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Today's top stock ideas (Mon, Dec 11)
Connor Van Ooyen
December 11, 2023
About // Sponsorships // Twitter
👋 Good Morning!
Welcome to the 213 new readers who joined over the weekend!
Our AI read and summarized 62 stock ideas, 1132 news articles, and 176 insider trades and found:
A commodity producer with 100% upside potential (featured stock idea)
Consumer sentiment jumps for the first time in 5 months (news)
The CEO at Warner Music Group sold $29M of the stock (insider trade)
3 bonus stock ideas
and much more…
I hope everyone had a great weekend. Thanks for reading!
Connor
* If you missed yesterday’s email, don’t forget to read it here
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FEATURED STOCK IDEA
BLOG POST
SIBANYE STILLWATER - Most hated commodity producer!
Sibanye Stillwater is a leading international precious metals mining company, with a diverse portfolio of assets including platinum group metals (PGMs), gold, and base metals. The company holds a significant portion of the world's PGM reserves and has substantial reserves of uranium, gold, silver, and lithium.
Ticker: SBSW | Price: $4.60 | Price Target: $9.20 (+100%) | Timeframe: N/A
💎 Precious Metals | ⛏️ Mining | 📈 Bullish Idea
Sibanye Stillwater, a key player in the platinum group metals (PGMs) market, has seen its share price plummet by 80% from its 2021 peak, largely due to investor fear, a broad market selloff, and specific challenges including an announced sale of convertible bonds. Despite these challenges and the grim economic and logistical conditions in South Africa—characterized by state power utility Eskom’s rolling blackouts impacting the nation's mining activities—the company remains intriguing due to its substantial share of global PGM reserves. With a projected supply deficit of PGMs increasing to 1,071 koz for 2023, reflecting a 3% drop in supply and a 26% spike in demand, the underlying market dynamics for PGMs are favorable. Sibanye's "flash crash" on November 21st, following the convertible bond announcement, suggests potential conflict of interest among banks involved in setting a low conversion price close to the pre-announcement trading level. The company boasts solid fundamentals, trading at four times earnings and offering a 7% dividend yield, with negligible net debt on its balance sheet. Sibanye recorded a net profit of 2 billion dollars in 2021 against a market cap of 3 billion dollars, signifying considerable undervaluation. Despite the severe risk of socio-political turmoil in South Africa, the company's assets, strong financials, and experienced CEO—who personally holds 10 million shares—make for a compelling investment case. The pitch sees Sibanye as significantly undervalued, suggesting the stock could double in value as sentiment shifts from "extremely hated to just hated," according to investor Rick Rule.
Read the full article here. Read time: 4 min
POLL - FEATURED STOCK IDEA
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How do you rate the featured stock idea? |
Yesterday’s Rating (link):
Altus Power ($AMPS)
🟩🟩🟩⬜️⬜️ - Buy (38%)
🟥🟥⬜️⬜️⬜️ - Pass (30%)
🟨🟨⬜️⬜️⬜️ - Watchlist (32%)
* There are more stock ideas later in the email!
MARKET OVERVIEW
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Result (link): 58%
The bearishness from the beginning of the week did not last long! The Fear v Greed index is back up to it’s recent peak of 68, the news sentiment jumped all the way up to 0.5 (above the weekly average of 0.22), all of the indexes were up for the second day in a row, and Yellowbrick Road readers have gone from 50% bullish at the beginning of the week up to 58% bullish at the end. Reader gbrig*** points out that “both major political parties have an interest in an improving the economy prior to the 2024 Presidential election. The spin will be taking credit for it.”
STOCK MARKET NEWS
Today’s news is brought to you by Techspresso. It’s a free newsletter that gives you a daily rundown of what's happening in tech and what you shouldn't miss. Subscribe for free
Consumer sentiment jumps in early December, first increase in five months, UMich says - Market Watch
Inflation expectations plunge in closely watched University of Michigan survey - CNBC
Paramount shares jump after reports of takeover interest - CNBC
U.S. approves first gene-editing treatment, Casgevy, for sickle cell disease - CNBC
X discusses using Amazon's ad-buying software - WSJ
* If you want all of the day’s most important stock market news, sign up for my free, daily email called Market Mornings.
QUIZ
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Which investor is famous for his "two rules of investing": Never lose money and never forget rule number one? |
Yesterday’s Question (link): What company did Steve Jobs found in 1985 after leaving Apple, which was later acquired by Apple in 1996?
Answer: NeXT! Apple actually bought it for $427M to bring Steve back as CEO and the NeXT software was combined with the Mac OS team to create Mac OS X. One of our readers actually had some experience managing NeXT systems back in the day.
INSIDER TRADES
The insider trades are brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here
Director at EyePoint Pharmaceuticals, Inc. ($EYPT) sold 1,000,000 shares at $19.51/share ($19.51M total) which decreased their holdings by 33.2% (link)
Director at DoorDash, Inc. ($DASH) sold 184,100 shares at $97.07/share ($17.87M total) which decreased their holdings by 82.0% (link)
CEO, Recorded Music at Warner Music Group Corp. ($WMG) sold 869,008 shares at $33.36/share ($28.99M total) which decreased their holdings by 31.6% (link)
Director at NXG NextGen Infrastructure Income Fund ($NXG) purchased 8,900 shares at $33.75/share ($300K total) which increased their holdings by 35.6% (link)
10% Owner at Pulse Biosciences, Inc. ($PLSE) purchased 66,021 shares at $9.34/share ($617K total) which increased their holdings by 23.1% (link)
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Secret Question: How was your weekend? My wife and I had a very relaxing weekend!
