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- Top stock ideas (Thu, Dec 21)
Top stock ideas (Thu, Dec 21)
Connor Van Ooyen
December 21, 2023
Sponsored by
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👋 Good Morning!
$LQDA popped 46% today which puts it up 76% since we posted about it on November 10th (link)! Not too shabby. You can see some of our other big winners here.
Welcome to the 106 new readers who joined yesterday!
Our AI read and summarized 95 stock ideas, 1056 news articles, and 121 insider trades and found:
102% upside for $RCM (featured stock idea)
The fed isn’t promising that they are done raising rates (news)
Charlie Munger’s five favorite mental models (links you’ll love)
A battery company with upside, 30% upside for a Gold miner, and a semiconductor company with a 3% dividend (bonus stock ideas)
and much more…
Thanks for reading! Have a great day.
Connor
* If you missed yesterday’s email, don’t forget to read it here
Premium members can see all of the exclusive stock ideas on Discord (and the Yellowbrick Road Premium Portfolio) and the updated Yellowbrick Road Portfolio by clicking the button below.
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FEATURED STOCK IDEA
HEDGE FUND
Voss Capital - R1: Shorts are Penny Wise, Pound Foolish
R1 RCM Inc. is a leading provider of technology-enabled revenue cycle management services which help healthcare providers generate more revenue, mitigate compliance risk, and reduce operating costs through end-to-end solutions. The company's comprehensive suite of services includes patient registration, insurance and benefit verification, medical treatment documentation and coding, billing, and collection services.
Ticker: RCM | Price: $10.39 | Price Target: $21 (+102%) | Timeframe: 2-3 years
🩺 Med Tech | 📈 Bullish Idea
The investment thesis for R1 RCM (RCM) posits a significant upside for the stock, anticipating a doubling in value over 2-3 years as profitability trends towards $1 billion in free cash flow (FCF) and the company's leading position in the growing healthcare IT space becomes more evident. Recent setbacks, including a short seller's report and minor issues such as a marginal rise in doubtful accounts, customer bankruptcy, and a reduction in leverage, are seen as short-term and misrepresentative of R1's long-term value. R1 specializes in revenue cycle management for healthcare providers, with comprehensive End-to-End (E2E) services, as well as modular solutions highlighted by their Cloudmed acquisition, which strengthens their offerings with a data-focused approach. The company's transformation began notably in 2016 through a strategic partnership with Ascension Health. R1's competitive advantage stems from its comprehensive Outsourced Revenue Cycle Management services, predicting a shift towards outsourcing in this $111 billion market due to increasing complexity in billing codes and regulations. Their potential for a 'winner takes most' scenario is backed by technological investments, particularly Cloudmed's capabilities in machine learning and AI, aiming for 30% EBITDA margins in a well-managed and profitable operation. R1's valuation, marred by recent negative sentiment and short-term risks, is significantly below that of related transactions in the industry, offering a compelling entry point. The company is expected to overcome debts by monetizing its Cloudmed acquisition and thriving amid the increasing demand for outsourced services. With strategic catalysts on the horizon, including profitability realization, customer growth, and debunking short seller claims, R1 presents a high-upward-potential investment with limited downside risks.
Read the full article here. Read time: 20 min
POLL - FEATURED STOCK IDEA
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Rating (link):
TransMedics Group ($TMDX)
🟩🟩⬜️⬜️⬜️ - Buy (33%)
🟥⬜️⬜️⬜️⬜️ - Pass (32%)
🟨🟨🟨⬜️⬜️ - Watchlist (35%)
* There are more stock ideas later in the email!
MARKET OVERVIEW
Today’s market overview is sponsored by TiiCKER. You can earn rewards like: 30% off Whirlpool Appliances, 50% off a STARZ subscription, and more just for owning the company’s stock. See all the rewards
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 57%
Well the market did a hard 180! The indexes were all down significantly, the new sentiment fell below the weekly average for the first time in a while, and the Fear v Greed index fell over 10 points! Yellowbrick Road readers remained at the same bullish level (though many of these votes probably came in before the market started dropping at the end of the day).
No obvious reason for the dip. The lower volume during Christmas time can lead to more volatility. It will be interesting to see how the year closes!
STOCK MARKET NEWS
Today’s news is brought to you by IBD. When Wall Street isn’t looking out for you, IBD has your back. See why countless investors trust IBD Digital to give them an edge––get 8 weeks for only $8.
Cheerios maker General Mills cuts sales view as price hikes hammer demand - Reuters
Alibaba CEO Eddie Wu to lead e-commerce business in latest reshuffle - CNBC
Where Will Nvidia Stock Be in 5 Years? - The Motley Fool
Electric scooter company Bird files for bankruptcy - CNBC
Argenx Dives On Autoimmune Therapy Failure - Investors Business Daily
Sony highlights PS5 momentum as hardware sales top 50 million - Reuters
Honda to recall over 100000 hybrid vehicles - NHTSA - Reuters
Tesla cut EV prices in China more than BYD did for its flagship Han sedan this year, study finds - CNBC
QUIZ
+3 POINTS - WEEKLY TOURNAMENT
Which company was founded by the inventor of the audio cassette, compact disc, and Blu-ray disc? |
Yesterday’s Question (link): What was the first successful product of 3M, initially set up to mine a mineral deposit for grinding-wheel abrasives?
