ContextLogic (NASDAQ:WISH) and WISH stock is an investment my brother would probably love. It’s cheap and misunderstood.

 

However, as I wrote in early October, it’s only a speculative buy at $2. So, I guess my brother will have to wait for it to implode some more. 

In the meantime, it occurred to me that ContextLogic operates two businesses: One is an e-commerce platform to sell tchotchkes from China. The other is a logistics and fulfillment operation. Both aren’t fully formed businesses at the moment. However, those long are betting on ContextLogic successfully growing both. 

I don’t think so.

However, if you’re hell-bent on investing in an e-commerce business and a logistics/fulfillment operation, let me give you two stocks that will achieve your goal without losing your shirt.

 

Forget WISH Stock and Buy This Instead

Let’s start with a suitable e-commerce business. The obvious choices would be Amazon.com (NASDAQ:AMZN) or MercadoLibre (NASDAQ:MELI) for a little Latin American flavor. However, I want something more similar to ContextLogic in size and scope.

So, I’ll go with Qurate Retail (NASDAQ:QRTEA, NASDAQ:QRTEB), a collection of seven retail brands, including QVC and HSN. It is a leading video commerce and e-commerce holding company whose brands have had more than their fair share of ups and downs over the years. 

At a market capitalization of $4.45 billion [423 million shares outstanding multiplied by $10.52 share price], it is almost $1 billion larger than ContextLogic by market cap. However, by trailing 12-month revenue (TTM), it is 5.2x larger than WISH.   

Now, where the rubber hits the road is a comparison of the two companies’ free cash flow (FCF). According to Morningstar.com, ContextLogic’s TTM FCF is -$1.05 billion while Qurate’s is $1.48 billion, or 241% higher. 

Based on its current share price, Qurate has an FCF yield of 33.3%. That’s off the charts cheap. So let’s take a closer look at how it’s generated such a high yield.

There’s no question it had a strong 2020. Moreover, all of its brands had healthy growth over 2019. As a result, it finished 2020 with a 5% increase in revenue, a 754% increase in operating income, and a 158% increase in FCF. 

In the second quarter, you can see that business is slowing. Overall, sales grew by 1% year-over-year, excluding currency, while operating income increased 5%. FCF through the first six months fell 46% to $592 million. 

Even still, its profitability is far superior to ContextLogic. 

In 2020, it paid a $1.50 special dividend, and it repaid $779 million in debt. That’s a good thing because if Qurate did have a weakness, its long-term debt at the end of the second quarter was $5.27 billion or 118% of its market cap. 

That said, it’s got plenty of FCF to cover its annual interest expense.

The Other Option

This one isn’t in the same league as ContextLogic. Admittedly, it’s far bigger, but Ocado Group (OTCMKTS:OCDDY) does do a lot of similar stuff to WISH in the areas of logistics and fulfillment, so it makes sense to consider its shares despite trading over-the-counter. 

Ocado has built three revenue streams:

• It owns 50% of Ocado Retail, an online grocery store. It sold 50% of the business unit to the Marks and Spencer Group (OTCMKTS:MAKSY) in August 2019. However, due to an existing arrangement with Waitrose, Ocado.com didn’t offer Marks and Spencer products until Sep. 1, 2020. 
• The UK Solutions & Logistics business provides logistics and fulfillment services to Ocado Retail and Morrison Supermarkets (OTCMKTS:MRWSY).
• The third segment is its International Solutions segment, which provides its Ocado Smart Platform (OSP) to online customers outside the UK. 

In the first half of 2021, the company’s overall sales were 1.32 billion British Pounds ($1.82 billion), 21.4% higher than a year earlier. Ocado Retail accounted for 76% of sales, UK Solutions & Logistics (22%), and International Solutions (2%).

EBITDA (earnings before interest, taxes, depreciation and amortization) profits increased by 41.2% in the first half to 61 million British Pounds ($84.0 million).

The company’s OSP hardware and software solution is expected to continue to grow the fees it receives from companies in and outside the UK who utilize Ocado’s solution. Companies using OSP in North America include Kroger (NYSE:KR) in the U.S. and Sobeys in Canada.

Ocado opened three CFCs (customer fulfillment centres) in the first half of 2021. It has 56 committed to, with 15 outside the UK currently under construction. It expects to open five CFCs in 2021 and nine in 2022. The more CFCs that open, the more revenue its International Solutions segment generates.

If you want to risk your hard-earned capital on a growth stock, this is a much better buy than ContextLogic.  

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.