🟨 Does the Stock Market Normally Go Up After a Down Year?

The article discusses the undervaluation of Brazilian retail conglomerate Companhia Brasileira de Distribuição (CBD:NYSE) and its potential as a prudent investment.

The company is controlled by French giant Casino and has three components, including a legacy Brazilian supermarket division (GPA), a controlling interest in Colombian retailer Grupo Éxito, and a stake in French online retailer Cnova. Management is taking steps to simplify the holding structure and spin off 87% of Éxito into another public entity, which is expected to increase its valuation.

Despite struggling in 2022 due to inflation in Brazil, GPA is expected to perform better as a stand-alone business with a target of opening 300 new stores between 2021-24. The article presents two scenarios for CBD's valuation, a worst-case scenario with a 32% downside risk and a bullish scenario with over 200% upside potential. The author holds a core position in CBD:NYSE shares.

The article recommends a long position in Prologis, a US-listed REIT that primarily owns and operates US industrial properties. The author argues that Prologis is undervalued due to embedded rent mark-to-market and low CapEx/re-leasing burden, and that demand for warehouse space will continue to be a secular growth story due to e-commerce growth.

The article also discusses the strong supply/demand fundamentals of the US e-commerce industry and the potential for industrial rents to multi-bag in the coming years.

Additionally, the article discusses the current state of the industrial real estate market, particularly in infill markets where industrial rents have room to increase before it becomes economically attractive to tear down other types of real estate and build industrial.

Treace Medical Concepts (TMCI) is targeting an under-penetrated market with its Lapiplasty bunion correction procedure. With strong uptake and increasing utilization, TMCI is converting the standard of care through strategic marketing and salesforce investments. With extensive patient data supporting Lapiplasty's success, TMCI has added around 1,100 surgeons in the last two years, accounting for about 24% of US bunion surgeons. In FY'22, TMCI sold 24,656 Lapiplasty kits, a 41% YoY increase. Revenue per surgeon also grew in FY'22, and the company is rapidly adding sales reps. The author rates TMCI as a buy with a $31 target, expecting continued Lapiplasty growth in the next 12 months.

The article weighs bullish and bearish arguments for Planet Fitness. Bullish points include contractual obligations for franchisees to open 1,000+ stores, strong consumer spending, share repurchase program, an appealing value proposition, a successful franchise model, potential to increase franchising fees, predictable revenue streams, international expansion, and a 20% stock pullback as a buy signal. Bearish concerns are low insider holdings, unattractive valuation, possible inflation, acquisition risks, legal actions, the high percentage of stores in low-income areas, and a high contractual obligation to EBITDA ratio. Overall, the article leans bullish, emphasizing growth potential and a strong franchise system.

GDI Integrated Facility Services, a consolidator in the janitorial and facility services industry, has grown revenues and EBITDA significantly. The company has acquired smaller operators in the fragmented sector, and its shares are attractively priced at 10.5x EBITDA (v 13x average for sector). GDI's stable revenues come from long-term contracts and recurring demand, with 56% generated from Canada and 44% from the US. The company has proven resilient during recessions, integrates new technologies for a competitive edge, and is positioned to benefit from outsourcing and sustainability trends. GDI's financials are impressive, and its balance sheet is solid. It may resume acquisitions and potentially pay a dividend. With a 26.7% upside from the current share price, GDI is a recession-resilient stock with long-term potential.

Alaska Airlines reported Q1 2023 revenues of $2.2 billion, exceeding analyst expectations due to higher unit revenue, improved load factor, and increased capacity. Despite higher fuel costs, revenues surpassed cost growth, indicating a strong revenue environment. The company expects Q2 2023 unit costs to decrease, and revenue to increase, leading to improved margins. Capacity is projected to grow faster than revenue growth, but Alaska Airlines considers this a temporary effect. Using EBITDA margin expectations and revenue consensus for 2023, the price target is $64.73, representing a 49% upside.