Answer: Waterproof sandpaper
INSIDER TRADES
The insider trades are brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here
CEO and Chairman of the Board at Beyond Air, Inc. ($XAIR)
The CEO and Chairman of the Board purchased 77,775 shares at $1.63/share ($127K total) which increased their holdings by 5.3%. The current price is $1.70 (+4.3%). (trade link)
Historic Returns
1m returns: 24% weighted | 8% median | 58% win rate (7/12)
3m returns: 14% weighted | 10% median | 58% win rate (7/12)
6m returns: 21% weighted | 5% median | 50% win rate (7/12)
1y returns: 14% weighted | 22% median | 70% win rate (7/10)
LINKS YOU’LL LOVE
+15 POINTS - WEEKLY TOURNAMENT
RAD AI has over $27M invested into its AI, has 3x’d revenue w/ clients and is the future of AI marketing. Invest before it’s too late*
* Sponsored link
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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: Just say hi!
BONUS STOCK IDEAS
Companies with growth potential - $ENVX
ENVX is a company that specializes in advanced battery technology, catering to the increasing power consumption demands of mobile devices and other applications. They are expanding their operations by building a manufacturing space in Malaysia, with production expected to commence in April 2024. The company is engaging with major cell phone manufacturers.
Ticker: ENVX | Price: $14.18 | Price Target: N/A | Timeframe: N/A
🔋 Mobile Batteries | 📈 Bullish Idea
Better battery technology is something that's needed with the increase in power consumption by mobile devices etc. This company is currently building out a manufacturing space in Malaysia. Production to start April 2024. Have been interacting with major cell phone makers.
Read the full article here. Read time: 1 min
BLOG POST
Texas Instruments: A Lollapalooza in Plain Sight
Texas Instruments is a leading manufacturer and seller of analog chips, which are pivotal in a variety of industries for sensing the real world and converting signals for computing, control systems, and automation processes. The company is currently planning significant investments in new manufacturing facilities, while continuing to reward shareholders through repurchases and dividends.
Ticker: TXN | Price: $167.73 | Price Target: N/A | Timeframe: N/A
⚡️ Semiconductor | 💰 3% Dividend | 📈 Bullish Idea
Texas Instruments (TXN) is a pivotal manufacturer of analog chips, integral for various industries, embarking on a significant capital investment phase over the next 3-5 years to build new manufacturing facilities. The market overlooks these investments' long-term benefits, which, drawn from Charlie Munger's concept of 'Lollapalooza effects,' includes a compound of pricing power, volume growth, operating leverage, increased terminal value, and an improved competitive position, unfolding concurrently to bolster TXN's market standing. Though not evidently cheap, TXN promises volume growth fueled by automation and AI, and expects a rise in free-cash flow upon capex cycle completion, which the short-sighted market undervalues. Potential risks involve the execution of large capital projects and significant sales exposures to China's market amidst geopolitical tensions. Investors’ focus on current earnings may be misguided, and a more appropriate valuation might consider dividend yield and price-to-sales ratios, hinting at potential rewards with minimal risk for long-term shareholders who trust in the thesis.
Read the full article here. Read time: 2 min
ANALYST REPORT
Newmont Corporation: Commodity Prices in Mining Sector Supportive; Some Opportunities Available
Newmont is the world's largest gold miner, with operations across five continents and a strong portfolio of mines and projects. The company is also involved in producing other commodities like copper, silver, zinc, and lead as byproducts. Newmont recently acquired Newcrest, expanding its gold reserves and production capacity.
Ticker: NEM | Price: 40.87 | Price Target: 53 (+30%) | Timeframe: N/A
⛏️ Gold Miner | 📈 Bullish Idea
Newmont, the world's largest gold miner with a no-moat rating, is poised for growth with elevated commodity prices, despite concerns of a Western recession and the complexity of managing its global portfolio. After acquiring Goldcorp and Newcrest, Newmont looks to boost gold sales to 8.8 million ounces by 2027, leveraging synergies from its joint ventures like the Nevada Gold Mines with Barrick. The company is heavily leveraged to fluctuating gold prices, which increased on interest rate peak optimism, offering protection against inflation but subject to investor sentiment. Newmont's strong balance sheet with a manageable net debt of around USD 4.9 billion post-Newcrest deal, fair value investments, and judicious shareholder distributions provide financial stability. Forecasting a gold price of USD 1,740/oz and copper at USD 3.10/lb from 2027, analyst Jon Mills retains a fair value estimate for Newmont at USD 53 per share, supported by COGS improvements, diversified international production, and higher-than-average dividend yields, especially for iron ore and coal segments. The company's cash flow is assessed at a 7.1% WACC, with a 7.5% long-term equity cost, and is traded at discounts by investors wary of coal or seeking lower-cost gold investment opportunities. CEO Tom Palmer's leadership and operational expertise are considered assets in navigating the cyclical and high-cap-ex industry, maintaining a medium uncertainty rating due to gold price volatility and ESG risks associated with gold mining.
Read the full article here. Read time: 7 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results (link):
🟩🟩🟩⬜️⬜️ [SHORT] Cava ($CAVA) [38%]
🟨🟨⬜️⬜️⬜️ Roivant Sciences ($ROIV) [33%]
🟥⬜️⬜️⬜️⬜️ Expedia ($EXPE) [29%]
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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
alpo**** (117 points)
colli*** (117 points)
trade**** (117 points)
Scoring
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+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
+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! |
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Some other newsletters to check out if you want more things to read:
Techpresso (link) - a daily rundown of what’s happening in tech
Passionate Income (link) - gain financial literacy with actionable steps in a bite-sized three-minute read
Early Bird (link) - the morning newsletter from MarketBeat
The Geek AI (link) - short newsletter on what matters in AI
Your Next Breakthrough (link) - one idea, one question, and one exercise each week
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