Top stock ideas (Mon, Mar 4)

Author

Connor Van Ooyen
March 04, 2024

👋 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 177 new readers who joined over the weekend!

Our AI read and summarized 141 stock ideas, 1099 news articles, and 144 insider trades and found:

  • $ICAD - an AI medtech play (featured stock idea)

  • $PYPL turnaround pitch, 35% upside over the next 24 months in $GDC.AX, 100% upside for an animal health company (bonus stock ideas)

  • AI tide lifts Nasdaq to record intra-day high (news)

  • The CEO at $ENPH with 400% returns buys more 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

TWITTER

$ICAD - Paves the Way for Growth in AI Medtech Sector

iCAD, Inc. engages in the provision of cancer detection and therapy solutions in the United States. It operates through two segments, Cancer Detection and Cancer Therapy. The company's breast AI suite includes cancer detection, automated density assessment, and breast cancer risk assessment solutions for both 2D and 3D mammography.

Ticker: ICAD | Price: $1.76 | Price Target: $6 (+241%)
Market Cap: $46M | Timeframe: N/A

🏥 MedTech | 🤖 AI | 📈 Bullish Idea

ICAD represents a pure-play AI medtech company transitioning to a Software as a Service (SaaS) model, strategically positioned to capture a significant share of a vast Total Addressable Market (TAM) in its early stages, particularly in AI solutions for cancer detection. Despite its recent surge, the company was previously undervalued, trading at less than 1x EV/Sales with 50% Annual Recurring Revenue (ARR), presenting a compelling investment opportunity. With a robust financial position boasting $24 million in cash reserves, no debt, and near breakeven profitability, ICAD has significantly improved its cost structure. While currently not demonstrating growth, this trajectory is expected to change once SaaS revenues materialize, and partners accelerate implementation. A comparable company, Volpara Health ($VHT.AX), was recently acquired at approximately 8x sales, suggesting a potential valuation increase for ICAD to around $6 per share, even before factoring in any top-line growth. Such microcaps present remarkable opportunities for investors willing to conduct thorough research, and I am optimistic about ICAD's prospects, holding a long position.

Read the full article here. Read time: 1 min

+3 POINTS - WEEKLY TOURNAMENT

How do you rate the featured stock idea?

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Yesterday’s Featured Stock Idea

Duolingo, Inc. ($DUOL)

🟩🟩🟩⬜️⬜️ - Buy (47%)
🟥⬜️⬜️⬜️⬜️ - Pass (34%)
🟨🟨⬜️⬜️⬜️ - Watchlist (19%)

  • ✅ joel***, lori*** - I’m an active user

  • ❌ jharr**** - Duolingo's new pathway sucks, they're ignoring a very dedicated user group. I used to be a paying member!

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

TODAY’S SPONSOR

+15 POINTS - WEEKLY TOURNAMENT

The brokerage I use to trade international and OTC stocks

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*I personally use Interactive Brokers because it allows me to trade international and OTC stocks

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

BONUS STOCK IDEAS

BLOG POST

Savant Investors: Idea Spotlight - PayPal

PayPal Holdings, Inc. operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide.

Ticker: PYPL | Price: $60.36 | Price Target: $76.80 (+27%)
Market Cap: $63B | Timeframe: N/A

💸 Digital Payments | 📈 Bullish Idea

PayPal Holdings, Inc. (ticker: PYPL) presents a strong investment opportunity, trading at less than 10 times next twelve months (NTM) free cash flow (FCF) with a potential upside of 29%. The company operates a global payments platform with 35 million active merchants and 400 million consumers, generating 90%+ of transaction gross profit from transaction fees. Despite concerns over slowing growth in net new active consumers (NNAs), competition from APMs like Apple Pay, Google Pay, Stripe, and Adyen, and management's historical capital allocation missteps, PayPal's network remains robust. PayPal's conversion advantage is evident from a Nielsen study showing 28% better conversion rates with PayPal at checkout. The company has sharpened its focus on high-quality customer acquisition—focusing on monthly active users (MAUs) which drive significant transaction volume—and boasts an impressive card-free 'Pay with Venmo' service adopted by major retailers like Amazon. Braintree, PayPal’s PSP for large-scale merchants, continues to grow at a 30%+ YoY rate, taking market share from competitors Stripe and Adyen by leveraging significant data advantages and cost-effective pricing. PayPal's simplified PSP strategy with PayPal Complete Payments (PPCP) benefits from strong market acceptance and growth, particularly among SMBs. Upcoming innovations like a network vault for one-click transactions across all PayPal merchants promise to further increase checkout conversion and network value. PayPal plans to maintain high return on invested capital (ROIC) and is executing a $15 billion buyback program, addressing concerns over past acquisition failures. Given PayPal's competitive position, growth avenues, and current valuation, it represents an attractive investment for the future.

