It's hard to believe it, but 2025 is almost over. And it's been a very fruitful year for growth stock investors. The benchmark S&P 500 index is up by a solid 15%, driven by wild gains in tech-related companies as they benefit from the recent generative artificial intelligence (AI) hype cycle.
But with the AI boom getting long in the tooth, it might make sense for growth-hungry investors to diversify their portfolios into other parts of the economy that also deliver explosive returns. Let's explore some reasons why Luckin Coffee (LKNC.Y +0.79%) and Mama's Creations (MAMA 1.68%) could be excellent picks in 2026 and beyond.
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1. Luckin Coffee
With shares up 33% year to date, Luckin Coffee has soundly outperformed the market, and it isn't hard to see why. The Chinese coffee chain has bounced back from its fraud scandal in 2020. And now, investors are paying closer attention to its impressive operational results and potential for growth as it expands into international markets.
For those who don't remember, Luckin Coffee became the poster child for below-board Chinese stocks when its management was found to have exaggerated its financial statements in 2019 and 2020. The crisis led to an $180 million fine from the Securities and Exchange Commission (SEC), Chapter 15 bankruptcy restructuring, and a delisting from the Nasdaq exchange. However, Luckin's core business continued to expand throughout the crisis. And now the company is stronger than ever.
OTC: LKNC.Y
Key Data Points
Third-quarter revenue jumped 50.2% year over year to $2.14 billion, driven by a relentless store count expansion in mainland China and Hong Kong, where the company opened 2,979 locations. The company is also trying to establish a foothold in international markets like Singapore, Malaysia, and most importantly, the U.S., where it could disrupt established players like Starbucks and Dunkin' Donuts in the world's largest coffee market.
With only five U.S. stores as of September, it remains unclear how Luckin Coffee's U.S. expansion will play out. But the company's vast and profitable Chinese business could give it economies of scale advantages while also allowing it to operate at a loss in the U.S. to gain market share among price-conscious consumers. With a forward price-to-earnings (P/E) multiple of just 15, Luckin Coffee stock is also incredibly cheap compared to alternatives like Starbucks, which trades for a forward P/E of 37.
2. Mama's Creations
If you think Luckin Coffee's rally is appetizing, you will love Mama's Creations. The share price of this packaged deli foods company has rocketed up by 75% year to date. And future growth looks likely as it expands its distribution network and product portfolio into new types of food items.
NASDAQ: MAMA
Key Data Points
In growth stock investing, it can pay to focus on smaller businesses without much scale or brand recognition. While these companies can be riskier than the more established players, they have significantly more room to grow -- creating the potential for multibagger returns over the long term. With a market cap of just $566 million, Mama's Creations fits into this category. And there is a lot to get excited about.
First-quarter revenue jumped 50% year over year to $47.3 million as the company invested in its production capacity and secured new deals with mainstream national retailers like Target and Food Lion. Management is also turning to synergistic acquisitions, such as the buyout of Crown 1, a ready-to-heat meal producer, for $17.5 million. Acquisitions can be risky in general, but in an industry like food production, they can help unlock valuable economies of scale advantages through benefits like shared production lines and larger purchase deals with meat distributors.
If there is any disadvantage to Mama's Creations' stock, it would be the valuation. With a forward price-to-earnings (P/E) of 58, the stock is significantly more expensive than the S&P 500 P/E of 22. That said, the premium looks worth it because of Mama's Creations' small size and impressive growth rate. It could likely scale into bigger profits over time.
