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Today's top stock ideas (Wed, Dec 13)
Connor Van Ooyen
December 13, 2023
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👋 Good Morning!
Welcome to the 123 new readers who joined yesterday!
Our AI read and summarized 51 stock ideas, 1301 news articles, and 121 insider trades and found:
An insurance company with 163% upside (featured stock idea)
Netflix to squeak past Disney+ in US advertising revenue (news)
A Director with an 80% win rate bought $1.3M of $MACK (insider trade)
and much more…
Reminder: if you are crazy like me and want even more stock ideas, Yellowbrick Premium is only $1 (for the whole year) if you sign up before Monday. It gives you access to the Discord where I post all of the extra stock ideas I find each day (10+ extra per day). Sign up here
Thanks for reading! Have a great day.
Connor
* If you missed yesterday’s email, don’t forget to read it here
TODAY’S SPONSOR
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FEATURED STOCK IDEA
BLOG POST
American Coastal (NASDAQ: $ACIC) Q3 Update
ACIC is a Florida-based property and casualty insurer focused on the commercial lines market, known for rate increases and a growing book value. The company is active in both commercial and personal lines, though it is looking to divest its personal lines segment to concentrate on its core business.
Ticker: ACIC | Price: $8.56 | Price Target: $22.47 (+163%) | Timeframe: N/A
🏦 Casualty Insurer | 📈 Bullish Idea
ACIC is a Florida-based property and casualty insurer focused on the attractive commercial lines market, where rates are increasing 35-36% due to favorable market conditions; in Q3, ACIC grew book value per share to $2.78 and delivered net income of $14.4 million, though the personal lines segment dragged earnings with a $5.5 million pre-tax loss which they plan to sell in 2024, freeing up capital; management sees continued hard market conditions in Florida commercial lines that will allow ACIC's core business to expand as competitors shrink - for 2023-2030 we project average annual earnings growth of 22% and recommend a strong buy rating with 164% upside based on a DCF model using a 10x exit multiple.
Read the full article here. Read time: 7 min
POLL - FEATURED STOCK IDEA
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Rating (link):
Toll Brothers ($TOL)
🟩🟩🟩⬜️⬜️ - Buy (38%)
🟥⬜️⬜️⬜️⬜️ - Pass (24%)
🟨🟨🟨⬜️⬜️ - Watchlist (38%)
antho**** (watchlist) - Great momentum on this name, and I have no doubt it will break 100. It's just hard to justify buying up at these premium prices.
ke4k**** (pass) - Not a good time now for builders. Costs are up and home sales have slowed. Builders are lowering the prices of their homes just to get them to sell.
* There are more stock ideas later in the email!
MARKET OVERVIEW
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 58%
A tiny bit less bullish than the day before, but still very bullish. Fear v Greed index is still at 68, 3 of the 4 indexes were up, the news sentiment was slightly more bullish than the previous 7-day average (0.42 v 0.383), and YBR readers were 58% bullish (down from 62%).
STOCK MARKET NEWS
Today’s news is brought to you by the Business Academy newsletter. A free, weekly email with the best tweets, a cool investment opportunity, and an interesting business insight. Subscribe here
Eli Lilly Skids, Weighing On Novo Nordisk, On A Key New Finding For Obesity Drugs - Investors Business Daily
A stock market rally is the time to use this ‘strategic chess move' for capital gains, advisor says - CNBC
* If you want all of the day’s most important stock market news, sign up for my free, daily email called Market Mornings.
QUIZ
+3 POINTS - WEEKLY TOURNAMENT
Which company was originally named "Blue Ribbon Sports"? |
Yesterday’s Question (link): Which company, originally known for its cameras, played a major role in the development of the digital camera technology that eventually led to its own decline?
Answer: Kodak!
TOP INSIDER TRADE
The insider trade is 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 MERRIMACK PHARMACEUTICALS INC ($MACK)
The Director purchased 101,050 shares at $12.85/share ($1.30M total) which increased their holdings by 6.2%. The current price is $13.21 (+2.8%). (trade link)
Historic Returns
1m returns: 12% weighted | 6% median | 94% win rate (16/17)
3m returns: 12% weighted | 8% median | 82% win rate (14/17)
6m returns: 23% weighted | 17% median | 81% win rate (14/17)
1y returns: 44% weighted | 31% median | 82% win rate (9/11)
LINKS YOU’LL LOVE
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SECRET QUESTION
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If you read this far, reply to this email with your answer to gain points for the weekly tournament. (Or if you’d rather not answer but still want the points, you can just reply and say hi!)
Secret Question: What was the first job you ever had? My first job was in a chocolate factory!
BONUS STOCK IDEAS
Vertiv one of their best ideas for 2024
Vertiv is a provider of equipment and services for datacenters, including power supplies and thermal management systems. The company's core market is data centers, which make up about 75% of its revenue, ensuring their safe and efficient operation.
Ticker: VRT | Price: $45.30 | Price Target: N/A | Timeframe: N/A
📊 Data Centers | 🏗️ Infrastructure | 📈 Bullish Idea
$VRT has been identified by TD Cowen as one of their top stock picks for 2024 due to expected strong top-line growth and operational leverage potential, underpinned by substantial increases in global data usage, estimated to hit 291 ZB by 2027. Vertiv, which specializes in power supplies and thermal management systems for data centers (around 75% of revenue), is expected to gain market share from smaller competitors and grow its revenues by 8-11% per annum, outpacing the underlying market projected growth of 7-10%. Improvements in supply chains now serve as a tailwind, especially for smaller, focused companies like Vertiv. Additionally, Vertiv has opportunities to cut costs and increase its margin, with aims to reach a 20% margin by FY26-28. The company has a conservative balance sheet and plans to deploy an expected $6.5 billion in cash through FY28, while also investing in future growth. Recently, Vertiv has authorized a $3 billion share repurchase program, signifying a renewed commitment to return capital to shareholders.
