Every investor wants to get in on the next big thing. The hard part is identifying which companies have the best shot at turning into something really big, and getting in early. Some investors will tell you it's just not possible, but it absolutely is (plenty of real people bought Amazon.com in 1997 for $1.50 per share).
The risk? These are often very small companies with tiny sales and huge competitors, and plenty of them don't pan out. But when they do, the results can be astounding. You may not find the next Amazon, but investing in a company that generates even a fraction of those kind of returns can change your life.
To help you get started, we asked three Motley Fool investors for their best below-Wall-Street's-radar ideas; they gave us Boston Omaha Corp. (NASDAQ:BOMN), Carvana Co. (NYSE:CVNA), and NV5 Global Inc. (NASDAQ:NVEE). Even if these companies aren't completely foreign to Wall Street, they're too small to get much notice at this point. Combine that overlooked status with their wonderful prospects, and you'll see why the investors who describe them below think they're worth buying.
A promising mini-Berkshire (with a twist)
Steve Symington (Boston Omaha): It's certainly not a household name yet, but I think Boston Omaha is a company everyone could be talking about decades from now. As it stands, Boston Omaha operates in several industries including billboard advertising, surety insurance, and real estate. None are particularly exciting in their own right, but management has expressed its intention to grow the business both through organic means and strategic acquisitions.
That might sound familiar for a couple of reasons. For one, Wall Street has heard of Boston Omaha, but the company is still too small to hold Big Money's attention. The company made waves a couple of months ago when The Wall Street Journal highlighted that one of Boston Omaha's co-CEOs, Alex Buffett Rozek, happens to be the grandnephew of Berkshire Hathaway CEO Warren Buffett. This helps explain why the company is essentially following the same proven model for creating long-term shareholder value as the one Warren Buffett has employed through Berkshire for the past several decades.
To be clear, WSJ pointed out that the elder Buffett is not involved with Boston Omaha's business and Boston Omaha stock is not part of his holdings -- nor should it be, considering its tiny $340 million market cap couldn't move the needle in Berkshire's enormous $170 billion stock portfolio.
But Warren Buffett did offer some encouraging words concerning his young relative, saying he "thinks the world of Alex" and adding, "He's got a good mind, a very good mind, and he certainly has good values."
In the end, if Rozek and his colleagues can harness that mind and those values to replicate even a fraction of Berkshire's success with Boston Omaha, it won't be long before the most of the investing world wishes they'd bought shares in these early stages.
A new way to buy
Daniel Miller (Carvana Co.): Carvana operates in a used-vehicle industry that has a reputation for frustrating its consumers. In fact, per DealerSocket's 2016 Independent Dealership Action Report and a 2015 Gallup poll, 81% of consumers don't enjoy the car-buying process, and only 8% of consumers rated car salespeople as highly trustworthy -- that's a bad sign.
Carvana isn't a stock you'll hear about on Wall Street yet, but if it executes its vision to offer consumers an effective online way to purchase vehicles, it'll reward investors down the road. The premise is simple: Offer consumers a way to purchase a vehicle online within 10 minutes. Consumers also have the option to have the car delivered the next day in certain markets and Carvana even offers a seven-day money-back guarantee to help reduce the anxiety of buying a vehicle online.
The company has only been publicly traded since April 2017, and it has plenty of room for growth. Carvana was operating in only three markets as recently as 2014, but that figure has ballooned to 50 operating markets currently. Furthermore, with only $500,000 in capital needed to launch a delivery-only program, investors can expect the company to launch in many more markets.
The main thing for Carvana and its investors in the near term will be improving gross profit per unit (GPU). As it does this by increasing the number of markets where it operates, and reducing average days to sell inventory -- all while polishing its brand image -- Carvana will be a name Wall Street talks about much more often.
A combination of special traits investors shouldn't ignore
Jason Hall (NV5 Global): With a market cap of less than $500 million and only a few sell-side analysts covering the company (and none from the big investment banks), NV5 Global is largely off Wall Street's radar. But that will quickly change if the company continues to deliver the kind of growth it has so far. Since its 2013 initial public offering, earnings per share have climbed 350% and the stock is up an incredible 481%.
Here are three reasons why NV5 could just be getting started.
First, this relatively small construction and infrastructure engineering company is set to benefit from increased demand for infrastructure investment in the U.S. and around the world. It has been well-documented that America's infrastructure is in serious need of modernization, but a growing global middle class -- especially urban populations -- will also require substantial expansions of water, waste, transportation, and energy infrastructure in the decades ahead. Serving five different vertical markets from over 100 locations in multiple countries, NV5 is counting on strong organic growth.
Second, management has a plan to deliver even more growth via acquisition. This can be a very hard way to grow, with numerous pitfalls in integrating multiple companies. But if done right -- which the company has, in its brief history -- it can generate incredible returns.
Lastly, NV5 shares something very important with some of the best investments in history: founder-led management with a big stake in the company. Led by chairman and CEO Dickerson Wright, who has nearly a 20% stake, NV5's management and employees own 35% of the company. This helps align their interests with the rest of us.
Combine the factors above with Wright's multidecade track record of successfully growing engineering companies, and this is a unique opportunity to get in early on something set to be very, very big.