Top stock ideas (Fri, Feb 9)

Author

Connor Van Ooyen
February 09, 2024

👋 Good Morning!

This is the Yellowbrick Road where I share the best stock ideas from billion-dollar hedge funds, professional analysts, millionaire investors, and more!

Welcome to the 105 new readers who joined yesterday!

Our AI read and summarized 122 stock ideas, 1139 news articles, and 208 insider trades and found:

  • $PARA has 60%+ upside with potential suitors placing bids (featured stock idea)

  • $LBRDA is dirt cheap, $OLN has a small dividend and 150% upside, and Needham upgrades Disney (bonus stock ideas)

  • Google rebrands Bard AI to Gemini and launches a new app (news)

  • The 3 biggest insider trades (insider trade)

  • and much more…

Thanks for reading! Have a great day.

Connor

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FEATURED STOCK IDEA

BLOG POST

Paramount: Ride The Bids Higher

Paramount Global, operating under the ticker PARA, is a multinational media conglomerate that produces and distributes television programs and films, owns and operates various broadcast networks, including CBS, Showtime, and Nickelodeon, and provides streaming services such as Paramount+. The company was previously known as ViacomCBS before rebranding to Paramount Global in 2022.

Ticker: PARA | Price: $13.01 | Price Target: $21 (+62%)
Market Cap: $9.8B | Timeframe: N/A

🎥 Entertainment/Media | 🤝 Potential Acquisition | 📈 Bullish Idea

Paramount Global (NASDAQ:PARA) has received a lowered bid from Allen Media Group according to the Wall Street Journal, valuing the company at nearly $15 billion with an enterprise value of $30 billion, factoring in $15 billion of net debt. The offer proposes $28.58 per voting share and $21.53 per nonvoting share, with the potential for a bidding war as Apollo Global and Skydance Media are also showing interest in Paramount or in National Amusements' controlling stake. Despite struggles in the streaming industry, competing with giants like Netflix and Disney, Paramount has seen its direct-to-consumer (DTC) service Paramount+ grow, reaching 63 million subscriptions, albeit with a loss of $238 million in the third quarter of 2023. The company's TV Media business is declining, underscoring the need for profitability in the DTC segment. With the stock trading around $14.50 and the possibility of bids over $21, investors have an opportunity for significant upside with limited downside, given an EPS forecast of $1.29 in the coming years providing a safety net. Therefore, Paramount looks like a potentially undervalued stock with a chance for near-term growth if it can secure a favorable deal and improve DTC profitability.

Read the full article here. Read time: 3 min

+3 POINTS - WEEKLY TOURNAMENT

How do you rate the featured stock idea?

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Yesterday’s Featured Stock Idea

Coupang ($CPNG)

🟩🟩🟩⬜️⬜️ - Buy (60%)
🟥🟥⬜️⬜️⬜️ - Pass (22%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (18%)

There are 3 more stock ideas after “Today’s Sponsor”

BONUS STOCK IDEAS

BLOG POST

Liberty Broadband: Dirt Cheap After The Charter Crash

Liberty Broadband Corporation engages in the communications businesses. The company's GCI Holdings segment provides data, wireless, video, voice, and managed services to residential customers, businesses, governmental entities, educational, and medical institutions in Alaska under the GCI brand.

Ticker: LBRDA | Price: $59.84 | Price Target: $106.62 (+78%)
Market Cap: $9.5B | Timeframe: N/A

