Top stock ideas (Fri, Mar 8)

Connor Van Ooyen
March 08, 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 114 new readers who joined yesterday!

Our AI read and summarized 132 stock ideas, 1421 news articles, and 258 insider trades and found:

$HIMS dominates the direct-to-consumer healthcare market (featured stock idea)
$TWLO announces a $2 billion stock buyback, $GLTO is an acquisition candidate, and $PLOW’s earnings may be turning around (bonus stock ideas)
Robinhood partners with Klutch Sports as it moves into sports and entertainment (news)
CFO at $RBBN with great returns buys the 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

Hims & Hers Health, Inc.

Hims & Hers Health, Inc. operates a telehealth platform that sells presciption and over-the-counter drugs online

Ticker: $HIMS | Price: $14.24 | Price Target: $50.21 (+253%)
Market Cap: $3B | Timeframe: N/A

💊 Drugs | 📈 Bullish Idea

Hims & Hers Health, Inc. (NYSE: HIMS) is projected to have tremendous growth potential with a fair value estimate of $50.21, signifying a 283% upside from the current share price of $13.12 and the possibility of a 10x increase within 7 years. HIMS dominates the direct-to-consumer (DTC) healthcare market, offering accessible treatment for chronic conditions such as hair loss and erectile dysfunction, boasting a 49% market share among top telehealth providers. The company has seen stunning growth, rocketing from $27 million in revenue in 2018 to $872 million in 2023 with a subscriber base of 1.54 million. HIMS' distinctive brand appeal, continued category expansion, increasing market presence, and strategic pivot toward personalized offerings foreshadow further growth and market share capture. With leadership holding significant equity stakes, there is strong alignment with shareholders' interests. Financial projections, based on continued revenue growth, decreased operational costs, and efficient marketing spend, paint an optimistic picture, despite possible concerns over commoditized offerings and reliance on marketing expenditure. As per financial models, HIMS trades at highly attractive multiples, with the market possibly underestimating its long-term prospects despite its derisked business model. The investment thesis concludes that HIMS is a GAAP profitable company with distinctive positioning, setting the stage for a potentially lucrative future, underlined by the investor's own significant long position in the company's stock and call options.

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

Limoneira ($LMNR)

🟩🟩🟩⬜️⬜️ - Buy (45%)
🟥🟥⬜️⬜️⬜️ - Pass (35%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (20%)

🔎 emoj*** - LMNR’s earning call occurs today. With California flooding, the agricultural sector might be negatively affected.

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

TODAY’S SPONSOR

+15 POINTS - WEEKLY TOURNAMENT

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BONUS STOCK IDEAS

TWITTER

Twilio Inc.'s Strategic Moves: AI Customer Service Focus, and Growth Projections

Twilio Inc., together with its subsidiaries, provides customer engagement platform solutions in the United States and internationally. It operates through two segments, Twilio Communications and Twilio Segment

Ticker: TWLO | Price: $56.66 | Price Target: N/A
Market Cap: $10B | Timeframe: N/A

📱 Customer Engagement Platform | 📈 Bullish Idea

Twilio Inc. (ticker: TWLO), currently with a market cap of $10.3 billion, has chosen to retain Segment, bolstering its AI customer service potential and keeping its 'dream' multiples alive. It announced an aggressive $2 billion stock buyback program to be completed by 2024, on top of the $200 million remaining from a previous authorization, with $70 million repurchased since the last quarterly announcement. Twilio ended the previous year with $415 million in cash from operations and expects a rise to $550-600 million, signifying a 38% growth, with organic revenue growth projected at 5-10%. The firm will repurchase 21% of its float in the next 9 months, concurrently generating $500 million in free cash flow, and aiming for an additional $500 million to $1 billion for buybacks next year. Despite $675 million in stock-based compensation (SBC) impacting last year's cash from operations, Twilio plans a $80 million cash bonus program to minimize future SBC. In March 2022, Twilio granted 919,289 performance-based restricted stock units (PSUs) to executives with a fair value of $157.44 per share, vesting upon achieving revenue and profitability targets. With $1.5 billion in unvested RSUs to be recognized over an average of 2.7 years, Twilio is positioned to significantly reduce its share count, bolster stock support at current levels, and as of today, the stock is considered a buy.

Read the full article here. Read time: 2 min

BLOG POST

Turtles Added to Portfolio Holding: Galecto, Inc.

Galecto, Inc., a clinical-stage biotechnology company, develops molecules for the treatment of fibrosis, cancer, inflammation, and other related diseases. The company's lead product candidate is GB2064, which is in Phase IIa for the treatment of myelofibrosis

Ticker: GLTO | Price: $0.89 | Price Target: $2.67 (+200%)
Market Cap: $24M | Timeframe: N/A

🧪 Biotech | 🚨 Event Driven | 📈 Bullish Idea

Galecto, Inc. (Ticker: GLTO) is under the leadership of CEO Hans Schambye, who stands to receive a bonus of up to 60% of his $300k annual salary if he doesn't leave the company prematurely and is successful in selling all or part of it. Schambye, also a board member, has maintained that preserving shareholder value is the top priority. Although unable to comment on specific outcomes due to regulatory constraints, he expresses optimism about the company's future beyond June 30, 2024. The stock's potential upside is notable, with the possibility of a 200% increase if Galecto secures $50m for its assets and if the stock currently trades at a 30% discount. Even with a modest $10m from asset sales and after a pessimistic cash burn projection of $20m, the downside is considered well-covered, due to the reasonable expectation of net cash matching the current share price. Investors have shown confidence, with Otto recently increasing his stake and valuing the intellectual property between $50-200m, creating the potential, though not guaranteed, for a '10-bagger' investment.

