As the present year draws to a close, many investors might be thinking about the moves they should make in 2022. But with the broad S&P 500 index near all-time highs, the prospect of opening new positions can be daunting given that many popular stocks are looking quite expensive.

If you're willing to venture off the beaten path, some pockets of the market are still attractively priced, though. 

Cohu (COHU -1.33%) is a semiconductor service company that Wall Street thinks could almost double from here, and action-camera company GoPro (GPRO) has just delivered consecutive blockbuster quarterly results, spurring an analyst upgrade from well-respected investment bank Morgan Stanley this week. 

These two stocks are just getting warmed up, and here's why they could be big-time contributors to your portfolio next year.

A computer chip manufacturing worker soldering a semiconductor.

Image source: Getty Images.

The case for Cohu

Cohu supplies testing and handling equipment to the world's largest semiconductor producers, designed to speed up the manufacturing process of fragile and highly valuable computer chips. 

A crippling semiconductor shortage has raged throughout 2020 and 2021, triggered by pandemic-related production shutdowns across Asia. These advanced computer chips are critical to most digital consumer goods, from mobile devices all the way up to new cars, and the inability to access them has caused a price surge in many of these products. 

The new vehicle market was arguably the most impacted sector, with some dealerships reporting an 80% decline in their inventories. As a result, the price of a new car is up almost 10% in the last 12 months, and the price of a used car is up a whopping 26% as consumers settle for pre-owned models instead. 

Cohu is playing a crucial role in alleviating these issues by focusing on the automotive segment, which is now its largest, accounting for 18% of total revenue. Its Neon inspection system is designed to detect defects in some of the world's smallest automotive-related semiconductors while still handling them at high speeds to prevent manufacturing delays.

This equipment is in high demand from semiconductor producers who need to quickly expand capacity to clear backlogs, and as such, Cohu is having its most profitable year since 2017. It's set to grow revenue by 39% compared to 2020, with $3.01 in earnings per share.

Based on its current share price of $36, it trades at a forward price-to-earnings multiple of just 12, about 65% cheaper than the broad iShares Semiconductor ETF, which trades at a multiple of 35. It's therefore within the realm of probability that the stock could double from here -- yet even if it did, it would still be cheaper than its peers in the industry. 

A low-angle view of a person snowboarding in midair.

Image source: Getty Images.

The case for GoPro

Action camera leader GoPro is a corporate comeback story for the ages. Its stock fell 97% between its public listing in 2014 and the 2020 pandemic, yet it has been resurrected by a strong performance from its management team. They've pivoted the company away from a one-dimensional revenue stream, and set up a booming subscription business with extremely high profit margins.

GoPro's new HERO10 Black camera shoots video in 5.2K high definition at a price point of just $499 -- its most comparable competitor, according to the company, is priced at $3,500. Traditionally, GoPro has sold its cameras through some of the largest retailers in the world, but it's currently shifting to a more direct-to-consumer model using its website. It means higher gross margins for the company, as it now keeps the retailers' cut. 

But perhaps more notably is the new subscription. For $49.99 per year, brand loyalists can access exclusive product discounts, unlimited cloud storage, live streaming, and damaged product replacements. The growth in subscriptions has been astronomical.


Q3 2019

Q3 2020

Q3 2021







Data source: GoPro. CAGR = compound annual growth rate.

The company expects to enter 2022 with 1.7 million paying subscribers, which will generate $90 million in revenue in the new year. But the kicker is the 70% to 80% gross margins -- this is an incredibly profitable business segment, and with its rapid growth will likely make an impactful contribution to GoPro's earnings.

Analysts expect the company to deliver $0.83 in earnings per share for 2021, which places the stock at a forward price-to-earnings multiple of 12 times. But with Wall Street titans like Morgan Stanley getting behind the company through a rating upgrade, investors could be enticed to ascribe a valuation that's more aligned with the broader Nasdaq 100 next year, which trades at an earnings multiple of 36. 

GoPro is certainly generating the growth to back that up and might be set to deliver top-tier returns in 2022.