Top stock pitches (Mon, Jun 3)

Connor Van Ooyen
June 03, 2024

About // Sponsor YBR // Yellowbrick Website // Twitter

*This newsletter is for entertainment purposes only. Nothing in this newsletter is financial advice or recommendations.

👋 Good Morning!

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

The three stock pitches you’ll read about in today’s email are:

R1 RCM Inc. ($RCM)

Open Text Corporation ($OTEX)

TAT Technologies ($TATT)

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

YBR PORTFOLIO

The YBR Portfolio copies the trades of the top 10 investors (based on the average returns of their previous stock pitches) in our database of 1,000+ investors. If you want to be alerted when the best investors buy/sell a stock, then this section is for you.

*All investments in the YBR Portfolio will be for ~3% of the portfolio value (which allows us to hold a maximum of 33 stocks at a time).

**I use Interactive Brokers (link) for the portfolio because it makes it easy to trade international and OTC stocks. If you decide to open an account with them, use this link so they know I sent you.

New Trade Alert!

We just made a new investment in the YBR Portfolio and copied a trade from the #7 investor in our database who averages 42%+ 2-year returns on their stock pitches.

The new stock is…

The YBR Portfolio is only available to Premium Subscribers. If you want to know which stocks the top investors are investing in, upgrade to Yellowbrick Premium (you get a 20% discount using that link or the button below).

WINNING PITCH

+95% Returns in 1 Month for $HUMA

$HUMA was pitched in our April 22nd email (link) at a price of $3.80. Just over a month later it is up 95%! And that is even after falling 20% at the end of last week.

The other two pitches that day were $TSSI and $FCH.L which are up 170% and 96% respectively. I think that email has to be one of the best-performing investing emails ever sent.

Shoutout to @beefwellingtoni for the pitch.

STOCK PITCHES

Author Returns

The below stock pitch is from Voss Capital.

We have 61 stock pitches from them in our database and their historic returns are:

Upgrade to Yellowbrick Road Premium to unlock the historic returns for this author. Upgrade for 20% off.

FUND LETTER - Voss Capital

Voss Capital Value Fund Portfolio Holding: R1 RCM Inc.

R1 RCM Inc. provides technology-driven solutions for the financial performance and patient experience of health systems, hospitals, and physician groups.

Ticker: RCM | Price: $12.48 | Price Target: $28 (+124%)
Market Cap: $5.26B | Timeframe: 2-3 years

🩺 Health Information Services | 📈 Bullish Idea

R1 RCM Inc. (RCM) recently received a lowball buyout offer from its largest shareholder, New Mountain Capital, prompting the Board to run a full auction process. If no deal materializes, the company's base case price target remains $28 (133% upside) over the next 2-3 years, based on 14x 2026 adjusted EBIT or 12x Q4 2026 EBIT run-rate, a significant discount to peers. Continued execution, onboarding of large clients, and AI-driven cost reductions are expected to drive upside. However, if a deal is commenced, the price target moves down to $16. The market appears to be underestimating the probability of a higher buyout offer, even if it comes from New Mountain and TowerBrook.

Read the full article here. Read time: 1 min

Author Returns

The below stock pitch is from Momentum Financial.

We have 3 stock pitches from them in our database and their historic returns are:

Upgrade to Yellowbrick Road Premium to unlock the historic returns for this author. Upgrade for 20% off.

