Top stock ideas (Mon, Jan 29)

Connor Van Ooyen
January 29, 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 over the weekend!

Our AI read and summarized 123 stock ideas, 953 news articles, and 121 insider trades and found:

An analyst upgrades $EVO and gives it 136% upside (featured stock idea)
$BTI has a 10% dividend and could re-rate and $ZM and $MRO are strong buys (bonus stock ideas)
Fed's favorite inflation gauge rose 0.2% in December (news)
An insider with 100% returns bought stock (insider trade)
and much more…

Thanks for reading! Have a great day.

Connor

* If you missed the previous email, don’t forget to read it here

FEATURED STOCK IDEA

ANALYST REPORT

RBC upgrades $EVO to Outperform

Evotec SE (ticker: EVO) is a drug discovery alliance and development partnership company that provides drug discovery solutions to pharmaceutical and biotechnology companies, academic institutions, foundations, and venture capitalists. It offers various drug discovery services, including target identification and validation, screening, medicinal chemistry, and drug optimization.

Ticker: EVO | Price: $7.89 | Price Target: $18.60 (+136%)
Market Cap: $3B | Timeframe: N/A

🧪 Biotech / Pharma | 🔄 Turnaround | 📈 Bullish Idea

Evotec SE (EVO), with a price target of €18.6, has been upgraded to Outperform following its share price dropping to a 5-year low due to the CEO's unexpected departure and concerns over potential impropriety in his share dealings. Despite uncertainties regarding its 2024 performance after a cyber attack and a subdued biotech funding market, the company is trading at just 8x its 2025 EBITDA guide, which seems exceedingly cheap for a business potentially growing in double digits. Strong partnerships with BMS, Sandoz, and the US DoD support the robust positioning of Evotec's business, which is underpinned by a strong EVT Execute business track record and an unlevered balance sheet. Although the near-term share price is unpredictable, our unchanged €18.60 target reflects a 20% discount due to the risks, but with significant EBITDA growth expected in 2025, the valuation could realistically reach upwards of €23 per share.

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

Paypal ($PYPL)

🟩🟩🟩⬜️⬜️ - Buy (47%)
🟥🟥⬜️⬜️⬜️ - Pass (29%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (24%)

❌ gtor**** - Recent performance has been sluggish and the new strategic direction is still speculative.
🔎 emoj**** - Let’s see if the new CEO, their buyback plan, and their new focus on AI materializes into an upturn for the company.

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

TODAY’S SPONSOR

Flower Turbines — Join 7000+ Investors in a $14M+ Journey in the clean energy sector

Flower Turbines has successfully secured over $14M through multiple funding rounds.

Become part of an exclusive group of over 7000 lifetime investors by backing patented wind technology before the investment window closes.

Be part of America's top 10 most fundable companies—small turbines, big disruption.

Please support my sponsors. It’s how I pay the bills to keep this newsletter free :)

BONUS STOCK IDEAS

BLOG POST

Librarian Capital portfolio: British America Tobacco ($BTI)

British American Tobacco PLC (ticker: BTI) is a multinational company that manufactures and sells cigarettes, tobacco, and other nicotine products, including vapor and oral products, under various brand names in markets around the world.

Ticker: BTI | Price: $29.64 | Price Target: N/A
Market Cap: $65B| Timeframe: N/A

🚬 Tobacoo | ⬆️ Re-rate | 💰 10% Dividend | 📈 Bullish Idea

British America Tobacco ($BTI) has seen some good news recently. The FDA has made some moves towards removing illegal disposable E-Vapour products from the market, seizing a shipment of 1.4m such units in December and issuing Marketing Denial Orders to a number of brands in January. The long-anticipated ban on menthol cigarettes appears to have been postponed beyond 2024. Billionaire Ken Dart has increased his stake by another 0.3% to 10.37% on December 15. Less positively, BAT was ordered by a Dutch court to pay €117m in back taxes and also fined $110m for anti-competitive behaviour by a Nigerian regulator during December. BAT’s investment case is based on a current 10% Dividend Yield, a re-rating of its P/E from 6.0x to 8.0x, and some earnings growth.

