It’s also incredibly volatile.
As I write this, GME stock is up 1,112% year-to-date, but up only 8% over the past six months. As a result, anyone who bought in at its most recent highs in early June is sitting on unrealized losses of 31%.
You can buy one share of GME that generates $86.1 million in trailing 12-month (TTM) free cash flow (FCF), or you can buy these five stocks for the same price and generate 10x the free cash flow.
It’s up to you.
The $60 Buy Instead of GME Stock
Comcast (NASDAQ:CMCSA) is the first of five stocks to buy instead of GME. It currently trades around $61 and generates $13.9 billion in TTM FCF. Assuming GameStop has 76.8 million shares outstanding, it has a $1.12 in TTM FCF per share. Comcast has $3.03 TTM FCF per share based on 4.59 billion shares outstanding.
In terms of news, Comcast’s mid-August announcement that it’s partnering with ViacomCBS (NASDAQ:VIAC) to create a European streaming service called SkyShowtime that pulls together several different television and movie libraries.
Expected to launch in 2022, it will have more than 10,000 hours of content, making it a formidable force in European streaming. ViacomCBS stock jumped more than 5% on the news.
The joint venture makes sense for both sides.
The $50 Buy
Acushnet (NYSE:GOLF) is the second of five stocks to buy instead of GME. It currently trades around $50 and generates $391.0 million in TTM FCF. Acushnet has 73.91 million shares outstanding for $5.29 TTM FCF per share. It trades at 9.5x TTM FCF compared to 185.7x TTM FCF for GameStop.
Golf, the game, not the symbol, became popular during the pandemic as a way to get outside while social distancing. Acushnet has benefited from this surge in interest. It makes golf equipment, golf balls, and golf wear under the Titleist brand and golf wear and footwear under the FootJoy brand.
Thanks to higher participation rates, Acushnet’s been able to reduce its debt levels from a leverage ratio of 2.3x in Q2 2020, at the start of the pandemic, to 0.7x at the end of Q2 2021. That’s an incredible turnaround.
As a result, it’s not surprising that GOLF stock has a one-year total return of 43.9%. Acushnet gives you representation from the consumer cyclical sector to go along with Comcast’s contribution to the communication services sector.
The $40 Buy Instead of GME Stock
Edgewell Personal Care (NYSE:EPC) is the third of five stocks to buy instead of GME. It currently trades around $41 and generates $215.0 million in TTM FCF. Edgewell has 54.36 million shares outstanding for $3.96 TTM FCF per share. It trades at 10.4x TTM FCF compared to 185.7x TTM FCF for GameStop.
Edgewell is best known for its Schick and Edge shaving brands, Hawaiian Tropic sun care, and Playtex feminine hygiene products.
In the first nine months of 2021, sales and earnings increased by 5.7% and 209.1%, respectively, over the same nine months in 2020. So it doesn’t have massive growth on the top line, but it’s coming along nicely on the bottom.
It’s a consumer defensive stock worth considering for your portfolio.
The $30 Buy
The penultimate stock selection in my group of five, Cricut (NASDAQ:CRCT), currently trades around $32 and generates $53.27 million in TTM FCF. Cricut has 222.23 million shares outstanding for $0.24 TTM FCF per share. It trades at 133.3x TTM FCF compared to 185.7x TTM FCF for GameStop.
I hadn’t heard of Cricut until doing this exercise. Apparently, it has ridden the craft wave that’s sprung up as a result of the pandemic. In mid-August, it reported its 10th consecutive profitable quarter while revenue increased 42% over Q2 2020, and paid subscribers jumped by 77% to 1.8 million.
“We successfully launched two new connected machines, a new line of Smart Materials, added new features and functionality to our software platform, and saw strong growth from our top international markets,” stated CEO Ashish Arora in its Q2 2021 press release.
As gross margins climb, so too will Cricut’s overall profitability and free cash flow. As a result, this is the most interesting buy of the five, in my opinion.
The $20 Buy Instead of GME Stock
The final stock in my group of five is Tronox Holdings (NYSE:TROX), a company that mines, manufactures, and sells titanium dioxide (TiO2), which is used for paints and coatings.
It currently trades around $21 and generates $397.0 million in TTM FCF. It has 143.64 million shares outstanding for $2.76 TTM FCF per share. It trades at 7.6x TTM FCF compared to 185.7x TTM FCF for GameStop.
The company has had a strong run over the past year. YTD through Sep. 7, it’s up 43% and almost 124% over the past year.
Tronox reported record revenue of $927 million at the end of July due to higher TiO2 and zircon average selling prices. In Q2 2021, it generated a record FCF of $150 million.
The company believes that it’s still early in the cycle and that demand remains very strong. Representing the basic materials sector, Tronox is an interesting way to play the housing market.
The Bottom Line
Adding up the five share prices, I get $205, about $3 less than GME. Adding up the TTM FCF of the five, I get $15.28 per share, or almost 14x GameStop’s TTM FCF per share.
GameStop might be the stock to buy to impress your Reddit friends, but you can do a lot better by spreading out your bets a little more without sacrificing investment quality.
The smart investor will take the path less traveled to profit from their investments.
Is that you?
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.