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- Top stock ideas (Tue, Nov 21)
Top stock ideas (Tue, Nov 21)
Connor Van Ooyen
November 21, 2023
About // Sponsorships // Twitter
👋 Good Morning!
Welcome to the 111 new readers who joined yesterday!
Our AI read and summarized 87 stock ideas, 1324 news articles, and 104 insider trades and found:
A hedge fund’s new purchase of Citigroup (featured stock idea)
OpenAI fired Sam Altman and he might be joining Microsoft (news)
A deep dive into Dream Finders Home (links you’ll love)
The CEO at $KRON bought $1.4M of his own stock (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
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FEATURED STOCK IDEA
HEDGE FUND
Silver Beech holding: Citigroup (NYSE: “C”)
Citigroup Inc., a diversified financial services holding company, provides various financial products and services to consumers, corporations, governments, and institutions in North America, Latin America, Asia, Europe, the Middle East, and Africa.
Ticker: C | Price: $45.48 | Price Target: $85 (+87%) | Timeframe: N/A
🏦 Banking | 📈 Bullish Idea
Citigroup (NYSE: “C”), a major global financial services holding company, is undervalued by the market at approximately 0.48x tangible book value despite being less risky than ever before. The company's historical challenges, including the Great Financial Crisis bailout and a costly global consumer bank, have led to a negative market perception and a lower ROE of about 7% compared to peers' 10%+. However, Citi’s leading position as a "global systemically important bank" has mandated higher capital ratios and less risk-taking, particularly in its high-growth Treasury and Trade Solutions segment. With a CET1 ratio that has increased from 10.6% to 13.5% over the past decade and a substantial margin of safety, Citi is well-protected against loan losses, even in severe economic downturns. Despite potential credit losses, Citi’s tangible common equity would remain robust compared to its current market cap, suggesting the stock is cheap relative to its adjusted tangible book value. Trading at a P/E of ~6.8x 2023E earnings, Citi’s shares are significantly undervalued, with a base case worth of more than $68 per share (~0.8x tangible book value). Management’s ongoing corporate transformation, divesting the global consumer bank and focusing on higher growth, premium ROE activities, could justify a revaluation closer to peers, with an upside case of more than $85 per share.
Read the full article here. Read time: 8 min
POLL - FEATURED STOCK IDEA
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Rating (link):
Spirit Airlines ($SAVE) merger arbitrage opportunity
🟩🟩⬜️⬜️⬜️ - Buy (30%)
🟥🟥🟥⬜️⬜️ - Pass (39%)
🟨🟨⬜️⬜️⬜️ - Watchlist (31%)
Most of the comments of readers passing were due to the trade being risky (if the merger doesn’t go through, the stock would likely fall by a decent chunk). I always find this kind of play pretty fascinating and have a small portion of my portfolio dedicated to insider trading and event-driven trades (like this one). I have a small position in this as the risk-reward looks pretty compelling to me. The upside is over 130% and I think the downside is likely -25%. As long as I believe the deal has a better than ~16% chance of closing (which I do), the expected value is positive.
* There are more stock ideas later in the email!
MARKET OVERVIEW
Are you short-term bullish or bearish on the market? |
Yesterday: 51% bullish
The bullishness continues (except for Yellowbrick Road readers)! The indexes were up, led by a pretty big day by tech stocks. The Fear and Greed index was up another 4 points and clearly into “greed” territory now. Yellowbrick Road readers actually were significantly less bullish with the poll score dropping from 64% to 51% bullish. Readers emoj*** and alpo*** think things are still pretty bullish heading into Q4/the holiday season.
STOCK MARKET NEWS
Today’s news is brought to you Boardroom Headlines. It’s a free morning newsletter covering the biggest stories in the business of sports, music, and entertainment. Subscribe here or visit their website.
Homebuilder rebound trend may accelerate, says S3's Ihor Dusaniwsky - CNBC Television
Treasury Secretary Yellen: We're making 'considerable progress' in bringing inflation down - CNBC Television
Hundreds of OpenAI employees threaten to follow Altman to Microsoft unless board resigns, reports say - CNBC
Yellen says high food and rent prices key factors in voters' negative economic outlook - CNBC
Exclusive: GM's cruise CEO resigns from company - email - Reuters
McDonald's increases its minority stake in China business - CNBC
* If you want all of the day’s most important stock market news, sign up for my free, daily email called Market Mornings.
QUIZ
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Since 2000, what was the first company to become worth $1 Trillion? |
Yesterday’s Question (link): Which industrialist founded the Standard Oil Company, becoming one of the world's wealthiest individuals in history?
Answer: John D Rockefeller. His net worth was estimated to be over $400B in today’s dollars and he literally believed God put him on Earth to make money. He was also one of our reader’s mother’s 5th cousins. I don’t even know any of my second cousins, so knowing your mom’s 5th cousin is very impressive.
INSIDER TRADES
The insider trades are brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones.