Read the full article here. Read time: 38 min

BLOG POST

Reporting Season Quick Review: Global Data Centre Group - $GDC.AX

Global Data Centre Group enables investors to invest in digital infrastructure assets in Australia. The company was incorporated in 2019 and is based in Sydney, Australia.

Ticker: GDC.AX | Price: 2.20 | Price Target: 2.82 (+28%)
Market Cap: 168M | Timeframe: 24 months

📀 Digital Infrastructure | 💸 Investment Fund | 📈 Bullish Idea

Global Data Centre Group (GDC.AX), with a current market cap of $170m, is a compelling investment proposition with a projected upside of 35% over the next 24 months. My valuation of the company stands at $256m, comprising ETIX at $115m, confirmed by a new investment from Eurazeo Infrastructure Partners, the Perth Data Centre valued at $15m despite its uncertain sale value, $6m in cash, and a significant discrepancy in the value of their Airtrunk investment, which I estimate at $120m compared to the $48.5m reported on the balance sheet. The stock's potential is buoyed by management's incentive changes emphasizing value realization over management fees; if they can return a Net Tangible Assets (NTA) of $3 per share to shareholders, they stand to make approximately $26m in performance fees, which is acceptable if it unlocks significant shareholder value. The urgency for value realization is high, as performance hurdles increase after 24 months, bolstering the case for a relatively secure investment with a solid potential return and additional upside from Airtrunk's performance in the buoyant tech infrastructure sector.

Read the full article here. Read time: 2 min

BLOG POST

Grey Wolf Animal Health - Multi-Bagger Potential in Animal Healthcare - $WOLF.V

Grey Wolf Animal Health Corp. provides products, solutions, and services for the health and wellness of animals in Canada and internationally. It operates through two segments, the Animal Health Business Unit, and the Pharmacy Business Unit.

Ticker: WOLF.V | Price: 0.90 | Price Target: $1.80 (+100%)
Market Cap: $28M | Timeframe: N/A

🐶 Pet Health | 📈 Bullish Idea

Grey Wolf Animal Health Corp. (WOLF.V) is a Canadian company positioned in the robust animal/pet health sector, favored by industry tailwinds such as increased pet ownership and spending by 'pet parents' that drives steady demand and high margins. The company operates in two segments, non-prescription Animal Health and prescription Pharmacy; the latter includes customized medications and is expanding at a faster rate (15% sales growth as of September 2023) compared to the former (9-10% sales growth). Grey Wolf's in-house commercial platform and niche product strategy diverge from crowded markets, favoring specializations that are more impactful for small businesses. Although management doesn't hold shares, significant insider ownership by the founder and principal investors indicates a deep involvement along with a professional, competent board. Their strategic acquisition of Trutina, a compounding pharmacy for horses, skillfully financed, shows their business acumen as it doubled Grey Wolf’s EBITDA and complemented their service offering. With a modest valuation and a share price of approximately $0.90 and the company targeting 3,400 veterinary clinics in a $1.5B Canadian market, WOLF's potential for growth is significant. The stock could see a double or more in value over three years due to its lower multiples compared to peers, negligible downside risk at its current price, and the future possibility for larger investors to fuel demand for shares as the company grows. Holding a 1% portfolio position, the stock is seen as having a reasonable chance for a solid return and the potential for a high-growth outcome similar to the success story of Paladin Labs.

Read the full article here. Read time: 6 min

+3 POINTS - WEEKLY TOURNAMENT

Which bonus stock idea was the most compelling to you?

Login or Subscribe to participate in polls.

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Driven Brands Holdings ($DRVN) [59%]

🟨🟨⬜️⬜️⬜️ Athens International Airport ($0901.F) [21%]

🟥⬜️⬜️⬜️⬜️ BNP Paribas SA ($BNPQY) [20%]

Your comments:

  • 🛩️ alpo*** ($0901.F): I love infrastructure that is not duplicable, but I wonder about currency risks.

