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Top stock ideas (Mon, Nov 20)
Connor Van Ooyen
November 20, 2023
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👋 Good Morning!
Welcome to the 242 new readers who joined over the weekend!
Our AI read and summarized 183 stock ideas, 1428 news articles, and 94 insider trades and found:
A merger arbitrage opportunity (featured stock ideas)
OpenAI fires the CEO (news)
Charlie Munger’s five favorite mental models (links you’ll love)
The CEO at $FBIO increased his holdings by 152% (insider trades)
and much more…
Thanks for reading! Have a great day.
Connor
* If you missed yesterday’s email, don’t forget to read it here
TODAY’S SPONSOR
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They have patented the only mass market shade automation device, and their exclusive deal with Best Buy resembles that which led Ring and Nest to their billion-dollar buyouts.
FEATURED STOCK IDEA
BLOG POST
SAVE - JBLU merger arbitrage
Jet Blue and Spirit Airlines are both airlines that have agreed to a merger that is currently being challenged in court.
Ticker: SAVE | Price: $12.43 | Price Target: $30 (+141%) | Timeframe: ~3 months
🛩️ Airline | 🚨 Event Driven | 📈 Bullish Idea
Spirit Airlines ($SAVE) has seen a significant 40% drop in its stock price from $16 to $9.50 within two weeks, attributed to modest changes in expected outcomes rather than fundamental business issues. The primary focus is on the pending acquisition by JetBlue Airways ($JBLU), with a potential upside of $30 per share if the acquisition is successful, translating to a 200% upside from the current price. Despite some uncertainty, the odds of the acquisition's trial success are assessed at 70%, with a slight risk of JetBlue attempting to renegotiate or break the deal, and a low probability of government intervention blocking the merger. Factoring in these risks, the expected outcome is a 60% chance of success, equating to an expected profit of $12.30 per share. On the downside, if the acquisition fails, the stock might drop to around $4, leading to a potential loss of $2.20 per share. This scenario presents a high-risk, high-reward investment opportunity, with an expected return exceeding 100% in about three months, but also carries the risk of a significant loss, potentially up to 60%, based on future developments and news updates
Read the full article here. Read time: 4 min
POLL - FEATURED STOCK IDEA
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Rating (link):
Charles River Laboratories ($CRL)
🟩🟩⬜️⬜️⬜️ - Buy (32%)
🟥🟥🟥⬜️⬜️ - Pass (36%)
🟨🟨⬜️⬜️⬜️ - Watchlist (32%)
* There are more stock ideas later in the email!
MARKET OVERVIEW
Are you short-term bullish or bearish on the market? |
Yesterday: 65%
Yellowbrick Road readers got quite a bit more bullish (up to 65% from 58%) and the Fear v Greed index was up another 3 points (from 55 to 58). All of the indexes were up, but the big news was the Russell index (small-cap stocks) was up significantly while the large-cap indexes were barely up. This has rarely happened this year as the small-caps have been lagging the large-cap stocks all year.
STOCK MARKET NEWS
Today’s news is brought to you by The Hustle. Impress your colleagues with the knowledge you get by reading the #1 news source read by entrepreneurs, CEOs, and business owners. Subscribe here or sign up instantly with this link.
Tech stocks wrap up strongest three-week rally since early days of Covid in April 2020 - CNBC
Short-seller Jim Chanos to close hedge funds, return cash to investors: WSJ - Market Watch
Amazon cuts 'several hundred' jobs in Alexa division - CNBC
ChatGPT maker OpenAI ousts CEO Sam Altman - Reuters
OpenAI pushing to bring Altman back as CEO one day after he was ousted by board - CNBC
Volvo Cars shares plunge to record lows as Geely cuts stake - Reuters
China's transition to EVs is so fast that Volkswagen is on track for its worst local sales in years - CNBC
Amazon says its first Project Kuiper internet satellites were fully successful in testing - CNBC
* If you want all of the day’s most important stock market news, sign up for my free, daily email called Market Mornings.
QUIZ
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Which industrialist founded the Standard Oil Company, becoming one of the world's wealthiest individuals in history? |
Yesterday’s Question (link): Which former Harvard Professor and economist was known for the concept of 'creative destruction' in economics?
Answer: Joseph Schumpeter. Creative destruction describes the deliberate dismantling of established processes in order to make way for improved methods of production (like when Xerox was destroyed when fax machines were replaced with the email and the internet).
INSIDER TRADES
The insider trades are 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.
Samsarra Biocapital, a 10% owner at Cargo Therapeutics ($CRGX), bought $15M (increasing holdings by 20%) (link)
A 10% owner at Hamilton Insurance ($HG) bought $3M (increasing holdings by 5%) (link)
The CEO at Fortress Bio ($FBIO) bought $2.6M (increased holdings by 152%) (link)
Joe Gebbia, co-founder of AirBnB ($ABNB) who stepped down last year, sold 47% of his holdings ($63M) (link)
The EVP of Operations at Acadia Healthcare ($ACHC) sold 52% of his holdings ($6M) (link)
LINKS YOU’LL LOVE
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* Sponsored link
SECRET QUESTION
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BONUS STOCK IDEAS
ANALYST REPORT
Lithium Americas: Thacker Pass in Full Scope After Separation
Lithium Americas is a pure-play lithium producer. The firm owns one resource, Thacker Pass, that is located in northwest Nevada. Thacker Pass recently began construction and is expected to begin production in the mid-2020s.
