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Top stock ideas (Tue, Mar 5)
Connor Van Ooyen
March 05, 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 104 new readers who joined yesterday!
Our AI read and summarized 122 stock ideas, 849 news articles, and 296 insider trades and found:
$CURN has 125% upside (featured stock idea)
$SIG is pivoting towards e-commerce, $IWG is transitioning to a capital-light model, Artko Capital holds $HQI as 11% of their portfolio (bonus stock ideas)
JetBlue and Spirit Airlines terminate merger agreement (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
FUND LETTER
Artko Capital Portfolio Holding: Currency Exchange International, Corp. - $CURN
Currency Exchange International, Corp. provides foreign exchange technology and processing services in North America.
Ticker: CURN | Price: $17.78 | Price Target: $40 (+125%)
Market Cap: $114M | Timeframe: N/A
💸 Foreign Exchange Technology | 📈 Bullish Idea
Currency Exchange International, Corp. (CURN), representing 19.0% of our portfolio, is an investment that cost us $8.08 per share and has risen to $18.00. Despite a near 12.0% drop from its winter peak, CURN's 2023 has yielded an 11.0% return, supported by revenue growth of 21.0%, notably a 23.0% spike in the Banknote segment and a critical 31.0% jump in the Banknote Wholesale subsegment in the U.S., now over 35.0% of total revenues. However, the Payments segment's revenue grew by only 15.0%, and a 30.0% surge in operating expenses led to a stagnant $19mm in EBIT, with significant outlays in salaries, shipping, and one-time losses and shortages totaling about $3mm. Looking ahead, we expect 2024 to see gains from investments in salaries and new ERP software, alongside continued revenue growth, potentially pushing EBIT to $25mm-$30mm in 12-18 months due to American tourism tailwinds, market share growth, and strategic pricing adjustments. Despite a $115mm market cap, a substantial $82mm net cash position, and over $20mm in robust EBIT growth, it was counterproductive to accumulate cash with the stock at 1.5X EBIT, prompting action upon our dialogue with management, culminating in a recent 5.0% share buyback announcement. This reflects a positive shift toward effective capital allocation and shareholder responsiveness. With assumptions of market re-rating at 8x EBIT and leveraging $30mm+ excess cash, we foresee CURN reaching our near-term $40 price target, indicating over a 100.0% upside potential from the current price.
Read the full article here. Read time: 3 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
iCAD, Inc. ($ICAD)
🟩⬜️⬜️⬜️⬜️ - Buy (23%)
🟥🟥⬜️⬜️⬜️ - Pass (37%)
🟨🟨🟨⬜️⬜️ - Watchlist (40%)
🔎 saltyp**** - Very compelling, but it’s run up almost 50% in the past 2 weeks. I don’t think it’s smart to buy right now
✅ jbs43**** - Any enhanced diagnostic and treatment incorporating AI is hot and accepted by patients and providers.
There are 3 more stock ideas after “Today’s Sponsor”
TODAY’S SPONSOR
+15 POINTS - WEEKLY TOURNAMENT
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BONUS STOCK IDEAS
VALUE INVESTORS CLUB
Signet Jewelers Limited - $SIG
Signet Jewelers Limited operates as a diamond jewelry retailer. It operates through three segments: North America, International, and Other.
Ticker: SIG | Price: $101.57 | Price Target: $172 (+69%)
Market Cap: $4.5B | Timeframe: N/A
💍 Jewelry | 🛍️ Retail Store | 📦 Ecommerce | 📈 Bullish Idea
Signet Jewelers Limited (SIG), a leading specialty jewelry retailer with dominant market shares in the US, Canada, and the UK, has undergone significant transformation under new management since 2018. Despite being a clear COVID beneficiary with substantial concerns around a post-pandemic consumer slowdown and engagement headwinds, Signet has closed over 700 underperforming stores, pivoted towards e-commerce with the acquisitions of Diamonds Direct and Blue Nile, and implemented cost-saving initiatives exceeding $700 million. Signet has increased its market share in the fragmented mid-tier US jewelry and watch market from ~6% to low-double-digits post-pandemic and aims for 12% longer-term. Bullish perspectives highlight the company's digital and omnichannel capabilities, service expansion, healthy inventory levels, aggressive share buyback program, and potential EPS accretion from convertible preferred share redemption. Despite bears noting concerns over low-quality customers, heightened credit risks, and potential over-earning, the thesis supports SIG as undervalued. With tailwinds expected in engagement trends, a recovery in FY24, and continued capital allocation, SIG is projected to re-rate higher than its current 7x earnings multiple. A conservative 10x P/E yields a $115 price target (20% upside), while historical multiples suggest a potential rally to over $172 (+80%). Key upcoming catalysts include earnings and potential early redemption of convertible preferred shares, which could materially accrete EPS and push the stock significantly above $150. The stock pitch emphasizes no personal or advisory stake in Signet Jewelers.
