In my most recent article about GoPro Inc (NASDAQ:GPRO) in August, I suggested that investors able to withstand above-average risk should consider buying GPRO stock as it likely had bottomed, or was close to the bottom, and had good upside potential.
GPRO stock is up about 21% since my August 17 article on news the company expects to deliver a non-GAAP profit in the third quarter.
That’s the good news.
The bad news, as InvestorPlace contributor Josh Enomoto sees it, is that GoPro stock can’t possibly maintain its momentum because the company just doesn’t have the wherewithal, not mention product diversification, to keep up with the big boys.
I agree with Josh, which is why I said in my previous article that I wouldn’t buy GPRO, but speculative investors should still consider it despite the run it’s had over the last month.
GoPro currently has a market cap of $1.6 billion. For investors like myself who like to buy stocks that are consistently profitable, the following stocks are worthy of your consideration (and they’re both at or below the $1.6 billion market cap of GPRO):
Noah Holdings
The wealth management industry in China continues to mature. Leading the charge is Shanghai-based Noah Holdings Limited (ADR) (NYSE:NOAH), which managed $20.5 billion in alternative assets as of June 30, 2017 — 37.1% higher than a year earlier.
Anyone who follows the large pension plans knows they’ve all made a big push into alternative investments in recent years, especially those of a private equity bent. At the end of the second quarter, Noah Holding’s asset management business, Gopher Asset Management, invested 52.0% of its total assets in private equity investments.
Regarding net revenue and non-GAAP net income, Noah Holdings has grown its top- and bottom-line by 46.4% and 43.8% annually over the past five years. Investors can expect that to continue rising given the number of high-net-worth individuals in China grew from 200,000 in 2006 to 1.9 million in 2016.
The need for wealth and asset management products and services isn’t going away — and that’s good news for Noah’s shareholders.
Viad Corp
Viad Corp (NYSE:VVI) is a business with two completely different segments. Together, they add up to a market cap of $1.1 billion (much less than GoPro’s $1.6 billion market cap, but with a much cheaper valuation than GPRO).
The first, and larger, of the company’s two operating divisions is GES, which puts on live events for the world’s leading brands. It accounts for approximately 87% of Viad’s overall revenue.
In 2016, GES’s exhibition business had 24% market share in North America and the UK, 14% market share in conferences, and 3% of the corporate events market. Overall, GES has a 13% share of the North American and UK live-event market.
The second operating segment is Pursuit, a hospitality and experiential travel provider, with operations in Vancouver, Banff and Jasper National Parks in Canada, and Glacier National Park in Montana. Although Pursuit only accounts for 13% of Viad’s revenue, it makes up for it on the bottom line. In 2016, it was responsible for 38% of the company’s adjusted segment EBITDA.
Pursuit might be tiny, but it’s powerful.
VVI stock is up 29% year-to-date through Sept. 18, 2017. The company hasn’t had a down year in the markets since 2011.
Can it keep it going?
With both segments going after higher-margin opportunities — GES is growing its 3% market share in corporate events where margins are higher, while Pursuit is positioning tourist attractions like the Banff Gondola for their highest and best use — Viad will have a $2 billion market cap before you know it.
Trading at 10 times cash flow, Viad’s valuation is lower than it’s been over the past five years, despite a 22% annual total return during this period.
Over the next decade, I expect VVI stock to move from the small-cap stock it is now to a mid-cap with a value of more than $5 billion.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
