- 🟨 The Yellowbrick Road
- Posts
- Top stock ideas (Wed, Dec 27)
Top stock ideas (Wed, Dec 27)
Connor Van Ooyen
December 27, 2023
Sponsored by
YBR Portfolio // About // Sponsorships // Twitter // Upgrade
👋 Good Morning!
Welcome to the 107 new readers who joined yesterday!
Our AI read and summarized 64 stock ideas, 874 news articles, and 99 insider trades and found:
An analyst believes an electricity utility company has 39% upside (featured stock idea)
Chinese online gaming stocks rebound (news)
3 bonus stock ideas
and much more…
Thanks for reading! Have a great day.
Connor
* If you missed yesterday’s email, don’t forget to read it here
Premium members can see the exclusive stock ideas and the Yellowbrick Road Premium Portfolio on the premium website (click the button below).
TODAY’S SPONSOR
Now you might be thinking: “what the heck are you talking about?” But keep reading, because this investment platform's users are already smiling all the way to the bank. Thanks to Masterworks, the award winning platform for investing in blue-chip art.
Every single one of Masterworks’ 16 sales has returned a profit to investors, for a 100% positive net return track record. With 3 recent sales, Masterworks investors realized net annualized returns of 17.6%, 21.5% and 35%.
How does it work? Simple, Masterworks does all of the heavy lifting like finding the painting, buying it, storing it, and eventually selling it. It files each offering with the SEC so that nearly anyone can invest in highly coveted artworks for just a fraction of the price of the entire piece.
Shares of every offering are limited, but readers can skip the waitlist to join with this exclusive link.
Past performance is not indicative of future returns, investing involves risk. See disclosures masterworks.com/cd
FEATURED STOCK IDEA
ANALYST REPORT
Eversource Energy: Maintaining BUY with shares trading on favorable valuation metrics
Eversource Energy is largely a pure-play transmission and distribution business. It provides electric service and natural gas to customers in Massachusetts, Connecticut, and New Hampshire. The utility has almost 60,000 circuit miles of transmission lines, of which about 30% are underground. Eversource's core subsidiaries include Connecticut Light & Power, Yankee Gas Services Co., Public Service Co. of New Hampshire, NSTAR Electric, NSTAR Gas, and Aquarian Water Co.
Ticker: ES | Price: $61.08 | Price Target: $85 (+39%) | Timeframe: N/A
🔌 Electricity | 🏗️ Utilities | 📈 Bullish Idea
Eversource Energy (NYSE: ES), a predominantly transmission and distribution company serving customers in Massachusetts, Connecticut, and New Hampshire, maintains a 'BUY' rating with a target price of $85, as per analyst Marie Ferguson of Argus. Despite the stock's underperformance against the S&P 500 over the last three months and the past year, Ferguson highlights its attractive valuation at a 2024E P/E ratio of 13.3-times, substantially below its five-year average, and the stock's favorable PEG and price/sales metrics compared to peers. Eversource recently sold offshore wind assets to focus on its significant $21.5 billion capital plan through 2027, avoiding potential long-term debt and interest rate exposure. The company also boasts a strong dividend yield of 4.4%. While earnings were impacted by the NSTAR rate design and increased non-tracked O&M expenses, the company projects a 5%-7% long-term earnings growth, with 2023 EPS guidance narrowed to $4.30-$4.43. Risks include slow regional growth, previous storm mishandling costs, and rate increase limitations in Connecticut until early 2024. Financially, Eversource's debt is investment-grade and the company expects to recover costs relating to storms and settlements. Management aims to expand transmission and maintain dividend growth, while the company targets carbon neutrality by 2030. Overall, despite short-term headwinds and slower service area growth, Eversource is positioned for solid income and moderate capital appreciation potential.
Read the full article here (paywall). Read time: 8 min
POLL - FEATURED STOCK IDEA
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Rating (link):
Sea Limited ($SE)
🟩🟩🟩⬜️⬜️ - Buy (37%)
🟥🟥⬜️⬜️⬜️ - Pass (33%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (30%)
* There are more stock ideas later in the email!
MARKET OVERVIEW
Today’s Market Overview is sponsored by Behind the Markets. Get their free report on the stock you need to buy before Taiwan is attacked.
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 58% bullish
The bullish streak continues! All of the indexes are green, the Fear v Greed index is up 2 more points and now 4 points into the “Extreme Greed” section, the news sentiment is above the previous 7-day average, and Yellowbrick Road Readers are 4 points more bullish. It seems the consensus is that things will remain bullish until next year.
STOCK MARKET NEWS
Today’s Stock Market News is brought to you by IBD. Ready to trade stocks like a pro? IBD Digital helps retail investors make more money in the market every day––sign up today to access 8 weeks of top stock picks for just $8.
