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Top stock ideas (Fri, Mar 1)
Connor Van Ooyen
March 01, 2024
YBR Portfolio // About // Sponsor YBR // YBR Premium
👋 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 107 new readers who joined yesterday!
Our AI read and summarized 145 stock ideas, 1219 news articles, and 288 insider trades and found:
Duolingo stock pitch (featured stock idea)
$DRVN has 159% upside, an international banking company with 53% upside, and a Greek airport with 50% upside (bonus stock ideas)
Dell shares soar 20% (news)
A director with 300% returns bought $153k of his own stock (insider trade)
and much more…
Thanks for reading! Have a great day.
Connor
* If you missed yesterday’s email, don’t forget to read it here
FEATURED STOCK IDEA
BLOG POST
Duolingo, Inc. - $DUOL
Duolingo, Inc. operates as a mobile learning platform in the United States, China, the United Kingdom, and internationally. The company offers courses in 40 different languages, including Spanish, English, French, German, Italian, Portuguese, Japanese, and Chinese through its Duolingo app.
Ticker: DUOL | Price: $239 | Price Target: $366 (+53%)
Market Cap: $8.2B | Timeframe: N/A
📱 Language Learning App | 📈 Bullish Idea
I wish I would’ve put this in yesterday’s email! It’s up 22% after crushing earnings. Still a really good pitch and a lot of upside left. YBR Premium Subscribers saw this pitch on Wednesday when it was added to the YBR Premium Website. Upgrade to Yellowbrick Road Premium.
Duolingo, launched in 2011 by Luis von Ahn and Severin Hacker, pivoted from crowdsourcing translations to a freemium app model, emphasizing a mission beyond just language learning to encompass general education. It's now pushing into math and music courses, positioning itself as a global education platform. Currently, 75% of revenue comes from its language app's subscriptions, and with 85 million monthly active users (up from 24 million over five years), its paid subscriber rate has grown from 3% to over 7%. Revenue has consistently grown over 40% post-COVID, supported by strong paid subscriber growth, and the company boasts a healthy free cash flow margin of 24% pre-stock based compensations (SBC) in 2023. With an impressive $200 million invested in R&D as opposed to $75 million in sales and marketing, Duolingo focuses on product development, exemplified by its integration of GPT-4 to enhance user experience. The financially robust company, with $700 million in net cash, is approaching GAAP profitability. Though valuation poses questions with a $9 billion enterprise value, the potential market could reach $3 billion in revenue if Duolingo's trajectory follows that of Netflix's, suggesting significant upside from today's prices, assuming the company can maintain subscription growth and effectively monetize its user base.
Read the full article here. Read time: 5 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
Tiptree ($TIPT)
🟩🟩🟩⬜️⬜️ - Buy (49%)
🟥⬜️⬜️⬜️⬜️ - Pass (23%)
🟨🟨⬜️⬜️⬜️ - Watchlist (28%)
❌ safiyy***, nbsom***, emoj*** - The Fortegra IPO didn’t end up going through
There are 3 more stock ideas after “Today’s Sponsor”
TODAY’S SPONSOR
+15 POINTS - WEEKLY TOURNAMENT
Invest in Jurny - an AI-Powered Hospitality Platform
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BONUS STOCK IDEAS
BLOG POST
One Hour Analysis: Driven Brands Holdings ($DRVN), Road Kill or Road to Redemption?
Driven Brands Holdings Inc., together with its subsidiaries, provides automotive services to retail and commercial customers in the United States, Canada, and internationally. The company offers various services, such as paint, collision, glass, vehicle repair, car wash, oil change, and maintenance services.
Ticker: DRVN | Price: $13.15 | Price Target: $31.50 (+159%)
Market Cap: $2.1B | Timeframe: 3 years
🚗 Automotive Care | 📈 Bullish Idea
Driven Brands Holdings Inc. (DRVN) operates in the $390B recession-resistant automotive care industry, leveraging a mix of franchised, independent, and company-operated locations totaling nearly 5,000 across North America and 13 additional countries, representing less than 5% market share. Its portfolio includes prominent brands like Take 5 Oil Change®, Meineke Car Care Centers®, and MAACO®. DRVN has seen 14 consecutive years of positive same-store sales growth, excluding 2020, with a 26% two-year stacked SSS. Despite successful divisions like Maintenance and Platforms, challenges in the Car Wash and Paint, Collision & Glass (PC&G) divisions—due to integration issues and a highly competitive and saturated market—have prompted strategic actions to improve performance and a potential $100M+ return of capital from the sale of pipeline sites. Driven Brands controls a significant portion of the market, but faces competition from large networks like Mr. Car Wash's 462 stores. With Roark Capital's backing and a strong track record, DVRN's management is confident in addressing current shortcomings, aiming to grow revenue from $2.3B to $3.4B and EBITDA from $535M to $850M by 2026, despite recent underperformance and guidance adjustments. With $211M in cash, manageable long-term debt of $3.0B with an average cost of 5%, and no debt due before 2026, the balance sheet supports corrective measures and expansion. If management meets their projections, DRVN's stock, trading at 9-10X EV/EBITDA—below the 15-20X of well-positioned franchising companies—could potentially double within three years, with a price target of $31.50. However, risks include intensified competition and integration challenges, particularly in Car Wash and Glass divisions, and slower-than-expected efficacy of loyalty programs and cross-marketing strategies. Despite these hurdles, the secure base of over $500M in Adjusted EBITDA and solid operating cash flow provide a cushion. With a cautiously optimistic view, even a conservative EBITDA estimate of $700M by 2026 could still indicate substantial upside for DRVN if the company executes on its strategic plans, revamps its loyalty programs, and successfully manages competitive pressures.