Read the full article here. Read time: 1 min

BLOG POST

Marathon Oil: A Strong Buy If Occidental Petroleum's CEO Is Right

Marathon Oil Corporation is an American oil and natural gas exploration and production company that operates both in the United States and select international markets.

Ticker: MRO | Price: $23.12 | Price Target: $35 (+51%)
Market Cap: $13B | Timeframe: 2025

🛢️ Oil/Gas | 💰 1.9% Dividend | 📈 Bullish Idea

Marathon Oil (MRO), an oil company actively engaged in four major U.S. basins and operations in Equatorial Guinea, stands strong amidst falling oil prices with a multi-decade oil and gas inventory. CEO Vicki Hollub's prediction of a supply crunch by 2025 could positively impact MRO, especially with U.S. WTI oil prices expected to average between $80-$85. In Q3 2023, MRO demonstrated efficient capital allocation with $718 million in adjusted free cash flow and a 38% reinvestment rate, and has returned over $5.1 billion to shareholders in the last eight quarters, reducing its share count by 26%. MRO's aggressive share repurchases complement its 2% yielding dividend, which is conservatively managed. The company maintains an investment-grade balance sheet (BBB-) and aims to reduce its gross debt from $5.5 billion to around $4.0 billion. Forward-looking, its EG Integrated Gas business is poised for a financial uplift, with easier access to European markets that offer higher gas prices. Currently trading at a low P/OCF ratio of 3.1x with a fair value of around $35 per share, MRO could see a substantial upside if economic growth fuels a rotation from growth to value stocks, possibly making it a takeover target. While not a fit for dividend-focused portfolios, Marathon Oil is an attractive stock for investors emphasizing buybacks.

Read the full article here. Read time: 7 min

BLOG POST

Zoom Video Communications, Inc.

Zoom Video Communications, Inc. (ticker: ZM) is an American technology company that provides videotelephony and online chat services through a cloud-based peer-to-peer software platform, widely used for teleconferencing, telecommuting, distance education, and social relations.

Ticker: ZM | Price: $67.42 | Price Target: N/A
Market Cap: $21B | Timeframe: N/A

💻 Enterprise SaaS - Video Chat | 📈 Bullish Idea

Zoom Video Communications (NASDAQ: ZM) presents a compelling investment opportunity amidst an overpriced market, especially considering its significant margin expansion and continued product development aimed at the enterprise segment. After a rally in the general market, the S&P 500 is trading at approximately a 19x forward P/E, suggesting that value-based stocks like Zoom, with its 40% pro forma operating margins, might offer less downside risk. Trading flat over the past year, Zoom stands out with high profitability unlike its low-growth software peers, which lack operating leverage. Zoom's initiatives such as the Zoom One bundle, price increases, and aggressive cost-cutting including a 15% workforce reduction, underpin both its growth and profitability. Additionally, its cash reserves, amounting to over $5 billion (approximately 30% of its market cap), make its valuation particularly attractive, with an ex-cash P/E of just 9.8 times against FY24 earnings estimates. Leading into FY24, Zoom expects revenue of $4.51 billion (+3% y/y) and pro forma EPS of $4.95 (13% y/y growth). With a P/E of 14.1x and strong Q3 results showcasing a 3% y/y revenue increase to $1.14 billion, enterprise customer growth, and successful launches like the Zoom Virtual Agent, Zoom's financials suggest robustness that belies its slow growth. Therefore, the stock is now labeled a 'strong buy,' offering a unique value proposition in a market with inflated valuations.

