Top stock ideas (Mon, Feb 5)

Connor Van Ooyen
February 05, 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 175 new readers who joined over the weekend!

Our AI read and summarized 167 stock ideas, 1031 news articles, and 130 insider trades and found:

A digital sign leader with 150% upside (featured stock idea)
$BIP is a “fat pitch”, 5 reasons to be bullish on $FLT, Greystone Capital’s new position (bonus stock ideas)
Mortgage demand down 9.4% (news)
Intel delays Ohio chip plant (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

Creative Realities (CREX): Digital Signage Leader

Creative Realities, Inc. (ticker: CREX) is a technology company that provides innovative digital marketing solutions including digital signage, digital merchandising, mobile applications, and other technology-enabled experiences, primarily to retail, entertainment, healthcare, and corporate sector clients.

Ticker: CREX | Price: $2.92 | Price Target: $7.25 (+148%)
Market Cap: $30M | Timeframe: N/A

🪧 Digital Signage | 📈 Bullish Idea

Creative Realities, Inc. (CREX) specializes in digital signage solutions across diverse industries and is set for substantial growth with their SaaS model in the booming $20B U.S. digital signage market. The company expects to post FY 2023 revenues of about $47M and EBITDA of $4M, with a SaaS ARR of $15.6M from over 375K connected devices. CREX differentiates itself in a fragmented market with full integration and scalability, boasting a blue-chip client base including Macy's, Verizon, and Best Buy, and has a significant $110M backlog, demonstrating strong customer value and revenue visibility. The company is trading below market value due to misjudgment of its SaaS potential, forecasted to hit $18M ARR in 2024, which is undervalued given the 80% margin profile and subscription-based recurring revenue. With anticipated 2024 revenues of $60M-$80M and EBITDA of $7.2M-$12.0M, CREX's growth is further secured by an experienced management team and a strategic channel partner program. The debt is being aggressively reduced, offering a leveraged exit ratio of 1.2x to 1.5x by 2024 end. The stock's fair value is appraised between $6.00 and $7.50, incorporating the SaaS business at a conservative 2x to 3x NTM revenue multiple, far below the sector's average of 4x to 14x. Risks include the company's small-cap nature, potential macroeconomic downturns, delayed project deliveries, and warrant dilution. CREX's stock currently priced around $2.60, presents a substantial upside potential, with a price target of $7.25, setting the stage for a significant re-rating once the market recognizes its SaaS potential.

Read the full article here. Read time: 9 min

+3 POINTS - WEEKLY TOURNAMENT

How do you rate the featured stock idea?

Yesterday’s Featured Stock Idea

Viatris ($VTRS)

🟩🟩🟩⬜️⬜️ - Buy (60%)
🟥⬜️⬜️⬜️⬜️ - Pass (18%)
🟨🟨⬜️⬜️⬜️ - Watchlist (22%)

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

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BONUS STOCK IDEAS

BLOG POST

Brookfield Infrastructure: This Is A Fat Pitch

Brookfield Infrastructure Partners L.P. (ticker: BIP) is a global infrastructure company that acquires and manages utilities, transport, energy, and data infrastructure businesses in North and South America, Europe, and the Asia Pacific.

Ticker: BIP | Price: $31.95 | Price Target: N/A
Market Cap: $14.8B | Timeframe: N/A

🏗️ Infrastructure | 💼 Roll-up | 💰 4.8% Dividend | 📈 Bullish Idea

Brookfield Infrastructure Partners L.P. (NYSE:BIP) is an attractive long-term investment due to its strong pipeline promising growth in Adjusted Funds From Operations (AFFO), below-average valuations, and technical indicators predicting a bullish trend. The company, which invests in infrastructure assets yielding 12-15% returns, has a stable ROI thanks to its regulated and contracted businesses. BIP's $13 billion invested capital exhibits a recent uptick, fuelling optimism for expansion, particularly in the data segment where capital commissioning has soared from $0.47 billion to $4.40 billion in a year, poised to drive significant growth in AFFO. Valuations are enticing, with 1-year forward P/AFFO multiples at 7.1x, a 20% dip from the decadal average of 9x. Technical analysis suggests a V-shaped recovery relative to the S&P 500, indicating outperformance potential. Risks include reliance on the data segment (14.7% of AFFO) and a watch on UK housing market weaknesses. Reaction to a recent short-seller report has been minimal, with low short interest and continued positive Wall Street ratings. The company offers a robust dividend yield (4.9%) and projected growth, leading to a 'Strong Buy' recommendation for investors pursuing both income and appreciation.

Read the full article here. Read time: 8 min

BLOG POST

Fleetcor Technologies: 5 Reasons Why I Am Bullish

FLEETCOR Technologies, Inc. is a global business payments company that provides a range of fuel cards, corporate lodging discount cards, and other specialized payment services for businesses around the world.

Ticker: FLT | Price: $296.93 | Price Target: $426 (+43%)
Market Cap: $21.3B | Timeframe: N/A

💸 Business Payment Services | 📈 Bullish Idea

FLEETCOR Technologies, Inc. (FLT) has outperformed since its IPO in December 2010 with a total return of 979% versus the S&P 500's 404%, driven by EPS growing at a nearly 15% CAGR over 10 years. As a $20+ billion market cap company, FLT is under-covered by analysts, prompting a buy rating because of its highly diversified business model across fleet, corporate payments, Brazil, lodging, and others, with strong geographic spread and a high customer retention rate of 91.2%. FLT, which trades at attractive valuations—15x FY 2024 EPS, below the S&P 500's 22x—has growth prospects above the market. Their competitive edge is bolstered by a robust EV offering, with a promising rollout in the UK where EV revenue surpasses ICE. Additionally, FLT’s aggressive share buyback program has reduced its share count by almost 16% in five years. Despite better prospects, it trades at a discount to historical valuation norms and reasonably against peers, with superior profit margins and potential upside. FLT faces macroeconomic risks and interest rate sensitivity, which could affect its performance. The conclusion is bullish with a stock price target of $426, supported by its quality, growth potential, and current undervaluation, but continued monitoring is advised for any adverse economic conditions or internal performance deviations.

