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Top stock pitches (Wed, Apr 24)

Top stock pitches (Wed, Apr 24)

Connor Van Ooyen
April 24, 2024

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

👋 Good Morning!

The FTC bans non-competes (link); Spotify has its most profitable quarter ever after its large layoffs; Tesla stock pops even though it missed earnings (badly) by announcing that a couple of their new vehicles are ahead of schedule; Wendy’s new AI drive-through system is crushing it (link); White Brook Capital pitches $PETQ with 171% upside in their fund letter (and more stock pitches in the newsletter); and more.

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

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Connor (follow the Yellowbrick Twitter account - @joinyellowbrick)

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STOCK PITCHES

FUND LETTER

White Brook Capital New Portfolio Holding: PetIQ, Inc.

PetIQ, Inc. operates as a pet medication and wellness company in the United States and internationally. It operates in two segments, Products and Services.

Ticker: PETQ | Price: $16.60 | Price Target: $45 (+171%)
Market Cap: $490M | Timeframe: N/A

🐶 Pet Wellcare | 📈 Bullish Idea

PetIQ is a pet medication and wellness services company that has benefited from increased pet adoption during the COVID-19 pandemic. As pets age, spending on medications and services is expected to rise. Branded products account for 30% of revenue and are projected to grow at a 15% long-term rate. The company distributes prescription and over-the-counter medications and operates veterinary clinics in retail stores. Acquisitions have added brands and capabilities to the company's portfolio. PetIQ targets 15% EBITDA growth, with potential upside from a strong tick and flea season, new product introductions, and services segment margins exceeding 20%. The sale of the company's European business is not reflected in historical numbers. With a debt-to-EBITDA ratio below 2.5x, PetIQ has the capacity for further acquisitions or share buybacks. The company's price target is $45, compared to its current price of $17.50.

Read the full article here. Read time: 6 min

BLOG POST

BQE Water Inc. - $BQE.V

BQE Water Inc., a water treatment company, provides wastewater management and treatment solutions to the mining and metallurgical industry in Canada, the United States, Latin America, China, and internationally.

Ticker: BQE.V | Price: CAD 51 | Price Target: CAD $125 (+145%)
Market Cap: CAD 62.8B | Timeframe: N/A

⛏️ Mining | 💦 Water Management | 📈 Bullish Idea

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

BQE Water provides water management services for the mining industry, with recurring revenue growing at a 60% CAGR and now accounting for 40% of sales. The company currently has 6 projects and aims to add 2 per year, with each project generating an average of $1.6 million annually for over 15 years. The pipeline includes potential 'company maker' projects like a new US Selen-IX plant that could double EBITDA. Selen-IX is a patented technology for selenium removal from mining wastewater. BQE Water is scaling rapidly with EBITDA margins exceeding 30%. The company has an enterprise value of $56 million, or 6 times next twelve months EBITDA. The $125 price target is based on growth and a potential re-rating. Key risks include project failures and competition.

Read the full article here. Read time: 20 min

*SPONSORED BY BASIN URANIUM

Basin Uranium - Pioneering the Future of Clean Energy

Basin Uranium Corp., a junior exploration company, engages in the mineral exploration and development activities in Canada and the United States. It explores for uranium and gold ores.

Ticker: BURCF | Price: $0.27 | Price Target: N/A
Market Cap: $4.15M | Timeframe: N/A

⛏️ Uranium | 📈 Bullish Idea

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

Basin Uranium Corp., trading as BURCF, is strategically positioned with its flagship Chord Project in South Dakota, just miles from the significant Dewey Burdock mine, enhancing its partnership or acquisition prospects with industry leaders like Encore EU. With projects across South Dakota, Wyoming, and Utah, Basin is set on advancing uranium exploration and extraction through In-Situ Recovery (ISR), known for its low environmental impact and cost-effectiveness. The company's proactive approach includes updating the historical resource estimates and achieving NI 43-101 compliance, positioning it well in a market driven by escalating uranium demands for green energy. With favorable government policies and a burgeoning nuclear power industry, Basin Uranium represents a tactical investment poised for growth in a critical resource sector.