Bristol Myers strikes $4.1 bln RayzeBio deal for targeted cancer therapies - Reuters
Israel grants Intel $3.2 billion for new $25 billion chip plant - Reuters
US holiday retail sales grow 3.1%, down from prior year -Mastercard - Reuters
Chinese online gaming stocks rebound after regulator's assurance on new rules - CNBC
Oil jumps 3% on Middle East strife, US rate cut hopes - Reuters
Samsung delays chip production at Texas plant as Biden slow to hand out CHIPS funds - New York Post
QUIZ
+3 POINTS - WEEKLY TOURNAMENT
Which brand, famous for its motorcycles, originally started as a manufacturer of musical instruments? |
Yesterday’s Question (link): Which company, originally known as 'Brad's Drink,' was created in the 1890s by Caleb Bradham?
Answer: Pepsi
FEATURED INSIDER TRADE
The featured insider trade is brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here
10% Owner at BUTLER NATIONAL CORP ($BUKS)
The 10% Owner purchased 54,000 shares at $0.69/share ($37,020.02 total) which increased their holdings by 1.4%. The current price is $0.70 (+2.8%). (trade link)
Historic Returns
1m returns: 5% weighted | 5% median | 81% win rate (42/52)
3m returns: 3% weighted | 19% median | 65% win rate (20/31)
6m returns: 24% weighted | 47% median | 62% win rate (21/34)
1y returns: 30% weighted | 32% median | 85% win rate (22/26)
LINKS YOU’LL LOVE
Attention Gmail Users: Gmail (and a few other email clients) cut off long emails and will cut off this email soon. You can read the rest of the email on the website by clicking the button below.
* If you don’t want any more of these emails, unsubscribe here.
+15 POINTS - WEEKLY TOURNAMENT
* Sponsored link
SECRET QUESTION
+10 POINTS - WEEKLY TOURNAMENT
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: Are you working this week or do you get a vacation between Christmas and New Year’s Eve? When I worked in tech in San Francisco, I’d get nearly 2 full weeks off!
BONUS STOCK IDEAS
Gaming regulations led to market overreaction on TCEHY
Tencent is a leading multinational conglomerate with a focus on various internet-related services and products, entertainment, AI, and technology in China and globally. Its diverse business includes social networks, music, web portals, e-commerce, mobile games, and many others.
Ticker: TCEHY | Price: $37.49 | Price Target: N/A | Timeframe: N/A
💻 Internet Conglomerate | 🇨🇳 China | 📈 Bullish Idea
We own $TCEHY in the Yellowbrick Road Portfolio. We also picked up $NTES on Friday when the stock dropped and are up 7% on that purchase already. Upgrade to Yellowbrick Road Premium for access to the Yellowbrick Road Portfolio
Good morning, quick thread on $TCEHY which I posted a video on youtube about yesterday (link is in the bio). The screen shot below is from Tencent's Q3 earnings call. The second from the bottom blue box is the % of revenue from China based video games. AKA what could be impacted. Analysts are pretty tightly clustered on what CY24 earnings will look like for $TCEHY, coming in around 2.75. If we assume a 1:1 revenue impact to EPS hit, a 20% hit on China VG rev is approximately an .11 hit to EPS. A 40% hit is .22c a 60% hit is .33. So lets work with those. Right now at 36.5 a share $TECHY with a 60% hit in EPS from their China VG segment gets you to about 2.45 a share, which is 15x earnings. That doesn't even take into account that the CCP seems to be walking back some of their ban because it blew up market on Friday. Nor does that 15x EPS for $TCEHY take into account that Tencent has about 100b in cash + investments. Which if loped off the market cap, takes the share price down to 25.66 and puts us at a 10x multiple for NTM EPS. The risk is solely that you're investing in something that generates huge chucks of revenue and EPS in China, and that hasn't worked in 2 years. But saying that, if you want very cheap video game exposure and can tolerate some China stuff, you can't go wrong with $TCEHY
Read the full article here. Read time: 1 min
BLOG POST
American Coastal Insurance Corp (NASDAQ: ACIC) Call with CFO Brad Martz
American Coastal Insurance Corporation operates as a property and casualty insurance holding company that sources, writes, and services residential personal and commercial property, and casualty insurance policies in the United States.
Ticker: ACIC | Price: $9.67 | Price Target: $22.47 (+132%) | Timeframe: N/A
🏦 Insurance | 📈 Bullish Idea
We posted this person’s original pitch for ACIC on December 13th (link).
