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Top stock ideas (Fri, Mar 15)
Connor Van Ooyen
March 15, 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 167 new readers who joined yesterday!
Our AI read and summarized 135 stock ideas, 1231 news articles, and 245 insider trades and found:
A cannabis company valued negatively by the market (featured stock idea)
3 bonus stock ideas
Amazon plans 'Big Spring Sale' that's not just for Prime members (news)
Top 3 insider trades
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
Cronos Group Inc. - $CRON
Cronos Group Inc. operates as a cannabinoid company. It manufactures, markets, and distributes hemp-derived supplements and cosmetic products through e-commerce, retail, and hospitality partner channels under the Lord Jones brand in the United States
Ticker: CRON | Price: $1.98 | Price Target: N/A
Market Cap: $770M | Timeframe: N/A
🌳 Cannabis | 📈 Bullish Idea
Cronos Group Inc. (CRON) presents a unique opportunity to invest in a potential blue-chip contender within the highly volatile and uncertain cannabis industry at an undervalued price. Despite widespread investor pessimism towards the sector, CRON’s net-net status, with the market assigning a negative ~$100mm value to the business despite its $840mm net cash and $885mm NCAV against a $750mm market cap, suggests a strong margin of safety. Cronos boasts considerable hidden assets, competitive advantages including brand power, strategic international partnerships, and a financially supportive multinational backer in Altria, offering access to lower-than-industry financing. Regulatory headwinds in Canada may soon ease, expecting a shift from punitive excise taxes to a more favorable regime, while global developments such as Germany’s legalization and the potential U.S. federal rescheduling of cannabis signal growth catalysts. Operationally, CRON is nearing break-even with revenue growth and reducing costs while also possessing a fortress-like balance sheet, further assuring its resilience. The backing from tobacco giant Altria not only ensures sustainability but could position Cronos to capture significant U.S. market share upon federal reforms. Despite the risks of poor capital allocation and opportunity costs, CRON’s robust balance sheet, powerful backers, and strategic positioning in a nascent industry may render it a compelling long-term, asymmetrical investment, with substantial upside against limited downside potential.
Read the full article here. Read time: 15 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
Oshkosh Corporation - $OSK
🟩🟩🟩⬜️⬜️ - Buy (60%)
🟥⬜️⬜️⬜️⬜️ - Pass (8%)
🟨🟨⬜️⬜️⬜️ - Watchlist (32%)
✅ micke*** - Used Oshkosh equipment while on active duty 50 years ago. Good quality, easy to work on, reliable.
❌ jaku*** - The current price is close to the previous ATH and there will likely be resistance around there
There are 3 more stock ideas after “Today’s Sponsor”
TODAY’S SPONSOR
+15 POINTS - WEEKLY TOURNAMENT
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BONUS STOCK IDEAS
VALUE INVESTORS CLUB
Jumbo Interactive Limited - $JIN.AX
Jumbo Interactive Limited engages in the retail of lottery tickets through internet and mobile devices in Australia, the United Kingdom, Canada, Fiji, and internationally. It operates through three segments: Lottery Retailing, Software-as-a-Service, and Managed Services
Ticker: JIN.AX | Price: AUD 17.27 | Price Target: AUD 29 (+68%)
Market Cap: AUD 1B | Timeframe: N/A
🎟️ Online Lottery | 🇦🇺 Australia | 📈 Bullish Idea
* I recommend using Interactive Brokers (link) to trade international and OTC stocks if you can’t trade them in your current brokerage
Jumbo Interactive Limited (JIN.AX), led by founder CEO Mike Veverka who owns circa 15%, operates in the favorable Australian online lottery space with plans to grow its SaaS/Managed Services internationally. JIN, established in 1995, holds a solid 20% market share in online lottery sales and collaborates with The Lottery Corporation and Lotterywest. With a dominant app responsible for around 65% of Total Transaction Value (TTV) and a website for the remaining 35%, JIN harnesses strong margins across its lottery retailing, SaaS, and Managed Services divisions, boasting an EBITDA margin of 30.1% in FY23 for lottery retailing. The company's ticket sales correlate with the frequency and size of large jackpots, which may introduce volatility but also offer significant upside, as seen with a record A$200m Powerball jackpot. Post-COVID online sales continue to ascend, expected to potentially hit 60-70% market penetration. The company shoulders increased fees as per new agreements but offsets this with ticket price hikes. JIN's expansion into SaaS and Managed Services represents a large addressable market and the potential to nearly double the stock value in three years while maintaining a defensible business model, robust cash generation, and no outstanding debt from acquisitions. Key catalysts for growth include the impact of recent price hikes and the expansion and integration of its SaaS and Managed Services offerings.
Read the full article here. Read time: 6 min
BLOG POST
Nephros, Inc - $NEPH
Nephros, Inc. engages in development and sale of high performance water solutions to the medical and commercial markets in the United States. The company operates in two segments: Water Filtration and Renal Products
Ticker: NEPH | Price: $2.16 | Price Target: N/A
Market Cap: $24.5M | Timeframe: N/A
💧 Water Solutions | 📈 Bullish Idea
Nephros, Inc. (Ticker: NEPH), with a market cap of $25.2 million and an enterprise value of $22.7 million, has transitioned from a history of perennially unprofitable and 'just around the corner' business model to a promising, more focused enterprise, meriting my full portfolio position. Originally established to develop ESRD technologies, NEPH has shifted to water filtration for hospitals, dialysis centers, and commercial applications, leveraging its ultrafilters to combat waterborne pathogens and contaminants. Despite offloading its underperforming Pathogen Detection Systems and Specialty Renal Products segments, NEPH's core water filtration business appears viable, serving approximately 1,000 hospitals and catering to over 6,000 dialysis clinics. The company has enforced strategic partnerships, such as an exclusive distribution contract with Donastar for commercial filters, and boasts a recurring revenue model with sizeable gross margins of 55-60%. The new CEO, Robert Banks, with a structured compensation plan aligning with future revenue targets, and supported by a steady board with the likes of Wexford Capital holding significant stakes, anchors managerial stability. Current valuations peg NEPH at about 1.6x EV/Revenue and 2.7x EV/Gross Profit, indicating a potentially undervalued stock. With a history of 40-50% year-over-year growth and a recent return to breakeven EBITDA, Nephros appears to be pivoting towards financial health, backed by a robust product with high retention in a necessary and regulated market.
