Top stock pitches (Fri, Apr 19)

Author

Connor Van Ooyen
April 19, 2024

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👋 Good Morning!

$GOOG announces restructuring and a focus on AI (link); Ally beats earnings and is one of our featured stock pitches with 183% upside; Netflix to stop reporting subscriber numbers (news section); TSM, ASML, and NFLX kick off a rough start to earning’s season where anything less than perfect is getting punished (link); Zuck does an interview on AI (link); Fed President Bostic says the route to 2% will be slower than people expect (link); Right Tail Capital pitches a collision repair company and Miller Value pitches a high dividend stock (stock pitches); and much more.

Thanks for reading the Yellowbrick Road where I share the best stock pitches from fund letters, analyst reports, blogs, and more!

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Connor (follow the Yellowbrick Twitter account - @joinyellowbrick)

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STOCK PITCHES

VALUE INVESTORS CLUB

Ally Financial Inc. - $ALLY

Ally Financial Inc., a digital financial-services company, provides various digital financial products and services in the United States, Canada, and Bermuda. The company operates through Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations segments.

Ticker: ALLY | Price: $38.70 | Price Target: $109.80 (+184%)
Market Cap: $11B | Timeframe: 2026

🏦 Digital Financial Services | 📈 Bullish Idea

ALLY: Earnings tailwind is ahead as net interest margin bottoms and bond mark-to-market losses ($13 per share) accrete back. Earnings per share could hit $10 in a recession with 2% Fed Funds due to fixed rate loans. Used car price risk equals 30-50 basis points of charge-offs. At $36, Ally trades at 14 times 2023 earnings, 9 times 2024 earnings, and 1 times tangible book value. There is upside potential to $108 (3 times current price) by 2026 based on rate cuts and 30% buybacks.

Read the full article here. Read time: 3 min

FUND LETTER

Right Tail Capital Portfolio Holding: Boyd Group Services Inc.

Boyd Group Services Inc., together with its subsidiaries, operates non-franchised collision repair centers in North America. The company operates its locations under the Boyd Autobody & Glass and Assured Automotive names in Canada; and Gerber Collision & Glass name in the United States.

Ticker: BYD.TO | Price: CAD 274.74 | Price Target: CAD 554.64 (+102%)
Market Cap: CAD 5.9B | Timeframe: 5 years

🧰 Collision Repair Centers | 📈 Bullish Idea

Boyd Group Services Inc. (BYD.TO) is a collision repair company with approximately 950 locations. The expected return is in the high-teens to 20%+ range, derived from a 2-3% cash yield, 3-5% growth without reinvestment, and 10-15% growth from investing nearly all free cash flow at a 25%+ return on invested capital. Upside potential includes a return to pre-COVID margins and high-margin sensor calibration. Risks involve lower accidents and total losses. The business is recession-resistant and provides value to its customers and partners.

Read the full article here. Read time: 4 min

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FUND LETTER

Miller Value Partners Income Strategy New Position: UGI Corporation

UGI Corporation, together with its subsidiaries, distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company operates through four segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities.

Ticker: UGI | Price: $24.11 | Price Target: N/A
Market Cap: $4.8B | Timeframe: N/A

⚡️ Gas/Electricity Distributor | 💰 6.5% Dividend | 📈 Bullish Idea

UGI Corporation, the largest US propane distributor with a utility business, has paid dividends for 139 straight years and increased them for 37 consecutive years. The company trades at a record low P/E ratio while offering a 6% yield. UGI is targeting high-single digit EPS growth.

Read the full article here. Read time: 1 min

Which stock idea was the most compelling to you?

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Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Lululemon ($LULU) [53%]

🟨🟨⬜️⬜️⬜️ Altria Group ($MO) [35%]

🟥⬜️⬜️⬜️⬜️ Bufab AB ($BUFAB.ST) [12%]

Your comments:

  • 🚬 burkh*** ($MO): Solid company, generous dividend, in a socially disfavored business. Held MO before, and this looks like a good re-entry point

MARKET OVERVIEW / NEWS

Market Overview

Which stock idea was the most compelling to you?

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Yesterday’s Poll Results: 56% bullish

Another red day in the markets, but Yellowbrick Road readers and the news sentiment have both been increasing their sentiment the last two days and are both bullish again. However, the Fear v Greed index fell another point and we are now at 5 red days in a row and about to have our first fully red week of the year.

Stock Market News

Netflix forces Wall Street to focus on profit and revenue with decision to stop reporting subscriber numbers in 2025 - CNBC

TSMC beats first-quarter revenue and profit expectations on strong AI chip demand - CNBC

Tesla shares fall as Deutsche Bank flags risks from focus on Robotaxi - Reuters 

Meta's new AI assistant is rolling out across WhatsApp, Instagram, Facebook and Messenger - CNBC 

Alaska Air forecasts second-quarter profit above estimates on strong travel demand - Reuters 

Medical device maker Intuitive beats estimates on strong demand for surgical robots - Reuters

UK's Deliveroo returns to order growth in first quarter - Reuters 

Micron Will Receive $6.1 Billion to Build Semiconductor Plants - NYTimes

Seeking edge over rivals, Intel first to assemble ASML's next-gen chip tool - Reuters

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President and CEO at WD 40 CO ($WDFC)

The President and CEO purchased 432 shares at $232.22/share ($100K total) which increased their vested holdings by 2.1%. The current price is $231.50 (-0.3%). Their median purchase size is $99,955.60 and this is their 1st largest purchase out of 4 all time. (trade link)

Historic Returns
1m returns: 8% weighted | 7% median | 100% win rate (3/3)
3m returns: 16% weighted | 13% median | 100% win rate (3/3)
6m returns: 24% weighted | 26% median | 100% win rate (3/3)
1y returns: 41% weighted | 34% median | 100% win rate (3/3)

LINKS YOU’LL LOVE

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