Read the full article here. Read time: 6 min
$IWG.L - Embraces Capital-Light Model in the Flex Space Market
IWG plc, together with its subsidiaries, provides workspace solutions in the Americas, Europe, the Middle East, Africa, the Asia Pacific, the United Kingdom, and internationally.
Ticker: IWG.L | Price: 188 | Price Target: N/A
Market Cap: $1.9B | Timeframe: N/A
🗄️ Workplace Solutions | 📈 Bullish Idea
IWG plc (IWG.L), the world's largest flex space operator, is transitioning from its traditional co-owned model with significant operating leverage to a capital light model resembling that of hotel operators such as Hilton, by signing management agreements to operate flex spaces for landlords. This shift has been accelerated by the retreat of competitor WeWork and a rise in landlord desperation to fill office spaces, evidenced by IWG's rapid signing growth—500 locations in 2022, 867 in 2023, and expectations to double in 2024 from a starting point of 3.5k locations post-Covid. With the capital light model, IWG incurs no fit-out capex, reduces earnings volatility, and receives a stable share of revenues (14-16%), poised to deliver around £0.6m in annual revenue per mature location. Despite the ongoing change not yet reflecting in current earnings due to the lag from signing to operation and maturity, IWG's EBITDA has returned to pre-Covid levels, boasting an EV of less than £2.7 billion and run-rate EBITDA of £0.4 billion, indicating that investors are not yet paying for the potential of the new model which could dominate the group in 5-7 years. Additionally, IWG's Worka segment, a high-margin tech office booking platform, could be undervalued, especially considering rumored rebuffs of a £1.5 billion acquisition offer in 2022. With CEO Dixon, who owns roughly 30% of IWG, at the helm and considering factors like decreased capex, IWG seems mispriced due to its real estate classification, historical leverage, UK listing, complicated lease accounting, and the WeWork association. Possible catalysts for IWG include a US listing, Worka spinoff, and the full emergence of capital light revenues, all leading to possible capital returns and deleveraging, further distancing IWG from the real estate sector and reflecting its diversified business model.
Read the full article here. Read time: 5 min
FUND LETTER
Artko Capital Portfolio Holding: HireQuest, Inc.
HireQuest, Inc. provides temporary staffing solutions in the United States. It offers staffing services, including skilled and semi-skilled industrial and construction personnel, clerical and administrative personnel, and permanent placement services. The company also specializes in commercial and non-CDL drivers.
Ticker: HQI | Price: $13.15 | Price Target: $35 (+166%)
Market Cap: $182M | Timeframe: N/A
💼 Temporary Staffing Solutions | 📈 Bullish Idea
HireQuest, Inc. (HQI) represents 11.0% of our portfolio and, despite a volatile year with concerns about the cyclical labor market and integrating a large acquisition, is maintaining strong fundamentals with a share price of $13.40, significantly above our $5.50 cost basis. Revenue growth was impressive, up 67.0% in 2022 and 23.0% in the first nine months of 2023, with franchise royalties—its primary profit source—rising 27.0% in that same period, though somewhat buoyed by the MRI acquisition and tempered by labor market softness. HireQuest faced increased SG&A expenses by 54.0% post-acquisition and unexpected workman's compensation costs, contributing to a 'kitchen sink' year, yet the market cap $180mm company led by CEO Rick Hermans continues its consolidation strategy in the staffing industry with $32mm in acquisitions across 2021 and 2022, adding over $20mm in 2023. The company promotes an entrepreneurial model through which salaried managers can purchase franchises and earn substantial incomes from a 6.0% franchise fee on generated revenues. Despite slight increases in unemployment rates and rising interest rates, system-wide sales surged to nearly $650mm at the end of 2023, hinting at over $40mm in franchise royalty revenues. Looking past short-term expense worries, we anticipate HireQuest to tighten expenses below $20mm and further benefit from the high-margin franchise model. We remain optimistic about the U.S. economy's resilience supporting low unemployment rates and anticipate this to fuel HireQuest's robust organic growth and EBITDA reaching over $30mm by late 2024. With an 8x to 10x multiple fitting the business’s franchise dynamics, we target a near-term share price of $35, holding our investment until an eventual sale under Hermans' leadership.
