Top stock ideas (Fri, Dec 29)

Author

Connor Van Ooyen
December 29, 2023

👋 Good Morning!

Welcome to the 143 new readers who joined yesterday!

Our AI read and summarized 74 stock ideas, 963 news articles, and 107 insider trades and found:

  • A first-place pitch from an investing challenge (featured stock idea)

  • Amazon to run ads on Prime Video - unless you pay more (news)

  • A CEO with a 0% win rate sells over $1M of stock (insider trade)

  • The future Wechat of Central Asia, an undervalued stock, and a stock with 60% upside (bonus stock ideas)

  • and much more…

Thanks for reading! Have a great New Year’s weekend!

Connor

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FEATURED STOCK IDEA

BLOG POST

PayPal Holdings, Inc. (NASDAQ: PYPL) - Long - Virginia Investing Challenge (1st Place)

PayPal is a multinational financial technology company that facilitates digital payments for customers ranging from individuals to large enterprises, with notable services including its core branded check-out and the popular payments gateway platform Braintree, which includes Venmo.

Ticker: PYPL | Price: $63.21 | Price Target: $110 (+74%) | Timeframe: 2028

📱 Fintech | 🔄 Turnaround | 📈 Bullish Idea

Paypal is one of our holdings in the YBR Premium Portfolio.

Long on PayPal (PYPL) with a target price of $110 by FY28 offers a 112% upside and a 15% IRR, driven by its resilient core checkout services and Braintree's potential. Despite an 80% decline from its 2021 peak amid competition fears, PayPal's trust-based moat in the high-profit cross-border segment and consumer purchase protection foster strong merchant relationships. The survey shows 70% of consumers value protection, mitigating merchant abandonment if they drop PayPal. Braintree's scalable model targets SMBs for higher take rates and better fraud mitigation. New CEO Alex Chriss focuses on cost efficiency, with a leaner PayPal planned through record buybacks, opex cuts, and negligible M&A. The valuation assumes a modest TPV and revenue CAGR of 8% through 2028 and a base case 12x P/E multiple. Risks include checkout business cyclicality and competition, yet these are considered priced in. Credit risk exists through merchant loans, but is relatively small against PayPal's cash reserves.

Read the full article here. Read time: 3 min

POLL - FEATURED STOCK IDEA

+3 POINTS - WEEKLY TOURNAMENT

How do you rate the featured stock idea?

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Yesterday’s Rating (link):

Micron Technologies ($MU)

🟩🟩⬜️⬜️⬜️ - Buy (33%)
🟥🟥⬜️⬜️⬜️ - Pass (32%)
🟨🟨🟨⬜️⬜️ - Watchlist (35%)

  • anthony.**** (buy) - $mu will get to $100 for sure. With price target upgrades across the board and bullish structure, it's only a matter of time

  • garfa**** (pass) - The market is getting ready to crash in the riskier sectors.

* There are more stock ideas later in the email!

MARKET OVERVIEW

Are you short-term bullish or bearish on the market?

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Yesterday’s Poll Results: 56% bullish

Things are slowly turning a bit more bearish, little by little. Overall, the indexes were still slightly positive, but the Nasdaq finished negative (and all of them fell at the end of the day). The news sentiment fell to its lowest amount in quite some time (0.385 v 0.503 for the last 7 days) while the Fear v Greed index remained at 77. Yellowbrick Road readers remained 56% bullish, but some reader like bucl*** have noted they are getting cautious while others like mnola*** believe the market is overvalued and are preparing for a crash.

STOCK MARKET NEWS

Today’s stock market news is brought to you by IBD. If you want to beat Wall Street, you need an edge––IBD Digital gives you the tools to invest with success. Try 8 weeks today for just $8.

New US jobless claims rise again as labor market cools - New York Post

China's Xiaomi unveils first electric car, plans to become top automaker - Reuters 

Amazon to run ads on Prime Video — unless subscribers pay more - New York Post 

Affirm's stock quintupled this year, beating all tech peers, on buy now, pay later boom - CNBC 

Baidu's ChatGPT-like Ernie Bot has more than 100 mln users - CTO - Reuters 

QUIZ

+3 POINTS - WEEKLY TOURNAMENT

Which company was originally known as 'Jerry's Guide to the World Wide Web' before being renamed in 1994?

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Yesterday’s Question (link): Who founded the American multinational tech company IBM?

Answer: Thomas Watson (which is who they named their AI computer system as pointed out by micked***).

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

Chairman and CEO at UDR, Inc. ($UDR)

The Chairman and CEO sold 45,000 shares at $37.90/share ($1.71M total) which decreased their holdings by 4.6%. The current price is $38.33 (+1.1%). (trade link)

Historic Returns
1m returns: -12% weighted | -17% median | 0% win rate (0/28)
3m returns: -7% weighted | -15% median | 18% win rate (5/28)
6m returns: -1% weighted | -9% median | 21% win rate (6/28)
1y returns: 1% weighted | -11% median | 39% win rate (11/28)

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BONUS STOCK IDEAS

BLOG POST

Kaspi – The future Wechat of Central Asia? – A destination analysis

Kaspi.kz Joint Stock Company, together with its subsidiaries, provides payments, marketplace and fintech services primarily through the online mobile app in the Republic of Kazakhstan.

