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Being young certainly has its advantages, not least of which is the miracle of compound interest, which Albert Einstein purportedly called the “eighth wonder of the world.” Even better than compound interest? The internal compounding of leading growth companies. By buying a top growth stock early in its corporate life and holding for many years, internal compounding can yield market-trouncing returns, making you potentially hundreds or even thousands of times your money.

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Of course, top-quality growth stocks don’t often look “cheap,” and in today’s frothy market, many trade at very high valuations. Many readers know that I’ve been skeptical of certain expensive stocks, including electric vehicle makers, due to the capital intensity and low margins of the auto business, online gambling stocks and cannabis companies due to regulation and competition, and even some pockets of technology, which are otherwise good businesses but have just gotten over-extended.

Yet if a company has a leading product, a developing economic moat, and a big enough market opportunity, investors shouldn’t hesitate to pounce. That’s why the following growth all-stars look like they could be real-deal life-changing stocks in the making, despite their pricey-looking valuations today.

A young man in a suit is rained on with dollar bills against a red background.

CrowdStrike

It’s no secret that cyberattacks have been, and will continue to be, on the rise. This is especially true now that the work-from-home trend has broken down the corporate perimeter and forced companies to guard not just their core data centers but also every “endpoint” device used by every employee.

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That’s where CrowdStrike (NASDAQ: CRWD) shines, with a novel solution that combines artificial intelligence and cloud computing in a leading endpoint protection solution. Though the cybersecurity market is fragmented and competitive, it appears CrowdStrike may have a winning formula on its hands that could eventually dominate the industry. That’s why if you’re young, paying a hefty 43 times sales for this high-growth stock might look very smart a decade or more down the road.

Like so many start-ups that were born in the cloud, CrowdStrike has a unique model drawn from a clean sheet of paper that capitalizes on the benefits of cloud computing and AI to enhance cybersecurity. Its lightweight Falcon agent can be deployed on any enterprise endpoint and sends information back to CrowdStrike’s centralized Threat Graph. Amalgamating data in real time and using artificial intelligence allows the Threat Graph to constantly hone its algorithms, improving CrowdStrike’s solution as it gains more and more customers in a positive network effect.

© Getty Images An illuminated lock icon in blue against a black background.

CrowdStrike’s recent quarterly growth of 84% and increasing market share appears to be proof-points its solution is working. In 2019, the company leapt from ninth place in the endpoint security market to fourth place. What’s even more encouraging is that CrowdStrike still garnered only 5.8% of the endpoint market after that jump, while the three legacy vendors ahead of it each lost share. Not only should CrowdStrike keep gaining share in a fragmented market that itself is growing, but CrowdStrike could also use its strong positioning in endpoints to grow in other aspects of cybersecurity. Last week the company acquired identity protection company Preempt Security for $96 million, adding Zero Trust identity protection to its arsenal and expanding its addressable market.

Disrupting the large, important, and growing cybersecurity market is an opportunity worth paying up for, which is why CrowdStrike makes this list.

© Getty Images Sea Limited could go on to rule Southeast Asian e-commerce. Young woman on her phone smiles and holds a cardboard box package.

Sea Limited

If cybersecurity has gotten an acceleration amid the COVID-19 pandemic, so have mobile video games, e-commerce, and digital payments. What if I were to tell you that there’s a company that possesses terrific businesses in each of those three segments? And what if I were to tell you this company operates in a large but under-penetrated part of the world? Better yet, what if I told you its founder and CEO was a highly invested owner-operator, who also had the backing of Chinese internet giant Tencent (OTC: TCEHY)?

