7 Hidden-Gem Stocks to Buy for the Long-Term


stocks to buy - 7 Hidden-Gem Stocks to Buy for the Long-Term

Source: Wright Studio/Shutterstock.com

The current market outlook seems to be slightly jittery. Geopolitical tensions coupled with the prospects of a rate hike have impacted sentiments. However, it’s these market conditions that are conducive for stocks to buy for the medium- to long-term.

It’s worth noting that even with depressed market sentiments, businesses are likely to do well as the pandemic becomes endemic. Further, rate hikes might be capped if asset markets continue to respond negatively. I am therefore not expecting a very deep correction.

One investment rule that never fails is buying a stock when it’s not in the limelight. When everyone is talking about or recommending a company’s shares, it’s already in the euphoria stage and overvalued. Of course, any under-the-radar stock has to be backed by solid business fundamentals.

My methodology for finding stocks to buy that are flying under the radar is simple: Focus on sectors that have multi-year tailwinds. Even a quick scan through stocks in the sector will show a few interesting names.

Let’s look at seven stocks to buy that deserve greater investor attention. I believe these hidden-gem stocks are poised for a rally in 2022 and also look good for the long-term.

  • Rada Electronics (NASDAQ:RADA)
  • Hive Blockchain (NASDAQ:HIVE)
  • Funko (NASDAQ:FNKO)
  • Radcom (NASDAQ:RDCM)
  • Tencent Music (NYSE:TME)
  • Coupang (NYSE:CPNG)
  • Volcon (NASDAQ:VLCN)

Stocks to Buy: Rada Electronics (RADA)

Large satellite against a backlit cloudy sky

Source: Dejan Lazarevic / Shutterstock.com

RADA stock is a small-cap name that’s still flying under the radar. The company is a seller of defense electronics and has witnessed healthy growth in the last few years.

As an overview, Rada Electronics is focused on tactical radars for the global defense industry. The company believes the total addressable market for the segment is in excess of $6 billion. This provides ample growth opportunities for the long-term.

The company’s revenue growth has already been robust. For 2020, Rada clocked growth of 105% followed by growth of 70% in 2021. Even for the current year, the company expects growth in excess of 20%.

With Rada aiming to be a market leader in the tactical radar segment, I would not be surprised if growth accelerates. The company expects organic revenue of $250 million over the next three to four years. Improving margins and a healthy cash buffer provide flexibility for investment in research and innovation.

Overall, RADA stock is among the top hidden-gem stocks to buy for the long-term. With high geopolitical tensions globally, the company has positive industry tailwinds to accelerate growth.

Hive Blockchain (HIVE)

An abstract concept image for blockchain and cryptocurrencies.

Source: Shutterstock

When we talk about Bitcoin (CCC:BTC-USD) mining companies, the names that usually come to mind are Marathon Digital (NASDAQ:MARA) and Riot Blockchain (NASDAQ:RIOT). But a lesser-known name with growth potential is Hive Blockchain.

With the recent crash in Bitcoin, HIVE stock has corrected significantly. Over the last month, the stock has fallen by 43%. I believe this is a good buying opportunity for long-term investors.

As an overview, Hive Blockchain is a diversified cryptocurrency miner. Currently, the company is involved in the mining of Bitcoin and Ethereum (CCC:ETH-USD).

One reason to be bullish on Hive is the rapid growth in miner deployment that’s likely to continue in 2022. For the second quarter of 2022, the company reported revenue of $52.6 million. Revenue growth was almost four times that of Q3 2021.

Furthermore, Hive Blockchain has been in diversification mode. The company already has 4.9% stake in DeFi Technologies (OTCMKTS:DEFTF). This gives Hive exposure to the fast-growing world of decentralized finance. Additionally, Hive has 3.4% stake in Network Entertainment (OTCMKTS:NETWF), which gives exposure to the non-fungible token (NFT) segment.

Overall, HIVE stock looks significantly oversold. Gradual accumulation can be considered at current levels. As sentiment regarding the crypto world improves, the stock can quickly double.

Stocks to Buy: Funko (FNKO)

A stack of Funko Pop! boxes from Funko (FNKO).

Source: Lutsenko_Oleksandr / Shutterstock.com

FNKO stock has trended higher by 39% over a 12-month period. However, I believe it’s among the most attractive stocks to buy that are relatively unnoticed. From a valuation perspective, FNKO stock trades at a forward price-to-earnings (P/E) ratio of 12.8x. This indicates potential for further upside.

As an overview, Funko is a pop culture lifestyle brand. The company produces vinyl figures, action toys, plush toys, apparel and board games. Recently, the company has also ventured into the NFT space.

For Q3 2021, Funko reported sales growth of 40% to $267.7 million. Sales in the United States increased by 35.7%. However, European sales growth was 65.7%. The company also has some presence in other international markets, a key reason to believe revenue growth is likely to remain robust.

In Q3 2021, the company launched its Digital Pop! NFT collections, which Funko claims all sold out in minutes. The company has also launched a digital marketplace in partnership with TokenWave.