Read the full article here. Read time: 6 min

FUND LETTER

Greystone Capital new position - Thryv ($THRY)

Thryv Holdings, Inc. is a company that provides digital marketing solutions, tools, and services to small-to-medium-sized businesses, helping them with customer relationship management (CRM) and end-to-end customer experience platforms.

Ticker: THRY | Price: $20.44 | Price Target: N/A
Market Cap: $733M | Timeframe: N/A

📢 Digital Marketing Tools | 📈 Bullish Idea

Thryv Holdings, Inc. (ticker: THRY) consists of a decreasing Marketing Services division, previously known as Yellow Pages, and a growing SaaS segment designed to streamline operations for small businesses. In 2022, Thryv's shares ended flat and are down 50% since the end of 2021, even though the company made strategic moves to enhance earnings. The Marketing Services generates substantial free cash flow, but Thryv faces a short-term issue with significant debt taking a portion of this flow, masking consolidated results that show an unprofitable business overall. Despite a general investor aversion to unprofitable SaaS in 2022, Thryv's SaaS segment presents an enticing return potential, aiming for $1 billion revenue by 2027 with a 20% EBITDA margin. If achieved, the SaaS division would trade at less than 4 times EBITDA, a low valuation considering its sticky, essential nature with ample room to grow. The company has made considerable advancements since our initial investment, as evidenced by key performance indicators (KPIs) like customer count, revenue, monthly active users, and average revenue per user (ARPU). The core investment thesis remains solid, yet shares are currently available at nearly the same price as in 2021.

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:

🟩🟩🟩⬜️⬜️ Garrett Motion ($GTX) [57%]

🟨🟨⬜️⬜️⬜️ General Dynamics ($GD) [25%]

🟥⬜️⬜️⬜️⬜️ Enterprise Product Partners ($EPD) [18%]

Your comments:

🛩️ john.j*** ($GD): Trump is polling well and a Trump presidency would be bullish for $GD

MARKET OVERVIEW

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

Yesterday’s Poll Results: 78% bullish

The small-cap companies just can’t catch a break and continue to lag behind the other indices. However, everything else is looking quite bullish. Yellowbrick Road readers are back up near 80% bullish while the Fear v Greed index and the news sentiment both jumped up a little bit.

STOCK MARKET NEWS

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US job growth unexpectedly jumps in January as economy adds 353,000 new positions - Fox Business

Exxon beats earnings expectations but lower oil prices weigh on profits - CNBC

Chevron fourth-quarter profits fall but shareholders see record windfall in 2023 - CNBC

Intel delays $20 bln Ohio project, citing slow chip market - WSJ

Nvidia sets monthly record with unprecedented market value surge in January - Reuters

Apple's sales plunged in China — these are the iPhone giant's 5 biggest problems right now - CNBC

Spotify renews deal with podcaster Joe Rogan, will put show on other platforms - CNBC

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 Vera Therapeutics, Inc. ($VERA)

The Director purchased 161,290 shares at $31.00/share ($5.00M total) which increased their holdings by 4.7%. The current price is $38.00 (+22.6%). Their median purchase size is $6.50M and this is their 3rd largest purchase out of 4 all time. (trade link)

Note: First purchase of $VERA since 2021

QUIZ

+3 POINTS - WEEKLY TOURNAMENT

If you like this quiz section, then you are probably like me and love to learn! One way I learn is by using Shortform. They are a website/app that creates summaries/guides for 1000s of nonfiction books and connects ideas between books. Whenever I have a free 10 minutes, I just open their app and learn something new from a book about finance, business, history, etc.

I’ve been lucky enough to partner with them and offer you a free trial and a 20% discount if you use my link: https://shortform.com/yellowbrickroad

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 (20% off using my link!).

John Meriwether was one of the biggest money-makers at Salomon Brothers but was forced to leave due to a scandal involving which practice?

Yesterday’s Question: At Salomon Brothers, John Meriwether led which department that was remarkably profitable, contributing up to 100% of Salomon's profits in some years?

Answer: Bond Arbitrage! The Bond Arbitrage group's success was largely due to innovative strategies that later influenced LTCM's methods and was why he was able to raise capital for LTCM.

LINKS YOU’LL LOVE

+15 POINTS - WEEKLY TOURNAMENT

Exploring alternative investments, focus, and standards

Why P/E is a useless metric for some companies (like Amazon)

Meta-Optimizations: Knowing When a Business is Operating from Strength or Weakness

Probably part of the reason their stock market is so abysmal

SECRET QUESTION

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I’ve decided to keep the Monday and Friday questions about weekends because I like hearing about everyone’s weekend lol. And then will probably also have a question on Wednesdays.

Secret Question: How was your weekend? The weather was fantastic in Indiana, which was great for the weekend but not so great for my desire to snowboard.

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 bk43***

🥈 Prizes - $10 Amazon gift cards to zswal*** and ftwor***

🥉 Prizes - $5 Amazon gift cards to rewj7***, ui.mer***, and jlpai***

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