Read the full article here. Read time: 7 min
FUND LETTER
Fairfax Financial Portfolio Holding: EXCO Resources, Inc. - $EXCE
EXCO Resources, Inc., an independent oil and natural gas company, engages in the acquisition, exploration, exploitation, development, and production of onshore oil and natural gas properties with a focus on shale resource plays in the United States
Ticker: EXCO | Price: $7.25 | Price Target: N/A
Market Cap: $156M | Timeframe: N/A
🛢️ Oil/Gas | 📈 Bullish Idea
* I recommend using Interactive Brokers (link) to trade international and OTC stocks if you can’t trade them in your current brokerage
EXCO Resources, Inc., under the ticker EXCE, is a U.S. oil and gas producer that made significant moves in 2023 by repurchasing 8% of its shares, which initially amplified Fairfax’s ownership from 44% to 48%. Following the year's end, another 2% of shares were bought back, further nudging our stake up to 49%. These strategic acquisitions took place at substantial markdowns, resonating with T. Boone Pickens's wisdom that sometimes acquiring oil and gas through the stock market can be more cost-effective than direct drilling. However, drilling was certainly on EXCO's agenda, as the company not only drilled but impressively added more than double to its reserves than what was produced in 2023. Admittedly, there was a downturn in the present value of proved reserves due to commodity price weaknesses, but that didn't stop a 3.2% uptick in production volumes year over year. With a robust financial structure, agile operations, and resolute governance, EXCO stands strong amidst price fluctuations characteristic of the commodity market. Leadership under Chairman John Wilder and CEO Hal Hickey, coupled with Fairfax's own Wendy Teramoto and Peter Furlan on the board, fortifies our long-standing partnership. This duo has been instrumental in fortifying EXCO into a steadfast entity. Our accounting reflects EXCO's value at $418 million, which translates to $18.24 per share—triple the net income in 2023 and a leap from the previous year's $12.59, thanks to the $5.65 per share earnings attributed to EXCO.
Read the full article here. Read time: 1 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ Coupang ($CPNG) [52%]
🟨🟨⬜️⬜️⬜️ MaxCyte ($MAXCT) [28%]
🟥⬜️⬜️⬜️⬜️ Burford Capital ($BUR) [20%]
MARKET OVERVIEW
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 61% bullish
A bit of a divergence between the sentiment data points we track. The indexes were all red and the Russell is getting close to going red for the year and the news sentiment remained just slightly bullish, but the Fear v Greed index jumped 4 points and is getting back up near Extreme Greed levels and Yellowbrick Road readers are back above 60% bullish. pals*** chimed in and mentioned that with the inflation numbers being stubborn, they don’t think the June rate cuts will
STOCK MARKET NEWS
Dick's Sporting Goods Stock Surges on Earnings Beat, Raised Dividend - Investopedia
US retail sales rebound in February; weekly jobless claims fall - Reuters
EV start-up Fisker prepares for possible bankruptcy filing, WSJ reports - Reuters
Adobe shares slip 10% on soft revenue forecast - CNBC
Biden voices opposition to US Steel's sale to Japanese firm - Fox Business
SentinelOne Stock Slumps After Full-Year Revenue Outlook Disappoints—Key Level to Watch - Investopedia
Robinhood jumps after robust growth in assets under custody in February - Reuters
Oracle adds generative AI features to finance, supply chain software - Reuters
Amazon plans 'Big Spring Sale' that's not just for Prime members starting March 20 - CNBC
Biden to announce Intel chips grant in Arizona next week, sources say - Reuters
TOP INSIDER TRADES
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Director at Globalstar, Inc. ($GSAT) purchased 1,320,000 shares at $1.43/share ($1.89M total) which increased their vested holdings by 11.8%. Their median purchase size is $1.26M and this is their 2nd largest purchase out of 7 all time (link)
Chief Executive Officer at GEN Restaurant Group, Inc. ($GENK) purchased 115,593 shares at $6.13/share ($708K total) which increased their vested holdings by 1.1%. Their median purchase size is $708K and this is their 1st largest purchase out of 1 all time (link). 4 other insiders also purchased the stock
10% Owner at GEN Restaurant Group, Inc. ($GENK) purchased 115,593 shares at $6.13/share ($708K total) which increased their vested holdings by 6.4%. Their median purchase size is $708K and this is their 1st largest purchase out of 1 all time (link). 4 other insiders also purchased the stock
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.*
* Sponsored link
SECRET QUESTION
+10 POINTS - WEEKLY TOURNAMENT
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WEEKLY TOURNAMENT
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🏆 This Week’s Leaderboard
john.h**** (136 points)
msimp*** (136 points)
jake.s**** (136 points)
Scoring
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+10 points for replying to this email
+15 points for clicking on an ad/sponsored link
+50 points for referring a friend
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MY OTHER FREE NEWSLETTERS
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+3 POINTS - WEEKLY TOURNAMENT
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