Read the full article here. Read time: 7 min

FUND LETTER

Heartland Mid Cap Value Fund New Portfolio Holding: The Hershey Company

The Hershey Company, together with its subsidiaries, engages in the manufacture and sale of confectionery products and pantry items in the United States and internationally. The company operates through three segments: North America Confectionery, North America Salty Snacks, and International.

Ticker: HSY | Price: $187.08 | Price Target: N/A
Market Cap: $37.8B | Timeframe: N/A

🍫 Chocolate Products | 💰 3% Dividend | 📈 Bullish Idea

The Hershey Company (HSY) is down 35% from its highs due to volume and margin pressure. Cocoa costs have increased, but price hikes will likely stick even after the spike subsides. The company has resolved its supply chain issues, and innovation and capacity are expected to fuel growth. Despite strong brands like Hershey's and Reese's, as well as prospects to balance profits and market share, HSY trades near historic lows compared to staples and the broader market.

Read the full article here. Read time: 1 min

Which stock idea was the most compelling to you?

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Amazon ($AMZN) [52%]

🟨🟨⬜️⬜️⬜️ Star Energy Group ($STAR.L) [24%]

🟥⬜️⬜️⬜️⬜️ Copart ($CPRT) [24%]

Your comments:

🚗 burkh*** ($CPRT): Owned CPRT until it hit a stop-loss last summer. It has since risen over 20% and looks like it has room to run. Learned my lesson, back in.
📦 pjmc*** ($AMZN): A company that is constantly expanding and is very innovatived.

MARKET OVERVIEW / NEWS

Market Overview

Which stock idea was the most compelling to you?

Yesterday’s Poll Results: 57% bullish

Another green day in the markets as sentiment rises again. If Spotify is any indication, some of the tech companies that did large layoffs and cost cuts will begin reaping the benefits. The news sentiment was bullish and above the 7-day average, Yellowbrick Road readers are closing in on 60% bullish, the Fear v Greed index gained a few more points, and all of the indexes were green for the second day in a row. Reader innov*** believes that all dips will be bought and the market will remain bullish until the US Presidential elections are over.

Stock Market News

General Motors raises 2024 guidance after big first-quarter earnings beat - CNBC

Spotify's monthly user numbers miss estimates on lower promotions, but has record profits - Reuters

Tesla's quarterly revenue falls for the first time since 2020, but stock rallies on announcement of new vehicles ahead of schedule - Reuters

PepsiCo earnings beat estimates as international demand boosts sales - CNBC

GE Aerospace lifts 2024 profit forecast on strong sales of engine parts, services - Reuters

Novartis lifts FY guidance after Q1 results beat expectations - Reuters

UPS quarterly profit falls on high labor costs, weak small-package demand - Reuters

JetBlue shares tumble 9% after airline lowers 2024 revenue outlook - CNBC

Apple's Q1 phone sales in China fall 19.1%, Huawei's up 70% - Reuters

Amazon launches low-cost grocery delivery subscription plan in US - Reuters

Lockheed Martin reports higher sales on strong defense demand - Reuters

HashiCorp shares spike on report that IBM is in talks to buy the cloud software maker - CNBC

Visa blows past expectations in its fiscal Q2 - Invezz

Adobe to bring full AI image generation to Photoshop this year - Reuters

Jack Dorsey's payments company, Block, is building its own bitcoin mining system - CNBC

BIGGEST INSIDER BUYS

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

10% Owner at EyePoint Pharmaceuticals, Inc. ($EYPT) purchased 581,765 shares at $18.03/share ($10.49M total) which increased their vested holdings by 8.4%. Their median purchase size is $7.42M and this is their 12th largest purchase out of 40 all time (link)

10% Owner at Steel Connect, Inc. ($STCN) purchased 701,246 shares at $9.83/share ($6.89M total) which increased their vested holdings by 34.0%. Their median purchase size is $1.26M and this is their 1st largest purchase out of 14 all time (link)

LINKS YOU’LL LOVE

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Michael Mauboussin and Bill Gurley on all things investing (podcast)

Transcript of Joel Cohen, global investor at MITIMCO, from a panel on emerging managers

Commentary on stock buybacks by Tweedy Browne