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Top stock ideas (Thu, Mar 7)
Connor Van Ooyen
March 07, 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 107 new readers who joined yesterday!
Our AI read and summarized 122 stock ideas, 1143 news articles, and 520 insider trades and found:
A citrus farming company pursuing strategic alternatives (featured stock idea)
A power tool manufacturer with a 5.85% dividend yield, $WBD has 100% upside, and the simple thesis for Planet Labs (bonus stock ideas)
Tesla shares fall after Morgan Stanley cuts price target (news)
The 3 biggest insider trades (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
Limoneira: Citrus Farmer, Pursuing Strategic Alternatives
Limoneira Company operates as an agribusiness and real estate development company in the United States and internationally. The company operates through three divisions: Agribusiness, Rental Operations, and Real Estate Development. It grows, processes, packs, markets, and sells lemons.
Ticker: LMNR | Price: $17.78 | Price Target: $29.28 (+64%)
Market Cap: 329M | Timeframe: N/A
🥑 Agribusiness | 🚨 Event Driven | 📈 Bullish Idea
Limoneira Company (Ticker: LMNR), with a $330MM market cap, is a California-based agribusiness focusing on lemons and avocados, also engaged in real estate development. On December 1, 2023, they announced exploring strategic alternatives to address the undervaluation perceived by the Board, given their sustainable agribusiness accomplishments, including owning over 11,100 acres of land and senior water rights. Limoneira, trading around $18/share, presents a 60% upside potential relative to its calculated net asset value, which considers fair market value of real estate and recent agriculture transactions. Despite the inherent challenges in selling agricultural businesses due to cyclical nature and capital intensity, the entry of 13D holder Peter Nolan into the board signals a genuine commitment towards a potential sale. CEO Harold Edwards recognizes a disparity between market and intrinsic valuation, suggesting that private ownership or a merger could be more beneficial. Patience may be required for the sale, possibly concluding by mid-to-late summer.
Read the full article here. Read time: 3 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
Research Solutions, Inc. ($RSSS)
🟩🟩🟩⬜️⬜️ - Buy (36%)
🟥⬜️⬜️⬜️⬜️ - Pass (30%)
🟨🟨⬜️⬜️⬜️ - Watchlist (34%)
✅ alpo*** - Academic research publications are a mess. Incredibly expensive subscriptions is the main problem. Even libraries must forgo other purchases to subscribe to them. I'd be willing to bet that consolidation of them into the cloud could rationalize pricing and distribution.
✅ jesan*** - I expect brokering information to be a pretty big play in the next 3-10 years as LLMs/AIs have to increasingly license their training data
❌ arlen*** - loss is growing exponentially
There are 3 more stock ideas after “Today’s Sponsor”
TODAY’S SPONSOR
+15 POINTS - WEEKLY TOURNAMENT
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BONUS STOCK IDEAS
BLOG POST
1527:TW - Power tool manufacturer, profitable since 98 trading at EV/FCF 3.3 with a 5.85% dividend yield
Basso Industry Corp. manufactures and sells pneumatic tools
Ticker: 1527.TW | Price: TWD 41.15 | Price Target: N/A
Market Cap: TWD 5.6B | Timeframe: N/A
🔨 Power Tools | 💰 5.85% Dividend | 📈 Bullish Idea
Basso Industry Corp. (1527.TW), an ODM/OEM manufacturer of power tools like nail guns and impact wrenches, trades at an absurdly low valuation with a market cap of NTD $5,681M and an enterprise value of NTD $2,399M. Profitable since 1998, Basso has been paying consistent dividends for 22 of the last 23 years, and despite previously poor capital allocation, the company has recovered under new management established in 2019. Basso excelled in high-mix, low-volume production, avoided heavy reliance on any single customer, and shifted towards better capital management, holding $NTD 3.3B in cash without significant borrowing as of Q3 2023. The company's product mix is diverse with a significant portion of revenue derived from the Americas, Europe, and Asia. Basso's connection to the US housing market and its high-quality manufacturing standards position it as a resilient player in the industry, while the new generation of leadership signals a better-aligned interest with shareholders, making it a potential value investment with the likelihood of continued returns to shareholders through dividends and prudent management practices.
Read the full article here. Read time: 4 min
BLOG POST
Warner Bros. Discovery Stock - Catching a Falling Knife
Warner Bros. Discovery, Inc. operates as a media and entertainment company worldwide. It operates through three segments: Studios, Network, and DTC.
Ticker: WBD | Price: $8.41 | Price Target: $16.22 (+93%)
Market Cap: $21B | Timeframe: end of 2025
🎥 Media | 📈 Bullish Idea
Warner Bros. Discovery, Inc. (WBD), despite being a top pick with expected triple-digit upside potential over the medium term, has faced a decline with shares hitting new lows after Q4 2023 results led to a 25% book loss. The quarter reported a net loss of $400 million amid a 7% revenue drop and included a $1.7 billion writedown of intangible assets. Despite the net loss figures for Q4 and the full year, WBD's free cash flow was robust, amounting to $3.3 billion in Q4 and $6.2 billion for the year, helping to reduce its debt by $5.4 billion to $44.2 billion, equating to 3.9x EBITDA with all fixed-rate debt at an average interest rate of 4.6%. Management achieved key 2023 goals but refrained from giving a 2024 cash flow forecast, instead reiterating their debt reduction plan and projecting a direct-to-consumer segment EBITDA over $1 billion by 2025, despite skepticism about competing with larger streaming services like Netflix and Disney+. The reluctance to provide specific guidance is viewed as a strategic move for flexibility. Currently, WBD is undervalued with a price at half its book value, an EV/free cash flow around 10 (versus 30-40 for peers), and an EV/sales ratio of 1.5, making its market cap of $21 billion and enterprise value of $65 billion seem too low for a leading media group. Although the market disagrees, the investment case remains strong for WBD, which is now in a position of financial strength allowing for debt reduction and investment for growth.