BLOG POST - Momentum Financial

Open Text: Quality at a bargain price

Open Text Corporation provides information management software and solutions

Ticker: OTEX | Price: $29.27 | Price Target: $71.80 (+145%)
Market Cap: $8.21B | Timeframe: N/A

💻 Information Management Software | 💻 B2B SaaS | 📈 Bullish Idea

Open Text Corporation (OTEX), Canada's largest software services provider, trades at a deeply discounted valuation despite its high-quality business model, characterized by a 98% retention rate among the world's top 100 companies, 80% recurring revenue, 30%+ EBITDA margins, and 25% FCF margins. The stock has fallen 45% due to concerns over its debt-fueled $5.8 billion acquisition of Micro Focus and rising interest rates. However, OTEX has taken steps to reduce its debt from 5.2x to 3x EBITDA by 2024 through asset sales and expects to achieve 3-6% annual revenue growth and 20% margins by 2027. The company's strong fundamentals, low capital needs, and scalability position it well for the future. At current prices, OTEX trades at just 7x 2027 FCF, offering a potential 132% upside to its $72 price target over the next three years. Key catalysts include successful integration of Micro Focus and lower interest rates, while risks involve macro weakness and potential dilution from stock-based compensation.

Read the full article here. Read time: 6 min

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Author Returns

The below stock pitch is from @SharogradskyM on Twitter.

Their historic returns are:

Upgrade to Yellowbrick Road Premium to unlock the historic returns for this author. Upgrade for 20% off.

TWITTER - @SharogradskyM

TAT Technologies’ Strategic Moves and Market Potential

TAT Technologies Ltd., together with its subsidiaries, provides solutions and services to the commercial and military aerospace, and ground defense industries in the United States, Israel, and internationally.

Ticker: TATT | Price: $15.22 | Price Target: $41.01 (+169%)
Market Cap: $154M | Timeframe: 12-15 months

✈️ Aerospace & Defense | 📈 Bullish Idea

TAT Technologies Ltd. (TATT), an aerospace services firm, is poised for significant growth due to tailwinds such as supply chain issues, aircraft production delays, and a resurgence in travel. The company acquired a license from Honeywell in 2020 to service and repair engines on new B777 and B737 models, which will commence in 2025, providing recurring revenue. Q1 results were impressive, with revenue up 35% YoY, EBIT up 133%, and net profit up 220%. TATT is expected to achieve $190 million in revenue and $18 million in net profit by 2025, trading at a 7.5 P/E compared to peers at 12-15x. Further growth is anticipated in 2026-2027 from new engines and tenders. With a bullish management team and the potential for a 100%+ upside in the next 12-15 months, TATT presents an attractive investment opportunity.

Read the full article here. Read time: 2 min

Which stock idea was the most compelling to you?

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Rentokil Initial ($RTO) [36%]

🟨🟨⬜️⬜️⬜️ Clean Harbors, Inc ($CLH) [33%]

🟥⬜️⬜️⬜️⬜️ Jack in the Box Inc. ($JACK) [31%]

MARKET OVERVIEW / NEWS

Market Overview

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

Yesterday’s Poll Results: 58% bullish

A bit of a surprising end to the day Friday with all of the indexes closing the last 4 hours of the week incredibly strong. That little jump also caused all of our sentiment trackers to rise a little bit. Yellowbrick Road readers flipped back to over 50% bullish, the Fear v Greed index moved up a few points to stay in the “neutral” range", and the news sentiment improved from “bearish” to just “slightly bearish”.

Stock Market News

The Fed's preferred inflation measure rose 0.2% in April, as expected - CNBC

Trump Media shares tumble after Donald Trump found guilty on 34 felony counts - CNBC

MongoDB shares sink 23% after management trims guidance - CNBC

Skydance sweetens offer for Paramount Global, source says - Reuters

Nvidia says its next-generation AI chip platform to be rolled out in 2026 - Reuters

Carl Icahn reportedly owns sizable stake in Caesars, sending shares soaring - New York Post

Meta's Facebook says it is attracting most young adults in 3 years - Reuters

FEATURED INSIDER TRADE

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10% Owner at ISSUER DIRECT CORP ($ISDR)

The 10% Owner purchased 50,971 shares at $9.41/share ($480K total) which increased their vested holdings by 8.4%. The current price is $9.50 (+1.0%). Their median purchase size is $315K and this is their 5th largest purchase out of 17 all time. (trade link)