BONUS STOCK IDEAS
BLOG POST
Rémy Cointreau: New Multi-Year Low with Weak Near-Term Outlook
Remy Cointreau is an international French spirits group whose portfolio includes cognac, liqueurs, and other distilled beverages. It has an established presence in the premium spirits market with a focus on luxury brands like Remy Martin cognac.
Ticker: OTC: REMYY | Price: $11.35 | Price Target: $16.11 (+42%) | Timeframe: N/A
🍾 Alcohol | 🇫🇷 France | 📈 Bullish Idea
Rémy Cointreau (RCO) shares have plunged, now sitting at lows unseen in the past five years, a stark contrast to their peak at the end of 2021. RCO's recent half-year financials for FY24 revealed a concerning 22% organic sales drop, with Current EBIT plummeting by 47%, notably with a halved performance in the Americas. This underperformance, attributed to post-COVID normalization and increased competition, particularly in the U.S. Cognac market, is expected to lead to a modest recovery in FY25. Despite these headwinds, the brand's position in the premium spirits sector sets forth a favorable long-term outlook with potential for significant stock upside. RCO's shares trade at an attractive P/E of 18.7x FY23 earnings; assuming a conservative 6.3% EPS CAGR from FY19 to FY26 and a 30x P/E, this points towards a potential 42% total return or 14.6% annualized gain. Rémy Cointreau's resilient dividend payout, with a ratio around 60% based on FY19 EPS, adds to the stock's attractiveness. With shares priced at €107.40, the analysis recommends a 'Buy' rating, despite acknowledging risks associated with the discretionary nature of premium spirits and the current industry challenges.
Read the full article here. Read time: 8 min
BLOG POST
Zynex (ZYXI US – $ 311m)
Zynex is a med-tech company, selling electro therapy products for muscle stimulations, inferential and TENS devices. The company appears to rely heavily on revenues from batteries and related supplies.
Ticker: ZYXI | Price: $8.29 | Price Target: N/A | Timeframe: N/A
🩺 Medical Technology | 🚨 Event Driven | 📈 Bullish Idea
Zynex (ZYXI – $ 311m). Zynex is VERY speculative opportunity. This is definitely NOT a high-quality company. Zynex is a (low-quality) med-tech company, selling electro therapy products for muscle stimulations, inferential and TENS devices. To be honest, we have big doubts if what the company is doing is sustainable, i.c. getting reimbursed (a lot) for what appears to be commodity products (80% of revenues appear to be batteries and related supplies that are offered at much lower prices at retail). One might call what Zynex is doing ‘regulatory arbitrage’ (that’s perhaps too kind). The point is that we feel that the CEO (>40% owner) knows that this game cannot continue (as a public company) and has initiated a strategic review, with we believe the intention to sell. This is a rapidly growing company trading at undemanding multiples (c. 11x 2023e ev/ebitda for >50% ebitda cagr - but for the previous explained reasons), which should not be public in our opinion.
Read the full article here. Read time: 1 min
ANALYST REPORT
[SHORT] We Believe SenseTime is Artificially (Un)Intelligently Inflating Revenue Through Highly Questionable Revenue Round-Tripping Schemes
SenseTime Group Inc. is a company listed on the Hong Kong Stock Exchange, known for supplying facial recognition technology primarily to the Chinese government. The company has an array of AI-driven projects and claims to be a leading AI platform company with applications in various fields including 'Smart City,' 'Smart Traffic,' 'Smart Auto,' 'Smart Business,' 'Industrial Quality Control,' 'Smart Culture and Tourism,' 'Smart Health,' 'Smart Life,' and 'AI Education'.
Ticker: 0020.HK | Price: HKD 1.29 | Price Target: N/A | Timeframe: N/A
💻 Facial Recognition | 🇨🇳 China | 📉 Bearish Idea
The stock pitch alleges that SenseTime Group Inc. (0020.HK), which presents itself as a leading artificial intelligence (AI) software company, is engaged in inflated revenue practices, primarily through revenue round-tripping schemes. In these schemes, SenseTime or its intermediaries reportedly provide funds to customers, who then use those funds to purchase products from SenseTime—transactions which often do not involve the actual delivery of products. This malpractice has been corroborated by lawsuits and testimonies, including the CEO of Capital Watch. SenseTime’s accounts receivable have ballooned, suggesting either an inability to collect payment or fake revenue, as a significant portion of its revenue comes from government contracts. Adding to the company's woes are its undue financial losses, deep ties and dependency on the Chinese government leading to unpaid contracts, a U.S. blacklist preventing access to crucial U.S. technology markets, and intense competition from better-funded rivals. Insider sentiment echoes these concerns, reflecting dissatisfaction and a perceived directionless, unprofitable business. Smart money, including large shareholders like Alibaba and a co-founder, are exiting their positions, signaling a loss of confidence. Moreover, SenseTime's opaque relationship with undisclosed related parties, controlled by its executives, raises questions about potential hidden liabilities and the true state of its financial health. This environment has led to layoffs and ongoing cash burn, with the company's IPO narrative shifting frequently, suggesting a lack of a stable business strategy. Employee reviews outlined a toxic work culture without direction and regular lay-offs. In addition, an embarrassing incident demonstrated SenseTime's AI technology might not be as proprietary as claimed, further casting doubt about the company's authentic AI capabilities. Ultimately, the pitch recommends investors scrutinize the overhyped AI narrative and consider the company's potential deep-rooted dishonesty, economic struggles, and the heavy selling by insiders.
Read the full article here. Read time: 25 min
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Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results (link):
🟩🟩🟩⬜️⬜️ Under Armour ($UAA) [38%]
🟨🟨⬜️⬜️⬜️ Armstrong World Industries ($AWI) [36%]
🟥⬜️⬜️⬜️⬜️ Gaming Innovation Group ($GIGSEK.STO) [12%]
WEEKLY TOURNAMENT
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🏆 Last Week’s Winners
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