2022 Marketplace Top Ideas And 2021 Results
- We have 14 top ideas from Marketplace contributors to share with you.
- As usual, there's a wide range from energy to tech and value.
- And a big congratulations to Laurentian Research, who had 2021's top performer with near 400% returns.
~Tim Murphy, Marketplace Success Manager
Better late than never! My apologies for the delay here in the results from the 2021 Marketplace Top Ideas and the new 2022 Top Ideas.
Before I continue, most content links in this article are either SA Marketplace account articles or Marketplace contributor blog posts, so they will not count toward the paywall limit for any non-Premium readers. Premium articles will be marked with '$'.
Without further ado, here are the results from the 2021 Marketplace Top Idea contest:
Top 6 Ideas
Information Analysis Inc.
Tenet Fintech Group Inc.
Top 3 Mid Year Reallocation Strategy Returns
Other 100% Gainers
TransGlobe Energy Corporation
Lithium Americas Corp.
First, congrats to Laurentian Research for their almost 5x pick of Firefinch Ltd (OTCPK:EEYMF). Here's the April 30 update where they summarized their thesis and correctly reiterated their conviction going forward. For a recap of the ideas submitted for the contest, you can go here, and the public Google Tracking Sheet is here. Congrats to the above top performers!
2022 Top Ideas
To jump right into it, to date, there are 14 top ideas submitted. A brief rationale is provided below. You can track all ideas in real-time with the 2022 Top Idea Google Tracking Sheet. The usual caveat - these are just one idea from each contributor of the several they share within their service, most chose with the purpose of maximum returns. Please do your due diligence before investing as to how they best fit into your investment return goals and risk tolerance. The ideas are presented in the order of when submitted between Feb. 18-27. Purchase price is at timestamp of Google Form submission, if after hours, then the price at the most recent market close is used. All contributors are long their stock choice, unless otherwise stated.
Chris Lau - DIY Value Investing
INMD - InMode Ltd.
InMode (INMD) has new product soft launches not yet adding to revenue until mid-2022 and beyond. Markets are typically impatient, selling off the stock instead of waiting. Management has a strong record for capturing much of its addressable market. EmpowerRF is a growth catalyst that will unlock InMode's stock appreciation. I have a price target of over $70 in a base case scenario (price on Feb 25, 2022, is $40). To learn more, read my article ($) here.
Chris Lau has no positions in INMD.
J Mintzmyer - Value Investor's Edge
SHIP - Seanergy Maritime Holdings
For this contest, with the goal of potentially producing the highest possible return in 2022, my candidate is Seanergy Maritime (SHIP). I should clarify upfront that this is a riskier position and not at all my "only" stock for the year, nor a stock, which I believe offers the best overall risk/reward. However, SHIP has the potential to return 3-4x or more in 2022 if the dry bulk markets perform well.
SHIP has a fleet of 17 Capesize dry bulk vessels, which primarily trade iron ore and coal. The dry bulk market was fairly strong in 2021 due to a tight balance between supply and demand, and 2022 might be even better since the orderbook (future supply) is at record lows and demand is likely to increase if China focuses on stimulus and infrastructure projects.
If the dry bulk market is mediocre, then SHIP is probably worth about $1.50, but in a boom market, it's easily a $3-$5 range stock. Not for the faint of heart, but something worth considering!
Long Player - Oil & Gas Value Research
LPI - Laredo Petroleum
Laredo Petroleum (LPI) has new oil-weighted leases that will increase cash flow as the oil percentage of production climbs. Costs are now under control, and the debt ratings have been raised. The stock trades at about 3 times expected earnings in 2022 and that expectation was before the recent events. New management is doing a fine job at adding value to the stock.
Laura Starks - Econ-Based Energy Investing
SND - Smart Sand
Although sand stocks can be a "Lucy-and-the-football" exercise - e.g., the opportunity vanishes - Smart Sand, Inc. (SND) is an easy, fun shot at a well-supported drilling sand company. Be aware that drilling sand company stocks, as third derivatives of oil and gas prices, are highly volatile. Due to a prolonged drilling downturn and literally tons of competition, many sand companies have combined, been absorbed, or gone bankrupt. Even Smart Sand is a microcap at just over $100 MM.
