Best New Companies to Invest In

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Determining which companies to invest in is important as you build your stock portfolio, and many investors believe they can do better by looking for new companies with serious growth potential. But when you want to invest in new companies, the process gets a little more complicated than it is when investing in companies with a proven track record. How do you choose which stocks to invest in and why? Benzinga did some research and found interesting and exciting new companies that may suit your investment needs.

5 Best New Companies to Invest In

When investing in new companies, you need information. What is the company about, what is its history, what venture capital funding has it received, and where is it attempting to go? Diversification is key when investing in new companies, so Benzinga has included a wide range of companies on the list below.

1. Applied Materials Inc. (NASDAQ: AMAT)

Applied Materials is regarded as a promising investment opportunity in the semiconductor industry. Despite recent weakness in the memory market, Applied Materials is well-positioned to benefit from high-growth technology markets such as the Internet of Things, wireless communications and next-generation automobiles. With a current stock price of $116 and a five-year forecast of $216, long-term investors have the potential to see significant returns. In addition to growth opportunities, Applied Materials recently raised its dividends by 23.1% and authorized a share buyback program.

While the stock has faced challenges because of cyclical downturns, the company's strong market position and diversified product offerings make it an attractive investment for those looking to capitalize on the semiconductor industry’s long-term growth potential.

2. NVIDIA Corp. (NASDAQ: NVDA)

Nvidia is a renowned multinational technology company that is highly regarded for its innovative high-end graphic processing units (GPUs) and systems on a chip (SoCs) units. The company has a strong presence in the gaming and professional markets as well as the mobile computing and automotive markets. Currently priced at $282 with a market capitalization of $705 billion, Nvidia has achieved remarkable year-to-date returns of almost 92%. The company's forecasted growth trajectory is expected to continue, with a projected stock price of up to $496 by May 2024.

The increasing demand for GPUs to power artificial intelligence and machine learning models coupled with supply chain shortages continues to drive Nvidia's success in the market. With a focus on high-growth technology markets like wireless communications and the Internet of Things, Nvidia is well-positioned to remain a top player in the semiconductor industry. Despite some recent setbacks, including the failed acquisition of Arms Ltd.,

Nvidia is an exciting investment opportunity for those looking to leverage the long-term growth potential of the technology sector.

3. Atlassian Corp. (NASDAQ: TEAM)

This Australian-based tech company is catching the eye of many investors as it keeps its focus on innovation and staying ahead of the crowd. Atlassian develops management software for businesses such as Trello and Jira. The company has more than 242,000 clients.

Recently, the company moved all its operations to the cloud and will disconnect physical connections by 2024. Doing so will allow it to focus on research and development (R&D), which in some investors’ minds makes it an exciting stock option. The company’s letter to shareholders states that in the fourth quarter of 2022, it hired an additional 634 employees, mostly in R&D. The company is projecting that it will have $10 billion or more in revenue if things stay on the present course. The stock price had a high of $441.59 in November 2021 and currently sits at $135.

If you are in the market for a company to invest in that is on track to meet expectations but with a stock price that hasn’t yet caught up with its ambitions, this could be one to look at.

4. Devon Energy Corp. (NYSE: DVN)

Devon Energy Corp. is an oil and gas exploration and production company with headquarters in Oklahoma City. It uses five core areas to find and produce its products — Delaware Basin, Eagle Ford, Anadarko Basin, Powder River Basin and Williston Basin. The company is dedicated to environmentally responsible production of oil and gas.

Since the war between Russia and Ukraine, the company’s oil and gas are in demand, which translates to higher stock prices. The company’s stock price started the year at about $45 and currently sits at $47.52.

If you are looking for a new company that may experience stock gains, this one might be right for you.

5. Upstart Holdings Inc. (NASDAQ: UPST)

This company was started by former Google employees and uses artificial intelligence (AI) to make bank loans easier for consumers and less risky for banks. Instead of relying on credit scores, Upstart uses AI that measures the true risk of a loan. This practice not only reduces the borrowing costs for consumers but also the lending costs for lenders.

