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Top stock ideas (Tue, Mar 12)
Connor Van Ooyen
March 12, 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 102 new readers who joined yesterday!
Our AI read and summarized 133 stock ideas, 1082 news articles, and 254 insider trades and found:
HCA Healthcare: strategic expansion and financial strength (featured stock idea)
3 bonus stock ideas (bonus stock ideas)
Reddit targets up to $6.4 bln valuation (news)
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
HCA Healthcare: Strategic Expansion and Financial Strength (L1 Capital)
HCA Healthcare, Inc., through its subsidiaries, owns and operates hospitals and related healthcare entities in the United States
Ticker: HCA | Price: $321.25 | Price Target: N/A
Market Cap: $85B | Timeframe: N/A
🏥 Healthcare | 📈 Bullish Idea
HCA Healthcare $HCA has strategically increased its case mix index (CMI) by over 25% in the past decade, indicating higher acuity and better reimbursement rates for its procedures. The company has significantly expanded advanced medical services, including quadrupling advanced stroke centers and tripling trauma and burn programs, positioning itself well for inpatient services growth, particularly in high acuity areas which are expected to be key drivers over the next decade. HCA has shown consistent revenue growth of 5 to 6% per year, combining volume growth (2-3%) and revenue per equivalent admission (2-3%), with outpatient revenue matching the pace of inpatient earnings. Operational efficiencies have contained costs, allowing hospital occupancy to rise while maintaining margins. HCA's financial performance remains robust, with long-term growth drivers, market leadership and aligned management facilitating predictable growth in cash flow and profitability, and free cash flow supporting dividends and buybacks, hence driving EPS growth. After the share price initially dipped due to short-term cost pressures, HCA's stock has recovered, now trading at a forward PE ratio of under 15x and a free cash flow yield of over 5%, and remains a top 10 holding for L1 Capital International with an attractive risk-adjusted return profile.
Read the full article here. Read time: 2 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
V.F Corporation ($VFC)
🟩🟩🟩⬜️⬜️ - Buy (40%)
🟥⬜️⬜️⬜️⬜️ - Pass (28%)
🟨🟨⬜️⬜️⬜️ - Watchlist (32%)
🔎 treb*** - Current price and expected look good, ceo change seems ok, but co is in competitive field, so I would watch 20 day vs 200 day ema to trigger future buy.
❌ adamno*** - The chart looks terrible
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
Bob Robotti's Thesis for LSB Industries $LXU
LSB Industries, Inc. engages in the manufacture, marketing, and sale of chemical products
Ticker: LXU | Price: $7.49 | Price Target: N/A
Market Cap: $549M | Timeframe: N/A
🧪 Chemical Products | 🏷️ Discount | 📈 Bullish Idea
Bob Robotti's pitch for LSB Industries ($LXU), presented at the Manual of Ideas, highlights the company as a compelling investment opportunity due to its potential role in the energy transition and its intrinsic competitive advantages. LSB, a manufacturer of chemical products like ammonia critical for agriculture, is also well-positioned to benefit from emerging markets in maritime shipping, power and electricity generation, and hydrogen transport. U.S.-based operations leverage cheap natural gas, generating a cost advantage in ammonia production. Additionally, LSB's largest facility has the unique ability to sequester CO2, opening up revenue opportunities from tax credits. Despite lumpy earnings—with a 2023 drop in sales and EBITDA from the previous year—Bob suggests the company is undervalued, trading at around $7.50 per share, well below its peak of $28, and significantly less than estimated replacement cost. Acquisition benchmarks in the industry imply LSB could have a value of $1.8-$3.6 billion, far exceeding its current market cap of roughly $500 million. With structural advantages and a shift in ammonia demand, LSB is seen as a growth company trading at a substantial discount, making it an attractive investment candidate.
Read the full article here. Read time: 5 min
VALUE INVESTORS CLUB
Northeast Bank - $NBN
Northeast Bank provides banking services to individual and corporate customers in Maine. The company's deposit products include demand deposit, NOW, money market, savings, certificate of deposit, and individual retirement accounts, as well as checking accounts
Ticker: NBN | Price: $53.44 | Price Target: $87.18 (+63%)
Market Cap: $416M | Timeframe: next several years
🏦 Regional Bank | 📈 Bullish Idea
Northeast Bank (NBN), a $3 billion bank headquartered in Portland, Maine, with a market cap around $430 million and daily liquidity near $1 million, stands out with its distinctive business model and seasoned management known for capital compounding at handsome risk-adjusted returns. Under the helm of CEO Richard Wayne, NBN trades at a compelling valuation—around 7x P/E and 1.4x P/B, at $55 per share—poised to deliver a 15 to 20+% IRR over the ensuing years. Since guiding Capital Crossing, which Lehman Brothers acquired for over 2x book value, Wayne has refocused NBN on a potent loan acquisition strategy. Despite Federal Reserve restrictions, now lifted, NBN's National Lending Division thrived with an origination business that saw $2.76 billion in loans with zero charge-offs. NBN's Purchased Loan book, conservatively managed and grown opportunistically, has noted annual net charge-offs between 0% and 0.4%. Highlighted by a recent $1 billion loan portfolio buy from US Bancorp at a 9% yield and 33.5% LTV, NBN's approach mirrors the successful tactics of billionaire banker Andy Beal, suggesting NBN's anticipation of a flourishing loan market. NBN's financial strength is evident in their over 10 years' charge-offs fluctuating between 0 and 25bps, a conservative LTV average of 47%, and Total Capital Ratio recovering to 13.5% from an 11% post-acquisition low. Management team, with substantial skin in the game, owns roughly 15% of the company, backing a shareholder-oriented corporate strategy. NBN expects to maintain strong ROEs and leverage its nominally affected net interest margin and capital position to persevere growth or reward shareholders. Despite potential risks like a downturn in commercial real estate and CFO transition, NBN's clear strategy, consistent performance, competent management, and robust credit quality make it an enticing investment opportunity.
