Top stock pitches (Wed, May 1)

Connor Van Ooyen
May 01, 2024

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👋 Good Morning!

The second day in a row with a Bitcoin stock at the top of the biggest losers list as MicroStrategy tanked; McDonald’s and Starbucks both miss earnings; the market took a hit after Chicago PMI came in at 37.9 vs an estimate of 45; AMZN, GOOGL, MSFT, and META all have announced massive CapEx, will it cause problems when it hits the P&L? (link); cannabis stocks jump after Biden administration moves to reclassify marijuana; this email has a stock pitch for a cannabis company with 180% upside, and much 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)

* If you missed yesterday’s email, don’t forget to read it here

STOCK PITCHES

BLOG POST

TSMC – Let’s be realistic; this is a no-brainer today

Taiwan Semiconductor Manufacturing Company Limited, together with its subsidiaries, manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally.

Ticker: TSM | Price: $135 | Price Target: $175 (+30%)
Market Cap: $616B | Timeframe: 2 years

⚡️ Semiconductor | 📈 Bullish Idea

TSMC, the chip titan with a 67% advanced node share, is fueling the AI and semiconductor boom. The company reported a Q1 beat with 13% revenue growth. Its 3nm technology is fully booked, and AI revenue is expected to double. TSMC's Arizona fabs will boost its US presence, while Intel is not seen as a match until 2030 and beyond. The risk from China is considered low as TSMC is vital to the US. The company is projected to see 21%+ year-over-year growth, with a price target of $175 based on a 22x PE multiple, offering a potential 17% IRR.

Read the full article here. Read time: 15 min

VALUE INVESTORS CLUB

Kansai Paint Co., Ltd. - $4613.T

Kansai Paint Co., Ltd., together with its subsidiaries, manufactures and sells paints and coatings in Japan, India, Asia, Africa, Europe, and internationally

Ticker: 4613.T | Price: JPY 2051.50 | Price Target: N/A
Market Cap: JPY 432B | Timeframe: N/A

🏭 Paint Manufacturing | 💰 2% 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

Kansai Paint (4613.T) is trading at an 8-year low of 10x EV/EBIT despite several positive factors: ROE target increased from 10% to 13%, an 18% buyback over the past 2 years, and a projected 50% increase in operating profit for fiscal year 2024. Although management has improved, the stock price remains flat, while comparable companies trade at 18-27x EV/EBIT. Potential risks include foreign exchange exposure, M&A activity, a price war in India, and convertible debt. The stock has upside potential if the company can sustain its higher earnings.

Read the full article here. Read time: 5 min

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BLOG POST

High Water Mark - Grown Rogue International Inc.

Grown Rogue International Inc., together with its subsidiaries, produces and sells cannabis products in the United States. It offers a range of cultivars for consumers, such as indicas, sativas, and hybrids; strain-specific prepackaged flowers; and pre-roll pack products, as well as provides consulting services.

Ticker: GRIN.CN | Price: CAD 1.07 | Price Target: CAD 3 (+180%)
Market Cap: CAD 199M | Timeframe: N/A

🌳 Cannabis | 📈 Bullish Idea

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

Grown Rogue is the #1 cannabis flower producer in Oregon and a top 5 producer in Michigan, now expanding to New Jersey and Illinois where flower prices are 3-4 times higher. The company has a production cost under $600 per pound, leading to the highest margins and growth rate in the industry. Hedgeye recently initiated coverage with a price target of $1.50-$3, based on expectations of triple-digit growth, 40% EBITDA margins, and a clean balance sheet. Grown Rogue was the best performing cannabis stock in 2022 and 2023, with potential upside of 130-360%. The company owns 14.43% of its shares.

Read the full article here. Read time: 4 min

Which stock idea was the most compelling to you?

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ CCC Intelligent Solutions ($CCCS) [45%]

🟨🟨⬜️⬜️⬜️ (short) Monogram Orthopedics ($MGRM) [30%]

🟥⬜️⬜️⬜️⬜️ Alphawave IP ($AWE.L) [25%]

MARKET OVERVIEW / NEWS

Market Overview

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

Yesterday’s Poll Results: 59% bullish

A brutal day in the market as the indexes refuse to flip back to an uptrend. All of the indexes were very red, Yellowbrick Road readers got slightly more bearish, the new sentiment fell back to slightly bearish, and the Fear v Greed index fell 4 points. The FOMC meeting today will play a big role in whether the market continues its dip or makes another attempt at flipping back to an uptrend.

Stock Market News

Amazon's advertising revenue jumps 24% in first quarter - CNBC

Eli Lilly beats on quarterly profit, hikes full-year guidance on strong sales of Zepbound, Mounjaro - CNBC

PayPal lifts 2024 profit forecast as spending stays resilient, margins improve - Reuters

Tesla shares drop nearly 6% after Musk cuts about 500 jobs in Supercharger team - CNBC

Cannabis stocks surge as Biden administration moves to reclassify marijuana - CNBC

AMD gaming revenue falls 48% year-over-year and the stock is down - CNBC

Walmart to shutter health centers, virtual care service in latest failed push into health care - CNBC

Starbucks shares sink 10% as same-store sales fall, quarterly results miss - CNBC

Computer parts maker Logitech's fourth-quarter sales rise - Reuters

Jeep-maker Stellantis reports sharp fall in revenue as it shifts car portfolio - CNBC

Eight newspaper publishers sue OpenAI over copyright infringement - CNBC

Super Micro pushes up full-year revenue forecast as it points to strong AI demand - CNBC

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President & COO at MSCI Inc. ($MSCI)

The President & COO purchased 7,500 shares at $459.41/share ($3.45M total) which increased their vested holdings by 2.6%. The current price is $465.79 (+1.4%). Their median purchase size is $1.81M and this is their 1st largest purchase out of 2 all time. (trade link)