical, positions it well for future growth, especially as AI applications continue to expand.

Stock Research on the Go. Anywhere, Anytime

An AI-driven stock research platform is ready for you. Enjoy instant and insightful stock analysis while investing smartly. You'll also have access to daily top stock recommendations and AI financial chatbot that make it easier than ever to choose your stock, manage auto-investments, view price charts, and make conversions with zero fees. Make an account for free and join millions of traders and investors on the stock market.