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Top stock ideas (Mon, Mar 11)
Connor Van Ooyen
March 11, 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 171 new readers who joined over the weekend!
Our AI read and summarized 173 stock ideas, 863 news articles, and 267 insider trades and found:
$VFC has 150% upside with the potential to sell off brands and generate over $5B (featured stock idea)
$COP has a 14% dividend hike and a $9B return plan, founder returns to $ATG.AX to turn things around, and $HERDEZ.MX is undervalued compared to peers (bonus stock ideas)
Rivian surges on new launch (news)
The 3 biggest insider trades (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
VALUE INVESTORS CLUB
V.F. Corporation - $VFC
V.F. Corporation, together with its subsidiaries, engages in the design, procurement, marketing, and distribution of branded lifestyle apparel, footwear, and related products for men, women, and children in the Americas, Europe, and the Asia-Pacific. It operates through three segments: Outdoor, Active, and Work
Ticker: VFC | Price: $16.09 | Price Target: $40 (+148%)
Market Cap: $6.2B | Timeframe: N/A
👕 Apparel | 📈 Bullish Idea
VF Corporation (VFC) is an apparel, footwear, and accessories giant with a $40/share price target, representing over 100% upside. Despite a difficult FY23, VFC's portfolio of strong, well-recognized brands such as The North Face, Vans, Timberland, Dickies, and Supreme (which collectively account for 90% of revenue), provide a solid foundation. VFC has a history of strategic brand acquisitions and divestitures, having recently overpaid for Supreme and then wrote down a third of its value. Management changes and the appointment of Bracken Darrell, former CEO of Logitech, have created a turnaround plan focusing on organizational streamlining, cost-cutting ($300 million in savings targeted by mid-FY25), and reducing debt—which stands at a net 4.2x FY23 EBITDA. The suggested rationalization of VFC's portfolio, potentially selling off 10 brands and generating over $5 billion, could significantly reduce leverage and afford share buybacks. VFC's EBITDA margins have the potential to improve with better gross margins and reduced SG&A, as well as correcting a supply chain imbalance that could unleash $450 million in free cash flow. Lastly, VFC's current valuation implies the opportunity to own their brand portfolio at a significant discount, supported by an estimated $8 billion in unlevered free cash flow through FY29, and guided by a new CEO with a history of delivering growth and improving balance sheets.
Read the full article here (free sign up required). Read time: 4 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
Hims & Hers Health ($HIMS)
🟩🟩🟩⬜️⬜️ - Buy (62%)
🟥🟥⬜️⬜️⬜️ - Pass (21%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (17%)
✅ jhc*** - I think it offers a good way for people who don’t want to go into an office to get a prescription, especially something that might be a fear talking to someone in person about. It also saves time.
There are 3 more stock ideas after “Today’s Sponsor”
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BONUS STOCK IDEAS
ANALYST REPORT
ConocoPhillips plans to return $9 billion to shareholders in 2024
ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids in the United States, Canada, China, Libya, Malaysia, Norway, the United Kingdom, and internationally
Ticker: COP | Price: $112 | Price Target: $150 (+33%)
Market Cap: $131B | Timeframe: N/A
🛢️ Oil/Gas | 💰 2.2% Dividend | 📈 Bullish Idea
ConocoPhillips (NYSE: COP) carries a BUY rating with a price target of $150. Despite reporting a downturn in 4Q23 with adjusted net profits of $2.862 billion or $2.40 per share, down from $3.375 billion a year earlier due to weaker realized prices for crude oil (-6%), natural gas (-48%), and NGLs (-19%), ConocoPhillips plans robust shareholder returns including a 14% dividend hike and a $9 billion return plan in 2024. The company projects 2024 production of 1.91-1.95 mmboe/d and capital expenditures of $11.0-$11.5 billion, with $9 billion earmarked for shareholder returns. Its financial strength is rated as Medium-High, with a debt/capitalization ratio slightly below peer average and a 2.1% yield on its now $2.32 annual base dividend. Despite lowering the 2024 EPS estimate to $8.69 from $10.49 and initiating a 2025 forecast at $9.40, Argus points out ConocoPhillips' robust cash flow, disciplined investment strategy, strategic acquisitions, and emphasis on shareholder returns, marking the stock as undervalued at its current price, far from the $150 target. As of March 5, COP closed at $111.22.
Read the full article here (paid). Read time: 6 min
BLOG POST
Dear COVID Darling - $ATG.AX
Articore Group Limited operates as an online marketplace that facilitates the sale of art and design products. It offers clothing, stickers, face masks, phone cases, home and living products, wall arts, kids and babies clothing, pet products, accessories, stationery and office products, and gifts
Ticker: ATG.AX | Price: AUD 0.53 | Price Target: N/A
Market Cap: AUD 151M | Timeframe: N/A
💻 Online Marketplace | 🔄 Turnaround | 📈 Bullish Idea
Articore Group Limited (formerly Redbubble, ticker: ATG.AX), an operator of the online marketplaces Redbubble and TeePublic catering to Gen Z and GenY demographics respectively, has experienced a dramatic 93% fall in stock price post-pandemic, from AUD 7 to AUD 0.5. The company's current market cap is AUD 140M, with a cash balance of AUD 41M, and generated 50M in FCF in FY2020 and FY2021. Articore, heavily reliant on the U.S. (70% of revenue) and Europe (22%), does not hold inventory, and benefits from network effects, economies of scale, and an asset-light model with a negative working capital cycle. The pandemic boom led to unrealistic growth expectations and a hiring spree, while low-quality design uploads degraded the value of the platform. As a result, FCF reversed to negative AUD 38M in FY2023 causing the stock to crash. Founder Martin Hosking returned as CEO in March 2023, dismissing 37% of the workforce, eliminating certain costs, and refocusing the company's strategy on profitability and quality content. This resulted in a turnaround with EBITDA going from negative AUD 18M to a positive AUD 13.5M and the company generating an underlying cash flow of AUD 8.8M. Challenges remain due to intense competition, and there are concerns about leadership and corporate governance. Nevertheless, Hosking's track record suggests potential for future growth; a 15% sales increase could substantially boost FCF and lead to a stock re-rating, making Articore a speculative yet potentially rewarding investment opportunity.
