Investors are captivated by hot IPOs because they're the earliest opportunity to invest in an exciting company. But you can earn fantastic gains even if you miss that eye-catching first-day pop if that company is built for long-term success. All three companies I'm featuring today are challengers that are changing how business is done in their respective industries. Lemonade (LMND 3.55%), Airbnb (ABNB 2.42%), and Affirm Holdings (AFRM -0.29%) have a lot to offer investors even after their initial public offerings and are worth watching.

Consumer-centric insurance technology

While fintech (financial technology) has changed the way people bank and make purchases, insurance has been largely left out of the revolution. Enter Lemonade, which is trying to upgrade insurance for the 21st century.

Lemonade offers homeowners, renters, and pet insurance in the U.S. and several other countries. It prides itself on "instant everything," and uses behavioral economics and artificial intelligence to offer policies and approve claims completely online. Lemonade's intake chatbot asks the applicant questions to determine accurate pricing and give a quote in seconds. About 30% of claims are taken care of by another bot in as little as three minutes, and approved funds are instantly transferred to the claimant's bank account. The company keeps a flat 25% fee from each policy and passes on the rest to a third-party reinsurer to handle claims. Customers can donate remaining money after claims and payments to a charity of their choosing.

A woman with a computer and a glass of lemonade.

Image source: Getty Images.

Lemonade has traditional insurance companies as its competitors, but there isn't any other home insurance company that's digitally focused, putting it in a class by itself. The transparent and customer-friendly approach to a normally unappealing part of life is clearly resonating with homeowners and renters, as the company topped 1 million customers in December in only four years of operation.

Other notable signs of progress are gross earned premium, which increased 104% in the third quarter of 2020, and gross loss ratio, which decreased 8 percentage points over the prior year to 72%.

I'm a big fan of Lemonade, and I think it has tons of value for investors as it disrupts the insurance industry and gains millions of customers. Even at an outsized valuation of 88 times sales at recent prices, Lemonade is a stock you should be keeping an eye on.

Revolutionizing travel

Airbnb has upended the travel industry by creating a marketplace for global house and room rentals and experiences. The company's debut in December was one of the hottest IPOs in 2020, and the price is up 45% in 2021.

Airbnb rental home in New South Wales.

Image source: Airbnb.

It's not all rosy. Gross booking volume (GBV) decreased 39% in the first nine months of 2020 and revenue decreased 32% as the pandemic crushed the travel industry.Airbnb is still operating at a loss, and a steep one -- $700 million for the first nine months of 2021.

But that loss is an improvement of $375 million over the prior year. And even though the company expects more pain in the short term due to COVID-19, management sees a $3.4 trillion total addressable market -- and a path toward growth by investing in its brand and connections to unlock more hosting and engage its market, and innovating through its web site. We can see the strength of Airbnb's model in its pre-pandemic growth: GBV increased 29% in 2019, while revenue increased 32%. 

As vaccines roll out, the economy is gearing up for a travel resurgence, and Airbnb is going to be one of the recipients of pent-up demand. The company's operating model, as a marketplace for vacation rentals, is asset-light, making it agile and easily scalable. It's the future of travel, creating experiences in places unreachable before.

In the meantime, shares are trading at 32 times sales, which is quite high, but lower than the other stocks on this list. Even if investors are put off by the valuation, there's a lot of potential here, and you should definitely keep it on your watch list.

Creative ways to make expensive purchases affordable

Affirm was one of the first IPOs of 2021, and it's already up 18% from its opening price on the first day of trading.

Affirm sees itself as an alternative to credit cards, and it offers buy now, pay later options so customers can more easily afford big purchases. The company sees this as a win-win for customers, who can get what they need without hidden interest or late fees, and merchants, who make more sales. Affirm gets money from both of those sides as well, in the form of payment processing fees for merchants and interest payments from customers.

A woman purchasing a product with Affirm on a computer.

Image source: Affirm Holdings.

The company's services are available through 6,500 merchant partners, including Walmart and Best Buy. Revenue increased 93% over the prior year in 2020, and gross merchandise volume grew 77%.

Affirm's biggest sales partner is Peloton Interactive, which accounts for roughly 30% of total sales. But it recently inked a deal with Shopify to be its exclusive partner for buy now, pay later services, which should be another huge revenue boost.

It has yet to turn a profit, but as it increases its partner count and gains new, happy customers, it envisions a cyclical effect where both increase, leading to higher revenue and profits. I wouldn't recommend a buy here just yet, but it's one to keep on your watch list.