Read the full article here. Read time: 2 min

VALUE INVESTORS CLUB

Douglas Dynamics, Inc. - $PLOW

Douglas Dynamics, Inc. operates as a manufacturer and upfitter of commercial work truck attachments and equipment in North America. It operates through two segments, Work Truck Attachments and Work Truck Solutions

Ticker: PLOW | Price: $25.64 | Price Target: $38 (+48%)
Market Cap: $589M | Timeframe: N/A

🛻 Work Truck Attachments | 💰 4.6% Dividend | 📈 Bullish Idea

Douglas Dynamics (PLOW), with a price target of $38, indicating a 43% upside, is a premium, niche industrial player known for its market-leading snowplows and ice control equipment, with solid brand loyalty, particularly under its Fisher and Western brands. PLOW's earnings have been subdued lately due to atypical factors such as inflation, chassis shortages, and an exceptionally weak snowfall season, especially on the East Coast. As weather patterns transition to El Niño, which portends increased precipitation, and chassis supply issues abate despite potential near-term disruptions from a UAW strike, PLOW's performance is expected to improve. The Work Truck Solutions segment has been underperforming amidst an OEM chassis supply shortage since 2017, further exacerbated by the pandemic; yet, a near-record backlog and price hikes suggest recovery potential once supply normalizes. Financially, PLOW trades at a compelling 10.2x normalized cash PE and 7.2x normalized EBITDA, below its historical medians of 19.6x PE and 10.9x EBITDA, backed by stable cashflows with limited economic cyclicality, and includes a 4.4% dividend yield. The investment thesis is strengthened by forecasted normal snowfall levels and improved chassis availability, offering a path to historical profitability levels.

Read the full article here. Read time: 4 min

+3 POINTS - WEEKLY TOURNAMENT

Which bonus stock idea was the most compelling to you?

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Basso Industry ($1527.TW) [40%]

🟨🟨⬜️⬜️⬜️ Planet Labs ($PL) [36%]

🟥⬜️⬜️⬜️⬜️ Warner Bros Discovery ($WBD) [24%]

Your comments:

📡 alpo*** ($PL): More cash than market cap!
📡 conta*** ($PL): Good industry and price
🎥 francis*** ($WBD): Trading at a multi-year low.

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: 63% bullish

Pretty similar to yesterday in terms of bullishness. All of the indexes were green again and the news sentiment remained around 0.5 (bullish). Yellowbrick Road readers did cross back up above 60% bullish and the Fear v Greed index bumped up one point to re-enter Extreme Greed territory.

STOCK MARKET NEWS

EV maker Rivian unveils smaller, less expensive R2 SUVs - Reuters

American Eagle tops estimates on robust apparel demand, fewer discounts - Reuters

Kroger forecasts 2024 sales, profit largely above market estimates - Reuters

Exxon could make a bid for Hess' oil assets in Guyana if Chevron deal terminates - CNBC

Entravision Communications crashes after Facebook owner Meta cancels all ad partner deals - Proactive Investors

Marvell Technology forecasts first-quarter revenue below estimates - Reuters

Costco Wholesale misses quarterly revenue estimates - Reuters

Broadcom's first-quarter revenue beats estimates - Reuters

Powell says the Fed is 'not far' from the point of cutting interest rates - CNBC

DocuSign Shares Spike as Earnings Top Street Estimates - Barrons

Robinhood partners with Klutch Sports, adds Rich Paul to its board as it moves into sports and entertainment - CNBC

FEATURED INSIDER TRADE

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EVP, CFO at Ribbon Communications Inc. ($RBBN)

The EVP, CFO purchased 2,000 shares at $2.95/share ($5,895.90 total) which increased their vested holdings by 0.7%. The current price is $2.93 (-0.6%). Their median purchase size is $8,910.00 and this is their 10th largest purchase out of 13 all time. (trade link)

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

According to "Irrational Exuberance," why is the steady increase in US population since the 1890s not a valid explanation for the housing market boom between 1997 and 2006?

Yesterday’s Question: What is the CAPE ratio, as discussed in "Irrational Exuberance," and why is it significant?

Answer: The CAPE ratio, developed by Shiller, is the Cyclically Adjusted Price-Earnings ratio. It is significant because it provides a more stable and long-term measure of stock valuation, taking into account the average inflation-adjusted earnings over the last 10 years. This ratio helps in understanding whether the stock market is overvalued, as seen during the dotcom boom.

LINKS YOU’LL LOVE

+15 POINTS - WEEKLY TOURNAMENT

Exploring the view, one more, and holding back

How Google Blew Up Its Open Culture and Compromised Its Product

How the small investor can beat the market

Yahoo homepage in 1999

SECRET QUESTION

+10 POINTS - WEEKLY TOURNAMENT

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Secret Question: Any big weekend plans? My parents are visiting this weekend, so will be spending time with them.

WEEKLY TOURNAMENT

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🏆 This Week’s Leaderboard

mh425**** (166 points)
ruthi*** (166 points)
lione**** (166 points)

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