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Top stock pitches (Wed, May 22)
Connor Van Ooyen
May 22, 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!
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).
New Trade Alert!
We just made a new investment in the YBR Portfolio and copied a trade from the #7 investor in our database who averages 53%+ 2-year returns on their stock pitches.
The new stock is…
The YBR Portfolio is only available to Premium Subscribers. If you want to know which stocks the top investors are investing in, upgrade to Yellowbrick Premium (you get a 20% discount using that link or the button below).
STOCK PITCHES
Author Returns
The below stock pitch is from the Clark Street Value blog.
We have 110 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. Upgrade for 20% off.
BLOG POST
Enhabit: Failed Strategic Alternatives Process, Proxy Fight
Enhabit, Inc. provides home health and hospice services in the United States.
Ticker: EHAB | Price: $9.27 | Price Target: $16.58 (+78%)
Market Cap: $418M | Timeframe: 3
🩺 Home Health | 📈 Bullish Idea
Enhabit (EHAB), a recent spinoff from Encompass Health trading at 4.5x EBITDA, faces activist pressure from AREX Capital Management (4.8% stake) for board seats after a failed sale review. The home health and hospice care industry benefits from tailwinds such as an aging population, cheaper care settings, and consolidation, as evidenced by UnitedHealth's acquisition of Amedisys at 13.7x EBITDA. Despite near-term headwinds, including a high debt load and pressure on margins due to a shift towards Medicare Advantage plans, Enhabit's stabilizing traditional Medicare mix and the presence of activism could drive operational improvements and potential M&A opportunities after July 2024. With the combination of financial leverage, improved operating leverage, and the possibility of a strategic takeout, EHAB presents a compelling opportunity for a highly leveraged re-rating play.
Read the full article here. Read time: 3 min
Author Returns
The below stock pitch is from Directionally Correct Research.
Their historic returns are:
Upgrade to Yellowbrick Road Premium to unlock the historic returns for this author. Upgrade for 20% off.
BLOG POST
Reading Tea Leaves: Two Budding Buyout Targets - Ducommun Incorporated
Ducommun Incorporated provides engineering and manufacturing services for products and applications used primarily in the aerospace and defense, industrial, medical, and other industries in the United States. The company operates through two segments, Electronic Systems and Structural Systems.
Ticker: DCO | Price: $58.08 | Price Target: $81.93 (+41%)
Market Cap: $833M | Timeframe: 2027
🛩️ Aerospace Supplier | 📈 Bullish Idea
Ducommun Incorporated (DCO), an aerospace supplier trading at 9.5x EBITDA, recently rejected a $60 per share offer from Albion River, a 9% PE owner. The company's standalone 'Vision 2027' plan targets a 3.5% organic revenue CAGR, $75M in M&A, and 400 bps margin expansion, which management believes is achievable given the commercial aerospace recovery, defense shift, cost savings, and sale-leaseback plans. CEO Steve Oswald, who owns over 2% of the company, is now incentivized to engage with bidders due to recently granted equity awards and a change-in-control amendment, potentially earning an additional $7M in a sale. Despite Boeing and Spirit AeroSystems issues, DCO has improved EBITDA margins from 9.7% in 2017 to 13.4% in 2023, demonstrating management's strong track record. The stock appears undervalued at its current multiple, considering the PE and strategic interest, and the credibility of the 2027 targets.
Read the full article here. Read time: 2 min
Author Returns
The below stock pitch is from Oscar’s Investing Radar.
We have 10 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. Upgrade for 20% off.
BLOG POST
$IGIC - My Research Notes
International General Insurance Holdings Ltd. engages in the provision of specialty insurance and reinsurance solutions worldwide. The company operates through three segments: Specialty Long-tail, Specialty Short-tail, and Reinsurance.
Ticker: IGIC | Price: $14.40 | Price Target: N/A
Market Cap: $671M | Timeframe: N/A
💸 Specialty Insurance | 📈 Bullish Idea
International General Insurance Holdings Ltd. (IGIC), a specialty insurer trading at 1x book value and 6x earnings, boasts an impressive 87.7% 10-year average combined ratio and a 13% return on equity. The company has scaled its business, now achieving 1.1x premium-to-equity ratio (adding 400 basis points to ROE) and a 4.3% investment yield. Management sees the best underwriting environment ever, with an 82% combined ratio in 2023 and 74% in Q1 2024, indicating a potential for 20%+ ROE. Despite strong fundamentals, IGIC trades at a 30% discount to peers due to its SPAC IPO and low trading volume. Share buybacks and a potential re-rating to 1.3x book value could result in a 25%+ IRR for investors. The main risk to consider is the possibility of the hard insurance market coming to an end.
Read the full article here. Read time: 4 min
Which stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ CRH plc ($CRH) [42%]
🟨🟨⬜️⬜️⬜️ Alphawave IP Group ($AWE.L) [33%]
🟥⬜️⬜️⬜️⬜️ MaxCyte ($MXCT) [25%]
Your Comments:
🔨 jdenn***: This company has strength but today is not my entry point as the share price has already doubled in the last 18 months. This type of parabolic move can't be sustained. A pull back to 65-70 would be a nice entry point IMHO.
MARKET OVERVIEW / NEWS
Market Overview
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 52% bullish
A bit of an interesting day where the markets were mostly green, yet all of our sentiment gauges got slightly more bearish. Yellowbrick Road readers are barely bullish, the news sentiment fell a little bit and is below the 7-day average ((though is still slightly bullish), the biggest losers’ list has much bigger losers than the biggest winners’ list has winners, and the Fear v Greed index fell by 1 point.
Stock Market News
Lowe's posts lower-than-expected drop in sales on demand for small-scale repairs - Reuters
Macy's beats earnings estimates, as turnaround plan shows early progress - CNBC
Microsoft talks up tools for making AI software - Reuters
Fed Governor Waller wants 'several months' of good inflation data before lowering rates - CNBC
Peloton shares drop after it announces refinancing to stave off cash crunch - CNBC
Zoom Video raises full-year revenue forecast - Reuters
Pixar is laying off 14% of its workforce as Disney scales back content - CNBC
Nestle set to sell $5 pizza, sandwiches for Wegovy, Ozempic users - Reuters
AutoZone's quarterly profit beats estimates on demand for car parts - Reuters
Trump Media stock falls 10% after posting $327.6 million loss in first quarter - CNBC
FEATURED INSIDER TRADE
The insider trade is brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here
See Remarks at Third Coast Bancshares, Inc. ($TCBX)
The See Remarks purchased 1,500 shares at $21.32/share ($31,980.00 total) which increased their vested holdings by 4.2%. The current price is $20.99 (-1.5%). Their median purchase size is $30,780.00 and this is their 2nd largest purchase out of 5 all time. (trade link)
Historic Returns
1m returns: 3% weighted | 3% median | 50% win rate (2/4)
3m returns: 17% weighted | 16% median | 75% win rate (3/4)
6m returns: 16% weighted | 16% median | 75% win rate (3/4)
1y returns: 32% weighted | 35% median | 100% win rate (2/2)
LINKS YOU’LL LOVE
THAT’S ALL FOLKS
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Connor
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