The CEO at Kronos Bio ($KRON) bought $1.47M (28% increase in holdings) (link)
A 10% owner at Cvd Equipment Corp ($CVV) bought $820k (19% increase in holdings) (link)
Thoma Bravo Group sold $500M (24% of their holdings) of Dynatrace ($DT) (link)
Providence VII sold $378M (31% of their holdings) of DoubleVerify Holdings ($DV) (link)
CEO of Heron Therapeutics ($HRTX) bought $138K (411% increase in holdings) (link)
LINKS YOU’LL LOVE
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Home prices relative to salaries are falling, but still at the peak of the housing bubble
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SECRET QUESTION
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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: Did you make or lose money on your first-ever stock purchase? Someone told me to buy an oil stock when I was 16 and I lost like 30% in a month. Lesson learned!
BONUS STOCK IDEAS
ANALYST REPORT
Fidelity National Information Services: Worldpay to be divested in 1Q24, new $3.5 billion buyback plan
Fidelity National Information Services provides technology solutions for merchants, banks and capital market firms.
Ticker: FIS | Price: $54.80 | Price Target: $85 (+55%) | Timeframe: N/A
🏦 Financial | 💻 Technology | 📈 Bullish Idea
Fidelity National Information Services Inc. (NYSE: FIS) reported a slight decrease in 3Q adjusted EPS to $1.65, though above consensus, and is proceeding with the divestiture of its Merchant Solutions business, expecting net proceeds of about $12 billion. This divestment is part of a strategic overhaul initiated in late 2022 and includes a significant $3.5 billion share buyback plan. The current market capitalization reflects an 11% repurchase potential. Despite uncertainties related to the divestiture, FIS's position in e-commerce and integrated payments, and its prospects in the growing digital payments market, underpin our BUY rating with a target price of $85. This represents 18 times our 2024 EPS estimate. The company’s financial strength is robust, with plans to reduce debt and continue dividend payments, currently yielding 3.9%. The shares, having underperformed the broader market, are seen as undervalued, offering an attractive entry point amidst the transition.
Read the full article here. Read time: 5 min
HEDGE FUND
Polen Capital Small Cap Growth new purchase: EXLS
ExlService Holdings, Inc. operates as a data analytics, and digital operations and solutions company in the United States and internationally. It operates through Insurance, Healthcare, Analytics, and Emerging Business segments.
Ticker: EXLS | Price: $27.77 | Price Target: N/A | Timeframe: N/A
📊 Data Analytics | 📈 Bullish Idea
EXL Services is an outsourced businesses services and analytics company with a long track record for driving digital transformation. EXL’s specialization and reputation in the insurance industry has also been a point of differentiation and served as a springboard to grow the business. We previously owned EXL but sold the position when the company navigated a difficult transition. Encouragingly, the company managed very well through that difficult period and upgraded the management team, which has brought more discipline to their capital allocation, as evidenced by increasing returns on invested capital. Looking ahead, we anticipate mid-teens free cash flow growth and capital to be deployed towards share buybacks and small acquisitions .
Read the full article here. Read time: 7 min
HEDGE FUND
Sohra Peak Capital holding: Duratec
Duratec Limited engages in the provision of assessment, protection, remediation, and refurbishment services to a range of assets, primarily steel and concrete infrastructure in Australia.
Ticker: DUR.AX | Price: AUD 1.28 | Price Target: N/A | Timeframe: N/A
🏗️ Infrastructure | 🛠️ Refurbishment | 🇦🇺 Australia | 📈 Bullish Idea
Duratec, an asset remediator, demonstrates strong growth potential across its diverse business segments, including defense, mining, oil and gas, and government projects. Site visits to various projects like the Garden Island naval base and Boddington gold mine, along with insights from MEnD Consulting’s office, highlighted Duratec's operational strengths and competitive edge. The company's decentralized management approach empowers segment leaders to drive innovation and growth, with a focus on expanding revenues and profits. Key segments like defense, mining and industrial, and building and façades are poised for significant growth. The defense segment alone is expected to become a $1B+ revenue unit, while MEnD Consulting's cutting-edge technology attracts major asset owners. Duratec's well-positioned for long-term success, with the potential to achieve AUD $1.0-1.2 billion in revenue in 4-5 years, maintaining strong margins, making it an attractive investment prospect.
Read the full article here. Read time: 7 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results (link):
🟩🟩🟩⬜️⬜️ Lithium Americas ($LAC) [41%]
🟨🟨⬜️⬜️⬜️ Crocs ($CROX) [33%]
🟥⬜️⬜️⬜️⬜️ Indofood and First Pacific ($PIFMY / $FPAFY) [26%]
Your Thoughts:
🔋alpo*** ($LAC): Clearly undervalued. It’s also domestic, which might become important
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**** (49 points)
dana.*** (49 points)
panh**** (49 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
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MY OTHER FREE NEWSLETTERS
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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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