The Wall Street spotlight in 2019 has concentrated on only a handful of stocks. The big tech stocks have dominated that spotlight, including Facebook (NASDAQ:), Amazon (NASDAQ:), Netflix (NASDAQ:), Microsoft (NASDAQ:) and Alphabet (NASDAQ:, NASDAQ:GOOGL).
Those big tech stocks have had to share the limelight with a few smaller but faster-growing tech stocks like Shopify (NYSE:) and Roku (NASDAQ:), a couple of booming IPO stocks like Beyond Meat (NASDAQ:) and Zoom Video (NYSE:), and pot stocks like Canopy (NYSE:) and Cronos (NASDAQ:). All the cloud stocks, Dow giants, video game stocks, e-commerce stocks and digital ad stocks have also been in the spotlight this year.
However, there are a lot of stocks that haven’t been in the Wall Street spotlight in 2019, but are just as good of buys as all of the stocks that are.
In this article, we will analyze that under-the-radar segment. Specifically, we will look at six of those high-quality stocks that have huge upside potential over the next several months and years.
Which stocks belong in that group? Let’s take a look.
Under-the-Radar Stocks to Buy: Crocs (CROX)
First up, we have sandal footwear brand Crocs (NASDAQ:).
Over the past several years, Crocs has orchestrated one of the most impressive retail turnarounds anyone has ever seen, simply by narrowing the product portfolio and . This has allowed the company to improve its clog design, re-charge consumer interest in that core shoe, pull gross margins higher through increased demand, and take tons of operating expenses out of the system. The result? Renewed revenue growth, renewed margin expansion and renewed profit growth.
Oh, and a surging CROX stock.
This operational turnaround hit a snag in early 2019, when the whole growth trajectory slowed against the backdrop of broader retail turmoil. But, that dour retail backdrop has significantly improved since then, as U.S. labor markets have remained healthy, rates have plunged, and trade tensions have eased. Plus, consumer interest with respect to Crocs has only since then.
Net net, the company will report much better numbers in the back half of 2019 and CROX stock will rebound as a result.
Second is digital education company Chegg (NYSE:).
Much like Crocs, Chegg’s story over the past several years is a very impressive one. A few years back, this was a textbook rental company. Management realized that textbook rental services were a very small piece of the pie in the global education picture. Consequently, Chegg branched out from textbook rental services to textbook solutions, on-demand tutoring, writing help, citations, and more. Today Chegg is an end-to-end connected e-learning platform which helps students learn more effectively.
Demand for this platform will only grow over time. Chegg is becoming a necessary learning companion for millions of high school and college students as they spend increasingly time in the digital space.
Over the next several years, millions more students will join the Chegg ecosystem, revenues will rise, and profits will, too. So will CHGG stock, which is worth holding for the long run.
Similar to Chegg, Kroger (NYSE:) is another under-the-radar stock worth buying and holding for the long run.
As America’s largest grocer, Kroger has benefited from stable demand drivers over the past several years (consumers always need to eat). But competition concerns related to Amazon entering the grocery space via its acquisition of Whole Foods, as well as competition concerns related to Walmart (NYSE:) and Target (NYSE:) building out their own grocery segments, has weighed on KR stock.
The only problem? These competition concerns aren’t showing up in the financials. Over the past several quarters, Kroger has reported largely positive comparable sales growth, market share gains, and margin stabilization ex fuel. Broadly, Kroger isn’t being hurt by the beefed up competition. Instead, the company continues to benefit from stable demand drivers throughout the grocery industry.
Overblown competition concerns have created a golden buying opportunity in Kroger. Long term, stable profit growth on top of a discounted present valuation will drive KR stock significantly higher from here.
Bilibili is one of China’s hottest growth stories. The company operates an animation, comics, and gaming-focused social video sharing platform. It has become a Generation Z favorite in China because it is visual-first, mobile-first, and is built upon consumer expression (which young consumers value). Consequently, this company has rattled off multiple consecutive quarters 25%-plus user growth and 45%-plus revenue growth.
Margins, however, have come under significant pressure over the past few quarters due to growth-related investments. That’s why BILI stock has struggled for gains. But margins are starting to show signs of stability, and management has said repeatedly that over time these investments will phase out and margins will improve.
It’s only a matter of time before the margin narrative here reverses course and heads higher with the revenue narrative. Once both of those narratives are trending in the right direction, BILI stock will rally.
Luckin Coffee (LK)
Another Chinese under-the-radar stock with big upside potential over the next several years is hyper-growth retail coffee chain Luckin Coffee (NYSE:).
Luckin Coffee is the fastest growing and second-largest retail coffee operator in China. At current expansion rates, the company is on track to become the largest coffee chain in China. At the same time, the Chinese economy is rapidly urbanizing and expanding, and the coffee market is surging higher. That makes Luckin the hyper-growth leader in a rapidly expanding market, a combination which implies tremendous long-term growth potential.
Right now, Luckin has a market cap of about $4 billion. The company it gets compared to, Starbucks (NASDAQ:), has a $102 billion market cap. That’s a 25-fold difference. Luckin won’t ever become Starbucks-big, but it will become much bigger than a $4 billion company, especially considering China’s retail coffee market should continue to grow.
As such, Luckin is in the early stages of a long-term growth narrative that will ultimately push LK stock materially higher.
Five Below (FIVE)
On the retail front, one of the industry’s hottest and yet relatively unknown stocks is trend-oriented discount retailer Five Below (NASDAQ:).
Five Below has found a winning strategy in the dynamic retail world. That strategy is simple: Sell cheap things (below $5) so that you always attract the price-oriented consumer, and sell trending things (like spinners or selfie sticks) so that you always attract the trend-oriented consumer. This strategy works because the consumers attracted to those trending items (young consumers) are also usually price-constrained (they don’t make enough money).
Due to this winning strategy, Five Below has reported consistently positive comparable sales growth and margin expansion over the past several quarters. The company has also rapidly grown its real estate footprint. The result? Consistent 20%-plus revenue and profit growth, which has caused FIVE stock to surge higher while the rest of retail has flopped.
This strong growth dynamic at Five Below will continue. As such, FIVE stock is arguably one of the best retail stocks to own for the long haul.
As of this writing, Luke Lango was long FB, AMZN, NFLX, GOOG, SHOP, ROKU, BYND, CGC, CROX, CHGG, KR, TGT, BILI, and LK.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.