Read the full article here. Read time: 14 min
ANALYST REPORT
BNP Paribas SA: BNP Paribas Is a Stable Performer Through the Cycle
BNP Paribas SA provides various banking and financial products and services in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. It operates through three divisions: Corporate & Institutional Banking; Commercial, Personal Banking & Services; and Investment & Protection Services.
Ticker: BNPQY | Price: $29.98 | Price Target: $46 (+53%)
Market Cap: $69B | Timeframe: N/A
🏦 Banking | 📈 Bullish Idea
BNP Paribas SA (Ticker: BNPQY) has a fair value estimate of EUR 85 per share set by analyst Johann Scholtz, CFA, reflecting a solid recovery in earnings anticipated for 2024 and a 10% midcycle return on tangible equity, aligning with the cost of equity. Despite minor adjustments to earnings guidance and a market overreaction, BNP trades at a discount, offering an attractive entry point with its stable earnings history and diversified business model including investment banking and asset management. Although navigating a difficult French retail banking market, BNP's asset management growth and cost-saving measures are expected to contain expense growth. Loan-loss provisions should normalize, supporting its financial soundness without significant excess capital. Risks involve its retail banking focus and trading activities, but carefully managed risk appetite and diversified lending could mitigate these. The bank's capital allocation strategy is seen as sound, with a balance of EUR 1 billion in annual buybacks and a 50% dividend payout from earnings. Scholtz does not believe BNP Paribas carries an economic moat, citing its average cost controls, interest margins, and market shares in non-core markets. The target price of $46/share aligns with 9.5x 2023 earnings and its tangible book value at the end of 2023, suggesting a stable investment opportunity bolstered by BNP's underappreciated investment banking growth and prudent financial management.
Read the full article here. Read time: 12 min
BLOG POST
Athens International Airport - A Peter Lynch-style thesis
Athens International Airport Eleftherios Venizelos, commonly initialised as AIA, is the largest international airport in Greece, serving the city of Athens and region of Attica.
Ticker: 0901.F | Price: 8.67 | Price Target: 13 (+50%)
Market Cap: $2.6B | Timeframe: N/A
🛩️ Airport | 🇬🇷 Greece | 📈 Bullish Idea
Athens International Airport S.A. (AIA) manages Greece's prime airport, Eleftherios Venizelos, which served a record 28.2 million passengers in 2023, commanding 39% of the country's air passenger traffic. With a dual-till system that allows for profitability from both regulated air activities and unregulated commercial endeavors, AIA boasts robust financials, with solid growth, margins, and a healthy balance sheet, despite significant CapEx commitments. The airport's Master Plan aims to expand capacity to 50 million passengers annually, enhancing its stronghold in the market. High barriers to entry, due to the current airport's scope, government's backing, and excellent relations with leading Greek airlines, provide AIA a competitive fortress. After privatization, the Greek government and other core shareholders show strong alignment in the company's direction, indicated by their sizable stakes and mandated directorships. The airport operates in a booming tourism market, with expectations of steady growth, and despite risks like lack of diversification and potential dividend adjustments due to expansion costs, AIA's shareholder remuneration and future expansion plan posit an appealing value opportunity. As it trades below the derived fundamental value of around €13 per share, AIA presents a probable 50%+ upside potential based on conservative future valuations, even considering the impact of reduced airport development fees (ADF).
Read the full article here. Read time: 23 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ Elastic N.V. ($ESTC) [43%]
🟨🟨⬜️⬜️⬜️ Builders FirstSource ($BLDR) [40%]
🟥⬜️⬜️⬜️⬜️ Bloomsbury Publishing ($BMY.L) [17%]
Your comments:
🏡 glennp*** ($BLDR): I like to invest in the tried and trusted(i.e. things we need). The world will always need building products and once demand picks up this pick should do very well.
🏡 krwilli*** ($BLDR): I think the industry is going to come back hard.
🏡 nathan.*** ($BLDR): 1) America’s infrastructure will continue to need upgrading. BLDR is sure to benefit. 2) Housing and Real Estate are expensive because not enough supplies are meeting demand. To meet the demand, more housing needs to be built, again benefiting BLDR. 3) Buildings and houses need to be continually maintained, again BLDR benefits.
MARKET OVERVIEW
The Market Overview is powered by Koyfin (link). Koyfin is my personal Bloomberg terminal that doesn’t cost $2,000/month. It has all of the news, financials, watchlists, screeners, charts, etc that I need to be an informed investor. *I’ve partnered with them to give you a 20% discount if you use my link!