Ticker: KSPI.IL | Price: 93.50 | Price Target: N/A | Timeframe: N/A

📱 Fintech | 🇰🇿 Kazakhstan | 📈 Bullish Idea

Kaspi, a dominant fintech company in Kazakhstan with a versatile "superapp" Kaspi kz, went public on the London Stock Exchange in October 2020 with a market valuation of $6.5 billion. The Kazakhstani fintech giant is divided into three major segments: a fee-based payments and e-commerce business, and a fintech segment offering wallets and lending. Their asset-light approach involves collaboration with third-party hardware and software providers. The company boasts substantial net revenue from these segments, with a noteworthy market share in digital payments of about 70% in Kazakhstan. Despite holding a strong position domestically, future growth includes exploring opportunities in neighboring Central Asia countries such as Uzbekistan, with steady, deliberate acquisitions. However, there are inherent risks, such as political instability, currency devaluation against the USD, and high inflation. This affects the company's potential for 100x growth, which seems unlikely given the substantial scale required on an international level. Conversely, a 10x growth could be within reach, factoring in continued domestic success, regional expansion, and the app's ability to incorporate new, quickly-growing services like e-grocery. The current PE multiple reflects the added investor risks associated with operating primarily in a high-inflation, politically uncertain Kazakhstan with a weakening currency. Kaspi's profitability and engagement through their superapp offer a strong investment case, but whether these will translate to significant long-term shareholder returns outside of Kazakhstan remains to be seen.

Read the full article here. Read time: 24 min

TWITTER

SODI is still very undervalued

Solitron Devices, Inc. designs, develops, manufactures and markets solid-state semiconductor components and related devices primarily for the military and aerospace markets. The company focuses on designing and developing amplifiers, voltage regulators, monolithic crystal filters, and other integrated circuits.

Ticker: SODI | Price: $15.20 | Price Target: N/A | Timeframe: N/A

⚡️ Semiconductor | 🛩️ Aerospace | 📈 Bullish Idea

I agree with @TreyHenninger. $SODI is still very undervalued at just 6.3x - 7.9x my estimate of normalized FCF. I anticipate at least $4m - $5m in annual FCF (~$2 - $2.5 per share) when incorporating their recent acquisition of Micro Engineering & the significant revenue uplift coming from the $20m restocking order they recently received. Not only is Solitron a good business, but @eriksen_tim (CEO) has proven to be a very good capital allocator and is very aligned with shareholders given his large share ownership.

Read the full article here. Read time: 1 min

ANALYST REPORT

Illumina: Plans to Divest Grail After U.S. Antitrust Case Faces More Hurdles

Illumina aims to transform human health practices through its leadership of genomic sequencing and related applications, providing instruments and consumables for genetic variation identification in research and clinical settings.

Ticker: ILMN | Price: $142.18 | Price Target: $228 (+60%) | Timeframe: N/A

🧪 Genome Sequencing | 🚨 Catalyst | 📈 Bullish Idea

Illumina (ILMN), a narrow-moat genomic sequencing leader, maintains a fair value estimate of $228 per share. Split into $180 for legacy sequencing operations and $48 for Grail, the company plans to divest Grail after facing antitrust challenges in the U.S., expecting to finalize terms by mid-2024. Illumina shares are undervalued, especially considering the intrinsic value of legacy operations without Grail's overshadowing losses. Regulatory hurdles include an ongoing EU appeal and a potential €432 million fine. Illumina's technology, which reduced genome sequencing costs from $3 billion to $1,000 and aims for a $100 genome, faces risks from emerging sequencing competitors and the clinical adoption of new technologies. Grail's divestiture offers strategic opportunities, with outcomes ranging from a tax-free spinoff to an outright sale, influenced by market sentiment towards liquid biopsy technologies. Despite uncertainties, Illumina's high R&D investments, significant switching costs, and vast patent portfolio (over 2,000 issued or pending patents) reinforce its economic moat. Activist investor Carl Icahn's involvement led to new management aiming to refocus on Illumina's core sequencing business and potentially divesting Grail.

Read the full article here. Read time: 9 min

+3 POINTS - WEEKLY TOURNAMENT

Which bonus stock idea was the most compelling to you?

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Yesterday’s Poll Results (link):

🟩🟩🟩⬜️⬜️ TETRA Technologies ($TTI) [41%]

🟨🟨⬜️⬜️⬜️ Huya ($HUYA) [34%]

🟥⬜️⬜️⬜️⬜️ Clear ($YOU) [25%]

Your Thoughts:

  • 🛢️ anthon*** ($TTI): $HUYA is a pure speculative play. No clear sign of institutional involvement...yet. $YOU has a lot to prove but I would definitely keep an eye out if we can clear $24. $TTI has a weekly bullish structure and is already in a GREAT spot to buy the dip. Keeping an eye out if this can clear $6

  • 🛢️ emoj*** ($TTI): This company’s technology is in great demand especially with an emphasis on the US increasing its oil production to reduce foreign dependency.

YELLOWBRICK ROAD PREMIUM

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  • Access to the Yellowbrick Road Premium Website where I post ALL of the best stock ideas our AI tool finds (including 50+ exclusive stock ideas every week that aren’t included in the free newsletter). You can also search for specific stocks.

  • The free stock ideas are posted on the website for Premium subscribers before they are sent in the free newsletter

  • Access to the Premium Discord channel where I share real-time updates on the stocks we are buying/selling in the Yellowbrick Portfolio and a place for us to all chat stock ideas

  • $10/month discount (50% off) on CEO Watcher Premium

    • Yellowbrick Road Premium only costs $7/month and gets you a $10/month discount

All of this costs me $2500/month ($1250/month for stock data, $1000/month for the AI, and $250/month for the insider trading data for CEO Watcher) and it’s available for you for less than $7/month (for the yearly plan).

Just one profitable trade will pay for multiple years of Yellowbrick Road Premium. And, I’ll even make a deal with you. If you join Yellowbrick Premium and don’t get 10x more value than the $80/year you paid, I’ll give you your money back at any time with no questions asked.

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🏆 This Week’s Leaderboard

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  3. stock**** (112 points)

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Some other newsletters to check out if you want more things to read:

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  • ELEVATOR (link) - eye and brain candy for men

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