That’s what you get with Sea Limited (NYSE: SE), which in the past five years has grown from a small game distributor to the leading gaming and e-commerce player in Southeast Asia. Sea Limited’s Garena video game distribution business got its first big break in in 2010 when Tencent-owned Riot games made Garena the exclusive distributor of games in the region. Garena then went on to develop its first in-house game, Free Fire, in 2017, which went on to be a massive international hit on the company’s very first try. Three years later, Garena continues to grow, hitting a new record high for monthly paying users while exceeding 100 million daily active users for the first time in July. Free Fire was also the highest-grossing mobile game in both Southeast Asia as well as Latin America in the second quarter.

However, it’s really the company’s Shopee e-commerce platform that could bring the biggest upside. That segment’s adjusted revenue grew a whopping 188% last quarter, surpassing rivals in the region to become the leading e-commerce app by downloads, time spent, and average monthly active users. However, there’s still a lot of growth to be had; Southeast Asia has a population of roughly 600 million, but only about 360 million are internet users, and of those, less than half made an online purchase last year.

Finally, Sea is using its leading internet platforms to boost usage of its SeaMoney digital payments solution. While SeaMoney is a small contributor to revenue thus far, its revenue grew 325% last quarter, as Shopee users increasingly used the option to make payments.

Oh, and by the way, Sea Limited just launched Shopee in Brazil in late 2019, giving it the potential to challenge South American leader MercadoLibre (NASDAQ: MELI) for e-commerce and digital payments supremacy in Latin America, a growing geography with similar population numbers to that of Southeast Asia.

A proven management team combined with such an open-ended growth opportunity means that even at 23 times sales and a $73 billion market cap, young investors scooping up Sea Limited today could find themselves very happy a decade out.

© Getty Images Hands hold a package of two plant-based meat patties over a salad bowl.

Beyond Meat

Finally, plant-based meat leader Beyond Meat (NASDAQ: BYND) has seen its stock rise 105% this year, which may lead some to think the stock has gotten ahead of itself. While anything can happen in the near term, and growth darlings like Beyond can be volatile, long-term Foolish investors shouldn’t sweat the small stuff and should rather stay focused on the bigger opportunity.

The global meat industry is worth $1.4 trillion, and plant-based meat occupied less than 1% of that total last year. Moreover, Beyond, under founder and CEO Ethan Brown, has been an innovative leader, not only with its impressive product R&D, but also with savvy marketing, making the ingenious decision to put Beyond Meat products in the meat section of the grocery store and not the vegetarian or vegan aisle. Beyond has also been aggressive recruiting celebrities to endorse its product, putting it front-and-center in terms of plant-based mindshare.

Last quarter, Beyond Meat’s revenue grew 68.5%, but that was during a quarter in which its restaurant-based sales were down 60.7% because of coronavirus quarantines. Retail sales at grocery stores nearly tripled during that time, showing that Beyond’s products are winning customers in this high-growth category. As more restaurants open, expect growth to accelerate back into the triple digits.

Yes, there will likely be competition from traditional consumer packaged goods companies as well as other start-up challengers like Impossible Foods — although Beyond makes a point of noting its products don’t use GMOs, as Impossible and others do. However, there should be room for more than one winner in this growing market. Meanwhile, Beyond is stepping on the gas, having just received approval to launch a manufacturing facility in China ahead of competitors, recently announcing the launch of its Beyond Meatballs product, and doubling the distribution footprint of its Beyond Sausage patties.

With a giant addressable market destined to grow by leaps and bounds over the coming decades, investing in the market leader at 23 times sales may look like a bargain when looking back five years, 10 years, or longer down the line. That’s why younger investors shouldn’t hesitate to gobble up Beyond’s shares today.

Billy Duberstein owns shares of Beyond Meat, Inc., CrowdStrike Holdings, Inc., and Sea Limited and has the following options: short October 2020 $100 puts on CrowdStrike Holdings, Inc. and short October 2020 $90 puts on CrowdStrike Holdings, Inc. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Beyond Meat, Inc., CrowdStrike Holdings, Inc., MercadoLibre, Sea Limited, and Tencent Holdings. The Motley Fool has a disclosure policy.

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