The company supplies premium "Northern White" sand, mined in Wisconsin, to hydraulic fracturing projects in North Dakota (Bakken-oil) and Pennsylvania (Marcellus-natural gas). Smart Sand has a logistics and quality advantage relative to these two fields compared to in-basin Permian sand. The company has added storage systems and is expanding into industrial products. Most especially, since sand prices, which were in the $10-$20/ton range for years are now $50-$70/ton, the stock could see a healthy uplift. To learn more, read my blog post here.
Chris DeMuth Jr - Sifting the World
RENN - Renren
If I could invest in only one stock for 2022, it would be Renren (RENN). It's up 50% YTD and over 100% since the position was first disclosed on StW. But it remains an attractive opportunity. It costs under $22 per share yet will probably distribute over $25 this year. It's safe, misunderstood, and uncorrelated with the equity markets.
Last year, minority shareholders reached a settlement worth over $25 per share. While a judge initially rejected it, it's moving closer to approval. Both plaintiffs and defendants are on board, and the judge is on board with the broad outlines. What is it worth after a dividend of over 100%? Perhaps a few bucks. What could go wrong? Failure to finalize a settlement for unprecedented reasons. What gives me confidence? The law is on our side, the settlement is fair for current holders and the defendants, and our cash is in escrow. We just have to wait to get a great risk/reward, IRR, and return of all of our original invested capital. To learn more, read my article ($) here.
Andres Cardenal, CFA - The Data Driven Investor
UPST - Upstart
Upstart (UPST) is disrupting the credit industry with superior data powered by AI. This is risky and hard to do, but Upstart is succeeding, and it's producing spectacular performance in the process. The market was expecting $262 million in revenue for Q4, but Upstart delivered $304.8 million, an annual increase of more than 250%. The contribution margin reached 52%, and the net income margin was 19% of revenue.
Upstart is just getting started in personal loans, and it will be expanding into autos, small loans, and mortgages over the near term. The opportunities for growth are enormous, and the upside potential is huge if management keeps executing well. Upstart is trading at a forward price to sales ratio below 8, quite an attractive entry price for such a dynamic growth business with massive profitability. Considering execution at scale, profitability, growth opportunities, and valuation, Upstart looks like a unique opportunity for investors.
Michael Wiggins De Oliveira - Deep Value Returns
APPS - Digital Turbine
Digital Turbine (APPS) is a rapidly growing mobile advertising platform that's expected to grow its EBITDA by 10x over the next three years. Its business model is getting apps on consumers' phones. Essentially, this is an advertising business. The strategy for Digital Turbine is focused on delivering strong margin expansion and driving cash flow substantially higher over the next few years.
Digital Turbine is a business that is going from $0.1 billion to $1 billion of EBITDA over the next three years. 10x EBITDA growth in about three years. Thus, if we assume that Digital Turbine's free cash flows grow by just 30% over the next year, this would translate into $155 million of free cash flow for its upcoming fiscal year. This puts the stock trading for 29x FCF.
I contend that there are now a lot of tired shareholders out there that are now looking to give up. To sell at any cost and just remove the name Digital Turbine from their lips, minds, hearts, and portfolios. That's their problem.
Ruerd Heeg - Global Deep Value Stocks
Man King Holdings (2193 in Hong Kong)
Man King Holdings (2193 in Hong Kong). This stock is extremely cheap based on earnings. I believe management is shareholder-friendly. The company provides civil engineering services in Hong Kong and also has a stake in a profitable coal shipping business to Pakistan.
Quantitative investing with many small positions in cheap stocks is different from investing with high conviction. This is just rolling the dice again, like last year with Sekonic. I was just lucky with the more than 200% return from Sekonic Corp. I do not expect to repeat that. But I still expect to beat the S&P 500 with this stock. In any case, there should not be much downside. To learn more, read my blog post here.
The Fortune Teller - Wheel of Fortune
LABU - Direxion Daily S&P Biotech Bull 3x
Almost all (!) biotech stocks are now trading in the bear market territory - one of the worst breadths in history. Biotech stocks have lost about two-thirds of their value since their early-2021 peak. Looking at the 21st Century, there were only two periods with similar declines. They both ended inside the first quarter of the respective years (2016, 2001).
