Hidden Stock Picks: September 2020

I’m always on the lookout for sub-sectors of the stock market that don’t get as much attention as they deserve. Instead of chasing already pricey tech stocks like Apple and Tesla, informed investors should add unique and underappreciated names to their watch lists.

It’s fun to highlight tomorrow’s runners before they happen, and it’s even more fun to watch your account grow faster than the major market indexes. After all, those market-cap-weighted indexes heavily favor stocks that are already household names. And for the most part, index-fund managers wouldn’t dare to try something new and out-of-the-box.

Let’s just say that sometimes to find the hidden gems, you have to turn on your flashlight, get down on the ground and look in all of the corners. You never know where the next market disruptor might be hiding.

Please be advised, though, that the following three stock picks are speculative and there are no guarantees of returns. A smart approach could be to own a few shares and keep them stored away for years in anticipation of (hopefully) outsized returns.

One affordable overachiever that the market seems to be overlooking is Glu Mobile (GLUU). This company specializes in mobile video games. It’s not difficult to construct an argument in favor of a video-game company during a time when people are staying at home and can’t necessarily afford expensive entertainment.

GLUU stock is easily affordable at less than $8 per share. Glu Mobile has three mobile games that are very popular right now: Tap Sports Baseball, Design Home, and Covet Fashion. These three games helped Glu Mobile achieve a 40% year-over-year increase in revenues during the second quarter, along with 79% growth in bookings.

​

Design Home could be a serious moneymaker for Glu Mobile. As CEO Nick Earl explained, “As successful as Design Home has been, we expect the franchise to continue to grow… We intend to build infrastructure to bring the game to other platforms [and] are looking at e-commerce opportunities as well as expanding our growth in Europe.”

A recent study conducted by Simon-Kucher & Partners revealed 30% growth in gamers playing more than five hours per week, 39% growth in monthly spend on video games, as well as 42% growth in gamers viewing video-game streams.

So, unless you really think that the stay-at-home trend will end soon, you might want to take a look at GLUU stock.

​

If you’re not averse to the idea of international investing, a worthy speculative play is Jumia Technologies (JMIA). Jumia is basically Africa’s equivalent of Amazon in the U.S. or Alibaba in China.

In other words, Jumia is a well-known e-commerce company in Africa. Yet, you don’t see the parabolic price movement in JMIA stock like you’ve seen with Amazon stock and, to a lesser extent, with Alibaba stock.

Indeed, JMIA stock trades for less than $9 per share at the moment. Could Jumia be the next Amazon or Alibaba? If so, then these low-priced shares could become quite expensive someday. But then, that event would depend on a pickup in e-commerce activity in Africa.

​

JMIA Stock Chart. Courtesy: Yahoo Finance

In a recent conference call, Jumia Co-Founder and Chief Executive Officer Jeremy Hodara reported that “The usage on the platform was resilient, with annual active consumers reaching 6.8 million and orders up 8% on a year-over-year basis.”

Moreover, Jumia reduced the company’s “sales and advertising expense by more than 50% in parallel on a year-over-year basis.” Hence, Jumia is finding ways to cut costs while platform usage remains solid. All in all, JMIA stock might not be as lucrative as Amazon shares, but there’s certainly room for growth in the international e-commerce domain.

My third market-corner pick is WiMi Hologram Cloud (WIMI). This Chinese company uses augmented reality to create holograms. Frost & Sullivan has called WiMi is “the largest holographic AR platform in China, in terms of total revenues in 2018.”

​

WIMI Stock Chart. Courtesy: Yahoo Finance

At $6 and change, most investors can pick up a few WIMI stock shares without breaking the bank. WiMi’s IPO just happened on March 31, so the stock could represent a ground-floor opportunity.

WiMi announced that the company earned over $45.8 million in 2019, representing a year-over-year increase of 42%. Not only that, but WiMi’s holographic augmented reality advertising services generated more than 9.7 billion views last year, easily beating the 6.6 billion views from 2018.

If your vision of the future involves hologram-enhanced meetings, presentations, and entertainment, then WIMI stock might be a worthy investment.