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- Top stock ideas (Wed, Jan 10)
Top stock ideas (Wed, Jan 10)
Connor Van Ooyen
January 10, 2024
YBR Portfolio // About // Sponsor YBR // YBR Premium
👋 Good Morning!
Welcome to the 104 new readers who joined yesterday!
Our AI read and summarized 177 stock ideas, 1451 news articles, and 211 insider trades and found:
A commercial real estate bridge lender with 158% upside (featured stock idea)
Hedge fund stock pitches for $XBI and $KWEB (bonus stock ideas)
Match shares surge (news)
The CEO at $WBA bought the stock (insider trade)
and much more…
We have had freezing rain for almost 24 hours straight! I hope your weather is nicer than ours.
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
$ACR: Trading at massive discount to $25 book value
Acres Commercial Realty Corp is a commercial real estate bridge lender focusing on lending to multi-family properties as well as a mix of office, hotel, and retail. It is associated with Oaktree, a distressed specialist, and is known for operating without paying dividends, allowing flexibility for credit management or share repurchases.
Ticker: ACR | Price: $9.70 | Price Target: $25 (+158%) | Timeframe: N/A
🏠 Real Estate | 🏦 Lender | 📈 Bullish Idea
Acres Commercial Realty Corp (ACR) is a commercial real estate bridge lender, primarily to multi-family properties, but also a smattering of office, hotel and retail. The market is particularly worried about lenders like ACR, they lend to developers/sponsors who are repositioning a property, which upon stabilization will then obtain long term financing to take out ACR's bridge loan. Banks have pulled back, no one wants to extend new loans to office in particular, but multi-family also has some fears of covid induced overbuilding, the pull back in financing itself could cause a sinkhole in CRE asset value. If the sponsor is unable to obtain new financing, ACR might be handed back the keys. The formation of ACR was basically sponsored by Oaktree, the distressed specialist, my inclination is their loan book is stronger than the average commercial mREIT as a result. ACR additionally is the odd REIT that doesn't pay a dividend, which gives them flexibility to plug credit holes or as they recently announced, return cash to shareholders via a share repurchase program. Shares have rallied with the repurchase news and Fed pivot, but at $9.80/share, it still trades at a massive discount to book of ~$25/share.
Read the full article here. Read time: 1 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
Charter Communications ($CHTR)
🟩🟩⬜️⬜️⬜️ - Buy (35%)
🟥🟥🟥⬜️⬜️ - Pass (37%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (28%)
emoj**** (watchlist) - Cable is out - fiber is in and satellite WiFi is the future. Would need to see how Charter is embracing this in their vision.
There are 3 more stock ideas after “Today’s Sponsor”
TODAY’S SPONSOR
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BONUS STOCK IDEAS
FUND LETTER
Top 5 picks 2024: $XBI
The S&P Biotech ETF tracks an index of US biotechnology stocks and aims to reflect their performance. It includes holdings in various biotech companies that could benefit from the industry's consolidation and growth.
Ticker: XBI | Price: $93.60 | Price Target: N/A | Timeframe: N/A
🧪 Biotech | 💼 ETF | 📈 Bullish Idea
$XBI (S&P Biotech ETF)- Despite underperforming in 2023 for the third year in a row, this sector has now caught the acquisition interest of the big pharmaceutical companies looking to increase their growth. The $XBI was up just ~8% in 2023 due to: a. the lack of profitability/need for capital in a rising rate environment, b. Medicare drug negotiation concerns, c. bipartisan bashing of drug costs going into an election year, d. the ancillary impact of weight loss drug concerns. The stock underperformance in 2023 follows a 26% decline in 2022 and 20% decline in 2021. But as big pharma looks to refill their drug pipelines, the sharp decline in biotech stock valuations seems to have reached a tipping point. Nearly half of the billion dollar biotech acquisitions done in 2023 were in Q4. $BMY (Bristol Meyers Squibb) alone spent $18B in the month of December to announce acquisitions of $RYZB (RayzeBio) for $4B and $KRTX (Karuna Therapeutics) for $14B for massive premiums to their stock prices. Finally, the healthcare sector tends to be more defensive during a recession if the soft landing scenario for 2024 turns into a recession. When the S&P declined -38% in 2008, the S&P biotech index increased 10%. And over 2000 and 2001 when the S&P declined 22% cumulatively, the biotech sector declined just 8%.
Read the full article here. Read time: 2 min
FUND LETTER
Top 5 picks 2024: $KWEB
China Internet ETF encompasses top internet and tech companies in China, providing exposure to sectors like technology, e-commerce, and gaming within the Chinese market.