Truth is, we don't know if this pick will win the 2022 competition, but we're quite confident it will lead the race at some point over the next couple of years. Like the famous song by Tears for Fears says, we're sowing the seeds of (biotech) love. It may involve tears and fears now, but we believe that it will grow into love and happiness soon enough. To learn more, read my article ($) here.
The Macro Teller - The Macro Trading Factory
CWEB - Direxion Daily CSI China Internet Index Bull 2x
The Nasdaq China Index has lost nearly two-thirds of its value over the past year. Tencent (OTCPK:TCEHY) and Alibaba (BABA) are leading the Chinese tech selloff amid fears of a further crackdown. Yet, China Credit Impulse went up sharply in January - the third consecutive month of higher prints since the Q3 lows.
While the Fed is tightening into a slowing economy, China is stepping on the gas, and that's likely to be reflected in better economic and market performances over time. Truth is, we don't know if this pick will win the 2022 competition, but we're quite confident it will lead the race at some point over the next couple of years. Like the famous song by Tears for Fears says, we're sowing the seeds of (Chins) love.
Long Term Tips - The EV Supply Chain
OTCPK:NNOMF - Nano One Materials
Nano One Materials (NNMOF) is on its path to commercialization, with a manufacturing agreement expected in the coming months. Nano One seeks to dramatically improve cathode performance and clean the supply chain by eliminating the need for precursor steps. Additionally, the company is working on the development of a cobalt-free NMC cathode (LMNO), which will operate at a higher voltage and lower global reliance on cobalt.
Ranjit Thomas, CFA - Stock Scanner
GOOGL - Alphabet
If I were to pick only one stock, it would be Alphabet (GOOG) (GOOGL). The company is firing on all cylinders, growing revenue and earnings at a double-digit rate. At 22x EPS and a cash-rich balance sheet, the stock is the cheapest it has been in a while. The company is buying back stock and will be doing a 20:1 stock split in the middle of this year.
Double Dividend Stocks - Hidden Dividend Stocks Plus
GLPI - Gaming and Leisure Properties
Gaming and Leisure Properties (GLPI) is a specialty REIT which leases its properties to well-known, publicly-traded casino operators. GLPI is the biggest US regional casino lessor. GLPI yields 6.08% with 5% average five-year dividend growth, and good coverage. At $44, it's 17% below its $53.21. avg. price target. After two years of pandemic restrictions, Americans have cabin fever - it's time to go out and play. This pent-up demand should benefit GLPI's casino tenants in 2022.
GLPI did a $1.8B deal in December '21 to buy the real property assets of Live! Casino & Hotel Maryland, Live! Casino & Hotel Philadelphia, and Live! Casino Pittsburgh, including applicable long-term ground leases, from affiliates of The Cordish Companies. GLPI will lease back all the properties to Cordish. The initial annual cash rent for all three properties will be $125M, a ~11% rise in GLPI's revenue. There's also a 1.75% fixed yearly escalator on the entirety of the rent commencing upon the leases' 2nd anniversary.
Enterprising Investors - Green Growth Stocks
PERI - Perion Network
It wouldn't be wise to invest in just one stock in 2022. I've chosen one unknown idea that has high potential to be a winner in 2022 and beyond. The robust 2022 growth and integration of acquisitions are potential near-term price catalysts.
Perion Network (PERI) is an advertising technology company. It has a strong balance sheet with a net cash position, high free cash flow conversion, and a strong growth outlook. I believe it's too cheap for its growth prospects and could yield outstanding returns.
Perion has all the ingredients to be a fruitful investment. Its management proves it can grow the business profitably. It operates in a growing market. Perion uses smart acquisitions to expand its offering. It remains unrecognized by the stock market. The combination of a low valuation and vigorous growth makes the upside potential enormous. The company trades at only 20 forward P/E, 1.58 PS, and 9 EV/FCF. Cheap for a stock with 30% expected growth in 2022 and 15% annual growth beyond.
This article was written by
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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