Top stock ideas (Mon, Feb 12)

Connor Van Ooyen
February 12, 2024

YBR Portfolio // About // Sponsor YBR // YBR Premium

Oh no!

I just realized I forgot to press send on this email this morning. Sorry about that.

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 over the weekned!

Our AI read and summarized 141 stock ideas, 1214 news articles, and 208 insider trades and found:

Base case for $LQDA is $50 (featured stock idea)
70% upside for $GOOGL, Suncor Energy has a 5% dividend and 40% upside, and a homebuilder with 50% upside(bonus stock ideas)
$NVDA chasing $30B market with new chip unit (news)
Director at $SMCI buys $1M of 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

FUND LETTER

Base case for Liquidia ($LQDA) is $50

Liquidia Corporation (ticker: LQDA) is a biopharmaceutical company focused on the development and commercialization of human therapeutics using its proprietary PRINT technology to develop engineered particles designed to improve the safety, efficacy, and performance of a wide range of therapies.

Ticker: LQDA | Price: $14.72 | Price Target: $50 (+239%)
Market Cap: $1B | Timeframe: N/A

🧪 Biotech | 📈 Bullish Idea

Liquidia Technologies, traded under the ticker $LQDA, is considered by Arquitos Capital and Arquitos Epicus Funds as significantly undervalued with a price target of $50. The company aims to capture 80-90% of the pulmonary arterial hypertension (PAH) market from competitor United Therapeutics ($UTHR), whose product Tyvaso encounters a high dropout rate of 50-60%. Liquidia has the potential to appeal to both current patients and new patients of PAH and the larger pulmonary hypertension in interstitial lung disease (PH-ILD) market, estimated at 60,000 patients. Sales of Tyvaso have doubled since being approved for PH-ILD, and even a conservative forecast of Liquidia seizing 20% of this market suggests a 50% undervaluation in its shares. A more optimistic outlook, with a 50% market share in a growing market, or 25% in a static market, drives its price closer to $50 per share. Two hurdles remain: reversal of an injunction at the district court level, which seems procedural following a favorable Circuit Court decision, and final FDA approval for its product, which was tentatively approved in 2021. Despite the FDA missing its goal date for final approval, it has not requested further documentation, hinting at an imminent approval. Liquidia prepared for an April product launch, bolstering its sales force and stockpiling a year's supply of the product, solidifying its readiness to take a substantial share in both the PAH and the growing PH-ILD markets. Currently priced at $13, Liquidia is viewed as having the best near-term risk/reward profile in the market.

Read the full article here. Read time: 2 min

+3 POINTS - WEEKLY TOURNAMENT

How do you rate the featured stock idea?

Yesterday’s Featured Stock Idea

Paramount ($PARA)

🟩🟩🟩⬜️⬜️ - Buy (42%)
🟥🟥⬜️⬜️⬜️ - Pass (30%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (28%)

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

TODAY’S SPONSOR

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BONUS STOCK IDEAS

BLOG POST

Alphabet: Broad-Based Double-Digit Growth in Q4, Now Even Cheaper

Alphabet Inc. is an American multinational conglomerate headquartered in Mountain View, California. It is the parent company of Google and several former Google subsidiaries, and it operates through segments that include Google Services, Google Cloud, and Other Bets, focusing on a variety of industries such as technology, life sciences, and investment capital.

Ticker: GOOGL | Price: $148.67 | Price Target: $248.20 (+67%)
Market Cap: $1.76T | Timeframe: end of 2026

Alphabet (GOOGL) delivered robust Q4 2023 results, with Google Ad revenues growing 11% and accelerating from Q3, while Cloud grew by 26%. Despite a 6% post-results drop, shares trade at an attractive P/E of 24.6x. The company's EBIT growth outpaced revenues due to well-managed costs, and it boasted a 2.0% Free Cash Flow Yield. Alphabet has seen over 50% stock gains since January 2021 and made substantial contributions to the 'Select 15' model portfolio, with a 23.3% total return in 2023. Q4 demonstrated strong ad revenue acceleration and double-digit Search and YouTube growth, backed by generative AI. Google Cloud revenue soared 25.7%, signaling Alphabet's solid position in cloud computing. Even with higher expected CapEx in 2024, Alphabet's FCF grew by 23.3% in 2023. With a share price of $144.30, we project a 72% total return (20.3% annualized) by the end of 2026, offering a compelling buy opportunity with a price target of $248.20.

Read the full article here. Read time: 8 min

BLOG POST

Suncor Energy Looks Undervalued Against Peers

Suncor Energy Inc. operates as an integrated energy company in Canada and internationally. It operates through Oil Sands; Exploration and Production; and Refining and Marketing segments. The Oil Sands segment explores, develops, and produces bitumen, synthetic crude oil, and related products.