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:

🟩🟩🟩⬜️⬜️ Kinder Morgan ($KMI) [53%]

🟨🟨⬜️⬜️⬜️ Kinsale Capital ($KNSL) [29%]

🟥⬜️⬜️⬜️⬜️ SPOK Holdings ($SPOK) [18%]

MARKET OVERVIEW

Today’s market overview is brought to you by Percent. Private credit, a $1.9 trillion industry, has historically only been available to institutional investors, but with Percent, accredited investors can access this alternative too. Diversify your investments and increase your returns.*

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

Yesterday’s Poll Results: 69% bullish

A slight decrease in bullishness after the most bullish week we’ve had in the last few months. For a change of pace, the Dow Jones and Russell were green while the Nasdaq and S&P were red. Yellowbrick Road readers remained around 70% bullish and the Fear v Greed index spent another day at 77, but the news sentiment dipped below the weekly average.

STOCK MARKET NEWS

Attention Gmail Users: Gmail (and a few other email clients) cut off long emails and will cut off this email soon. You can read the rest of the email on the website by clicking the button below.

* If you don’t want any more of these emails, unsubscribe here.

Fed's favorite inflation gauge rose 0.2% in December, and was up 2.9% from a year ago - CNBC

Visa's quarterly profit rises as holiday shopping powers spending - Reuters

JetBlue casts doubt on Spirit deal completion - Reuters

LVMH shares jump 8% as earnings point to luxury sector resilience - CNBC

Intel tumbles on dismal forecast, weak PC chip demand - Reuters

Vince McMahon Resigns From TKO Group Board - WSJ

Tech layoffs balloon in January as Wall Street rally lifts Alphabet, Meta, Microsoft to records - CNBC

Bitcoin tops $41K, Coinbase upgraded to Outperform by Oppenheimer - Yahoo Finance

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

10% Owner at Paysign, Inc. ($PAYS)

The 10% Owner purchased 107,157 shares at $2.79/share ($299K total) which increased their holdings by 2.0%. The current price is $2.86 (+2.4%). Their median purchase size is $230K and this is their 3rd largest purchase out of 8 all time. (trade link)

QUIZ

+3 POINTS - WEEKLY TOURNAMENT

The 'Barings Bank' collapse was mainly attributed to unauthorized trading activities by which individual?

Yesterday’s Question: What does the financial term 'alpha' represent in investing?

Answer: The performance of a stock relative to a benchmark index

LINKS YOU’LL LOVE

+15 POINTS - WEEKLY TOURNAMENT

Still holding cash in a bank account that earns less than 1%? Move your cash to Public's high-yield cash account and earn 5.1% interest on your cash with no strings attached. Learn more*

An In-depth Look into What Went Wrong with Wish

The long view: using unorthodox signals to spot the next big thing

The new, new utilization normal in health care: why the pendulum is swinging back to providers in 2024

*The H100 is used for AI workloads

* Sponsored link

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?

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!

🏆 Last Week’s Winners

🥇 Prize - $25 Amazon gift card to shanno***

🥈 Prizes - $10 Amazon gift cards to willsha*** and david.***

🥉 Prizes - $5 Amazon gift cards to joezep***, cathe***, and alrayu***

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)

INVITE YOUR FRIENDS

+50 POINTS - WEEKLY TOURNAMENT

If you enjoy the Yellowbrick Road newsletter, please share it with a friend :). Plus, you’ll get points for the Weekly Tournament!

THAT’S ALL FOLKS

+3 POINTS - WEEKLY TOURNAMENT

Thank you so much for reading today’s email! Your support is the only way I can write this email for free every day. Give me feedback in the poll below to earn 3 points for this week’s tournament.

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!

*Flower Power Disclaimer:

The preceding post was written and/or published as a collaboration between The Yellowbrick Road’s in-house sponsored content team. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. The Yellowbrick Road may receive monetary compensation from the issuer, or its agency, for publicizing the offering of the issuer’s securities. This content is for informational purposes only and is not intended to be investing advice. This is a paid ad. Please see 17b disclosure linked in the campaign page for more information.

You should read the Offering Circular and Risks related to this offering before investing. This Reg A+ offering is made available through StartEngine Primary, LLC, member FINRA/SIPC. This investment is speculative, illiquid, and involves a high degree of risk, including the possible loss of your entire investment. In addition, as described in the Offering Circular, the Company retains the right to continue the offering beyond the Termination Date, in its sole discretion.

Reply

or to participate.