Augmented Reality Craze and Stock Picks

Earlier this month, Pokémon Go took the augmented reality world by storm, sending throngs of folks into the streets hunting monsters. In his latest article for John Reese, CEO of Validea, offered his insights on AR, where it’s headed, and the potential opportunities it presents in other industry sectors.

The retail sector and social media space are two areas he highlighted as rife with potential. In fact, several retailers have launched AR apps to make shopping (and buying) easier for their customers. Needless to say, the possibilities for this technology are vast, and Reese identified the following four stocks that could benefit:

  • Gamestop Corp. (GME) is an omnichannel video game retailer. Our Peter Lynch-based model likes the company’s strong revenue base ($9.27 billion) and healthy dividend yield (4.79%). Our Kenneth Fisher stock screen finds GME’s price-to-sales ratio of 0.35 to be exceptional, and the company’s positive free cash flow gets a thumb’s up under our John Neff-based methodology.
  • Facebook Inc. (FB), the social media giant, gets high marks under Validea’s Momentum Investor model given its exemplary quarterly EPS growth (188.89%), and our Martin Zweig model likes the company’s debt-free balance sheet and long-term EPS growth of 129.44%.
  • Verizon Communications Inc. (VZ), a communication, information and entertainment products company, earns a perfect score under our James O’Shaughnessy-based model due to its substantial market cap of $227.74 billion and solid, stable earnings base. Our Joel Greenblatt-based stock screen favors the company’s earnings yield of 9.84% and return-on-total-capital of 36.03%.
  • Apple Inc. (AAPL), the mobile communication and media device behemoth, gets a thumb’s up under our Warren Buffett-based investment strategy given its durable competitive advantage, earnings predictability and higher than average return-on-total-capital (average of 27.6% over the last ten years). Our Peter Lynch-based stock screen likes the price-earnings-to-growth ratio of 0.46 and considers EPS growth of 23.5% to be strong and sustainable.


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