As I sit here contemplating what to write about MicroVision (NASDAQ:MVIS), a Reddit favorite, I’m tempted to say MVIS stock is a piece of dog excrement. But that would be unprofessional.
So, instead, I’ll roll out the Forrest Gump line from the movie. Stupid is as stupid does. That only applies, however, if you’re considering buying this turd. Everyone else can just go about their day knowing I haven’t insulted them.
So far this month, MicroVision stock lost 22% of its value. Yet, the company still had a market capitalization of $2.2 billion.
Let’s consider what Reddit enthusiasts can buy for around $2.2 billion.
Forget MVIS Stock and Buy This Instead
According to Finviz.com, there are 123 stocks with a current market cap between $2.1 billion and $1.9 billion. Approximately eight of those have a return on assets of 10% or higher. From this, I will give you a stock that even Forrest Gump can see is a better investment than the much-hyped lidar (light detection and ranging) stock.
One of the eight that catches my fancy is Victory Capital Holdings (NASDAQ:VCTR), an asset management firm whose best-known brands are USAA Investments and VictoryShares ETFs.
In August 2013, the employees of Victory Capital and New York-based private equity firm Crestview Partners closed their transaction to buy the company from KeyCorp (NYSE:KEY) for $246 million in cash and stock.
At the time, Victory had $22.1 billion in assets under management (AUM). As of April 30, its AUM was 157.1 billion, a compound annual growth rate of 27.8%.
The inevitable initial public offering (IPO) came 54 months later, in February 2018. Victory sold 11.7 million shares at $13, raising approximately $138 million in net proceeds, which it used to repay some of its debt and the rest for general corporate purposes.
Post-IPO, Crestview owned approximately 62.6% of its shares. Today, it actually owns 66.2% of Victory’s outstanding shares. The company has been public for more than three years, and yet Crestview has hung on to its shares despite the fact Victory’s shares are up 116% since its IPO.
That only means one thing: There’s more money to be made holding than selling off its position. And, if you take a look at its long list of financial services investments, it’s easy to see that it’s laser-focused on four sectors or industries.
In the end, Crestview has made a lot of money from Victory Capital and it intends to make a lot in the years to come.
How Much Does It Make?
Victory reported Q1 2021 revenue of $212.9 million, 6.2% higher than its sales at the end of December. That translated into an operating profit of $89.8 million, 15.6% higher over Q4 2020.
By generating tremendous cash flow, Victory reduced its debt by $50 million in the first quarter and by $388 million since July 1, 2019. In the trailing 12 months, it had free cash flow of $270.6 million. Based on a market cap of $1.9 billion, it has a free cash flow yield of 14.2%. That’s deep value territory despite being up 111% over the past 12 months.
As Victory CEO David Brown said in the company’s Q1 2021 conference call, the increase of its quarterly dividend to 12 cents represents increases totaling 140% since May 2020. Yielding 1.7% and capable of delivering a double in a year, VCTR hardly seems like a sleepy stock to pass over for the trendy MicroVision.
You can be stupid is as stupid does and shoot for the stars, or you can buy a quality company like Victory and collect a decent dividend. While at the same time, it sneakily delivers above-average capital appreciation.
The last time I wrote about MVIS stock in March, I said it wasn’t worth $17 a share or 790x sales. Two months later, trading at $14, it still doesn’t look like a sensible buy for sensible investors.
If you want to make money in the markets, you have to zig when investors zag. Victory might not be sexy, but if it will make you money if you’re patient enough to let it.
Lidar will happen. Just not in time to save MicroVision. This is a dead stock walking.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.