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Top stock pitches (Wed, Mar 13)
Connor Van Ooyen
March 13, 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 94 new readers who joined yesterday!
Our AI read and summarized 155 stock ideas, 1225 news articles, and 285 insider trades and found:
The Olstein Funds pitch $RTX (featured stock idea)
3 bonus stock ideas
Apollo reaches out to Paramount about deal (news)
The 3 biggest insider trades
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
The Olstein Funds Portfolio Holding: RTX Corporation
RTX Corporation, an aerospace and defense company, provides systems and services for the commercial, military, and government customers in the United States and internationally. It operates through three segments: Collins Aerospace, Pratt & Whitney, and Raytheon
Ticker: RTX | Price: $89.95 | Price Target: $115 (+28%)
Market Cap: $120B | Timeframe: N/A
🛰️ Aerospace & Defense | 💰 2.6% Dividend | 📈 Bullish Idea
RTX Corporation, an Aerospace & Defense company, dealt with a manufacturing flaw in some Pratt & Whitney GTF engines, leading to a required fleet inspection of 1,200 engines and a subsequent 10% stock price drop after the July disclosure. The issue necessitated a $3 billion pre-tax charge for Pratt & Whitney's majority stake in the venture responsible for these engines, covering customer compensation and additional maintenance, triggering another 8% stock drop post-September update. The accumulated impact led to a 26% stock price decline and a $37 billion market cap reduction, an overreaction in our view given the estimated $3 to $3.5 billion cost of the fix. As value investors, we see this as a long-term investment opportunity, confident that the problem does not affect RTX's intrinsic value long-term and is addressed properly by the company. Our valuation pegs RTX's value at $115 per share, considering the cost of corrective actions, and we have capitalized on the price dip to increase our holdings, with shares recovering to above $92 by February 1, 2024. Our ongoing evaluation of RTX's intrinsic value will continue to reflect the financial outcomes and the company's resolution progress.
Read the full article here. Read time: 3 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
HCA Healthcare ($HCA)
🟩🟩⬜️⬜️⬜️ - Buy (33%)
🟥🟥🟥⬜️⬜️ - Pass (42%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (25%)
There are 3 more stock ideas after “Today’s Sponsor”
SPONSORED STOCK PITCH
Gladiator Metals Corporation ($GDTRF): Your Ticket to Capitalize on the Copper Crisis
Gladiator Metals Corp. engages in the acquisition, development, and operation of mineral property. The company explores for copper, molybdenum, silver, gold, zinc, nickel, and lead minerals
Ticker: $GDTRF | Price: $0.282 | Price Target: N/A
Market Cap: $11.5M | Timeframe: N/A
⛏️ Mining | 📈 Bullish Idea
* I recommend using Interactive Brokers (link) to trade international and OTC stocks if you can’t trade them in your current brokerage
Overview:
Copper Crisis Ahead: Anticipated 10 million ton deficit by 2035, potentially driving significant price surges.
Strategic Position: Located in Yukon's Whitehorse Copper Belt with high-grade copper deposits.
Experienced Team: Leadership includes veterans from Snowline Gold, Dolly Varden, K92, and First Quantum.
Strong Ownership: Notable insider and institutional investment, indicating confidence in the company's prospects.
Active Development: Engaged in a 10,000m drilling program, with promising historical results and strong government support.
Opportunity: Gladiator Metals Corporation (GLAD/GDTRF) offers a unique investment opportunity, leveraging its high-grade assets and experienced team to capitalize on the escalating copper demand. As the market braces for a substantial deficit, Gladiator is well-positioned to thrive, making it an attractive option for investors looking to benefit from the upcoming copper squeeze.
