Best stock ideas (Thur, Nov 2)

👋 Good Morning!

The weather has suddenly turned freezing here in Indiana. I hope your weather is better.

Our AI read and summarized 205 articles today and found:

  • Two new hedge fund purchases (stock ideas)

  • WeWork is filing bankruptcy (news)

  • 21 of Charlie Munger’s best mental models (resource)

  • Two stock ideas in Europe (stock ideas)

  • and more…

Thanks for reading!

Connor

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FEATURED TRADES
HEDGE FUND

🥇 GORA new position: Torrid Holdings

Torrid Holdings Inc. operates in women's plus-size apparel and intimates market in North America.

Ticker: $CURV | Price: $2.35 | Price Target: N/A | Timeframe: N/A

👕 Apparel | 🏷️ Undervalued | 📈 Bullish Idea

Torrid Holdings (CURV), North America's largest direct-to-consumer brand for women’s plus-size apparel and intimates, serves over 3 million repeat customers through its e-commerce platform and 640 physical stores. Despite its strong brand and positive business inflection, CURV’s shares are undervalued, largely due to a poorly timed IPO amidst 2021's market skepticism. Since its IPO, the share price plummeted from $21 to $1.50, yet various indicators like high-frequency data and peer retailer feedback signal a business upswing post-summer. Management’s overly conservative guidance, stemming from forecasting wariness, has led to undervalued consensus estimates, presenting an investment opportunity with CURV acquired at a mere 3.0x EV/EBITDA valuation and above 50% FCF yield. Moreover, with major PE firm Sycamore Partners retaining 79% ownership post-IPO, and given its recent privatization of Chico’s at a 65% premium, there's a viable scenario for CURV to follow suit, especially considering its robust $1.2 billion annual sales and around $150 million EBITDA, juxtaposed against Sycamore’s over $10 billion in committed capital.

Read the full article here. Read time: 8 min

BLOG POST

🥈 AGB 2023.9 - Amphenol Corp.

Amphenol Corporation, together with its subsidiaries, primarily designs, manufactures, and markets electrical, electronic, and fiber optic connectors in the United States, China, and internationally. It operates through three segments: Harsh Environment Solutions, Communications Solutions, and Interconnect and Sensor Systems.

Ticker: $APH | Price: $80.55 | Price Target: N/A | Timeframe: N/A

⚡️ Electronics Parts | 🏭 Manufacturing | 📈 Bullish Idea

Amphenol, a notable designer and manufacturer of electronic connectors and sensors, serves a wide array of markets from automotive to aerospace with a decentralized structure across 130 business units. Despite a modest 5.4% market share in the $235B interconnect and sensor sector of 2022, it leads in several verticals, outpacing competitors like Aptiv and TE Connectivity. Its growth is driven by a blend of organic reinvestment and strategic acquisitions, notably in the automotive sector due to electrification trends. With a robust reinvestment rate and a 9%-21% return on incremental capital over the past five years, Amphenol is well-poised for steady value increase, especially with potential benefits from the rising Department of Defense budget in the military/aerospace & defense vertical. Its global manufacturing presence, unlike the more capital and complexity intensive semiconductor sector, along with a strategic M&A approach, underpins its consistent performance and growth prospects.

Read the full article here. Read time: 11 min

HEDGE FUND

🥉 Miller Deep Value new position: Bread Financial

Bread Financial Holdings, Inc. provides tech-forward payment and lending solutions to customers and consumer-based industries in North America

Ticker: $BFH | Price: $27.02 | Price Target: 81 (+200%) | Timeframe: 3-5 years

🏦 Financial Services | 📈 Bullish Idea

We recently initiated a position in Bread Financial (BFH), formerly Alliance Data Systems, as its share price has dipped to near historical recessionary lows. Bread Financial, specializing in proprietary direct-to-consumer credit cards and deposits, also offers digitally enabled private-label, co-branded credit cards, installment loans, and buy now, pay later (BNPL) options. A management overhaul in 2020 led to a multi-year transformation, streamlining the business model, developing differentiated products, and expanding brand partnerships. The new CFO notably enhanced the company's balance sheet, tripling capital ratios to over 9%, reducing debt by $1.7B, and increasing direct-to-consumer deposits by nearly $5B. Since 2020, BFH's tangible book value surged by over 30%, nearing $40/share. Despite market concerns over potential late fee payment industry changes and weaker consumer spending, management envisions profitability even in a severe recession scenario akin to 2008-09. The current low valuation of BFH, with a price to earnings (FY2) of 3.3x and a 25% discount to the current tangible book value, significantly discounts these marketplace concerns. With management's long-term return-on-equity target notably exceeding market expectations, we foresee an upside potential for BFH over the next 3-5 years to more than triple the current share price.

Read the full article here . Read time: 7 min

POLL - FEATURED TRADES
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Which featured trade idea was your favorite?

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Yesterday’s Poll Results (link):

🟩🟩🟩⬜️⬜️ Sherwin-Williams Co ($SHW) [42%]

🟨🟨⬜️⬜️⬜️ Bel Fuse Inc ($BELFB) [35%]

🟥⬜️⬜️⬜️⬜️ FirstCash Holdings ($FCFS) [23%]

Your Thoughts:

  • 🏡 atone*** ($SHW): I work in a retail store and some of the paint items we stock are from Sherwin-Willams. It seems to be one of the best-selling items in the store.