From a financial perspective, Funko reported operating cash flow (OCF) of $78.8 million for Q3 2021. This implies an annualized OCF of $315 million. As of September 2021, the company had a total liquidity buffer of $193.2 million. With ample financial flexibility, there is scope for aggressive expansion.

Radcom (RDCM)

5G digital hologram floating over a phone on a city background. representing 5g stocks investing for the next decade

Source: Fit Ztudio / Shutterstock.com

Among small-cap names, RDCM stock is a quality name to consider for the long-term. Radcom is a provider of 5G-ready, cloud-native, network intelligence solutions. Its customers are telecommunications operators transitioning to 5G.

For Q3 2021, the company reported revenue of $10.2 million. Radcom believes the global addressable market for its 5G solutions is $2.7 billion. Therefore, there is ample headroom for revenue upside.

Another point to note is that 75% of the company’s revenue was recurring in nature for the first nine months of 2021. This indicates its subscription-based cloud model provides long-term revenue visibility. Radcom already has multi-year contracts with operators that include AT&T (NYSE:T), Rakuten (OTCMKTS:RKUNY) and Veon (NASDAQ:VEON).

I also like that the company is currently investing 60% of its revenue in research and development. From a balance sheet perspective, the company has zero debt and a cash buffer of $67 million. This provides flexibility for investing in accelerating growth.

As the number of multi-year contracts swell, the company is positioned for healthy expansion in its EBITDA margin. Overall, RDCM can be a potential cash flow machine over the next few years.

Stocks to Buy: Tencent Music (TME)

Tencent Music (TME) logo on an iphone screen

Source: rafapress/Shutterstock.com

After a massive correction, it seems TME stock has bottomed out. At a forward P/E of 15.7x, the stock is worth considering.

It’s worth noting the company has healthy fundamentals. However, regulatory headwinds in China have impacted stock sentiment. TME stock, however, does seem poised for a reversal.

As of Q3 2021, Tencent reported 636 million monthly active users (MAUs) for mobile online music. On a year-over-year basis, the MAUs declined by 1.5%. However, for the same period, paying users increased by 37.7% to 71.2 million. The company also had strong MAUs of 205 million in the social entertainment segment.

For Q3 2021, Tencent Music also reported operating cash flow of $248 million. This implies an annualized OCF potential of $1 billion. As the number of paid subscribers increase, the company cash flow is likely to swell further.

Another important point to note is that as of Q3 2021, the company reported cash and short-term investments of $3.8 billion. There is ample financial flexibility to invest. Key focus areas for expansion include music production, licensed content and social entertainment.

Coupang (CPNG)

The Coupang (CPNG stock) campus in Silicon Valley, California.

Source: Michael Vi / Shutterstock.com

CPNG stock has disappointed with a decline of over 54% in the last six-months. With a sustained decline, the stock seems to have fallen off the radar for most investors. However, I believe the correction presents a good buying opportunity.

For Q3 2021, Coupang reported revenue growth of 48% and gross profit growth of 62%. Cash burn has sustained on higher marketing activities. However, it’s worth noting that average revenue per active customer has continued to increase. With operating leverage, Coupang is positioned for healthy cash flows in the next few years.

Another point to note is that Coupang is looking at international expansion. The company already has presence in Japan and Singapore. With cash and equivalents of $3.9 billion, the company has ample financial flexibility to pursue aggressive expansion. In particular, the Southeast Asian market is likely to be a gamechanger.

Besides core commerce, Coupang has also seen healthy growth for Rocket Fresh, the company’s fresh grocery offering. The fulfillment center for Rocket Fresh was likely to double by the end of 2021 as of last November.

Overall, CPNG stock gives investors good exposure to the Asian e-commerce market. The company has ample scope for growth as it expands into more markets in the next few years.

Stocks to Buy: Volcon (VLCN)

A gloved hand resting on the handles of a motorcycle.

Source: Shutterstock

Among small-cap stocks to buy, VLCN stock looks attractive. From its 52-week high near $18, the stock has seen meaningful correction to current levels around $4.30. This seems like a good buying opportunity.

As an overview, Volcon is an off-road powersports vehicle company. Currently, the company has two- and four-wheel motorcycles and utility terrain vehicles. The company already commenced shipping of Grunts, its electric motorcycle, in September 2021.

The two-wheeler is currently being shipped across the U.S. and Latin America. In the current year, Grunts will also be available in Canada, Europe and Africa. The company has ambitious global expansion plans with likely inroads in Southeast Asia and Australia by 2023.

Volcon also has more launches in the pipeline. In the two-wheeler segment, the Runt is scheduled for commercial deliveries in 2022. Additionally, in the four-wheeler utility terrain vehicle segment, the Stag and Project X are in the pipeline.

Therefore, the company is still at an early growth stage. With a wider addressable market plus an increase in distribution network and visibility, the outlook seems optimistic. VLCN stock looks attractive for the medium- to long-term at current levels.

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More:Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Article printed from InvestorPlace Media, https://investorplace.com/2022/01/7-hidden-gem-stocks-to-buy-for-the-long-term/.

©2024 InvestorPlace Media, LLC