The company went public in 2020 and initially saw a 1,500% increase in shares and peaked at $379.68 but then lost almost all of it. Today, the stock sits at $16.39. This large gap in the highs and current market price could simply be from early investors and venture capital firms exiting, but it does not mean there is no further upside in the future.

If you are someone who believes that AI and fairer loan practices are something that will grow as more Americans are turning to credit, you might consider investing in this one.

How To Choose New Stocks to Invest in

When making a decision about which new stocks you want to invest in, these characteristics can help guide your decision.

Initial Pricing

Pay close attention to the initial pricing of the stock and determine whether it fits your investment goals. For instance, if you are excited about a company, make sure you can afford enough stock at the initial price to make investing in it worth your while. Also, for new growth stocks, you should aim for a margin of safety between 15% and 30% in case something unexpected comes up such as a larger player entering the market or the company faces an unforeseen challenge.

Company Outlook

Company outlook is a good indicator of whether or not a stock would be a good investment for you. For instance, if you believe in what the company is doing well despite the fact that the stock isn’t taking off, it may make sense for you to invest.

Stock Drop

At one point or another, most stock prices will experience a drop, but it pays to understand why the stock dropped. For instance, did the stock drop because the company was unable to get parts because of the supply chain, or did it not meet its expected quarterly gross margins?

Stock Rally

Another thing to look for is when the stock rallies. What’s the reason behind it? Is it because the company just received a cash infusion? That could be a great reason to invest. Or is it based on unfounded rumors? In that case, the rally may be short-lived, and you could end up with overpriced stock.

Understand It 

When investing in stocks, it’s important to understand what the company does and how it does it. For instance, does the company have a competitive edge? Warren Buffett calls this a moat, and it means that the company has an edge that makes it stand out from its competitors. Value stocks and growth stocks are other important distinctions to make when making an investment decision because of their different risk and return profiles. Value stocks tend to have lower price-to-earnings ratios and higher dividend yields, indicating that the company may be undervalued by the market and vice versa for growth stocks.

Benefits of Investing in New Stocks

You can gain benefits by investing in new companies. Here are some to consider:

• Potential growth: One of the biggest benefits of investing in the stock of new companies is growth potential. Growth may not be consistent as the new company establishes itself, so you will have to be patient until it does.
• Price: New company stocks are typically less expensive than established stocks, and this is a great reason to look at them. Just be sure to do your research, establish a sound entry price and only invest within your margin of safety.
• No leverage: When a company is new, investors can often purchase large amounts of shares without having to use leverage. This makes it possible to become a large shareholder in a company you are excited about.
• Upward trends: When purchasing new stocks, the odds are that the stock will go up as the company becomes more well-known and establishes itself. In other words, you could get in on the ground floor of a company.

Compare Trading Platforms for Investing in New Companies

When purchasing stocks, you will need a trading platform to conduct business. Benzinga offers insights and reviews on the most popular brokerages.

Emerging New Companies To Invest in for a Diversified Portfolio

When building a stock portfolio, it is crucial to carefully select companies to invest in. Some investors believe that seeking out new companies with significant growth potential can yield better results.

Different investors have different needs and risks they are comfortable taking. Some of the best new companies to invest in can be found by doing thorough research into each company’s business model and financials, understanding the market opportunity they are addressing and staying informed on industry trends.

Frequently Asked Questions

Best New Companies Methodology

Benzinga conducted research and analysis to identify the best new companies to invest in. It evaluated each company's potential for growth, financial performance, industry outlook, diversification and company background and fundamentals. Investing in new companies carries risks, and investors should conduct their own due diligence and consult with financial advisers before making any investment decisions. The information provided in the article is for informational purposes only and should not be considered as financial or investment advice.