📞 Telecommunications | 📈 Bullish Idea

Liberty Broadband Corporation (NASDAQ: LBRDA), which owns 26% of Charter (CHTR) valued at $13.5 billion post-Q4/23 earnings crash, and Alaskan telecom GCI purchased for an EV of $2.7 billion, is notably undervalued with a current market cap of $9.7 billion, excluding $2.6 billion of net debt. Assuming GCI's value compensates for the debt, Liberty Broadband's stock trades at a 28% discount to the value of its CHTR stake, implying a 38% upside from today's NAV and potentially a 60% discount to fair value given CHTR's undervaluation. Despite unexciting Q4 performance with negative net broadband additions and flat EBITDA leading to steady leverage, CHTR's sell-off was likely due to short-term speculation rather than fundamental issues, as negative earnings elements had been previously disclosed. Projected $8.5 billion FCF by 2027 reflects Charter's expansion and competitive position in a market where fixed wireless faces capacity constraints, and fiber remains a tool for DSL providers to maintain market share. At today's valuation of 6x 2027e FCF, Liberty Broadband offers an even better deal at an effective 4.4x FCF through its tracking stocks. While near-term concerns exist, especially with the possible depletion of Affordable Connectivity Program funds by April 2024, the substantial margin of safety gives Liberty Broadband an attractive potential for closing its NAV discount. Moreover, Liberty Broadband's regular share repurchases using proceeds from selling CHTR stock hint at a strategy that will likely generate outperformance relative to Charter over time, as it effectively buys back its exposure to Charter at a significant discount.

Read the full article here. Read time: 4 min

BLOG POST

Olin | Good Old Fashioned Business

Olin Corporation manufactures and distributes chemical products in the United States, Europe, Asia Pacific, Latin America, and Canada.

Ticker: OLN | Price: $51.35 | Price Target: $127 (+147%)
Market Cap: $6B | Timeframe: next 5 years

🧪 Chemical Products | 🔫 Ammunition | 💰 1.56% Dividend | 📈 Bullish Idea

Olin Corporation (OLN), a market-leading chlor-alkali producer and ammunition manufacturer with a legacy reaching over 130 years, is poised as a long-term investment opportunity due to its sustainable earnings and strategic business management. With a current market cap of $6.2 billion and a share price of $51, Olin has successfully navigated industrial cycles and is implementing restructuring to optimize costs, particularly in its Epoxy segment. This includes plant closures in Europe and South America to address oversupply issues caused by China's increased production. Although short-term, the 'Value Accelerator Initiative' will detract $100 million from adjusted EBITDA in Q4 2023, it's expected to create a significant uplift in 2024. Olin also benefits from strategic alliances, like the Blue Water Alliance with Mitsui & Co., which explores shrewd market opportunities in shipping and trading caustic soda, potassium hydroxide, and EDC. Despite the cyclical nature of its market, Olin displays strong fundamentals, generating up to $2.7 billion in EBITDA and over $1.5 billion in free cash flow in 2022, and strategically reducing its debt. With minimal growth CAPEX requirements, Olin's pursuit of share repurchases has led to a 20% reduction in outstanding shares, proving highly accretive to shareholder value. The firm faces leadership transition as CEO Scott Sutton, who has been instrumental in recent strategic decisions, plans to retire in H1 2024, raising questions about management continuity and succession planning. Nevertheless, the company's established, straightforward industry position and solid financial footing suggest continued success, and the current share price offers an attractive entry point for investors. Olin's stock seems primed for upward movement, allotting a conservative NPV of $127 per share against a $51 market price, indicating an average annualized return of over 22% over the next five years, including dividends.

Read the full article here. Read time: 14 min

BLOG POST

Needham Upgrades Disney to Buy

The Walt Disney Company operates as an entertainment company worldwide. It operates through three segments: Entertainment, Sports, and Experiences.

Ticker: DIS | Price: $99.14 | Price Target: N/A
Market Cap: $204B | Timeframe: N/A

🎥 Entertainment/Media | 🎢 Theme Parks | 📈 Bullish Idea

Disney (ticker: DIS) - Needham Upgrades Disney to Buy - “The Magic is Back” | We upgrade DIS to BUY based on our expectations for strong (23%) FY24 EPS growth driven by additional cost savings (>$7.5B), DTC breakeven by 4Q24 with 'double-digit' margins at maturity and 5.5mm-6mm new subs from CHTR in FY2Q, new ESPN Sports JV with FOX and WBD, $1.5B investment in Epic Games (build DIS video games), 70% of $60B Parks CapX will be 'incremental capacity' (ie, added revs), $8B of FY24 FCF, exclusive Taylor Swift concert rights on Disney+, a 50% higher dividend (to $0.45), and >$3B of share repurchases in 2024. Longer term, we believe bundling can lower churn by up to 50%. In Sept 2024, DIS will offer its new Sports JV as part of its bundle, and in fall 2025 DIS will offer a new flagship ESPN+ service to its Disney+ and Hulu subs. Larger bundles lower churn and raise LTV, we believe.

