🟨 After $1B in Purchases by the CEO, is this Stock Finally a Buy?

Alphabet and Microsoft are both investing in AI and expanding their offerings. Microsoft has taken the lead in AI with its investment in OpenAI and Azure, while Alphabet has introduced Bard to compete with ChatGPT and added AI capabilities to Google Workspace. Alphabet's focus on creating custom chips for AI training using TPU technology places the company in a favorable position for long-term growth in the AI market. Google's entry into the AI chatbot space with Bard is a significant move, but its responses are often basic and lack originality compared to ChatGPT and Bing. Microsoft's decision to monetize its AI-powered Bing search service suggests a positive outlook for further growth, and its ability to bring AI products to its extensive product portfolio could benefit from AI integration.

Alphabet is using AI to develop innovative products and services that can attract new users and customers. AI-powered advertising solutions can drive significant campaign improvements and add value for advertising partners. Specific AI solutions for various sectors can attract more customers and lead to revenue growth. Alphabet is focused on making Google a core part of shopping journeys and improving the overall consumer experience through more immersive search and a shoppable YouTube. The company is investing in YouTube's creator ecosystem and multiformat strategy to drive long-term growth. In the fiscal year 2022, Alphabet brought in $282.8 billion, a 10% increase over 2021, with Google search being the primary source of revenue. Alphabet's focus on expanding its offerings in the online video and streaming market positions it as a one-stop shop for various types of video content. The company faces several challenges in the short term, such as regulatory issues, tough comparisons, and foreign exchange headwinds, but remains optimistic about the longer-term prospects of mobile apps and gaming, YouTube subscriptions, and Google Cloud's market opportunity. Alphabet is committed to investing in opportunities for long-term revenue growth, such as advances in AI and more compelling creative content for advertisers, along with efforts to re-engineer its cost base.

Alphabet's strategic focus is on developing sustainable, growing businesses. The company is emphasizing cloud profitability, which is a key area of growth. Alphabet has continued momentum in differentiated products, which sets it apart from competitors. The company is investing in AI and ML solutions, which are expected to drive long-term growth. Alphabet is committed to delivering sustainable value while investing in long-term opportunities.

Microsoft's recent FY23 Q2 earnings report shows that it continues to be a vital participant in the tech industry. The company's investments in AI, Azure, data, and other innovative technologies drive its growth and financial performance. Microsoft's cloud offerings, particularly Azure, are gaining traction as a preferred digital transformation tool for businesses, especially in healthcare and financial services. Dynamics 365, Microsoft 365, Teams, and Microsoft Viva are driving the company's growth in the long term. LinkedIn continued to be a platform of choice for professionals worldwide, with record engagement and newsletter creation up 10x YoY. Microsoft's Q3 forecast is optimistic, and the company expects its productivity and business processes to improve between 11% and 13% in constant currency, while its LinkedIn revenue is expected to grow in the mid-single digits. Microsoft's solid growth in several optimistic, positive Q3 forecasts the company is well-positioned for continued success.

Alphabet and Microsoft are good long-term investment opportunities in the tech industry. Both companies have strong financial standing and focus on AI and cloud technology. Alphabet's investment in AI has resulted in innovative products and services that drive growth in online video, ads, searching, and streaming. Microsoft's investment in AI, Azure, and data drives growth and financial performance. Both companies are positioned for long-term financial success and market growth. Their stocks provide an attractive risk/reward profile at current levels.

The author is bullish on Asana's growth potential as a cloud software company in the project management space. Asana is still in the early stages of its go-to-market reorganization to strengthen its focus on the enterprise segment, which is expected to drive revenue growth and profitability. The company has demonstrated a commitment to operational efficiencies, including laying off 9% of its workforce to improve efficiency. Co-founding CEO Dustin Moskovitz's strategic intervention and long-term commitment to the company are seen as positive factors.

