🤖📈 Top Trade Ideas for July 26

Auburn National Bancorp is a small bank focused on real estate lending in the Auburn-Opelika region of Alabama. The company offers a 6% return of cash flow to investors through a combination of a 5% dividend yield and 1% share buyback per annum. The bank consistently retains the largest market share of deposits in its region, indicating strong relationships with local customers. Current management owns 3% of outstanding shares, while two individuals own 32% and have a vested interest in the company's success. Despite a decline in market price over the past two years, as economic conditions improve, Auburn National Bancorp is expected to increase its loan-to-deposit ratio and drive book value higher. The major risks associated with this investment are the potential for a bank run and the lack of economic growth in the area. However, the stickiness of Auburn's deposits and projected population and wage growth in the region mitigate these risks. Regional banks are currently less expensive than they were last year, and Auburn National Bancorp is considered to be well-established with committed management and favorable regional economics. Overall, the bank is currently valued favorably and offers potential for market-beating returns.

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Vistra is a company that produces and sells electricity and natural gas to residential and business customers. It is currently trading at a valuation of less than 6 times EBITDA. The company aims to achieve a valuation of 11 times EBITDA by shifting its energy mix to clean energy, partly through a large acquisition. Vistra recently acquired a nuclear energy business, Energy Harbor Corp, which essentially turns Vistra into two businesses internally and will expand its presence in the Midwest and Northeast and increase its clean energy generation. The shift to nuclear power is seen as cost-effective, clean, and appealing to ESG investors. Vistra's valuation is lower compared to Constellation Energy, which has a larger nuclear portfolio. The company has a strong focus on buybacks and plans to repurchase at least $1 billion annually. The Energy Harbor transaction may lead to the separation or sale of Vistra's clean energy and fossil fuel generation assets in the future. The author discusses the valuation of Vistra Vision and Tradition, highlighting the importance of separate reporting for Vistra Vision's earnings and projects a valuation of $37/share. The author also mentions the net debt post-close and suggests that if the company can change sentiment and control debt, there is potential for upside.

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The author is bullish on Tencent Music Entertainment (TME) and believes it is a good investment opportunity. They predict that TME's adjusted EPS for 2023 will beat consensus estimates by around 20%. The author also notes that TME is trading at a discount to its intrinsic valuation and sets a price target of $11.5 per share. TME is seen as having a strong competitive advantage in the online music sector in China, with a diverse portfolio of music services and strong relationships with content suppliers. The author expects TME's revenue growth to be driven by increasing the paying ratio and pricing of monthly subscriptions, as well as non-subscription sales and advertising. They also highlight the potential for TME's social entertainment segment to experience revenue recovery and margin expansion. However, the author does acknowledge some downside risks, including lower-than-anticipated margin growth, uncertainty surrounding subscription boosts, and a worse-than-expected outlook for the social entertainment business. Despite these risks, the author recommends a buy and hold investment strategy for TME.

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