GameStop Corp. (GME)

The co-founder of CHWY-N bought 13% and joined the board to transform GME into a digital business. But how will he transform 5,000 shops into a digital business? They report Tuesday; he presumes we will see this plan then. He can't see this stock rising beyond current levels, though a good plan that incorporates e-sports and cryptos could attract more buyers. But if these bulls don't get what they want, GME can turn ugly fast.

The world’s largest video game retailer. They’ve done a lot of things well. To combat online gaming, they have a great trade program. If someone is tired of a game, they can take the video to this company, and get credit for the new hot game they want, and that ability is not available online. The challenge is that they are going through a transition of being known as a video game retailer to being a sort of entertainment media outlet, and are doing that in a variety of ways, including getting into selling mobile phones. Expects this will trade at a discount because the market is worried about what it will look like 5 years from now. The balance sheet looks pretty good and pays a juicy dividend of 8%.

The challenge for this company is more secular rather than cyclical. They specialize in trading used video games. With digital downloads and digital formats, there is less and less of that going on, which is one reason the stock has not done well. Their balance sheet in the meantime has gone from rich in cash to just OK. Going forward, the prospects are somewhat uncertain.

(Top Pick Jan 16/15, Down 19.11%) It was up over 20% a few months ago. The drop is overdone. It is not well understood on the street.

(A Top Pick Jan 16/15. Up 10.83%.) Pulled back about 15% recently because a firm downgraded them. He feels that is meaningless and there is still a lot of upside. They pay a great dividend and have very little debt.

(Top Pick Jan 16/15, Up 23.39%) He has owned it for 4 years. When the stock corrected last year they improved their fundamentals, getting into the mobile space. They have diversified.

(A Top Pick Jan 16/15. Up 32.29%.) They generate about $9.5 billion a year and have about $8-$9 million in debt. With that kind of cash flow, he feels comfortable that the dividend is going to continue to grow. The underlying business fundamentals look quite healthy. He still sees some upside. Dividend yield of about 3%.

A retailer of games and game devices, etc. He has been a big proponent of consumer discretionary stocks, especially companies that don’t require a huge outlay. As a retailer, this company is in a good space, because there continues to be lots of new titles coming out and lots of refreshes of existing titles. He would prefer to own online retail for video. This stock has just made a new high. He would have no problem owning the stock. (See Top Picks.)