BONUS STOCK IDEAS
BLOG POST
Loma Negra C.I.A.S.A - $LOMA
Loma Negra Compañía Industrial Argentina Sociedad Anónima, together with its subsidiaries, manufactures and sells cement and its derivatives in Argentina. The company operates through Cement, Masonry Cement and Lime; Concrete; Railroad; Aggregates; and Others segments
Ticker: LOMA | Price: $6.64 | Price Target: $16 (+141%)
Market Cap: $954M | Timeframe: N/A
🚧 Cement | 💰 12% Dividend | 🇦🇷 Argentina | 📈 Bullish Idea
I recommend investing in Loma Negra Compañía Industrial Argentina Sociedad Anónima (LOMA), currently priced at $7.18 per ADR, with a target price of $16, representing a 50-120% upside. LOMA, with its 45% market share, is the top cement and ready-mix producer in Argentina and possesses excellent economics due to favorable industry structure, substantial capacity for increasing demand, and a strong logistics network. Trading below replacement cost, LOMA offers a compelling valuation, an 11% free cash flow yield, and under 1x net debt/EBITDA. The prospect of control change in 2024 with a 70% likelihood necessitates an equal offer to minority shareholders, which could result in an $11-$16 exit per ADR. Its ownership, historically by a Brazilian family control, now teeters on the brink of sale by Intercement due to debt pressures. Possible buyers exclude Cemex and Holcim but may involve Chinese firms or other local investors like Pampa Holdings. The risk to this investment arises if volumes disappoint in the short term due to economic woes, or if the company is undervalued in a bundled sale. The catalyst would be a change in control driven by Intercement's debt, providing an attractive risk-reward scenario.
Read the full article here (free login required). Read time: 5 min
VALUE INVESTORS CLUB
SCHOTT Pharma AG & Co. KGaA - $1SXP.F
SCHOTT Pharma AG & Co. KGaA develops, manufactures, and sells drug containment solutions and delivery systems for injectable drugs for pharmaceutical, biotechnology, and life science industries worldwide. The company offers prefillable glass or polymer syringes, glass vials, cartridges, and ampoules
Ticker: 1SXP.F | Price: 36.40 | Price Target: 58 (+59%)
Market Cap: 5.8B | Timeframe: 2 years
🧪 Biotech | 🏭 Packaging | 📈 Bullish Idea
* I recommend using Interactive Brokers (link) to trade international and OTC stocks if you can’t trade them in your current brokerage
SCHOTT Pharma AG & Co. KGaA (Ticker: 1SXP.F), a pharmaceutical packaging manufacturer with a price target of €58 for a 2-year timeframe, is capitalizing on the secular growth prospects of the pharma packaging industry. The company stands to benefit from the rising demand for High Value Solutions (HVS) such as autoinjectors and ready-to-use vials, which have grown from 39% to 48% of total revenues, and are expected to reach 60% medium-term. These HVS offerings are three times more lucrative than non-HVS and more margin accretive, with SCHOTT leading in multiple delivery modalities. The oligopolistic market structure ensures strong pricing power due to high entry barriers, and the company boasts advantageous terms with the SCHOTT Group for raw material supply. SCHOTT is on track to meet its medium-term targets of 10%+ revenue growth and 30%+ EBITDA margins, while strategically expanding in the promising GLP-1 segment that underpins diabetes and weight control treatments. Despite a strong business outlook, it trades at a discount (20x EBITDA) compared to peers like Stevanato (24x EBITDA) and West Pharma. The industry is expected to see continued growth with the rise of biologics which benefit from SCHOTT’s glass vials, while transition from bulk to ready-to-use formats promises long-term growth. Risks include potential overhangs from vials destocking and the uncertainty around GLP-1 market momentum, but the expected abatement of destocking and improved free cash flow could serve as catalysts to close the valuation gap with competitors.
Read the full article here (free login required). Read time: 5 min
FUND LETTER
The Brown Capital Management Small Company Fund Portfolio Holding: Datadog, Inc.
Datadog, Inc. operates an observability and security platform for cloud applications in North America and internationally
Ticker: DDOG | Price: $122.99 | Price Target: N/A
Market Cap: $40B | Timeframe: N/A
☁️ Cloud Observability | 💻 SaaS | 📈 Bullish Idea
Datadog, Inc. (ticker: DDOG), a leading SaaS-based IT-monitoring and analytics platform, differentiates itself by providing a unified, user-configurable visual interface that consolidates monitoring across cloud infrastructures, applications, logs, and networks. Despite strong revenue growth exceeding 60% annually from 2020 to 2022, customer cloud spending optimizations in 2023 prompted Datadog to lower its revenue growth forecast to 24%, causing a 59% stock price drop in 2022. However, we viewed this as a temporary setback and increased our position early in 2023. Subsequently, as customers' cloud optimizations moderated and demand rebounded, Datadog's stock surged 33% in Q4 and 65% over the full year, contributing significantly to the Small Company portfolio. We maintain confidence in Datadog's future due to its robust market positioning, market share growth potential, and upcoming product pipeline.