Asana is recommended as a long-term hold rather than an opportunistic buy due to economic shocks from COVID-19 and increased pressure to demonstrate a path to profitability. Cloud project management and collaboration software is a large market with different vendors competing along the SMB and enterprise segments. Asana beat revenue guidance in Q4 2023 with $150.2 million, a 34.2% YoY growth, and grew 45% YoY for the full year with a FY 2023 revenue of $547.2 million. The company showed progress in winning enterprise deals, with 80% YoY growth in revenues from customers spending $100k+ and a 135% NRR achieved in the $100k+ segment.

Asana's growth has been affected by macro issues, which are expected to continue into FY 2024, with revenue growth forecasted to be 17%-18% YoY. The company has maintained and expanded gross margins, with a Q4 Non-GAAP gross margin of 90.5%. Asana has been subject to scrutiny for its high spending on Sales and Marketing (S&M), which has grown much higher than other expense items and reached 75%-80%+ of revenue every quarter, with 90% of revenue pre-pandemic. The company's CFO expects to see a gradual downtrend of S&M as a percentage of revenue over time to demonstrate economies of scale, and the company has brought in new leadership overseeing S&M in Q4.

Asana recently cut 9% of its global workforce, which was a bold move for a company promoting modern work culture. Asana's co-founding CEO, Dustin Moskovitz, has personally made over $1 billion worth of share purchases in private placement transactions, significantly improving the company's balance sheet with fresh cash injections. The author sets a FY 2028 price target for Asana based on the median P/S of cloud software stocks with similar characteristics, with Monday.com serving as an ideal target model for Asana.

Asana's sizable sales and marketing spend is a risk factor, and it may take time for new executives and hires to ramp up productivity. Execution-related mistakes could lengthen the payback period and put pressure on profitability, cash flows, and share price. Asana has not generated strong cash flow from its core operations and has relied more on financing, which could create an impression of an unsustainable business model. Asana's recent upmarket move is meant to target higher-sized enterprise deals that could positively impact operating cash flows, but it is critical for Asana to demonstrate a path to positive free cash flow over the next 18 months. Asana's historical cash burns and losses have been subject to scrutiny, but the profitability outlook is expected to improve with a strategic shift towards the enterprise segment. The management's bold move to cut 9% of the workforce and the co-founding CEO's share purchases demonstrate a sense of safety and trust for investors.

Texas Roadhouse is expected to see revenue growth due to price increases and strong demand for its dine-in and to-go services. The continuous expansion of new restaurant units should help expand its footprint and support long-term revenue growth. The company is poised to benefit from price increases, moderating inflation, improving labor productivity, and increasing operational efficiencies on the margin front. Currently trading below its historical averages EV/EBITDA, Texas Roadhouse offers an attractive investment opportunity.

Over the past five years, the company has almost doubled its revenue despite COVID-related disruptions. Its success is attributed to its ability to recover from the pandemic, increase guest traffic, and maintain high guest satisfaction. In Q4 of 2022, the company experienced continued growth in guest traffic, contributing to revenue growth. Increased average unit volume and menu prices also played a role in sales growth. Texas Roadhouse raised prices in October 2022 and March of this year, supporting future revenue growth.

The company has seen positive traffic growth in Q4 despite price increases due to resilient demand for both dine-in and to-go services. Texas Roadhouse plans to reach a total of 900 restaurants in the long run, focusing on opening new locations in small communities and suburban areas with less competition. The company's restaurant margins have been negatively impacted by inflationary commodity costs and higher labor wages since the second half of 2022. However, price increases and volume leverage partially offset these headwinds, and as comparisons ease and inflation moderates, margin pressure should reduce.

Texas Roadhouse is currently trading at an EV/EBITDA (TTM) of 15.18x, below its historical average FWD EV/EBITDA of 18.89x, providing room for the upside. The company is expected to continue benefiting from price increases, strong guest traffic and volume growth, new unit expansion, moderating inflation, and improving productivity. The company also has a good track record of providing shareholder returns through an attractive dividend yield, with the recent increase in annual dividend payments bringing the forward dividend yield to ~2%. The author has a buy rating on the stock.