American Coastal Insurance Corp (ACIC), through a recent call with CFO Brad Martz, revealed insights into their long-term strategic vision, underlining the strength and experience of the management team. ACIC, with over two decades of underwriting expertise in the Florida market, emphasizes the sustainable role of the Florida Hurricane Catastrophe Fund (FHCF), expressing confidence in its ability to replenish funds post-catastrophic events due to Florida's robust budget surplus and legislative backing. The company distinguishes itself through its granular understanding of risk, boasting a proprietary model informed by extensive loss data and construction performance, analyzing over 140 risk characteristics per policy. ACIC's commercial strategy leans on their reputable brand, AmRisc, to leverage relationships for distribution and service fee income, while prioritizing underwriting discipline and selective risk engagement even when facing the temptation of top-line growth. Despite the potential challenges from newcomers like HCI and regulatory risks, ACIC is poised for strategic growth, focusing on E&S markets and fee-income ventures. Their approach to reinsurance involves a gradual reduction of quota share agreements, an increase in excess loss reinsurance, and re-entry into the CAT bond market. Management remains vigilant against reckless competition and regulatory changes, emphasizing a commitment to fiscal prudence and strategic capital deployment, particularly through its captive for high-return layers. ACIC's inspection process targets low-risk properties, such as newer, low-rise, joisted masonry constructions within a specific geographic band, ensuring a high-quality portfolio. As they move forward, ACIC's goals include maintaining their 'golden goose' while exploring new avenues for fee income and underwriting profit, ensuring a balanced and disciplined growth strategy over the next decade.
Read the full article here. Read time: 8 min
VALUE INVESTORS CLUB
MGP Ingredients - MGPI
MGP Ingredients is a producer and supplier of premium distilled spirits, branded spirits, and food ingredients. With origins as a third-party supplier of food grade alcohols, the company has diversified with acquisitions, operates under three segments, and is a major supplier to boutique American whiskey brands.
Ticker: MGPI | Price: $101 | Price Target: N/A | Timeframe: N/A
🍾 Spirits | 🏷️ Undervalued | 📈 Bullish Idea
MGP Ingredients, traded under ticker MGPI, is a producer of premium distilled spirits and food ingredients with a recent push into branded spirits through the acquisitions of Luxco and Penelope Bourbon, now largely focusing on American whiskeys following the closure of the Atchison Kansas distillery. MGPI's Distilling Solutions, Branded Spirits, and Ingredient Solutions segments accounted for 55%, 30%, and 15% of 2022 revenues, respectively. The strategic shift towards high-value branded spirits aims to leverage their substantial inventory of aging whiskey, seeing EBITDA growth from $45 million in 2015 to $68 million in 2020. Despite its transformation and key role in the fast-growing American whiskey market, MGPI's stock is trading at a historic low valuation of 11.6x NTM EBITDA, a discount relative to peers like Brown Forman (20x), Diageo, and Pernod Ricard (14-15x), and precedent M&A transactions (13-20x). With new CEO David Bratcher at the helm, MGPI is poised for revenue and margin growth as a consolidator in the industry, though risks include potential market and category slowdowns, competitive pressures, and dilutive acquisitions. The company is undervalued with potential catalysts in upcoming earnings and acquisition announcements.
Read the full article here (paywall). Read time: 3 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results (link):
🟩🟩🟩⬜️⬜️ American Electric Power ($AEP) [56%]
🟨⬜️⬜️⬜️⬜️ CarMax ($KMX) [22%]
🟥⬜️⬜️⬜️⬜️ Baxter International ($BAX) [22%]
YELLOWBRICK ROAD PREMIUM
Want to level up your investing skills and make even more money in the stock market?
Well, Yellowbrick Road Premium is the best deal in the entire stock market industry.
For less than $7/month, you get access to tools/data that cost me $30,000 per year.
Yellowbrick Road Premium includes:
Exclusive, premium stock ideas from the best investors and researchers in the world that don’t get included in the free email (50+ per week)
Get the free stock ideas before they are sent in the free email
Get access to the Premium Yellowbrick Road Discord community
Get access to the Premium Yellowbrick Road Portfolio that has $10,000 that premium members help me invest in the stock ideas we find
$10/month off of CEO Watcher Premium
You are literally paying less than $5/month with the special welcome offer to get a discount of $10/month
All of this costs me $2500/month ($1250/month for stock data, $1000/month for the AI, and $250/month for the insider trading data for CEO Watcher) and it’s available for you for just $80 (less than $7/month).
Just one profitable trade will pay for multiple years of Yellowbrick Road Premium.
And, I’ll even make a deal with you. If you join Yellowbrick Road Premium and don’t get 10x more value than what you paid, I’ll give you your money back at any time with no questions asked.
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
kris.bo**** (49 points)
jv.mart*** (49 points)
dexnu**** (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
* 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
If you enjoy the Yellowbrick Road newsletter, please share it with a friend :). Plus, you’ll get points for the Weekly Tournament!
THAT’S ALL FOLKS
+3 POINTS - WEEKLY TOURNAMENT
Thank you so much for reading today’s email! Your support is the only way I can write this email for free every day. Give me feedback in the poll below to earn 3 points for this week’s tournament.
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! |
—
Some other newsletters to check out if you want more things to read:
Reply