Top stock pitches (Tue, Jul 2)

Connor Van Ooyen
July 02, 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:

British American Tobacco ($BTI)

Ingevity Corporation ($NGVT)

Par Pacific Holdings ($PARR)

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).

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STOCK PITCHES

Author Returns

The below stock pitch is from Shade Research.

We have 2 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.

BLOG POST - Shade Research

British American Tobacco (BTI - BATS)

British American Tobacco p.l.c. engages in the provision of tobacco and nicotine products to consumers worldwide. It also offers vapour, heated, and modern oral nicotine products; combustible cigarettes; and traditional oral products, such as snus and moist snuff

Ticker: BTI | Price: $31.16 | Price Target: $32.41 (+4%)
Market Cap: $66B | Timeframe: N/A

🚬 Tobacco | 💰 12% Dividend | 📈 Bullish Idea

British American Tobacco (BTI), a global tobacco giant with 80% of revenue from combustibles, offers a compelling investment opportunity. Trading at 7.3x P/E and 0.7x P/B with a 9.8% dividend yield, BTI has a 2% revenue CAGR, 27% net margin, and 34% ROOC. The company operates worldwide, with key brands like Lucky Strike and Camel, and is diversifying into new categories (vape, heated, oral) currently at breakeven. The investment thesis revolves around capturing a sin stock premium and capitalizing on a temporary discount due to a recent impairment. With an estimated NPV of £25.65/share (+7% upside), BTI presents an attractive risk/reward ratio. However, investors should be aware of risks including industry decline and debt refinancing costs. The company aims to reduce net debt to adjusted EBITDA to 2.2x by 2030, potentially retiring £8 billion in debt. While not significantly undervalued, BTI's stable cash flows and high dividend yield offer a defensive investment option in a challenging industry.

Read the full article here. Read time: 5 min

Author Returns

The below stock pitch is from Buckley Capital.

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.

FUND LETTER - Buckley Capital

Buckley Capital New Position: Ingevity Corporation

Ingevity Corporation manufactures and sells activated carbon products, derivative specialty chemicals, and engineered polymers in North America, the Asia Pacific, Europe, the Middle East, Africa, and South America. It operates through three segments: Performance Materials, Performance Chemicals, and Advanced Polymer Technologies.

Ticker: NGVT | Price: $42.18 | Price Target: $250 (+493%)
Market Cap: 1.57B | Timeframe: 2028

🧪 Chemicals | 📈 Bullish Idea

Ingevity Corporation (NGVT), a diversified specialty chemicals company, presents an attractive investment opportunity with potential for 80-100% upside by 2025 and multi-bagger returns in 3-5 years. The company operates four segments: Performance Materials (45-50% EBITDA margin), Road Technologies (mid-20% margin), Advanced Polymer Technology, and Industrial Specialties. While the Industrial Specialties segment has been impacted by high crude tall oil (CTO) prices, recent developments including declining CTO prices, closure of a low-margin factory, and rebounding specialty chemical markets are expected to improve performance. Management targets $1 billion EBITDA by 2028, though $700-800 million is more realistic. With projected earnings of $5-6 per share by 2025, NGVT currently trades at 7-8x earnings compared to its historical 14-17x multiple. A return to historical valuation could lead to a $200-250 price target by 2028, based on 10x $700-800 million EBITDA. Key risks include slower-than-expected recovery in the Industrial Specialties segment.

Read the full article here. Read time: 3 min

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Author Returns

The below stock pitch is from @blondesnmoney.

We have 6 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.

BLOG POST - @blondesnmoney

Par Pacific Holdings: Capital Returns and Undervalued Assets

Par Pacific Holdings, Inc. owns and operates energy and infrastructure businesses. The company operates through Refining, Retail, and Logistics segments.

Ticker: PARR | Price: $25.30 | Price Target: $27.50 (+9%)
Market Cap: $1.38B | Timeframe: N/A

⚡️ Energy | 📈 Bullish Idea

Par Pacific Holdings (PARR), trading at $24.30 with a target of $27.50, is an energy company operating refineries in uncompetitive regions (Hawaii, Montana) and owning gas stations. The company's retail segment generates $60M EBITDA, potentially worth $720M at a 12x multiple. PARR has repurchased $34.2M in Q1 and $70M YTD, demonstrating confidence in its value. The CEO's retirement at the $40 peak suggests insider knowledge of overvaluation. PARR's advantages include operating in uncompetitive regions and owning gas stations, which can regularly raise prices 4-6% annually. The company's logistics and retail assets are undervalued, with newly renovated gas franchises potentially worth $720M at a 12x EBITDA multiple. Despite trading like a 'shitco,' PARR has a strong history of capex management and capital returns. The author is long 3,600 shares and looking to add more below $24.50, viewing the current price as attractive compared to the previous $40 peak.

Read the full article here. Read time: 2 min

Which stock idea was the most compelling to you?

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Corning Incorporated ($GLW) [59%]

🟨🟨⬜️⬜️⬜️ Tiptree Inc ($TIPT) [28%]

🟥⬜️⬜️⬜️⬜️ The Liberty SiriusXM Group ($LSXMA) [13%]

Your comments:

⚡️ burkh*** ($GLW): Blue-chip U.S. company, undervalued, AI tailwinds. I have held the stock before and got out with a profit. This looks like an opportunity to get back in.

MARKET OVERVIEW / NEWS

Market Overview

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

Yesterday’s Poll Results: 70% bullish

Stock Market News

Exclusive: Boeing agrees deal to buy Spirit Aero for $37.25 per share - sources - Reuters

Tesla deliveries set to fall for second straight quarter - Reuters

Trading app Robinhood agrees deal with Pluto Capital to tap into AI - Reuters

Inside Starbucks' plans to improve stores for customers and baristas - CNBC

'Roaring Kitty' is sued for alleged GameStop manipulation - Reuters

Chewy shares rally 20% after SEC filing reveals ‘Roaring Kitty' Keith Gill has 6.6% stake - CNBC

Boeing restarts new plane deliveries to China - 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

Director at AMERICAN SOFTWARE INC ($AMSWA)

The Director purchased 271,518 shares at $9.00/share ($2.44M total) which increased their vested holdings by 187.7%. The current price is $9.13 (+1.5%). Their median purchase size is $99,809.20 and this is their 1st largest purchase out of 6 all time. link

LINKS YOU’LL LOVE

Takeaways from Executive Incentives v Corporate Growth

The Outsiders Book summary

Key lessons from Francois Rochon annual letters

THAT’S ALL FOLKS

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Connor

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