Unity Software is the largest company in the market for creating, running, and monetizing interactive, real-time content for various devices, including mobile phones, PCs, consoles, and augmented and virtual reality devices. The company has faced significant problems with its software and a merger with IronSource, just as macro headwinds have impacted demand. Unity's latest earnings report contained disappointing guidance, causing the shares to fall by 25%.

Despite these challenges, Unity has provided investors an update on the mobile game marketplace's resilience and is now in the early phases of offering customers a generative AI marketplace. The company has also expanded its initiatives beyond the gaming market with the release of Unity Industry, its latest offering for digital twins and immersive experiences.

The investment thesis suggests that Unity's prospects in a recovery are under-appreciated, and the positive impacts of the IronSource merger have been overlooked in many evaluations. Unity's EV/S has fallen to less than 7.5X, and for the first time, the company has a measurable forward P/E-33X based on the analyst consensus forecast for 2024 non-GAAP EPS. The analyst consensus for Unity's revenue growth in 2024 is a rather tepid 19%, reflecting a conservative view of a potential recovery in mobile ad spending, creating an attractive setup for longer-term investors.

Unity's shares have been affected by macro headwinds and a lack of clarity about demand. The latest revenue forecast for the company is conservative and does not account for potential cross-selling opportunities or digital twin technology initiatives. The author believes that Unity's negatives are already priced into the shares and recommends considering buying at the current entry point.

Unity's business model is still a work in progress, but the company's forecast for adjusted EBITDA of about $260 million at the mid-point works out to a free cash flow margin of 10% for this year. The investment thesis includes sustained leadership within the game creation software business, the leading mediation solution, a unique position that allows the company to sell mediation solutions to creators who use its technology, a substantial opportunity outside games through its digital twin's technology, and a strong focus on margins. However, the author advises against buying the shares based on hopes of better guidance or Q1 earnings, as many IT vendors are facing headwinds and there is a recession either here or nearby.

The company is expected to benefit from revenue growth through price increases, a more diversified customer mix, expanding catering business, and resuming new unit expansion. Margin recovery is anticipated through moderating inflationary pressure, productivity initiatives, and price increases. The stock is trading below historical levels, making it a good buy at current levels.

CBRL's revenue has experienced solid growth over the last couple of years, thanks to easing travel restrictions, an increase in off-premise sales, and continuous menu enhancements. The company should continue to see revenue growth due to price increases, expanding off-premise services, resuming new unit expansion, and attracting a younger customer base. CBRL's off-premise business has significantly grown from pre-pandemic levels over the past couple of fiscal years, with catering services also rapidly expanding. The company's new unit expansion, disrupted during the pandemic, is expected to resume in the coming years, focusing on expanding Maple Street Biscuit Company.

CBRL is actively diversifying its demographic mix and increasing the traffic of younger customers in its stores. Management has guided for a 7-9% reported sales growth for FY23, which appears achievable due to the anticipated 8.5% price increases for the full year. CBRL's longer-term growth outlook also looks positive.

CBRL's adjusted operating margin has been negatively impacted by inflationary commodity costs and higher labor wages. However, moderating inflationary pressures should help improve margins in the coming quarters. The company is implementing cost-saving and productivity-enhancing measures, which are expected to generate cost savings in 2023 and beyond.

Cracker Barrel is currently trading below its historical 5-year average forward P/E and has good growth prospects, making it a good buy at its current price.

Spirit Airlines' share price is currently trading at a discount compared to the acquisition price offered by JetBlue, which suggests that the acquisition may not be completed. Although Spirit has been facing challenges such as high oil prices, inflation, special charges, and a significant debt load, the company's strong growth and low-cost operating model help balance these risks. Spirit's cost advantage over its competitors can be attributed to factors such as higher aircraft utilization, more seats per aircraft, and lower fuel and marketing costs.