PayPal, a major player in online secure payments, has experienced growth during the pandemic and aims to maintain momentum with its innovation-centered strategy, customer satisfaction, ease of use, and strategic partnerships. Despite trading at a 44% discount to its intrinsic value and having a narrow economic moat due to high competition, PayPal has robust financial metrics (such as a 5Y average ROIC of 16.66% and 5Y operating margin of 16.13%) and cost management strategies. The author believes PayPal is undervalued and rates it a Strong Buy due to its undervaluation and strong business fundamentals.

The article discusses 360 Digitech (QFIN), a Chinese online loan facilitation company, as a solid investment opportunity with potential for a 100% upside over the next three years. QFIN has significantly improved its business model and regulatory environment, but is still undervalued. The article compares QFIN's business in 2019 and now, highlighting improvements in funding, leverage, regulation, and competition. QFIN has diversified its customer acquisition channels and has cheap, stable funding from regulated banks. The company has lower leverage and fewer competitors due to regulatory barriers to entry and scale. The article suggests that QFIN is growing its SME loan business, which unlocks significant new TAM. The author argues that QFIN has strong growth potential due to an expected recovery in loan origination volumes, decreasing delinquency rates, and regulatory clarity. The article also discusses catalysts and earnings in relation to the recovery of the Chinese consumer market.

The author addresses bear cases against SoFi and highlights its wide moat stemming from its technology segment, which is hard to replicate. SoFi's modern, vertically-integrated, API-driven, and cloud-based technology stack offers unique product offerings for partners. The three pillars of technology—Galileo, Technisys, and their bank charter—reduce costs. SoFi's BNPL product, Pay In 4, demonstrates the potential of their technology platform. This platform could establish SoFi as a low-cost provider for loans and financial services, but margin expansion and revenue growth need to be seen in 2023.

Rivian Automotive, Inc. (NASDAQ:RIVN) maintains a Buy rating due to positive short-term prospects and promising long-term growth, led by its upcoming R2 platform. Despite a 28.8% year-to-date stock price drop and a valuation decrease, Rivian's projected 2023 production of 50,000 units, although 20% below market expectations, still signals a significant increase from 2022. Short-term catalysts include potential Q1 production outperformance and an accelerated path to profitability, with Q1 production exceeding estimates by 7%. Looking ahead, the R2 platform is central to Rivian's 5-year plan, expecting over 200,000 units by 2027 with the new Georgia facility. The R2 platform aims for mass market appeal, competitive pricing, and cost efficiencies, with a financial runway sustained by $13.5 billion cash reserves and potential financing options. Rivian's strategy positions it for volume growth and improved profitability, making it an attractive long-term investment.

The article discusses the performance of the Nasdaq Composite and S&P 500 in 2022 and 2023, highlighting the difference in volatility and direction. In 2022, both indices experienced numerous down days and losses, while in 2023, there have been few down days and more gains. The article notes that bad years in the stock market are often followed by good returns, but there are no guarantees. The current market seems to be pricing in an end to the inflationary crisis of 2022, but there is a risk of a recession from a slowing economy. The article emphasizes the importance of a long-term mindset in investing in the stock market.

This report analyzes Leatt Corp.'s recent financial results, including a drop in stock price and an increase in global revenue attributed to helmet and accessory sales. The company's OPEX items increased by 17%, leading to a reduction in EBIT margin. Leatt aims to expand into new markets and achieve double-digit revenue growth. The article discusses potential risks and catalysts for the company, including an uplisting on the OTC market. The CEO states that it is not an immediate need but could be considered in the future.

The article discusses the idea of De-Dollarization and the suggestion by Brazilian President Lula for a BRICS Central Bank with its own currency for trade. However, the US Dollar remains the global currency of choice due to the US Treasury market providing a safe and liquid asset for recycling USD proceeds from global trades. The article highlights the huge amount of USD-denominated debt accumulated by entities outside the United States, making De-Dollarization unlikely and emphasizing the importance of understanding this concept