Hidden Gem Stocks We Love at the End of the Year
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What hidden gem stocks are discussed for the end of 2025?
Do you still have some items to buy on your holiday shopping list? What about your holiday stock shopping list?
Today is Thursday, December 18th. Welcome to Motley Fool Money. I'm your host today, Jason Hall. And I'm joined by Motley Fool analysts Dan Kaplinger and John Quast to discuss some of our favorite hidden gem stocks that look like great buys as 2025 comes to a close. Get ready for a fun Foolish Roundtable discussion. If I say hidden gems, you probably think I'm talking about small esoteric companies that nobody's ever heard of, right? That's true, but it's not the only place that you can find hidden gems. And on today's show, we have three giants and their respective industries. Airbnb is one of those dominant companies. John, you brought it to the table. It's a name that people think of when describing the entire short-term stays industry now.
It's become the verb, too. Since the first day of trading post-IPO, the stock's up almost double, but it peaked a month later, and it's way down since then, in early 2021. John, why is this on your list as a hidden gem stock worth buying?
Let me give you my elevator pitch here for Airbnb to start it off. People aren't giving up this short-term rental model. Airbnb is the dominant player in this space. I think it has a brand moat, and it's printing cash like few companies do. Eventually, these factors should make Airbnb stock a winner. I know it hasn't performed great in recent years, but I think that it will eventually catch up. Let's talk about one of the traits I like of a hidden gem, and that's reasonable growth in an expanding market. Airbnb is growing its revenue at a double-digit pace, 10% in the most recent quarter, expecting high single-digit in the upcoming quarter. It's not red hot, but that is reasonable growth. There's market research pointing to ongoing growth in this space as a whole.
And AirDNA is one of the third parties that puts out reports on this. And what's so interesting to me is that AirDNA has showed that there are rental property owners who are willing to put... they're listing on multiple platforms. That's the majority. But if you're only listing exclusively, you're not listing with Airbnb's competitors. You're listing on Airbnb exclusively. It's either Airbnb alone or Airbnb Plus, but never without Airbnb. That, to me, shows the moat here. One of the reasons I like it in this expanding market.
There's more you like, too.
Yeah, for sure. I also like companies that exhibit this trait of having this relentless drive and curiosity to finding new business opportunities. Airbnb is definitely one of those. It's invested $200 million this year in experiences and services. When you look at its bookings in the third quarter, half weren't attached to a place to stay. I'm talking about its experiences and services. People stay in a new place, and maybe they'll book an experience on top of that, but half of the experiences now don't have a place attached to it, so they're doing it exclusively for the experience. That's an interesting trend. The company investing in that seems to be paying off. And management's also talked about, hey, we're going to launch a couple new businesses ideas every single year.
This is throwing spaghetti at the wall, for sure. But it has extra cash on hand, so it can't afford to invest in these new ideas. You look at the whole thing, it trades at 18 times its free cash flow. That's a valuation I can get behind. It's buying back shares, and the share count is coming down. And it's investing in new opportunities. And here's the thing, its competitive position does afford investors the luxury of patience. If it was being out-competed, if it was burning cash, you wouldn't have the ability to be very patient here. But because it is so strong, you can be patient while it waits for some of these new ideas to work out.
John, I'm a little less convinced that optionality is going to lead to that next leg of growth. But the core business is a wonderful business. And you mentioned the valuation.
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