5 High-Growth Stocks That Could Be the Next 10-Baggers

After a delayed start due to the Great Recession, millennials are getting married and moving out in greater numbers than ever before. These younger consumers currently make up roughly 38% of all home buyers. Unfortunately, this growing trend comes at a time when the existing supply of homes is millions of units behind the current demand. As a result, the U.S. is in the earliest stages of a home-building boom.

On this clip from Motley Fool Live, recorded on Feb. 16, "The Wrap" host Jason Hall and Fool.com contributors Danny Vena and Dan Caplinger make the case for five stocks that could be 10-baggers, fueled by the coming housing boom.

Jason Hall: What I thought would be interesting to hear from you guys on is a 10-bagger stock for the housing boom. It doesn't have to be a homebuilder, it doesn't have to be housing directly because there's a lot of trends that are going to drive the housing market. You have the work-from-home trends, so there's more people that are going to be willing to move into the suburbs or even away from where the corporate offices are. There's just so many different ways you could think about investing in this and I wanted you guys to just think broadly about a top stock that you think could be a 10-bagger over the next 10 or 15 years that's related to the housing boom. Dan, you go first.

Dan Caplinger: I got a couple for you. One is an actual homebuilder, it's LGI Homes (LGIH -0.32%).

Hall: Dang it, you stole mine.

Caplinger: Sorry, buddy. But no, then I'll let you put your hand on that.

Hall: No, take it. It's big, I've got five more. Keep going.

Caplinger: But they really concentrate on that entry level and they've done a good job. They're all over the country. They got stuff in Texas, they got stuff in Florida. Some pretty hot markets in their jurisdiction and they're small. Market cap is under $3 billion. So I think that there's room for a 10x there if you're going to go that way.

As far as the more picks-and-shovels play, I'm going to point you toward a special purpose acquisition company (SPAC) that is Social Capital Hedosophia Holdings V (IPOE). That is the Chamath Palihapitiya SPAC that is in the process of merging with Social Finance, the SoFi app, which has become a big player in personal and mortgage lending. They are expanding into broker and banking. App-based, technology focused, cutting-edge, looking at grabbing the whole customer experience. Again, set to go forward with a SPAC merger here in the next few months if approved. Plenty of potential for going up from here.

Hall: Yeah, I love that, especially with LGI Homes. This company that trades for about 11-1/2 times earnings. I love that company. I absolutely love that company. Danny Vena, my good friend. What you got for us?

Danny Vena: Yeah, I'm the reason that Jason included remote work and work-from-home stocks in there because housing is out of my area of expertise.

Hall: I like to think broadly about these categories. There's lots of different kinds of businesses that can benefit from the tailwinds. I'm actually being selfish. I'm looking for a new stock to buy, Danny.

Vena: Well, I'm going to go with one that even though this company already has a market cap of, I want to say, right in the neighborhood of $50 billion, I think it has the potential to go much higher, and that company is DocuSign (DOCU 1.02%).

This is a company where when you talk about remote work, one of the big things is that people still have to conduct business regardless of where they work, they're going to want to have to sign documents, they are going to want to have business-to-business agreements.

People that are buying homes are going to have to sign real estate documents, and all of those things play right into DocuSign's key strength as the leader in the digital signature market. They currently command about 70% of the existing digital signature market. But that market is expanding all the time. Now, that market alone is worth about $25 billion.

But when you look at DocuSign recently, probably with the last couple of years, introduced its agreement cloud, which is a software as a service (SaaS) that manages agreements through the entire life cycle. From the time you think up the idea of this is an agreement that you want to do until it's actually been signed, sealed, and delivered, and it handles it all the way through the lifecycle.

That market itself is another $25 billion. You're looking at a company that has a $50 billion market cap right now, that's only just barely scratched the surface of its business and could foreseeably generate $50 billion in revenue annually going forward.

I like DocuSign not only for the fact that it's a leader in its field because it's got the remote work tailwinds, but also because it has a $50 billion addressable market opportunity and growing.

Hall: I've got two as well to take from the Dan Caplinger school here. The first one is Redfin (RDFN -0.74%). Believe it or not, Redfin is only about a $9.4 billion market cap. I would say this is a 10 to 15 years and it might be hard to get there, and the reason it might be hard to get there is Redfin is not just a technology company, it's also a people company.

A large part of their business their iBuying model that they're trying to grow is they actually have to build out a base of license brokers who can actually transact in real estate and their CEO said a couple of times over the past year as one of the challenges is scaling up staffing to meet the quick increase we saw in demand in the second and third quarters and carried over through the end of the year to meet the demand for people looking to buy homes.

Because this is a cyclical industry, again, the long-term trend I think is great, but the cyclicality can make it challenging for Redfin to scale up and then scale back down based on the cycles. But I think it's a company that has I would say a 50-50 chance of being a 10-bagger from here over the next 10 or 15 years. Because housing is going to be such a big growth area. It's so many aspects of housing that they deal with, not just buying and selling homes. I think there's a lot of opportunity there.

The other one, and this is a company that I don't own shares of and I'm personally still sitting back and watching. But I think could be a 10-bagger from here, and that's Lemonade (LMND -0.46%), and so you might be asking, how does Lemonade benefit from the housing trends?

Well, I live in California, they've actually started offering homeowners insurance in California. They're going to be adding more lines and more states over time as they can. Two huge things that are in their favor.

No. 1, seems like young people love Lemonade. They love this company. We're talking about people that already embrace tech in every other aspect of their life. Lemonade's front end seems to be incredible. The speed to establish a policy, the speed to do claims, like all of the aspects of their business seem to be really good if they can get the underwriting right.

If they can do the underwriting well and profitably, then I think this company could be easily a 10-bagger over the next 10 or 15 years because you know what homeowners do? They buy more insurance. They insure more things. They buy more life insurance. Across the board, they spend more money on insurance to protect the liabilities, to make sure the assets they own don't get damaged or lost for whatever could happen in life. I think Lemonade's one not to sleep on. Like I said, I'm not completely sold on the company because I need to make sure that their underwriting model is going to be profitable. If it is, I think Lemonade could be a 10-bagger from here.