Read the full article here. Read time: 2 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ Petroleo Brasileiro ($PBR) [48%]
🟨🟨⬜️⬜️⬜️ Northeast Bank ($NBN) [29%]
🟥⬜️⬜️⬜️⬜️ LSB Industries ($LXU) [23%]
Your comments:
🛢️ mikem***, stevem***, cosm***, and more: Oil isn’t going anywhere and the dividend is huge
MARKET OVERVIEW
The Market Overview is powered by Koyfin (link). Koyfin is my personal Bloomberg terminal that doesn’t cost $2,000/month. It has all of the news, financials, watchlists, screeners, charts, etc that I need to be an informed investor. *I’ve partnered with them to give you a 20% discount if you use my link!
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 52% bullish
The poor Russell index continues to lag behind while the market is driven by large-cap tech stocks. CPI came in a little stronger than exppected and the market liked it (it seems like the market is more bullish on AI than it is scared of the macro environment). All of the sentiments were up today (except for YBR readers, but that is because many of the votes came in before CPI was announced) with the Fear v Greed index jumping a couple of points and the Stock Market news sentiment jumping from just barely above 0 to above 0.18.
STOCK MARKET NEWS
Southwest Airlines cuts jet delivery forecast from Boeing - Reuters
Babies R Us is coming to about 200 Kohl's stores - CNBC
Boeing whistleblower found dead of apparent suicide - Reuters
Arm's shares rise as Wall Street eyes IPO lock-up expiration - Reuters
Apple to let developers distribute apps directly from their sites - Reuters
China's Xiaomi says it will start deliveries of its first EV model on March 28 - Reuters
Activist Third Point nears deal with Advance Auto Parts for three board seats - CNBC
Consumer prices rose 0.4% in February and 3.2% from a year ago - CNBC
Apollo reaches out to Paramount about deal, Axios reports - Reuters
IBM tells employees it's cutting jobs in marketing and communications - CNBC
Airbnb bans use of all indoor security cameras to 'prioritize the privacy' of guests - CNBC
Oracle shares surge 12% and head for record close - CNBC
FEATURED INSIDER TRADE
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10% Owner at Corbus Pharmaceuticals Holdings, Inc. ($CRBP) purchased 550,000 shares at $42.41/share ($23.33M total) which increased their vested holdings by 37.3%. Their median purchase size is $7.20M and this is their 4th largest purchase out of 39 all time (link)
Director at Globalstar, Inc. ($GSAT) purchased 1,320,000 shares at $1.32/share ($1.75M total) which increased their vested holdings by 13.4%. Their median purchase size is $1.11M and this is their 2nd largest purchase out of 6 all time (link)
Chief Executive Officer at LIONS GATE ENTERTAINMENT CORP /CN/ ($LGF.B) purchased 100,000 shares at $8.84/share ($884K total) which increased their vested holdings by 26.4%. Their median purchase size is $884K and this is their 1st largest purchase out of 1 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 in "Irrational Exuberance" argue that media coverage contributes to the growth of speculative bubbles? |
Yesterday’s Question: Which of the following was a factor in the dotcom boom, as analyzed in "Irrational Exuberance"?
Answer: In analyzing the dotcom boom, Shiller identifies several factors, including the impact of the Baby Boom and the creation of 401(k)s. The Baby Boom generation began investing heavily in the stock market as they approached retirement, alongside the rise of 401(k) plans that increased public stock market participation. This led to a surge in investments, particularly in the technology sector, fueled by optimistic expectations about the internet's potential. The influx of capital and speculative buying pushed tech stock prices to unsustainable levels, creating a significant market bubble.
LINKS YOU’LL LOVE
+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
treyk**** (73 points)
dhruv.*** (73 points)
lsmun**** (73 points)
Scoring
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+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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+3 POINTS - WEEKLY TOURNAMENT
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