Ticker: LAC | Price: $6.96 | Price Target: $20 (+187%) | Timeframe: N/A
🔋 Lithium | 📈 Bullish Idea
Lithium Americas, now a standalone company after separating from Lithium Argentina, maintains a focus on its Thacker Pass project in Nevada, with Seth Goldstein, CFA, setting a $20 fair value estimate (CAD 28 in Canadian dollars) and a no-moat rating. Thacker Pass, the first clay-based lithium resource, is expected to start with a 40,000 metric ton capacity, potentially expanding beyond the planned 80,000 metric tons due to its location on one of the world's largest lithium resources. Despite current lithium price volatility and market undervaluation of Lithium Americas' shares, trading at a 65% discount to fair value, the company anticipates a more balanced market in 2024 with rising demand from electric vehicle sales. A key milestone is securing a U.S. Department of Energy loan for up to 75% of phase 1 construction costs, expected by early 2024, which, along with an equity investment from General Motors, would fully fund the project. Lithium Americas aims to be a top lithium producer, benefiting from the growing EV market, with management targeting an eventual expansion to 240,000 metric tons annually. The company also holds stakes in Green Technology Metals and Ascend Elements. Risks include project execution, lithium price volatility, and potential cost overruns, but the company's strategy and Thacker Pass's potential place it in a favorable position in the growing lithium market. CEO Jonathan Evans leads the company with extensive industry experience.
Read the full article here. Read time: 9 min
HEDGE FUND
Voss Capital on $CROX: The cheapest apparel stock
Crocs designs, develops, manufactures, markets, and distributes casual lifestyle footwear and accessories for men, women, and children worldwide.
Ticker: CROX | Price: $79.18 | Price Target: N/A | Timeframe: N/A
👞 Footwear | 📈 Bullish Idea
CROX, a branded apparel/footwear company, presents a compelling investment opportunity in our portfolio due to its significantly undervalued stock, down 31% since Q2, trading at a near-historic low P/E, only cheaper in mid-2009. Despite market concerns about the sustainability of its core Crocs brand and near-term HeyDude inventory issues, Crocs continues to exhibit strong double-digit growth with expanding margins. The core Crocs brand generates the majority of the company's revenue and gross profit. With a robust free cash flow yield of 15% and a share buyback authorization for approximately 20% of outstanding shares at current market prices, along with a high short interest of 10%, we see a substantial potential for upside from its recent trading price of $80. This outlook is based on CROX's strong financials, operational efficiency, and market position, underscoring the stock's asymmetric return prospects.
Read the full article here. Read time: 10 min
BLOG POST
Indofood and First Pacific: The Noodle Narrative
PT Indofood Sukses Makmur Tbk operates as a food solutions company in Indonesia, the Middle East, Africa, rest of Asia, internationally. First Pacific Company Limited, an investment holding company, engages in the consumer food products, telecommunications, infrastructure, and natural resources businesses in the Philippines, Indonesia, Singapore, the Middle East, Africa, and internationally
Ticker: PIFMY / FPAFY | Price: $19.83 / $1.91 | Price Target: N/A | Timeframe: N/A
🍜 Food | 🇮🇩 Indonesia | 📈 Bullish Idea
Indofood Sukses Makmur and First Pacific, interlinked through the Salim family's ownership and a shared focus on the noodle brand Indomie, represent contrasting investment profiles. Indofood, the world's top instant noodle maker, is renowned for Indomie, a dominant brand in Indonesia and increasingly popular globally. This segment's strong tailwinds and market leadership underpin Indofood's attractiveness, complemented by its diverse portfolio in snacks, beverages, and wheat products. Despite being a consumer staple with stable revenues, Indofood's growth is tightly linked to Indomie's success and faces risks like poor corporate governance and complex structures.
First Pacific, on the other hand, is laden with significant debt but diversified across telecommunications, infrastructure, and power sectors in emerging markets. Its major segments include PLDT, a profitable yet financially strained telecom company, and stable utility subsidiaries like MPIC and FPM Power. While its financial structure appears manageable with long-term debt strategies, it's not devoid of risks, including currency volatility and regional economic instability.
The author currently has the position structured as 3% First Pacific and 8% Indofood.
Read the full article here. Read time: 4 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results (link):
🟩🟩🟩⬜️⬜️ Healthpeak Property ($PEAK) [51%]
🟨🟨⬜️⬜️⬜️ Travelsky ($TSYHY) [28%]
🟥⬜️⬜️⬜️⬜️ Talkspace ($TALK) [21%]
WEEKLY TOURNAMENT
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🏆 Last Week’s Winners
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MY OTHER FREE NEWSLETTERS
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