JetBlue has expressed interest in acquiring Spirit, but the Department of Justice (DOJ) has sued to block the deal, potentially creating a major distraction for both parties. However, the likelihood of the courts stopping this merger would be unprecedented. If the JetBlue offer falls through, Frontier has shown interest in acquiring Spirit. However, if those fall through, it could lead to a significant decline in Spirit's stock price.

If Spirit manages to return to its pre-Covid profit levels and achieve its anticipated future capacity, the company could generate an operating profit of approximately $1 billion. This would result in a back-of-the-envelope valuation of an EV/EBIT ratio of 4x. If the JetBlue deal goes through, investors stand to gain an 80% return on their investment. If the deal fails, they will still own a stake in an airline that is not only extremely affordable but also experiencing rapid growth and offering the most cost-effective tickets in the market.

The author believes that Cronos Group stock is attractively priced and has added two purchases to their model portfolio, resulting in a 10.25% exposure to the company. In 2022, Cronos Group had a successful year, with revenue reaching $91.9 million, a 23.5% increase from the previous year, and a gross profit of $12 million in comparison to a loss in 2021. However, the acquisition of Lord Jones in the United States proved to be a significant misstep, as revenue in this segment fell by 48% to just $5.2 million, and the company reported an adjusted EBITDA of -$20.1 million.

The Rest of World segment accounted for most of the company's revenue, totaling $86.7 million, which is up 34.4% from 2021. With no debt and $877.7 million in cash and short-term investments at the end of the year, Cronos Group boasts the best balance sheet in the industry. Analysts predict that the company's revenue will grow by 9% to $101 million in 2023 and by 17% to $117 million in 2024.

Currently, Cronos Group is trading at a low valuation of 0.65 times its tangible book value and has a negative enterprise value due to its substantial cash reserves. Other cannabis companies, such as Organigram and Village Farms, are trading at even lower multiples of tangible book value, making them appealing investment options. The author sees the potential for Cronos Group to work its way back towards tangible book value, which would signify considerable upside.

Although the stock has dropped by 50% from its December peak, it appears to have support at the $1.80 level. The author still believes that Altria could potentially acquire the rest of Cronos Group, but investors can still profit even if that does not occur. Overall, Cronos Group seems to be a relatively safe haven for cannabis investors during the bear market.

Citigroup is currently undervalued, making it a good buy at its present price. The company has made significant progress in modernizing its technological infrastructure, divesting noncore assets, and improving its Services and Wealth Management businesses. Book value per share metrics continue to grow, and earnings have been solid.

Historically, the discount to peers is based on the lower ROTCE that Citigroup has generated and the uncertainty surrounding the large, global organization. Jane Fraser's plan to address these issues involves divesting noncore global consumer banking operations and focusing on allocating capital towards higher-returning businesses such as TTS and Wealth Management. A likely sale of Citigroup's Banamex franchise will have a short-term negative impact on capital, but it will free up billions for stock buybacks.

Citigroup reported an exceptional first quarter, with a net income of $4.6 billion and EPS of $2.19. Revenues grew by 6%, driven by Services and Fixed Income, while Investment Banking and Equities trading remained weak. Expenses increased by 4% due to transformation and other business investments.

With over $1 trillion in available liquidity resources and $1.3 trillion in deposits across its corporate and consumer banking enterprises globally, Citigroup's primary institutional customers are multinational companies fully integrated into its payroll, supply chain, and cash/liquidity systems, making deposits sticky.

After reporting earnings, Citigroup's stock rallied over 4% and closed at $49.56, which is only 59% of its end of Q1 tangible book value per share of $84.21. The author believes that Citigroup should trade at a minimum of $80 per share and ultimately reach a stock price over $100 per share with accretive stock buybacks and operating leverage.

