3 Hot Stocks That Doubled Last Year That Still Have Room to Run

Legendary investor Peter Lynch is one of the most successful and quotable investing icons out there. One of his most often cited tidbits is "Sometimes, the best stock to buy is one you already own." That is certainly the case for companies that have already proven they have what it takes to flourish, as past performance is one of the best indicators of future success.

On this clip from Motley Fool Live, recorded on Feb. 24, "The Wrap" host Jason Hall and Fool.com contributors Danny Vena and Jamal Carnette offer up three stocks that have doubled over the past year that still have fuel in the tank.

Jamal Carnette: I think the question is, a hot stock that doubled last year, so it has room to run. I'm assuming last year was 2020.

Jason Hall: 2020, any time over the past year really even lets you go back 13 months and four days if you wanted to.

Carnette: I'm going to say I'm right there with Magnite (MGNI 2.94%) through 2021, but I'm going to default to the double last year. It's the biggest holding in my portfolio. Matt and I will probably covering it in a lot of different angles. Just because of the tremendous growth, it's become a large part. At one point, I owned 5,000 shares, but certainly had to take some off the table.

But we'll talk about it at earnings, but the potential and the opportunity here in connected TV as people are going from linear to connected TV and meeting that advertising and having that scalability for connected TV advertising is just a unique opportunity and I believe currently it's a $6 billion market cap. I certainly see that expanding as this long-term story plays out.

Hall: Yeah. I think you're right. It's actually become my largest individual stock holding. I'm right there with you and I have that same compelling belief that it's going to continue to deliver. Danny Vena, I know you are certainly a proponent of the "winners continue to win" theory of investing. What's your favorite hot growth stock that doubled last year, still has plenty of room to run?

Danny Vena: It changes from minute to minute and day to day and week to week. But for this instance, I'm going to go with Twilio (TWLO 1.08%).

A lot of folks may not be familiar with Twilio. Twilio is a company that certainly not a household name. However, if you have ever gotten a real-time message from your food delivery service or your ride share provider or you got a text from within an app that allowed you to change your password or you had in-app chats with customer service, there's a pretty good chance that these experiences were powered by Twilio's technology. Essentially what the company did, is it created the infrastructure to communicate with customers and then used it as a platform as a service (PaaS) for other companies to be able to communicate with their customers.

Now, this is a stock that has been growing like a weed. It was up over 200% over the past 12 months. But there's a good reason for that. If you look at just the most recent results, the fourth quarter of 2020, their revenue increased 65% year over year. This was almost $100 million over what the company's guidance was. So easily smashed management's expectations, easily surpassed analyst consensus estimates. They delivered an adjusted earnings per share, which was not something that was expected.

One of the things that I see is, as we lean more and more into cloud-based computing, whether it's software as a service (SaaS), platform as a service, I think we're going to see a lot more need, particularly within apps and software packages for companies to be able to communicate with their customers, and Twilio offers all that and more. I think there's a good reason that the stock was up as high as it was over the last year, and I think there's plenty of growth left.

Hall: Yeah, I think you're right.

I really struggled with this one, too, just to identify that one that I think is going to be big. But it's a good problem to have here. I think a really interesting one that folks should be looking at right now, it's still a really small company that has a lot of things in its favor but it's also easy to overlook, is Boston Omaha (BOC -0.39%). Went up about a 125% over the past 12 months, and by far, the vast majority of that was in the past six months. In the past six months, the stock is up a 171%. In other words, the first half of the year was actually down a little bit.

This is a business that's really interesting for a couple of reasons. First of all, they're not in any of the buzz-wordy stuff. This isn't a big cloud play. This isn't a big software tech company. This is old school capital allocation at its finest. This has taken some really smart people. It's the two co-founders that are running this business, who are looking for opportunities to invest cash from the business from its operations, into new entities to grow a larger business over time that's going to generate more per-share cash flow that they can rinse and repeat with.

I expect this is going to be a really lumpy business because these guys have massive stake, massive skin in the game. Essentially, their entire compensation is aligned with what is best for common shareholders, because that's where their wealth is going to come from as far as creating shareholder value over time.

That means they're not going to be chasing the quarterly analyst estimates to make estimates happy and to hit those comp plan numbers for share prices, that will kick off whatever their comp is. So I think that's really important.

The downside again, it's going to be lumpy because when there are opportunities for them to reinvest that capital, they're going to take those opportunities and they're going to act quickly. When there's not opportunity, they could be sitting on capital for a while and the market is going to punish the company in the short term. We've seen that with Brookfield Infrastructure (BIP -0.47%), for example. Over the past year, this is a stock that's generally underperformed because management hasn't gone out and made a lot of deployments to grow revenues over time, so the market is punishing them even though it's a business that has multiple decades of success of capital allocation in a really, really smart way.

So I think Boston Omaha is going to be the same thing. It's going to be lumpy. But if these guys continue to do what they've proven that they can do, it's going to be an incredible investment.