Read the full article here. Read time: 4 min
BLOG POST
My Thesis in Planet Labs, Explained Simply
Planet Labs PBC designs, constructs, and launches constellations of satellites with the intent of providing high cadence geospatial data delivered to customers through an online platform worldwide.
Ticker: PL | Price: $2.15 | Price Target: N/A
Market Cap: $618M | Timeframe: N/A
🛰️ Earth Imaging Satellites | 📈 Bullish Idea
Planet Labs PBC (Ticker: PL), a leader in daily global Earth imaging, is currently undervalued at just over $300 million (when you account for $320 million in net cash), with a share price that is down 80% from its December 2021 SPAC debut. Despite the stock decline and a slower revenue increase, Planet has significantly improved products, a larger customer base, and increased gross profit. It has received praise for its technological advancements and profound global impact from leaders in tech and governance. The company maintains a net dollar retention rate over 100%, indicating customer spending growth and deeper workflow integration. Revenue growth may not be explosive due to its careful approach to understanding customer value extraction, but gross profit growth has been impressive with a 64% CAGR over the past three years, emphasizing its operational leverage and the benefits of its scalable data business model. Planet's investments into its vertical integration capabilities and product development, such as the SuperDove satellites, are designed to provide increasingly valuable data with favorable reinvestment opportunities, despite the short-term hit to free cash flow. Instead of high-resolution data that competitors Maxar and BlackSky offer, primarily to the D&I market, Planet focuses on daily global scans, targeting a longer-term market with subdued capacity constraints. Adjustments to sales strategies, like focusing on core verticals and productizing data for easier scaling, are ongoing efforts to boost sales execution. Valued at less than three times gross profit with no immediate financial risk and significant upside potential, Planet symbolizes an investment with promising long-term growth based on its strong feedback loops, beneficial investments, and the scaling of a revolutionary market for satellite data utilization.
Read the full article here. Read time: 11 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ Turtle Beach Corp ($HEAR) [36%]
🟨🟨⬜️⬜️⬜️ Betacom S.A. ($BCM.WA) [33%]
🟥⬜️⬜️⬜️⬜️ R1 RCM ($RCM) [31%]
MARKET OVERVIEW
The Market Overview is powered by Koyfin (link). Koyfin is my personal Bloomberg terminal that doesn’t cost $2,000/month. It has all of the news, financials, watchlists, screeners, charts, etc that I need to be an informed investor. *I’ve partnered with them to give you a 20% discount if you use my link!
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 54% bullish
Looks like Crowdstrike (among others) saved the markets for the time being with a great earnings report (though it did fade throughout the day). Most of the responses to yesterday’s email believed the recent dip was just a head fake and the market will continue growing (so far, so good).
The news sentiment shot from just barely bullish (0.05) all the way up to 0.504. The indexes were also all green and YBR readers got slightly more bullish. The only thing that didn’t move was the Fear v Greed index which stayed just below Extreme Greed levels.
STOCK MARKET NEWS
Why private equity has been involved in every recent bank deal - CNBC
Abercrombie & Fitch beats holiday estimates as sales soar again - CNBC
Foot Locker shares fall after heavy promotions lead to holiday-quarter losses - CNBC
Epic Games says Apple retaliated over lawsuits by banning company's developer account - CNBC
Private payrolls rose by 140,000 in February, less than expected, ADP reports - CNBC
Lyft earnings report error prompts shareholder lawsuit - Reuters
Tesla shares fall after Morgan Stanley cuts price target on weakening EV demand - Reuters
CrowdStrike stock jumps as forecast signals strong cybersecurity demand - Reuters
Grifols shares drop 15% after new Gotham City Research report - Reuters
BIGGEST INSIDER TRADES
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The insider trades are brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here
CEO & Executive Chairman at Keurig Dr Pepper Inc. ($KDP) purchased 171,821 shares at $29.10/share ($5.00M total) which increased their vested holdings by 4.2%. Their median purchase size is $339K and this is their 1st largest purchase out of 4 all time (link). 1 other insiders also purchased the stock
CFO, President International at Keurig Dr Pepper Inc. ($KDP) purchased 85,910 shares at $29.10/share ($2.50M total) which increased their vested holdings by 26.7%. Their median purchase size is $517K and this is their 1st largest purchase out of 7 all time (link). 1 other insiders also purchased the stock
EVP & Chief Financial Officer at Jazz Pharmaceuticals plc ($JAZZ) purchased 12,000 shares at $119.65/share ($1.44M total) which increased their vested holdings by 75.3%. Their median purchase size is $1.44M and this is their 1st largest purchase out of 1 all time (link)
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 CAPE ratio, as discussed in "Irrational Exuberance," and why is it significant? |
Yesterday’s Question: Robert Schiller published the book just before the peak (and following crash) of which bubble?
Answer: Remarkably, Shiller published the first edition of "Irrational Exuberance" in March 2000, coinciding with the peak of the dotcom boom. This timing is significant because it shows that he identified the speculative bubble in the dotcom market before it burst, highlighting the predictive power of his analysis.
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+15 POINTS - WEEKLY TOURNAMENT
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+15 POINTS - WEEKLY TOURNAMENT
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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
chelse**** (132 points)
c00l.r*** (132 points)
msham**** (132 points)
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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+50 POINTS - WEEKLY TOURNAMENT
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THAT’S ALL FOLKS
+3 POINTS - WEEKLY TOURNAMENT
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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! |
*Disclaimer: This is a paid advertisement for Jurny’s Regulation CF offering. Please read the offering circular at https://www.startengine.com/offering/jurny.
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