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?

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Yesterday’s Poll Results: 68% bullish

The Fear v Greed index continues to move the opposite way of everything else (granted, it’s only moving a little bit and still is at Extreme Greed levels). It fell 2 points while the indexes were all very green. The news sentiment finally jumped above the 7-day average and is getting more bullish and Yellowbrick Road readers are getting back near 70% bullish levels.

STOCK MARKET NEWS

NYCB expands top team, says 'material weakness' will not hit 2023 results - Reuters 

Exclusive: Nissan, Fisker in advanced talks on investment, partnership-sources - Reuters 

CVS and Walgreens to start selling abortion pill mifepristone this month - CNBC 

US money market funds see big inflows ahead of inflation data - Reuters 

AI tide lifts Nasdaq to record intra-day high - Reuters 

Vista Outdoor gets $2.9 billion takeover offer, WSJ reports - Reuters 

Elon Musk Sues Sam Altman's OpenAI Over Microsoft Ties - Barrons 

Yum China CEO says consumers are growing more 'rational' as rising costs cut dining budgets - CNBC 

US FDA approves Boston Scientific's heart device - Reuters 

FEATURED INSIDER TRADE

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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

President & CEO at Enphase Energy, Inc. ($ENPH)

The President & CEO purchased 4,000 shares at $120.54/share ($482K total) which increased their vested holdings by 0.2%. The current price is $128.86 (+7%). Their median purchase size is $94,133.60 and this is their 1st largest purchase out of 8 all time. (trade link)

Historic Returns
1m returns: 29% weighted | 38% median | 71% win rate (5/7)
3m returns: 95% weighted | 46% median | 100% win rate (7/7)
6m returns: 167% weighted | 151% median | 100% win rate (6/6)
1y returns: 410% weighted | 368% median | 100% win rate (6/6)

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

What is the fundamental cause of speculative bubbles, as explained by Robert Shiller in "Irrational Exuberance"?

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Yesterday’s Question: What is the lifespan of a speculative bubble as described by economist Hyman Minsky?

Answer: The economic cycle of a bubble typically involves five phases:

  • Initial Optimism - A shift in sentiment leads to rising demand, such as innovations in technology or changes in interest rates.

  • Rising Prices - Prices increase steadily then accelerate as speculation and media attention increases.

  • Peak - Prices skyrocket to unsustainable levels as irrational exuberance sets in. Speculation is rampant.

  • Panic Selling - Prices begin to fall as investors take profits. Sentiment turns negative.

  • Bust - Accelerating declines due to fear and panic selling. Prices fall sharply until the bubble bursts and calm is restored.

LINKS YOU’LL LOVE

+15 POINTS - WEEKLY TOURNAMENT

(Fixed link from Friday) Stock pitch: Austin Gold Corp, a gold exploration company, is one of the very few gold exploration companies listed on the NYSE. They have an experienced leadership team and 50% of shares are owned by management/directors and are working on 3 projects. Click here to read the full pitch deck.*

Private Investment Pitch: Jurny is an AI-powered platform automating hotel and short-term rental operations. With $2.2M in ARR, industry partnerships with major companies including Airbnb, Vrbo, and Expedia, and more than $35 million in bookings processed through their platform last year alone, it's no surprise that Jurny has the backing of leading venture capitalists and over 1,000 individual investors. Read their full pitch*

Billionaire investor Chris Hohn on how TCI consistently generates high alpha

* Sponsored link

ONE OF MY FAVORITE TOOLS

+15 POINTS - WEEKLY TOURNAMENT

33% returns in 3 days copying an insider trade

*CEO Watcher is another newsletter I write. I track all of the insider trades AND calculate their historic returns and win rates to know which insiders are profitable and worth copying. I send a free, weekly email and you can upgrade to CEO Watcher Premium to get a daily email.

On Tuesday, February 13th, I highlighted $SANA as a top insider purchase in the CEO Watcher Premium email.

Highlighted as a top purchase in Tuesday’s premium email

Just 3 days later it was already up 33%!

Less than 1% of all insider trades pass my criteria for being a “top insider trade” and worth copying.

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? We had some great weather and spent time with family which is always nice.

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 wcumm***

🥈 Prizes - $10 Amazon gift cards to bball3*** and tipof***

🥉 Prizes - $5 Amazon gift cards to barran***, mcutl***, and stell***

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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THAT’S ALL FOLKS

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