Read the full article here. Read time: 2 min
VALUE INVESTORS CLUB
CPI CARD GROUP INC - PMTS
CPI Card Group manufactures debit and credit cards in the United States, known for generating strong cash flow and having a solid presence in its market with competitive EBITDA and free cash flow yields. The company is diversifying with eco-friendly card offerings and potentially benefiting from industry consolidation and advancements in card technology.
Ticker: PMTS | Price: $17.08 | Price Target: $30 (+76%) | Timeframe: N/A
💳 Credit Cards | 🏭 Manufacturing | 📈 Bullish Idea
CPI Card Group, a manufacturer of debit and credit cards in the U.S., is trading attractively given its healthy financials, including $100m EBITDA and $42m net income over the past year, with a strong cash flow from operations and modest capex requirements. With a market cap of $180m and an EV of $453m, its equity offers a 20% free cash flow yield and trades at 4.6x EV/EBITDA and 5x 2023 P/E. CPI is effectively managing its debt, paying down high-interest bonds, and has room for share buybacks. The company competes in a consolidated market against major European firms but has been gaining market share due to superior customer service and competitive pricing. Although CPI's stock dipped after a cautious Q1 earnings call, which cited banking industry stress but maintained guidance, the company rebounded with a solid Q2, suggesting resilience. The upcoming CEO change seems unrelated to company performance. The potential for company sale remains, facilitated by the controlling PE firm, Parallel49 Equity, which may wait for stock price recovery to consider an exit, possibly at or above $30. CPI could be an acquisition target for private equity, strategic players like Thales or G+D, or card service operators like FIS and Fiserv. Card manufacturing is transitioning, with eco-friendly cards like CPI's "Second Wave" and "Earthwise" becoming a new growth avenue, supported by mandates from Mastercard and likely Visa. Despite the card industry's high competition, CPI's current 5x P/E valuation offers a favorable entry point. CPI's ability to keep pace with shifting card technology trends, its leadership in eco-friendly cards, and the potential tailwinds from this emerging segment position it well, and the private equity influence could safeguard against missteps. Upcoming Q3 earnings and how CPI meets 2023 guidance will be key catalysts to watch, as will broader market shifts towards small-cap stocks.
Read the full article here. Read time: 3 min
HEDGE FUND
Hayden Capital holding - $SMRT
SmartRent is a company that provides smart home technology solutions for real estate owners, aiming to enhance efficiency and profitability through innovative software and hardware products. The company has a strong customer base among the top real estate owners and has been focusing on achieving profitability and scaling its customer base.
Ticker: SMRT | Price: $3.16 | Price Target: N/A | Timeframe: N/A
🏠 Smart Home Tech | 📈 Bullish Idea
Recently, I visited SmartRent's (SMRT) team in Scottsdale, Arizona, and while a short report had emerged questioning their growth sustainability and reliance on RET Ventures' network, my discussions reinforced my confidence in their imminent free cash flow generation. SmartRent, focused on profitability, has transitioned their growth strategy from expanding unit numbers to increasing customer lifetime value and ARPU, resulting in higher sales & marketing expenses per unit. With substantial market penetration among top real estate owners and a considerable long-tail customer base, they face increased customer acquisition costs and longer sales cycles as they shift from low-hanging fruit to smaller, often family-run property owners resistant to change. Despite this, SmartRent ensures customer acquisition remains profitable within a year of signing, with software ARPU doubling in the last two years and newly booked units priced 67% higher than current average rates. Partnerships with RET Ventures provided market credibility and critical mass, and their recent distribution of SmartRent stock to LPs solidifies direct shareholder relationships rather than signifying customer attrition. SmartRent's asset-light shift, made possible through a distributor partnership and enabling self-installation for customers, has already released substantial working capital. SmartRent anticipates EBITDA positivity by Q4 and FCF generation early next year, projecting around $35M in FCF in the next year and over $50M by 2025, suggesting 9-13% FCF yields and 25% CAGR software revenue growth. With $210M in cash reserves, management is keen on share buybacks, indicating potential shareholder returns as the company approaches FCF positivity.
Read the full article here. Read time: 6 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results (link):
🟩🟩🟩⬜️⬜️ Veeva Systems ($VEEV) [42%]
🟨🟨⬜️⬜️⬜️ AZEK ($AZEK) [32%]
🟥⬜️⬜️⬜️⬜️ Flywire Corp ($FLYW) [26%]
Your Thoughts:
💻 emoj*** ($VEEV): The pharmaceutical/medical fields need to move to SaaS for HIPPA and other security features to show Due Diligence.
PREMIUM DISCORD COMMUNITY
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WEEKLY TOURNAMENT
Gain points and earn prizes every week just for voting on the quizzes/polls, replying to this email, and clicking on ads/sponsored links!
🏆 This Week’s Leaderboard
jwill**** (98 points)
zwgi*** (98 points)
mast**** (98 points)
Scoring
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+10 points for replying to this email
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+50 points for referring a friend
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MY OTHER FREE NEWSLETTERS
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Intentional Dollar (link): Simple thoughts, tools, and questions to help move your money forward → published weekly, for free, from a professional Financial Advisor and CFP® (written by my friend)
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THAT’S ALL FOLKS
+3 POINTS - WEEKLY TOURNAMENT
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How would you rate today's newsletter?If you vote 1 or 3 stars, please leave a comment with what you didn't like so I can improve it! |
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