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Top stock pitches (Thu, Apr 18)

Top stock pitches (Thu, Apr 18)

Connor Van Ooyen
April 18, 2024

Quick Idea: Lululemon Athletica

Lululemon Athletica Inc., together with its subsidiaries, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. It offers pants, shorts, tops, and jackets for healthy lifestyle, such as yoga, running, training, and other activities. It also provides fitness-inspired accessories.

Ticker: LULU | Price: $345.39 | Price Target: $632 (+83%)
Market Cap: $42.4B | Timeframe: 2027

🩳 Athletic Apparel | 📈 Bullish Idea

Lululemon is a leading premium apparel brand with a loyal consumer base. The company's membership program reached 17 million members in just one year. Lululemon has high margins, strong cash flows, and engages in share buybacks. It is gaining market share in a competitive space with a large, growing total addressable market. There are significant opportunities for product growth. The stock trades at a forward P/E of 25x, compared to its historical average of 43x. Assuming a P/E of 35x, the 2027 price target is $632. Risks include a slowdown in retail spending, a credit event, and resurgent inflation.

Read the full article here. Read time: 5 min

VALUE INVESTORS CLUB

Bufab AB - $BUFAB.ST

Bufab AB (publ) operates as a trading company that provides solutions for sourcing, quality control, and logistics for C-parts in Sweden and internationally. It offers metal or plastic fasteners comprising screws, bolts, nuts, pins, washers, retaining rings, threaded rods, and structural fasteners

Ticker: BUFAB.ST | Price: SEK 387.80 | Price Target: SEK 765 (+97%)
Market Cap: SEK 15B | Timeframe: 2027

⚙️ Supply Chain Trading Company | 📈 Bullish Idea

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

Bufab AB, Sweden's leading C-parts supply chain partner, delivers savings and efficiency to OEMs globally through its entrepreneurial culture and strong execution. The company is targeting a higher ROIC as growth approaches a cyclical inflection point. Mid-teens revenue growth is projected for 2024-28, with mid-single-digit organic growth and acquisitions at approximately 10x EBITA. Bufab has initiatives in place to boost its EBITA margin to 14%+ and improve net working capital to peer levels of 33-34% by 2026, elevating ROIC to 15%. The investment is timely, with growth inflecting and the stock trading at a normalized 13x NTM EV/EBITDA. The 2027 target price is SEK 765, based on 13x 2028E EBITDA, representing a 94% upside. Key risks include M&A execution and cyclicality.

Read the full article here. Read time: 6 min

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FUND LETTER

Andvari New Holding: Altria Group, Inc.

Altria Group, Inc., through its subsidiaries, manufactures and sells smokeable and oral tobacco products in the United States.

Ticker: MO | Price: $40.95 | Price Target: N/A
Market Cap: $70.3B | Timeframe: N/A

🚬 Tobacco | 💰 9.6% Dividend | 📈 Bullish Idea

Altria Group, Inc. (MO) is a tobacco company with high margins, low capital expenditures, and pricing power. Despite declining cigarette volumes, Altria has offset this by implementing price hikes and experiencing growth in oral nicotine pouches, with its on! brand growing over 30%. The company recently raised $2.1 billion by selling its stake in Anheuser-Busch InBev (BUD) to buy back its own undervalued shares. Altria offers an attractive 9.7% dividend yield with 2-3% dividend growth, making it an appealing entry point for investors.

Read the full article here. Read time: 2 min

Which stock idea was the most compelling to you?

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Hunting PLC ($HTG.L) [42%]

🟨🟨⬜️⬜️⬜️ CoStar Group ($CSGP) [34%]

🟥⬜️⬜️⬜️⬜️ Tutor Perini Corp ($TPC) [24%]

Your comments:

⚙️ glennp*** ($HTG.L): Hunting looks as good a long term investment as you will get. Lots of opportunities for growth over the coming years.

MARKET OVERVIEW / NEWS

Market Overview

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

Yesterday’s Poll Results: 50% bullish

Another red day in the market (I think that’s four in a row). Surprisingly, Yellowbrick Road readers and the news sentiment both jumped from yesterday, but the Fear v Greed index fell a few more points and all of the indexes were red yet again.

Stock Market News

ASML earnings drag semiconductor stocks lower - CNBC

Eli Lilly's Zepbound shows promise as a sleep apnea treatment in late-stage trials - CNBC

Abbott beats quarterly profit estimates on strong medical device sales - Reuters

JB Hunt Stock Drops as Logistics Company's Earnings Miss Estimates Amid Soft Demand - Investopedia

'Grand Theft Auto' publisher Take-Two Interactive to lay off 5% of staff - Reuters

Amazon to push cashierless shopping tech into more third-party stores, while backing off itself - Reuters

Adidas shares rise 6% after first-quarter profit hike, improved outlook - CNBC

Google restructures finance team as a part of AI shift, CFO tells employees in memo - CNBC

United Airlines jumps after results beat 'dramatically low' expectations - Reuters

Rivian cuts 1% of workforce in second job cut this year - Reuters

BIGGEST INSIDER TRADES

The insider trades are 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

CEO and Chairman of the Board at Ashford Inc. ($AINC) purchased 200,000 shares at $4.91/share ($982K total) which increased their vested holdings by 5.9%. Their median purchase size is $2.12M and this is their 5th largest purchase out of 5 all time (link)

10% Owner at Global Crossing Airlines Group Inc. ($JETMF) purchased 722,581 shares at $0.38/share ($275K total) which increased their vested holdings by 19.1%. Their median purchase size is $24,874.90 and this is their 4th largest purchase out of 37 all time (link). Was part of a purchase agreement

LINKS YOU’LL LOVE

Greenhaven Road shares their thoughts on $PAR (podcast)

The Indispensibility of Risk by Howard Marks

5 takeaways from Michael Porter’s lecture on strategy at Harvard

THAT’S ALL FOLKS

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Connor

*Follow Yellowbrick on Twitter at @joinyellowbrick

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