Ticker: KWEB | Price: $25.21 | Price Target: N/A | Timeframe: 2024
💻 Tech | 🇨🇳 China | 💼 ETF | 📈 Bullish Idea
The $KWEB ETF represents a high-risk, high-reward investment in the China internet sector, which has faced significant regulatory headwinds since late 2020, including the Ant Financial IPO block, punitive gaming regulations, and a recent Alibaba fine. This onslaught, coupled with China's sluggish economy, has resulted in $KWEB declining 19% over the past decade and 65% since the end of 2020, underperforming the Nasdaq and S&P during the same periods. Nevertheless, key players in the ETF, Baidu ($BIDU), Alibaba ($BABA), and Tencent ($TCEHY), collectively known as "BAT," boast robust revenue growth but trade at low 2024 GAAP P/E ratios averaging 13x, compared to a 34x average for their Western counterparts, the so-called Magnificent 7. Foreign investor sentiment has been bearish, with Chinese equity allocations dropping to 1.75%, yet signs are emerging that may signal a turnaround for Chinese tech. These include implications of US policy pressures, social unrest nudging the government towards pro-growth policies, subdued domestic growth potentially lowering geopolitical aggressions towards Taiwan, the advantage of vast data pools for AI, and recent proactive buying from China's “National Team" indicating market support. Moreover, a comparison with big tech's rebound in 2023 suggests a strong upside for Chinese tech with a change in sentiment, especially considering "BAT's" relatively higher revenue growth against much steeper declines in stock prices, contrasting with the performance of the Magnificent 7. A shift from aggressive persecution to vigilant regulation by the Chinese government could substantially uplift the sector's valuations, marking $KWEB as a potentially lucrative, albeit speculative, bet for 2024.
Read the full article here. Read time: 3 min
ANALYST REPORT
Sprout Social (SPT - Outperform)
Sprout Social is a leader in social media monitoring software with a growing Total Addressable Market (TAM) as the social media space is in the early stages of maturity.
Ticker: SPT | Price: $58.71 | Price Target: $72 (+23%) | Timeframe:2024
📱 Social Media Monitoring | 💻 SaaS | 📈 Bullish Idea
Leader in social media monitoring software. Increasing TAM opportunity with Social in early stages of maturity. - Controversial name. Highly shorted stock, with short interest ~20% and target of recent short report. - Volatility in recent quarters masking success. Stepping back from noise around core/non-core and Tagger acquisition, the move up into enterprise is working. - Competitive landscape opening up. SPT well-positioned to compete at enterprise, with competitor Sprinklr (CXM) experiencing some internal challenges. - Salesforce relationship bearing fruit. We expect 2024 to be solid year for Social Studio conversions and the broader Salesforce relationship. - Attractive long-term targets. 2028E targets include revenue >$1B (~25% AGR from 2023), 20% operating margin (+400bps/year), and 20-22% FCF margin. Why now. Positive checks, solid execution amidst investor controversy, strong Salesforce relationship. Valuation: Our $72 price target reflects EV/Sales multiple ~7.3x our 2025E revenue, compared to peer group average ~5.5 (range 3-15x). We believe the premium multiple is justified due to large addressable market, early stages of opportunity, founder-led vision, and ability to scale margins/FF. Risks: Risks include contract/platform risk social moves quickly), SMB exposure/higher churn, competition, and need to ramp profitability over time.
Read the full article here. Read time: 2 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ Indi Semiconductor ($INDI) [36%]
🟨🟨⬜️⬜️⬜️ Avrobio ($AVRO) [33%]
🟥⬜️⬜️⬜️⬜️ Meta Platforms ($META) [31%]
Your comments:
⚡️ alpo*** ($INDI): Seems to provide components for self-driving cars. Good market, need more info on patents, customers, and competition.
MARKET OVERVIEW
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 68% bullish
Well, that was an interesting day. The market started very red and tried to work its way back to green. All of the indexes still ended red except for the Nasdaq which barely made it into the green. The Fear v Greed index remained at 74 and the news sentiment fell down pretty close to 0 which is well below the previous 7 days’ average. However, Yellowbrick Road readers are almost as bullish as they’ve ever been.
We are entering earnings seasons, so we will see how it goes!
STOCK MARKET NEWS
Today’s stock market news is brought to you by IBD. If you want to beat Wall Street, you need an edge––IBD Digital gives you the tools to invest with success. Try 8 weeks today for just $8.
JetBlue CEO Robin Hayes to step down in February, COO Joanna Geraghty to take helm - CNBC
Match shares surge on report activist investor Elliott takes $1 billion stake - CNBC
Unity Software lays off 25% of workforce - Fox Business
Juniper jumps on reports Hewlett Packard Enterprise close to $13 bln deal - Reuters
Netflix downgraded by Citi, cites 3 potential risk areas - Yahoo Finance
Chinese EV giant BYD to launch cars in Indonesia next week - company - Reuters
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FEATURED INSIDER TRADE
The insider trade is brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here
Chief Executive Officer at Walgreens Boots Alliance, Inc. ($WBA)
The Chief Executive Officer purchased 10,000 shares at $24.22/share ($242K total) which increased their holdings by 1.7%. The current price is $25.63 (+5.8%). (trade link)
Historic Returns
1m returns: 7% weighted | 7% median | 100% win rate (1/1)
3m returns: 34% weighted | 34% median | 100% win rate (1/1)
6m returns: 26% weighted | 26% median | 100% win rate (1/1)
1y returns: 59% weighted | 59% median | 100% win rate (1/1)
Note: His first purchase as CEO of $WBA. His only other purchase was of $ESRX in 2017 when he was the CEO there. He bought the dip when they announced their dividend cut.
QUIZ
+3 POINTS - WEEKLY TOURNAMENT
Which South Korean company started as a grocery trading store in 1938 and is now a major global conglomerate? |
Yesterday’s Question: Who founded the successful hedge fund SAC Capital Advisors, which later became Point72 Asset Management?
Answer: Steven A Cohen. SAC are his initials as a few readers pointed out.
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🏆 This Week’s Leaderboard
llimb**** (74 points)
dshaw*** (74 points)
lando**** (74 points)
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