Read the full article here. Read time: 1 min

+3 POINTS - WEEKLY TOURNAMENT

Which bonus stock idea was the most compelling to you?

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Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Rocket Lab ($RKLB) [39%]

🟨🟨⬜️⬜️⬜️ Loan Ridge Financial ($LRFC) [37%]

🟥⬜️⬜️⬜️⬜️ Cantaloupe ($CTLP) [24%]

Your comments:

  • 🚀 jesan*** ($RKLB): I've held Rocket Lab for a long time. Even with big names like SpaceX and ULA, the demand for smaller rockets and lower orbits remains - and is underserved

  • 🚀 arturo*** ($RKLB): GREAT MOAT; a duopoly

MARKET OVERVIEW

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

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Yesterday’s Poll Results: 85% bullish

The bull run continues. All of the indexes are green with the small-cap stocks leading the way (which has been very rare this year). Yellowbrick Road readers have their most bullish vote of the year at 85% bullish. The Fear v Greed index continues to move higher and is now a few points into Extreme Greed levels. The news sentiment is a little bit lower than yesterday, but remains bullish and above the 7-day average.

STOCK MARKET NEWS

Google rebrands Bard AI to Gemini and launches a new app and subscription - CNBC 

Expedia CEO resigns, shares slump on air travel softness - Reuters 

Mattel misses holiday-quarter estimates, sees dull 2024 sales on tepid toy demand - Reuters 

Spirit Airlines narrows loss to $184 million, says it's on the path back to profitability - CNBC 

Hawaiian Airlines debuts free inflight Wi-Fi from SpaceX's Starlink - CNBC 

PayPal shares fall as 2024 forecast clouds promise of turning leaner, more profitable - Reuters 

Cloudflare stock jumps on earnings beat as the company wins larger deals - CNBC 

Oil rises for a fourth day after U.S. kills militant commander in Iraq, Israel rejects Hamas proposal - CNBC 

BIGGEST INSIDER TRADES

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10% Owner at AMERICAS CARMART INC ($CRMT) purchased 42,149 shares at $60.20/share ($2.54M total) which increased their holdings by 6.7%. Their median purchase size is $325K and this is their 5th largest purchase out of 67 all time (link)

President and CEO at CHARTER COMMUNICATIONS, INC. /MO/ ($CHTR) purchased 5,050 shares at $295.29/share ($1.49M total) which increased their holdings by 2.6%. Their median purchase size is $1.49M and this is their 2nd largest purchase out of 3 all time (link)

Director at NEXTERA ENERGY INC ($NEE) purchased 20,000 shares at $55.84/share ($1.12M total) which increased their holdings by 36.2%. Their median purchase size is $680K and this is their 1st largest purchase out of 7 all time (link)

QUIZ

+3 POINTS - WEEKLY TOURNAMENT

This month’s quiz questions focus on the legendary rise and fall of Long-Term Capital Management which Roger Lowenstein chronicles in his awesome book: When Genius Failed.

An in-depth guide/summary of this book is available on Shortform (20% off using my link!). It’s what I use for summaries/guides for 1000s of nonfiction books.

Following its establishment, how did LTCM initially perform in terms of annual returns in its first 3 years?

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Yesterday’s Question: LTCM's initial capital raised from investors was notable for its size. It was the largest initial fundraise at the time. How much did they raise?

Answer: $1.25B. Even though he had recently been fired for illegal activities, he had no trouble raising money.

LINKS YOU’LL LOVE

+15 POINTS - WEEKLY TOURNAMENT

S&P 500 EPS growth has been positive for 4 quarters in a row

The first innovation isn’t always the winner (relevant for AI today)

* Sponsored link

SECRET QUESTION

+10 POINTS - WEEKLY TOURNAMENT

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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

  1. ashwi**** (141 points)

  2. mknol*** (141 points)

  3. jake.s**** (141 points)

Scoring

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  • +50 points for referring a friend

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