Top stock pitches (Mon, May 6)

Connor Van Ooyen
May 06, 2024

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👋 Good Morning!

I hope you had a great weekend.

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

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

Dramatically Undervalued SAAS Company Primed for Buyout ($AWRE)

Aware, Inc., an authentication company, provides biometrics software products and solutions for government agencies and commercial entities in the United States, the United Kingdom, and internationally.

Ticker: AWRE | Price: $1.83 | Price Target: $10 (+446%)
Market Cap: $44M | Timeframe: 2029

🪪 Biometric Software | 📈 Bullish Idea

Aware, Inc. (AWRE), a biometric identification solutions provider, is undergoing a successful turnaround under CEO Bob Eckel, transitioning from an enterprise software company with lumpy revenue to a SaaS company with predictable recurring revenue growing at a 20% CAGR. Trading at ~0.72x EV/OCF with $1.44 per share in net cash, Aware is drastically mispriced considering its strong competitive advantages, including high switching costs, superior product performance, demographic considerations, and long-standing relationships with government agencies and commercial lenders. With the biometrics industry projected to grow at a 15% CAGR, Aware is well-positioned to benefit from tailwinds such as increasing cybersecurity threats and border security concerns. The company's attractive financial profile, valuable IP, and precedent of CEO's previous successful exit make it a prime target for private equity acquisition. Organic growth and share buybacks provide additional upside potential, with a projected price target of $10 per share by 2029.

Read the full article here. Read time: 7 min

*SPONSORED BY RYSE

Missed out on Ring and Nest? Don’t let RYSE slip away!

Ring 一 Acquired by Amazon for $1.2B

Nest 一 Acquired by Google for $3.2B

If you missed out on these spectacular early investments in the Smart Home space, here’s your chance to grab hold of the next one.

RYSE is a tech firm poised to dominate the Smart Shades market (growing at an astonishing 55% annually), and their public offering of shares priced at just $1.50 has opened.

They have generated over 20X growth in share price for early shareholders, with significant upside remaining as they just launched in over 100 Best Buy stores.

Retail distribution was the main driver behind the acquisitions of both Ring and Nest, and their exclusive deal with Best Buy puts them in pole position to dominate this burgeoning industry.

Secure your stake before the offer closes.

BLOG POST

Against The Trend. How to Creating Shareholder Value in Uncommon Places - Ithaca Energy plc

Ithaca Energy plc, together with its subsidiaries, engages in the exploration, development, and production of oil and gas in the North Sea. The company own a portfolio of assets located in Northern and Central North Sea, Moray Firth, and West of Shetland area of the UKCS.

Ticker: ITH.L | Price: GBp 116 | Price Target: N/A
Market Cap: GBp 1.19B | Timeframe: 3 years

🛢️ Oil/Gas Producer | 💰 18% Dividend | 📈 Bullish Idea

* I recommend using Interactive Brokers (link) to trade international and OTC stocks if you can’t trade them in your current brokerage

Ithaca Energy (ITH.L), a North Sea oil and gas producer, is merging with Eni UK to become the second-largest operator in the region with 110 kboe/d output and 600 million boe in 2P reserves (15-year life). Despite UK windfall taxes, Ithaca's $4.5 billion tax loss pool reduces its tax burden, enabling aggressive investment compared to peers. In 2023, the company generated $800 million in free cash flow after $492 million in capital expenditure and paid a $400 million dividend (15-30% of after-tax cash flow from operations). Ithaca guides for $500 million dividends in both 2024 and 2025, representing a 20% yield post-merger. Following the deal, Delek Group will own 52.7% of the company.

Read the full article here. Read time: 4 min

FUND LETTER

Tourlite Capital New Portfolio Holding: Perrigo Company plc

Perrigo Company plc provides over-the-counter health and wellness solutions to enhance individual well-being in the United States, Europe, and internationally. It operates through Consumer Self-Care Americas and Consumer Self-Care International segments.

Ticker: PRGO | Price: $32.79 | Price Target: N/A
Market Cap: $4.45B | Timeframe: N/A

🏥 Healthcare | 💰 3.3% Dividend | 📈 Bullish Idea

Perrigo Company plc (PRGO), a consumer healthcare company, is currently undervalued, trading at less than 10 times its projected 2025 normalized earnings. Although the company's earnings have been temporarily impacted by the ongoing reset of its infant formula facilities, Perrigo's future prospects remain promising. The recent approval of Opill, the first over-the-counter daily birth control pill in the United States, presents significant upside potential that is not yet reflected in the current share price. As Perrigo continues its transformative journey and unlocks the value of its innovative products, the company is well-positioned for growth and offers a compelling investment opportunity.

Read the full article here. Read time: 1 min

Which stock idea was the most compelling to you?

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Meta Platforms ($META) [51%]

🟨🟨⬜️⬜️⬜️ Ceragon Networks ($CRNT) [33%]

🟥⬜️⬜️⬜️⬜️ BAE Systems ($BA.L) [16%]

MARKET OVERVIEW / NEWS

Market Overview

Which stock idea was the most compelling to you?

Yesterday’s Poll Results: 64% bullish

You know sentiment has swung to the positive when GameStop is at the top of the biggest gainers list. We’ve had a few fakeouts over the last 6 weeks, but the market is gaining some strength here and could be turning the momentum back to the positive.

Yellowbrick Road readers are back above 60% bullish, the Fear v Greed index is slowly creeping upward, and the indexes were all green for the second day in a row.

Stock Market News

U.S. job growth totaled 175,000 in April, much less than expected - CNBC

Expedia shares fall as Vrbo weakness weighs on revenue forecast - Reuters

Hershey tops first-quarter estimates on higher pricing - Reuters

Cloudflare reports wider first-quarter operating loss, shares slide - Reuters

Exxon Mobil completes $60 billion deal for Pioneer Natural - Reuters

Boeing sending first astronaut crew to space after years of delay - Reuters

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

GC & Corporate Secretary at GE HealthCare Technologies Inc. ($GEHC)

The GC & Corporate Secretary purchased 1,315 shares at $76.52/share ($101K total) which increased their vested holdings by 1.8%. The current price is $77.83 (+1.7%). Their median purchase size is $76,596.90 and this is their 1st largest purchase out of 2 all time. (trade link)

LINKS YOU’LL LOVE

Read The Rundown — the world’s largest AI newsletter read by over 600,000 early adopters, staying ahead of the curve. (link)*

30 lessons from the book: “Walt Disney: The Triumph of the American Imagination” (link)

Soldier On: “I basically believe in the soldier on system” - Munger (link)

Where did all the stocks go (link)

* Sponsored link

THAT’S ALL FOLKS

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Connor

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