  • 🏡 loril*** ($SHW): More people will Improve their properties instead of moving since the mortgage rates so high

  • 🏭 bzaha*** ($BELFB): 12% earnings yield and with 6% LT revenue growth and upside on operating margin enhancements make this a nice return and the 15%+ ROIC shows how strong this business is.

  • 🏭 emoj*** ($BELFB): Has been vetted and trusted in the supply chain for government/military and will continue to grow its established customer base.

Keep reading until the end of the email for the bonus stock ideas!

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DAILY QUIZ
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Which company had the tagline "Don't be evil" in its corporate code of conduct?

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Yesterday’s Question (link): Which country has a stock market index known as the FTSE 100?

Answer: United Kingdom

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WEEKLY TOURNAMENT

Gain points and earn prizes every week just for voting on the quizzes/polls, replying to this email, and clicking on ads/sponsored links!

🏆 This Week’s Leaderboard

  1. emoj**** (122 points)

  2. dmor*** (122 points)

  3. joe_**** (122 points)

Scoring

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BONUS STOCK IDEAS

The Bonus Stock Ideas section tends to include more unique trade ideas: short ideas, OTC stocks, foreign stocks, special situations, etc. These are for more adventurous/advanced investors.

HEDGE FUND

Plural Investing new holding: Jet2 (Jet2.L)

Jet2 plc, together with its subsidiaries, engages in the leisure travel business primarily in the United Kingdom. The company operates scheduled holiday flights to leisure destinations in the Mediterranean, the Canary Islands, and European Leisure Cities.

Ticker: $JET2.L | Price: 1,002 GBP | Price Target: N/A | Timeframe: N/A

🛩️ Travel | 🇬🇧 UK | 📈 Bullish Idea

UK-based package holiday business Jet2, steered by CEO Steve Heapy and CFO Gary Brown, has grown its market share from 2% to 21% over the last decade, driven by excellent customer service and retention. Despite a 22% stock dip in Q3 from its high earlier this year, Jet2 reported record profits for the summer, doubling its pre-Covid EPS peak to around £1.8/share, aligning with the initial investment thesis when shares were bought at around £5, now trading at £11, and estimated to reach £25. Although currently trading at a decade-low 6x P/E, against an assumed conservative 12.5x P/E, sell-side estimates project another record earnings next year due to strong orders, pricing, and a robust travel outlook. Despite the retirement of Founder & Chairman Philip Meeson, the leadership transition is expected to be seamless with internal promotions and Meeson's continued 20% shareholding. The company's potential to buy back shares at the current low P/E, while continuing to invest in the business, could act as a stock catalyst. With Jet2's leading position in the UK package holiday market, the expectation is for the company to sustain double-digit earnings growth over the next 3-5 years, eventually trading at a double-digit multiple.

Read the full article here. Read time: 7 min

BLOG POST

Aedas Homes (AEDAS Spain – EUR 667m)

Aedas Homes, S.A. engages in the development of residential homes in Spain. The company focuses on multi- and single-family homes; and provides real estate services, as well as rents properties.

Ticker: $AEDAS.MC | Price: 15.08 EUR | Price Target: N/A | Timeframe: N/A

🚗 Housing Development | 💰 14% Dividend | 🚨 Event Driven | 📈 Bullish Idea

Real estate developer, screening great risk/reward. We have previously mentioned that we have been looking at companies with a relatively large balance sheet and strong (future) cash flow generation in a market / industry that is being pressured due to the macro environment. Aedas is an interesting company that fits this description. The share prices of many companies in the industry have been suffering, but the Spanish (end-)market continues to show relative resilience. Aedas’ pre-sales remained strong, giving visibility on future earnings generation. It even managed to increase pricing in this tough environment. Trading at c. 40% discount to NAV, >14% dividend yield and what looks promising cash flow generation. Potential target if the valuation remains pressured.

Read the full article here. Read time: 15 min

ANALYST REPORT

Bausch & Lomb: Solid Demand for Lenses and Consumables Continues to Fuel Growth

Bausch & Lomb is one of the largest vision care companies in the U.S. The firm was previously a subsidiary under parent company Bausch Health and it was spun off to become a public company in 2022. It operates in three segments: vision care, surgical, and ophthalmic pharmaceuticals.

Ticker: $BLCO | Price: $16.52 | Price Target: $26 (+57%) | Timeframe: N/A

👓 Vision Care | 🩺 Healthcare | 📈 Bullish Idea

Bausch & Lomb, a prominent vision care company, showcased a positive financial trajectory in its Q3 2023 report, with a 6.9% YoY increase in sales, bolstered by robust demand and a diversified product range. Key achievements included the acquisition of Xiidra, a dry-eye drug from Novartis, and the successful launch of Miebo, an FDA-approved dry-eye treatment. Despite the company's late entry into the daily silicon hydrogel lens market, its strong brand and high-quality products continue to uphold its competitive stance. Bausch & Lomb's strategic acquisitions like Xiidra and innovative products like Miebo are set to significantly enhance its ophthalmic pharmaceutical segment, aiming for a significant market share in the $5.0 billion dry eye disease market. The company's solid footing in vision care, surgical segments, and expanding pharmaceutical portfolio, alongside a proactive approach towards capturing market share in the dry eye disease realm, underline a promising outlook. The fair value estimate is now adjusted to $26 per share, reflecting the potential growth from the recent strategic moves. However, financial risks persist with a high leverage ratio following the Xiidra acquisition, indicating the need for successful product launches and operational efficiency to realize the projected growth.

Read the full article here (paywall). Read time: 14 min

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