Read the full article here. Read time: 2 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ Global Data Centre Group ($GDC.AX) [52%]
🟨🟨⬜️⬜️⬜️ Paypal ($PYPL) [25%]
🟥⬜️⬜️⬜️⬜️ Grey Wolf Animal Health ($WOLF.V) [23%]
Your comments:
🐶 alpo*** ($WOLF.V): Insider ownership. Nice speculation on a large market.
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: 60% bullish
A little bit of a mixed day in terms of sentiment. All of the indexes were red and Yellowbrick Road readers nearly fell below 60% bullish for the first time in a long time. However, the Fear v Greed index jumped up two more points and the news sentiment continues to slowly trudge upward and remain above the 7-day average.
STOCK MARKET NEWS
Apple hit with more than $1.95 billion EU antitrust fine over music streaming - CNBC
JetBlue and Spirit Airlines terminate $3.8 billion merger agreement - CNBC
Ford's US auto sales rise 10.5% in February on SUV, hybrid demand - Reuters
Tesla shares skid after February China sales slump - Reuters
Microstrategy shares fall after announcing convertible offering to buy bitcoin - Reuters
Apple announces new MacBook Airs with its latest M3 chip - CNBC
Super Micro pops 15% after S&P 500 selection - CNBC
Airbus delivered close to 50 jets in February -sources - Reuters
BIGGEST INSIDER TRADES
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Executive Chairman / CEO at Sphere Entertainment Co. ($SPHR) purchased 76,139 shares at $40.73/share ($3.10M total) which increased their vested holdings by 16.6%. Their median purchase size is $1.67M and this is their 1st largest purchase out of 4 all time (link)
EXECUTIVE CHAIRMAN OF BOARD at AGREE REALTY CORP ($ADC) purchased 16,000 shares at $55.50/share ($888K total) which increased their vested holdings by 2.6%. Their median purchase size is $698K and this is their 4th largest purchase out of 12 all time (link)
Director at Gates Industrial Corp plc ($GTES) purchased 50,000 shares at $14.55/share ($728K total) which increased their vested holdings by 88.2%. Their median purchase size is $132K and this is their 1st largest purchase out of 3 all time (link)
QUIZ
+3 POINTS - WEEKLY TOURNAMENT
This month’s quiz questions focus on the investing book, Irrational Exuberance by famed economist Robert Shiller, which examines economic bubbles in the 1990s and early 2000s and argues that the market is not efficient.
An in-depth guide/summary of this book is available on Shortform (a free trial and 20% off using my link!). Shortform has summaries/guides for 1000s of nonfiction books and even connects ideas between books. It’s one of my favorite tools for learning
How does Shiller's view in "Irrational Exuberance" contradict traditional economic theory? |
Yesterday’s Question: What is the fundamental cause of speculative bubbles, as explained by Robert Shiller in "Irrational Exuberance"?
Answer: Shiller argues that speculative bubbles are primarily caused by a cycle where news of price increases leads to further increases. This happens as investors learn about the initial rise and become overly optimistic, driving prices up further without substantial evidence about the asset's actual value.
LINKS YOU’LL LOVE
+15 POINTS - WEEKLY TOURNAMENT
Gladiator Metals ($GDTRF / $GLAD.V) specializes in high-grade advanced copper exploration and development in the promising Whitehorse Copper Belt in Yukon, Canada. Read their full pitch deck on the Whitehorse Copper Project.* (If your brokerage doesn’t allow you to trade international / OTC stocks, I recommend Interactive Brokers).
Polish stock market hits all-time high
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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
dv.kim**** (44 points)
mwhee*** (44 points)
james**** (44 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)
INVITE YOUR FRIENDS
+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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