Read the full article here. Read time: 10 min
BLOG POST
Petrobras: They're Panicking Again
Petróleo Brasileiro S.A. - Petrobras explores, produces, and sells oil and gas in Brazil and internationally. The company operates through Exploration and Production; Refining, Transportation and Marketing; and Gas and Power
Ticker: PBR | Price: $14.78 | Price Target: N/A
Market Cap: $96B | Timeframe: N/A
🛢️ Oil/Gas | 💰 20% Dividend | 🇧🇷 Brazil | 📈 Bullish Idea
Petróleo Brasileiro S.A. (PBR) experienced a sell-off last week due to disappointment over a lack of special dividends for Q4. Initial fears upon a CEO change three years ago, which implied future dividends might cease and the company could become a political tool for re-election efforts or even face asset confiscation, proved unfounded as the stock continued to rise simply by maintaining dividends. Concerns over asset theft and nationalization under President Lula's return were also exaggerated; the market overlooked the potential repercussions for a government that wishes to engage with foreign investors. As the bear case evolved from state appropriation fears to worries over dividend cuts and economic spending, PBR remains undervalued with a P/E of less than 4 and $24 billion in profit last year. The current regular dividends are still high at a 13.5% yield or roughly $2 per share. The company, with clear management policies and a reputation for delivering on promises, is expected to recover swiftly from the temporary dividend setback and potentially resume or catch-up special dividends in 2024. As perceptions shift over time and the company's success continues, it may eventually be compared favorably with major energy companies, potentially valuing PBR at 9-10x earnings in line with an energy bull market. This analysis suggests we are mid-way through a narrative arc that will see PBR's true value recognized, with significant room for appreciation before considering an exit.
Read the full article here. Read time: 3 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ ConocoPhilips ($COP) [58%]
🟨🟨⬜️⬜️⬜️ Grupo Herdez ($HERDEZ.MX) [28%]
🟥⬜️⬜️⬜️⬜️ Articore Group Limited ($ATG.AX) [14%]
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: 58% bullish
Sentiment is turning a little sour to start the week. Yellowbrick Road readers are back below 60% bullish, the Fear v Greed index fell a few more points and is now well below Extreme Greed levels, 3 of the 4 indexes closed red, and the news sentiment took a massive hit down to just 0.057 which is barely bullish.
STOCK MARKET NEWS
Reddit targets up to $6.4 bln valuation in much-awaited US IPO - Reuters
Oracle beats quarterly profit expectations on AI-driven cloud demand - Reuters
EQT, Equitrans Midstream to combine in $5.5 bln deal, WSJ reports - Reuters
Shares of U.K. retailer Currys plunge 10% after U.S. fund manager Elliott pulls out of takeover race - CNBC
Activist Third Point nears deal with Advance Auto Parts for three board seats - CNBC
Acadia Pharmaceuticals' schizophrenia drug fails in late-stage study - Reuters
Lufthansa flight attendants to strike on Tuesday and Wednesday - Reuters
Nintendo Plans New Super Mario Bros. Movie - WSJ
Temu Owner PDD's Stock Jumps After Analyst Upgrade. How Shares Could Rise 80%. - Barrons
BIGGEST INSIDER TRADES
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10% Owner at Perspective Therapeutics, Inc. ($CATX) purchased 60,431,000 shares at $0.95/share ($57.41M total) which increased their vested holdings by 107.3%. Their median purchase size is $57.41M and this is their 1st largest purchase out of 1 all time (link)
10% Owner at Archer Aviation Inc. ($ACHR) purchased 3,603,580 shares at $4.34/share ($15.63M total) which increased their vested holdings by 11.6%. Their median purchase size is $42.82M and this is their 2nd largest purchase out of 2 all time (link)
Co-COE at SLR Investment Corp. ($SLRC) purchased 116,036 shares at $15.61/share ($1.81M total) which increased their vested holdings by 3.2%. Their median purchase size is $357K and this is their 2nd largest purchase out of 22 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
Which of the following was a factor in the dotcom boom, as analyzed in "Irrational Exuberance"? |
Yesterday’s Question: According to "Irrational Exuberance," why is the steady increase in US population since the 1890s not a valid explanation for the housing market boom between 1997 and 2006?
Answer: On March 24, 2000, the S&P 500's CAPE ratio reached a record high of 47.2. This high value was significant as it indicated an extreme overvaluation of stocks, a hallmark of speculative trading. This level of overvaluation was a clear sign of the speculative bubble in the stock market at the time.
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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
mmmad**** (39 points)
drive*** (39 points)
j.shan**** (39 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! |
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