Ticker: SU | Price: $32.21 | Price Target: $45.84 (+42%)
Market Cap: $41.4B | Timeframe: N/A

🛢️ Energy | 💰 5.1% Dividend | 📈 Bullish Idea

Suncor Energy Inc. (NYSE:SU), a leading integrated Canadian oil sands producer, is an attractive buy despite its stock lagging behind the S&P 500 and Energy ETF (XLE) in the last five years, dropping over 3%. The company is poised to see increased shareholder returns, buoyed by improved financials, strategic free cash flow allocation, and the anticipated Trans Mountain Pipeline expansion, which is set to jump from 300,000 to 890,000 barrels per day—facilitating higher price realizations through global market access. Although Suncor faced challenges with a decrease in Q3 profits due to lower oil prices and a slight dip in production, its strong refinery utilization and reduction in net debt speak to its operational efficiency and sound strategic positioning. With a current EV/EBITDA multiple of 3.48, below the peer average of 4.97, the stock is undervalued, suggesting a potential 42% upside to a price of $45.84 based on peer valuation. Investors should be mindful of risks associated with oil price volatility, environmental incidents, and regulatory changes. However, despite these risks and a temporary setback with a delayed Trans Mountain Pipeline, Suncor Energy’s focus on cost reduction, production growth, and shareholder value enhancement makes it an attractive investment.

Read the full article here. Read time: 6 min

BLOG POST

Forestar Group: Homebuilders Are Primed For A Strong 2024, Buy While Still Cheap

Forestar Group Inc. operates as a residential lot development company in the United States. The company acquires land and develops infrastructure for single-family residential communities. It sells its residential single-family finished lots to local, regional, and national homebuilders.

Ticker: $FOR | Price: $32 | Price Target: $48 (+50%)
Market Cap: $1.5B | Timeframe: N/A

🏡 Home Builder | 📈 Bullish Idea

Forestar Group Inc. (NYSE:FOR) is a large real estate developer specializing in single-family community development, benefiting from a potential housing market recovery expected in 2024. Although the stock has seen nearly a 100% return over the past year, it trades at under 8.5x forward earnings and is positioned for growth, having increased lots sold by 1,000% from 2018 to 2023. Optimistic forecasts foresee a bounce-back in single-family housing construction due to declining mortgage rates, continuing inventory shortages, and persistent high demand. Forestar, a majority-owned subsidiary of D.R. Horton, has a nationwide presence with active projects in 57 markets across 23 states and delivered over 14,900 residential lots in 2023. The company aims to double its current market share of 2.3% to 5% and anticipates delivering up to 15,500 lots generating up to $1.5 billion in revenue in 2024. Despite robust company performance and a strong balance sheet with $840 million in liquidity, the stock’s price is not reflective of its success, offering a 50% upside potential at a conservative price-to-earnings (P/E) ratio of 12x and earnings per share (EPS) estimates of about $4 by 2025. Given these factors and the stock's rating of a Strong Buy by analysts, FOR presents a substantial growth opportunity for investors willing to tolerate some volatility.

Read the full article here. Read time: 8 min

+3 POINTS - WEEKLY TOURNAMENT

Which bonus stock idea was the most compelling to you?

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Liberty Broadband ($LBRDA) [42%]

🟨🟨⬜️⬜️⬜️ Olin Corporation ($OLN) [31%]

🟥⬜️⬜️⬜️⬜️ Disney ($DIS) [27%]

MARKET OVERVIEW

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

Yesterday’s Poll Results: 80% bullish

The news sentiment dipped a little bit and fell back below the 7-day average for the first time in a few days, but everything else looks as bullish as ever. Only the Dow Jones ended red (slightly) and the small caps led the way for the second day in a row (are small caps becoming interesting?). The Fear v Greed index added another point and Yellowbrick Road Readers continue to be extremely bullish.

STOCK MARKET NEWS

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

PepsiCo earnings top estimates, but quarterly revenue slides - CNBC

Tesco to sell banking operations to Barclays for up to 700 mln pounds - Reuters

Inflation in December was even lower than first reported, the government says - CNBC

Expedia shares sink after 2024 revenue warning on softening air fares - Reuters

Children's Place's stock slides 27% after profit warning and as company says its in talks with lenders for new financing - Market Watch

Cisco to cut thousands of jobs as it seeks to focus on high growth areas -sources - Reuters

Exclusive: Nvidia chases $30 billion custom chip market with new unit -sources - Reuters

S&P 500 hits 5,000 for first time; Microsoft topples Apple as world's largest company - Fox Business

FEATURED INSIDER TRADE

The insider trade is brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here

Director at Super Micro Computer, Inc. ($SMCI)

The Director purchased 2,000 shares at $568.00/share ($1.14M total) which increased their holdings by 4.9%. The current price is $698.35 (+23%). Their median purchase size is $329K and this is their 1st largest purchase out of 8 all time. (trade link)

Note: Pretty crazy to see a director buying $1M in stock after the stock is up 100% in one month. This was sent in Tuesday’s Premium email and is up 4% since then

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 (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 financial event in the mid-1990s tested LTCM's strategies but ultimately led to a profitable outcome for the fund?

Yesterday’s Question: Following its establishment, how did LTCM initially perform in terms of annual returns in its first few years?

Answer: All 3 years had stellar returns. The first three-year returns were 21%, 43%, and 41%.

LINKS YOU’LL LOVE

+15 POINTS - WEEKLY TOURNAMENT

Etsy business history

Charles D Ellis’s investment letter to his grandchildren

The worst tech predictions ever

Walter Schloss’ Investment Strategy Explained

* Sponsored link

SECRET QUESTION

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