Bullish arguments for Palantir (PLTR) include the company's recent GAAP profitability and guidance for continued GAAP profitability this year, which could exceed Wall Street's expectations. As a reasonably valued play on artificial intelligence, PLTR has numerous use cases for AI, with a focus on AI-driven and software-driven weaponry. The company's strong cash flow margins and potential for 30% net margins over the long term make it an attractive investment. PLTR is considered a top pick for those looking to participate in a tech recovery.

Neutral arguments acknowledge that management may be planning acquisitions or special transactions to close the gap between expectations and reality, while macroeconomic factors may have influenced their decision not to mention previous revenue growth targets.

Bearish arguments point to PLTR's slow revenue growth, especially in the US commercial sector, and weakness in non-US commercial revenue, which may be due to other countries being less receptive to new innovations. The surprise GAAP profit in the recent quarter came from a non-cash gain, and PLTR's adjusted operating margin declined significantly in 2022. Future revenue growth is expected to be modest, and margin expansion will likely rely on operating leverage. Risks for PLTR include competition, being ahead of its time, inaccurate guidance, and a lack of insider buying.

The author views a basket of undervalued tech stocks as being an optimal way to position ahead of a recovery in tech stocks. PLTR fits right in such a portfolio and they expect the stock to perform strongly in a broader sector recovery.

Elevance Health Inc., a rapidly expanding health benefits company in the US, is currently trading at a discount compared to some peers, offering an attractive entry price for investors. The healthcare industry's shift towards value-based care has driven strong membership growth for the company. With an aging US population and increasing demand for healthcare services, the health insurance market is booming.

Elevance Health boasts strong fundamentals, including an industry-leading increase in operating revenue and a robust cash position of over $7 billion. The company has also demonstrated faster bottom-line growth than the overall insurance market and generated around $8.5 billion in free cash flow in the last 12 months. This has allowed for share buybacks and increased dividends.

Despite the risks posed by regulatory changes, competition, and potential inflationary impacts on cash flows, Elevance Health remains a solid investment option due to its strong cash position and focus on shareholder returns. The author recommends Elevance Health as a buy, with potential upside if the P/E ratio aligns with the broader sector.

The article introduces a new series on investment strategy and discusses the author's personal process for finding and selecting investment ideas, as well as staying informed about current investments. The topic is split into multiple parts, with the first part focusing on idea generation. The author discusses various tools and methods for finding new investment ideas, including social media platforms such as Twitter, Substacks and personal investment blogs, investment communities, stock forums, and other websites.

The article also discusses various methods for generating investment ideas, including analyzing research from analysts and funds, using stock screeners, keeping an eye out for trends, and attending investor conferences. The author emphasizes the importance of doing one's own due diligence and provides examples of tools and resources for finding investment opportunities.

The article discusses Databricks, a data science and machine learning company that offers a platform for managing data, machine learning, and artificial intelligence applications. Databricks was founded after a team of students competed in the Netflix Prize competition and developed Spark, a processing framework designed for fast and efficient data processing and analytics on large-scale data sets. The article highlights the key differences between Hadoop and Spark and how Spark has become a popular tool for Big Data processing. Databricks monetized Spark by offering a managed version in the cloud and is expanding its product to serve traditional data warehouse use cases. Databricks and Snowflake were benchmarked, with Databricks being found to be 2.7x faster and 12x better in terms of price performance. The article discusses the potential for Databricks to IPO at a premium due to its reported growth in the AI and ML workload market.

The article discusses the potential investment opportunity in Minto Apartment REIT and Morguard Residential REIT due to Canada's robust immigration program, which is expected to cause a housing shortage and increase demand for rental properties in the six largest cities.

The article also analyzes Canadian Apartment Properties REIT (CAPREIT), praising its management and focus on Toronto but expressing concern about its valuation compared to peers. The author suggests a lower valuation for CAPREIT based on enterprise value and cap rate and places it on their "buy if it falls 10-20%" list.

The article notes that residential REITs can mitigate the impact of higher interest rates by locking in mortgages and staggering debt maturities and have the ability to raise rents annually.