Top stock ideas (Tue, Feb 13)

Author

Connor Van Ooyen
February 13, 2024

Sponsored by

👋 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 87 new readers who joined yesterday!

Our AI read and summarized 112 stock ideas, 1042 news articles, and 209 insider trades and found:

  • A turnaround (and 5% dividend) at $PBI (featured stock idea)

  • LVS Advisory starts a new position in $CLMT, $UBER is a prime holding, and $SAVE could be turning around (bonus stock ideas)

  • Arm holdings jumps over 40% (news)

  • The largest 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

Hestia Capital Will Bring Major Changes To Pitney Bowes In 2024

Pitney Bowes Inc., a shipping and mailing company, provides technology, logistics, and financial services to small and medium-sized businesses, large enterprises, retailers, and government clients in the United States, Canada, and internationally.

Ticker: PBI | Price: $4.19 | Price Target: $10.72 (+156%)
Market Cap: $687M | Timeframe: N/A

🗄️ SMB Services | 🔄 Turnaround | 💰 5% Dividend | 📈 Bullish Idea

Pitney Bowes Inc. (NYSE: PBI), with its recent board changes signaling activist influence from Hestia Capital, is positioned for transformative shifts with potential divestment of its Global Ecommerce segment (GEC) and the appointment of a permanent, decisive CEO. Despite fears of Kurt Wolf running another proxy battle like at GameStop, his appointment of Bill Simon and Jill Sutton to PBI’s Board indicates a majority control which could expedite the sale of GEC. Analyzing Pitney Bowes from a conservative worst-case scenario lens, even a GEC sale for $0 could mean a net income rise by $187M with abstracted operational losses, leading to an earnings increase to around $1.07 per share. Assuming a 10x P/E ratio, shares could be undervalued by over 160%, projecting a potential target of $10.72/share from the current $4.06. With additional strategic shifts and cost savings, specifically from the high-margin subsegment transfer to Sending Technology Solutions and potential debt refinancing, PBI could significantly increase its net income further, despite risks of GEC retention or economic downturn affecting Presort or SendTech segments. The stakes are raised for a profitable turnaround, with a likely CEO announcement and GEC divestment in the near future.

Read the full article here. Read time: 10 min

+3 POINTS - WEEKLY TOURNAMENT

How do you rate the featured stock idea?

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Yesterday’s Featured Stock Idea

Liquidia Corporation ($LQDA)

🟩🟩🟩⬜️⬜️ - Buy (60%)
🟥⬜️⬜️⬜️⬜️ - Pass (11%)
🟨🟨⬜️⬜️⬜️ - Watchlist (29%)

  • 🔎 emoj**** - Wait to see if the current injunction is reversed and then see if the FDA approves this drug/therapy.

  • ✅ fiction**** - I can absolutely support this signal. I have 2k shares and have been following this company and Patent infringement case since its inception. I bought 25k shares in 2020 and made a nice profit but had to sell for cash purposes so now I still own 2k shares and it will absolutely rock this year.

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

TODAY’S SPONSOR

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2) Dubbed “essential AI” for brands looking to attract new audiences and boost ROI. 

3) 3X revenue growth, clients include Hasbro, Sweetgreen, MGM and more.

83% Subscribed, Invest Before Feb. 16th, Closing Soon.

BONUS STOCK IDEAS

FUND LETTER

LVS Advisory new position - Calumet ($CLMT)

Calumet Specialty Products Partners, L.P. manufactures, formulates, and markets slate of specialty branded products to various consumer-facing and industrial markets in North America and internationally.

Ticker: CLMT | Price: $17.12 | Price Target: $30 (+75%)
Market Cap: $1.3B | Timeframe: N/A

🧪 Specialty Products | 📈 Bullish Idea

We've initiated an investment in Calumet (NASDAQ: CLMT), positioned in the 'moderate risk, high reward' tier of our event-driven portfolio, due to three anticipated catalysts that could significantly increase its value. First, Calumet intends to monetize its renewable energy arm, which has seen a $550 million investment over three years to become a low-cost producer of renewable diesel and sustainable airline fuel (SAF), with an expansion project set for 2025 to potentially lead SAF supply in North America. The conversion from a master-limited partnership (MLP) to a Delaware C-Corp is the second catalyst, likely increasing liquidity and valuation due to a broader base of potential investors including institutional ones. Their final strategy involves refinancing their high-interest balance sheet with potential low-cost Department of Energy loans. These steps together could potentially elevate Calumet's share value to over $30, compared to the current $16, particularly if the crown jewel renewable business is valued at a premium during its sales process, though the success of securing DOE financing remains a significant risk factor.

Read the full article here. Read time: 3 min

BLOG POST

Uber Earnings Review

Uber Technologies, Inc. develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia excluding China and Southeast Asia. It operates through three segments: Mobility, Delivery, and Freight.

