Top stock pitches (Mon, Apr 22)

Author

Connor Van Ooyen
April 22, 2024

Sponsored by:

👋 Good Morning!

AI/Semi stocks got crushed on Friday with $NVDA down 10%, $ARM down 16.90%, and $SMCI down 23.14%; Redfin CEO says housing is in a recession and he’s never seen anything like it in 20 years as CEO (link); tech stocks had the worst week since November (link); $TSSI is a data center services provider with 294% upside, a pitch for a company that produces off-the-shelf human tissue grafts for vascular surgery, and a pitch for an SMB lending platform leader (stock pitches); and more in this email!

Thanks for reading! Feel free to share this email with any other investors that may like it.

Connor (follow the Yellowbrick Twitter account - @joinyellowbrick)

* If you missed yesterday’s email, don’t forget to read it here

STOCK PITCHES

BLOG POST

A 4x in 4 Years Surfing the Data Center Tsunami? ($TSSI)

TSS, Inc. provides integration technology services to implement, operate, and maintain information technology systems to enterprises and users in the United States. The company operates in two segments, Facilities and Systems Integration.

Ticker: TSSI | Price: $0.71 | Price Target: $2.80 (+294%)
Market Cap: $13M | Timeframe: 4 years

📊 Data Center Services | 📈 Bullish Idea

TSSI is a modular data center services provider, with 96% of its revenue coming from Dell. A data center tsunami is coming, with AI and machine learning driving demand. Dell is investing in modular data centers, a market that is expected to reach $112 billion by 2032. TSSI sees 77% year-over-year revenue growth and expects up to a 10-fold increase in its integration segment. The company has a clean balance sheet and aligned management. There is a potential 400% 4-year return on $1 earnings per share and a 4x price-to-earnings ratio. Key risks include customer concentration and execution, while catalysts are continued growth and profitability.

Read the full article here. Read time: 10 min

FUND LETTER

Rockwood Strategic New Position: Funding Circle Holdings Plc

Funding Circle Holdings plc, together with its subsidiaries, provides online lending platforms in the United Kingdom, the United States, and internationally. The company offers small business loans, recovery loan schemes, and business finance solutions to small enterprises. It also provides flexipay and flexipay card solutions.

Ticker: FCH.L | Price: GBp 46.70 | Price Target: N/A
Market Cap: GBp 165M | Timeframe: N/A

💸 Small Business Lending | 📈 Bullish Idea

Funding Circle Holdings (FCH.L) is a leading UK and US lending platform for small and medium-sized enterprises. Despite holding £175 million in cash, the company's market capitalization fell to £100 million. After engaging with management, a buyback was triggered, and a likely sale of the US business is in the works. The next step is cost cutting. Even after a 29% rise since the initial purchase, the stock still trades below its cash value, presenting significant upside potential.

Read the full article here. Read time: 1 min

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TWITTER

Exploring Humacyte's Potential in Regenerative Medicine

Humacyte, Inc. engages in the development and manufacture of off-the-shelf, implantable, and bioengineered human tissues for the treatment of diseases and conditions across a range of anatomic locations in multiple therapeutic areas.

Ticker: HUMA | Price: $3.80 | Price Target: N/A
Market Cap: $364M | Timeframe: N/A

🧪 Biotech | 📈 Bullish Idea

Humacyte is a company that produces off-the-shelf human tissue grafts for vascular surgery using their proprietary LUNA200 system. Their human acellular vessel (HAV) has the potential to become the standard of care for hemodialysis access, targeting 20% of the market, as well as vascular trauma. The company expects Phase 3 data for their dialysis indication in Q3, with previous trials showing lower infection rates and better tissue remodeling compared to ePTFE grafts. Humacyte's future focus will be on dialysis access in women and peripheral artery disease (PAD). With a market cap of approximately $300 million and funding secured through FDA approval in August, Humacyte presents an intriguing investment opportunity in the regenerative medicine space.

Read the full article here. Read time: 7 min

Which stock idea was the most compelling to you?

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Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Ally Financial ($ALLY) [51%]

🟨🟨⬜️⬜️⬜️ UGI Corporation ($UGI) [36%]

🟥⬜️⬜️⬜️⬜️ Boyd Group Services ($BYD.TO) [13%]

MARKET OVERVIEW / NEWS

Market Overview

Are you short-term bullish or bearish on the market?

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Yesterday’s Poll Results: 55% bullish

Another mostly red day in the market to end a week full of red days. Friday’s red day was led by a massive dump in the Nasdaq, led by the AI/semi stocks with the three biggest losers in the market being $SMCI, $ARM, and $NVDA. We’ve seen a little bit of relative strength in the Dow (and even a green day in the Russell today), but the large-cap tech stocks have been getting hit. The news sentiment also took a huge with a very bearish news day and the Fear v Greed index fell a few more points as well. Yellowbrick Road readers are the only ones remaining bullish, but reader palsr*** mentioned that the uneasiness in the Middle East and stubborn inflation are keeping them bearish for now.

Stock Market News

Oil prices jump 3% on reports of explosions in Iran - CNBC

Apple removes WhatsApp, Threads from China app store, WSJ reports - Reuters

Tesla to recall 3,878 Cybertrucks, NHTSA says - Reuters

Super Micro plunges as investors rotate out of red-hot AI stock ahead of earnings later this month - CNBC

Procter & Gamble raises earnings forecast but quarterly sales disappoint - CNBC 

American Express beats profit estimates on strong spending by wealthy customers - Reuters 

Oilfield firm SLB's profit rises on international drilling demand - Reuters

Citadel Securities blasts Trump Media CEO Devin Nunes over DJT short-selling letter - CNBC

Paramount shares jump more than 10% as Sony, Apollo discuss joint buyout bid - New York Post

Lululemon to shutter Washington distribution center, lay off 128 employees after tripling warehouse footprint - CNBC

FEATURED INSIDER TRADE

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President & CEO at SONIDA SENIOR LIVING, INC. ($SNDA)

The President & CEO purchased 3,000 shares at $28.72/share ($86,160.00 total) which increased their vested holdings by 1.0%. The current price is $29.61 (+3.1%). Their median purchase size is $71,158.80 and this is their 1st largest purchase out of 2 all time. (trade link)

Historic Returns
1m returns: 5% weighted | 5% median | 100% win rate (1/1)
3m returns: -0% weighted | -0% median | 0% win rate (0/1)
6m returns: -1% weighted | -1% median | 0% win rate (0/1)
1y returns: 303% weighted | 303% median | 100% win rate (1/1)

Note: The lower 1m, 3m, and 6m returns give me lower confidence in this trade, but the massive 1y return makes it interesting. May make more sense as a longer-term play.

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THAT’S ALL FOLKS

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Connor

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