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 62% bullish
A total flip from yesterday as all of the indexes flipped to green today. The Fear v Greed index and news sentiment are almost exactly the same as yesterday (which is a little odd since the market was red yesterday and green today), but Yellowbrick Road readers are 10 points less bullish. Earnings were really good after the market closed yesterday, so I’d expect YBR readers to be more bullish today.
STOCK MARKET NEWS
Dell shares soar 20% after beating earnings expectations, cites rising demand for AI servers - CNBC
Best Buy tops holiday quarter estimates but issues soft full-year guidance - CNBC
Key Fed inflation measure rose 0.4% in January as expected, up 2.8% from a year ago - CNBC
C3.ai posts robust quarterly results, announces CFO change - Reuters
Okta Stock Surges On Strong Earnings, Raised Outlook—Key Price Levels to Watch - Investopedia
Duolingo stock soars as online learning surge and AI boost forecast - Reuters
Trump Media sued by co-founders ahead of DWAC merger, potential setback for lucrative deal - CNBC
Newly listed Birkenstock beats revenue expectations on higher pricing, U.S. demand - CNBC
Shares of NYCB fall 20% after bank discloses 'internal controls' issue, CEO change - CNBC
Exclusive: GM's Cruise valuation slashed by more than half, email shows - Reuters
Semiconductor parts maker Aixtron sees further sales growth after Q4 beat - Reuters
FEATURED INSIDER TRADE
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Director at APPLIED OPTOELECTRONICS, INC. ($AAOI)
The Director purchased 10,000 shares at $15.29/share ($153K total) which increased their vested holdings by 5.3%. The current price is $14.08 (-7.9%). Their median purchase size is $101K and this is their 1st largest purchase out of 3 all time. (trade link)
Historic Returns
1m returns: 14% weighted | 14% median | 100% win rate (2/2)
3m returns: 42% weighted | 40% median | 100% win rate (2/2)
6m returns: 72% weighted | 67% median | 50% win rate (1/2)
1y returns: 311% weighted | 294% median | 50% win rate (1/2)
QUIZ
+3 POINTS - WEEKLY TOURNAMENT
This month’s quiz questions focus on the investing book, Irrational Exuberance by famed economist Robert Shiller, which examines economic bubbles in the 1990s and early 2000s and argues that the market is not efficient.
An in-depth guide/summary of this book is available on Shortform (a free trial and 20% off using my link!). Shortform has summaries/guides for 1000s of nonfiction books and even connects ideas between books. It’s one of my favorite tools for learning
What is the lifespan of a speculative bubble as described by economist Hyman Minsky? |
Yesterday was the final question from the book When Genius Failed.
Yesterday’s Question: What was the career path of John Meriwether, the founder of LTCM, following the fund's collapse in 1998?
Answer: After LTCM's collapse in 1998, John Meriwether remained active in the finance industry. In 1999, he established JWM Partners LLC, a hedge fund that utilized similar strategies to LTCM. However, JWM Partners struggled during the financial crisis of 2008 and was subsequently closed in 2009. Meriwether then launched another fund, JM Advisors Management, in 2010, continuing his involvement in the hedge fund sector. Despite the high-profile failure of LTCM, Meriwether persists in finance, though with less prominence than during his LTCM days.
LINKS YOU’LL LOVE
+15 POINTS - WEEKLY TOURNAMENT
Stock pitch: Austin Gold Corp, a gold exploration company, is one of the very few gold exploration companies listed on the NYSE. They have an experienced leadership team and 50% of shares are owned by management/directors and are working on 3 projects. Click here to read the full pitch deck.*
"It is difficult to get a man to understand something when his salary depends upon his not understanding it."
* Sponsored link
ONE OF MY FAVORITE TOOLS
+15 POINTS - WEEKLY TOURNAMENT
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As you know, I use Koyfin for my in-depth research. While Simply Wall St is not as in-depth, I often use it as a starting point for my analysis as it’s super easy to use to gain an understanding of a company.
It’s also a great tool if you don’t need everything that Koyfin has to offer and Simply Wall St is quite inexpensive (with a great free tier). You can also get a 14-day free trial with my link!
SECRET QUESTION
+10 POINTS - WEEKLY TOURNAMENT
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: Any big plans for this weekend? We are driving back to our hometown for a family gathering
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
jimrol**** (136 points)
albay*** (136 points)
ww.sim**** (136 points)
Scoring
+3 points for voting in each poll
+10 points for replying to this email
+15 points for clicking on an ad/sponsored link
+50 points for referring a friend
* Learn more about the Weekly Tournament here
MY OTHER FREE NEWSLETTERS
CEO Watcher (link): I built a tool that tracks all insider trades AND calculates their historical returns so that we know which insider trades are worth copying. The top insider trades are sent every Friday.
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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+50 POINTS - WEEKLY TOURNAMENT
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THAT’S ALL FOLKS
+3 POINTS - WEEKLY TOURNAMENT
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Connor (@connorvo on Twitter)
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! |
*Disclaimer: This is a paid advertisement for Jurny’s Regulation CF offering. Please read the offering circular at https://www.startengine.com/offering/jurny.
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