Read the full article here. Read time: 14 min
BLOG POST
A Mexican Blue Chip Bargain: Grupo Herdez
Grupo Herdez, S.A.B. de C.V., a food company, engages in the manufacture, purchase, distribution, and marketing of canned and packed food products in Mexico and internationally
Ticker: $HERDEZ.MX | Price: MXN 45.79 | Price Target: MXN 75 (+64%)
Market Cap: MXN 15B | Timeframe: N/A
🥫 Packaged Food | 🇲🇽 Mexico | 💰 1.3% Dividend | 📈 Bullish Idea
Grupo Herdez, S.A.B. de C.V. (HERDEZ.MX), with a market capitalization of MXN 15.2 billion, is a leading Mexican food company with a strong presence in grocery categories like mayonnaise and salsas. Led by CEO Héctor Hernández-Pons and established in 1914, the company operates significant joint ventures, including 50% stakes in McCormick Mexico and Barilla Mexico, and a 25% indirect stake in MegaMex, a partnership with Hormel, exporting Mexican foods to the US. Its wholly-owned Impulsos division, selling ice cream and frozen treats, has underperformed due to COVID but shows improvement potential. Herdez dominates Mexican supermarket shares, with a robust competitive position in 10 different categories. Its five-year annual revenue growth is 11.5% with an average EBIT margin of 12.5%, excluding Impulsos, where 2023 margins are at 16.9%. In contrast to its profitability and growth, Herdez trades at just 11.6x earnings and 5.8x EBITDA, undervalued compared to partners McCormick and Hormel, and even when considering the controlled nature of the company and associated risks, such as currency and commodities fluctuations, political risk, changing consumer behavior, and insider control. Celebrated for its shareholder-friendly practices, including dividends and share repurchases, the company’s stock is considered undervalued, with an 18x earnings or 8x EBITDA multiple suggesting a price target of MXN 75—a substantial premium to its current price.
Read the full article here. Read time: 5 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ Twilio ($TWLO) [41%]
🟨🟨⬜️⬜️⬜️ Galecto ($GLTO) [35%]
🟥⬜️⬜️⬜️⬜️ Douglas Dynamics ($PLOW) [24%]
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
Markets finished the week with a red day on Friday after a surge the previous two days. The indexes were all red (with the Russell being surprisingly strong) and the Fear v Greed index also took a big hit, falling by 4 points and out of the Extreme Greed level. The news sentiment fell a little bit and is now equal to the 7-day average while the Yellowbrick Road readers remained just above 60% bullish.
STOCK MARKET NEWS
Old Navy returns to growth as Gap's holiday earnings blow past estimates - CNBC
Treasury yields are lower after unemployment rate ticks up in February jobs report - CNBC
Costco stock set for worst day in near two years on quarterly revenue miss - Reuters
Amylyx's ALS drug fails in late-stage confirmatory study - Reuters
Rivian surges as new launch R2 SUV attracts strong early orders - Reuters
HelloFresh shares dive 42% after meal kit giant warns on outlook - CNBC
Petrobras loses over $10 billion in market cap after dashing dividend hopes - Reuters
TOP INSIDER TRADES
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10% Owner at AmBase Corp ($ABCP) purchased 44,200,500 shares at $0.20/share ($8.84M total) which increased their vested holdings by 276.3%. Their median purchase size is $8.84M and this is their 1st largest purchase out of 1 all time (link). Was part of a private placement. Was part of a purchase agreement
Director at Keurig Dr Pepper Inc. ($KDP) purchased 171,821 shares at $29.10/share ($5.00M total) which increased their vested holdings by 4.9%. Their median purchase size is $581K and this is their 1st largest purchase out of 17 all time (link). 2 other insiders also purchased the stock
10% Owner at AMERICAS CARMART INC ($CRMT) purchased 12,145 shares at $61.27/share ($744K total) which increased their vested holdings by 1.7%. Their median purchase size is $337K and this is their 19th largest purchase out of 69 all time (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
Which of the following was a factor in the dotcom boom, as analyzed in "Irrational Exuberance"? |
Yesterday’s Question: 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?
Answer: Shiller counters the argument that population growth drove the housing market boom by noting that the US population has been increasing steadily since the 1890s, with no particular surge between 1997 and 2006. This steady growth rate undermines the argument that population increase was responsible for the dramatic rise in housing prices during this period
LINKS YOU’LL LOVE
+15 POINTS - WEEKLY TOURNAMENT
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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: How was your weekend? Of course, the weekend my parents come up from South Carolina is cold and rainy, but it was still a nice time.
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
🥇 Prize - $25 Amazon gift card to mark.t***
🥈 Prizes - $10 Amazon gift cards to llume*** and jmurr***
🥉 Prizes - $5 Amazon gift cards to alowe3***, idra***, and jh34***
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! |
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