Ticker: UBER | Price: $70.65 | Price Target: N/A
Market Cap: $146B | Timeframe: N/A

🚗 Ride Sharing | 📈 Bullish Idea

Uber Technologies (UBER) presented a robust set of financial results, surpassing bookings estimates by 1.3%, revenue estimates by 1.8%, and monthly active user (MAU) estimates by 1.4%, with Mobility bookings rising 29% year-over-year (Y/Y) in FX-neutral terms and Delivery bookings up by 19% Y/Y FX-neutral, despite a reclassification affecting revenues and take rate figures. On the profitability front, they exceeded EBITDA estimates by 5.2%, with GAAP earnings per share outperforming due to equity investment gains, achieving $0.20 per share excluding these gains. Operating efficiencies were noted with reduced costs across various lines, including cost of revenue and sales & marketing. The balance sheet showed strength with $5.4 billion in cash & equivalents, investments of $6.1 billion, and debt at $9.5 billion, alongside a possible share buyback indication. Looking ahead, Q1 guidance on bookings and EBITDA is optimistic, with a trading multiple at 40x 2024 earnings and substantial growth expected in earnings (44% Y/Y non-GAAP and 198% Y/Y GAAP) and free cash flow (60% Y/Y). Competitive advantages were highlighted, including driver supply and earnings, strong brand, cross-selling capabilities, and an expanding UberOne membership, now at 19 million. Market share gains were achieved across all sizable delivery markets, with new partnerships and advertising revenue reaching near targeted goals, exemplifying high-margin potential. Mobility and Freight also saw innovations and customer growth. The quarter's success points to Uber's solid market position, operational mastery, and strategic innovations positioning it as a prime holding, with more upside expected as the business progresses.

Read the full article here. Read time: 7 min

BLOG POST

Spirit 4Q23: Beginning of the Turnaround?

Spirit Airlines, Inc. provides airline services. The company provides front seats, including wider seats with extra legroom, carry-on and checked baggage, assigned seats, travel insurance, and onboard beverages and snacks, as well as hotels, cars, vacation packages, and cruises services.

Ticker: SAVE | Price: $6.72 | Price Target: $10 (+49%)
Market Cap: $783M | Timeframe: N/A

🛩️ Airline | 🔄 Turnaround | 📈 Bullish Idea

In January, I predicted the market overreacted to Spirit Airlines (ticker: SAVE) falling to $6 due to a court ruling against their merger with JetBlue, seeing bankruptcy fears as overstated since their liquidation value plus off-balance sheet assets like airport concessions likely exceed their market cap of $600m, against an equity book value of $1bn. While not ruling out M&A, Spirit can gain financial health by downsizing or slowing growth, focusing on profitable routes, as evidenced prior to 2020 and as Allegiant demonstrates currently at a smaller scale. Following weak Q4 results, management's forward-looking statements in the earnings release suggest a credible turnaround with profitability and positive cash flow expected this year, counter to analysts predicting losses through 2026. With improving domestic airline industry conditions, I foresee a narrative shift that could see SAVE stock, currently at $7, rebound to at least $10, its book value, in line with Allegiant's valuation, and potentially higher if airline stocks revert to the historical norm of trading at about 2x book value, recognizing the cyclical nature of the industry's current struggles.

Read the full article here. Read time: 3 min

+3 POINTS - WEEKLY TOURNAMENT

Which bonus stock idea was the most compelling to you?

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Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Alphabet ($GOOGL) [65%]

🟨🟨⬜️⬜️⬜️ Suncor Energy ($SU) [19%]

🟥⬜️⬜️⬜️⬜️ Forestar Group ($FOR) [16%]

MARKET OVERVIEW

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

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Yesterday’s Poll Results: 82% bullish

A little bit of a mixed bag in the market as large-cap tech stocks were actually down while the small-caps led the market once again (and the small cap index finally flipped green for the year). Yellowbrick Road readers, the news sentiment, and the Fear v Greed index all remain very bullish.

STOCK MARKET NEWS

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Hunt for ‘next Nvidia' draws options traders to Arm's soaring stock - Reuters 

Diamondback Energy to buy Endeavor Energy in $26 billion deal - Reuters 

Drugmaker Gilead to acquire CymaBay for $4.3 bln - Reuters

Nvidia partners with Beamr on newest AV1 video format - Invezz 

Uber, Lyft, DoorDash drivers in the US to strike on Valentine's Day for fair pay - Reuters 

Monday.com Earnings Top Estimates - Barrons 

Activist investor Carl Icahn reports nearly 10% stake in JetBlue Airways, says stock is undervalued - CNBC 

Arm Holdings jumps over 40%, adds to staggering AI-powered rally - Reuters 

BIGGEST INSIDER PURCHASES

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Director at Aon plc ($AON) purchased 50,000 shares at $301.97/share ($15.10M total) which increased their holdings by 27.1%. Their median purchase size is $5.43M and this is their 1st largest purchase out of 9 all time (link)

10% Owner at Jasper Therapeutics, Inc. ($JSPR) purchased 350,000 shares at $12.95/share ($4.53M total) which increased their holdings by 32.3%. Their median purchase size is $4.53M and this is their 1st largest purchase out of 1 all time (link)

10% Owner at Clearside Biomedical, Inc. ($CLSD) purchased 444,444 shares at $1.35/share ($600K total) which increased their holdings by 6.5%. Their median purchase size is $146K and this is their 7th largest purchase out of 51 all time (link)

Director at NEW YORK COMMUNITY BANCORP INC ($NYCB) purchased 100,000 shares at $4.15/share ($415K total) which increased their holdings by 170.5%. Their median purchase size is $462K and this is their 2nd largest purchase out of 2 all time (link)

QUIZ

+3 POINTS - WEEKLY TOURNAMENT

This month’s quiz questions focus on the legendary rise and fall of Long-Term Capital Management which Roger Lowenstein chronicles in his awesome book: When Genius Failed.

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 was a unique aspect of LTCM's investment approach that contributed to both its initial success and eventual downfall?

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Yesterday’s Question: Which financial event in the mid-1990s tested LTCM's strategies but ultimately led to a profitable outcome for the fund?

Answer: The Mexican Peso Crisis in 1994-1995 was a significant early test for LTCM's strategies, but the fund managed to navigate it successfully and profitably, reinforcing the confidence in their models.

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🏆 This Week’s Leaderboard

  1. jk_simp**** (34 points)

  2. emoj*** (34 points)

  3. ddriv**** (34 points)

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