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Top stock ideas (Fri, Jan 26)
Connor Van Ooyen
January 26, 2024
YBR Portfolio // About // Sponsor YBR // YBR Premium
👋 Good Morning!
This is the Yellowbrick Road where I share the best stock ideas from billion-dollar hedge funds, professional analysts, millionaire investors, and more!
Welcome to the 95 new readers who joined yesterday!
Our AI read and summarized 163 stock ideas, 1231 news articles, and 185 insider trades and found:
Is it finally time for Paypal to turn around? (featured stock idea)
An American energy infrastructure with a 6.9% dividend, an undervalued small-cap with an 8% dividend, and an insurance company with a 78% upside (bonus stock ideas)
Intel 2024 outlook isn’t great (news)
An insider buys the stock for the 6th time recently (insider trade)
and much more…
Thanks for reading! Have a great day.
Connor
* If you missed yesterday’s email, don’t forget to read it here
FEATURED STOCK IDEA
BLOG POST
PayPal: This Could Be The Game Changer
PayPal Holdings, Inc. is an American company operating an online payments system in the majority of countries that support online money transfers, serving as an electronic alternative to traditional paper methods like checks and money orders. The company also owns a range of payment platforms, including Venmo and Braintree.
Ticker: PYPL | Price: $59.97 | Price Target: 101.23 (+69%)
Market Cap: $70B | Timeframe: end of 2024
💸 Fintech/Payments | 📈 Bullish Idea
PayPal Holdings, Inc. (NASDAQ: PYPL) has been underperforming the S&P 500, but its present valuation, technical breakout, and new strategic direction present a compelling growth-at-a-reasonable-price (GARP) opportunity. The company, independent from eBay since 2015, operates a global technology platform for various payment services and reported a solid Q3 2023, with adjusted EPS at $1.30, up 20% year-over-year, and a 15% growth in total payment volume to $387.7 billion, despite a slight decrease in active accounts to 428 million. A partnership with KKR is projected to yield $1.8 billion in proceeds in H2 FY2023 in the rapidly expanding European BNPL market, where PayPal's 'Pay in 4' option is particularly strong. Incoming CEO Alex Chriss is directing focus on AI and data leveraging to improve PayPal’s offerings and shift back to profitable growth over mere expansions. The company's guidance for 4Q FY2023 anticipates 6-7% revenue growth and non-GAAP EPS growth at 10%, alongside a significant $5 billion stock buyback plan. Estimating a conservative multiple of 15x EV/EBITDA, PayPal's growth potential could reach 53.8% by the end of 2024, factoring in FY2024 revenue projections and expected margin improvements. Risk factors include competition in the payment market, consumer preference changes, and the uncertainty surrounding management changes. Nevertheless, favorable buybacks, expected cost cuts, and potential for profitable top-line growth contribute to a 'Strong Buy' rating for PYPL stock.
Read the full article here. Read time: 5 min
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Featured Stock Idea
Hewlett Packard Enterprise ($HPE)
🟩🟩🟩⬜️⬜️ - Buy (51%)
🟥🟥⬜️⬜️⬜️ - Pass (27%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (22%)
❌ burkh**** - HP has always been the cheaper alternative to Dell in the desktop business, and no evidence this is changing. No significant insider buying of company stock. Not a fan.
❌ joelm**** - Personal experience with HP, poor quality equipment, constant need of repair or tech support for problems.
🔎 alpo**** - I've seen several other suggestions that they are upgrading their product mix.
❌ greg.d**** - The company just announced that it got hacked by Russian hackers. Bad timing on this recommendation
There are 3 more stock ideas after “Today’s Sponsor”
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BONUS STOCK IDEAS
BLOG POST
Kinder Morgan: Growth Acceleration Ahead
Kinder Morgan, Inc. (ticker: KMI) is an American energy infrastructure company that operates pipelines and terminals to transport natural gas, gasoline, crude oil, carbon dioxide (CO2), and other products. It is one of the largest energy infrastructure companies in North America.
Ticker: KMI | Price: $17.33 | Price Target: N/A
Market Cap: $38B | Timeframe: N/A
🛢️ Oil/Gas | 💰 6.6% Dividend | 📈 Bullish Idea
Kinder Morgan, Inc. (KMI) has enhanced its fiscal year 2024 guidance following a small yet strategic acquisition that is anticipated to bolster earnings by 15%. This significant growth for a company of Kinder Morgan's stature highlights its strength in the midstream sector, which is beginning to consolidate, presenting potential for future opportunistic purchases. The company stands out with operational green projects, unlike its mostly speculative competitors, positioning it as a leader in the green revolution within the industry. Kinder Morgan's proactive reduction of debt levels below target positions it with the financial leeway for future growth initiatives, including fully debt-financed projects. Notably, the company managed the recent acquisition without surpassing a proforma debt ratio estimate of 4.1, beneath the guided ceiling of 4.5. The preference for stock repurchases over rapid dividend increases hints at additional capital for forthcoming growth projects. Despite a warmer-than-expected December affecting natural gas demand, a subsequent cold spell is realigning performance with initial forecasts. The company's long-standing expertise in fossil fuel transportation could naturally extend to future energy solutions. Renewable projects already active include a carbon capture initiative utilizing existing CO2 pipelines and renewable fuel involvement in California. Management, maintaining a conservative approach to finance, anticipates an 8% growth in DCF and is cautious on dividend hikes until the growth projects' impacts are clear-cut. Kinder Morgan's strategic direction, combined with climatic factors such as the possibility of a hot La Nina summer increasing natural gas usage, underpins a robust buy recommendation, with single-digit growth from the current price contributing to a likely total return in the low double digits in the long term, possibly punctuated by higher returns in growth cycles and balanced by lower returns in downturns.
Read the full article here. Read time: 5 min
BLOG POST
Jan Svenda of MS Microcaps pitch - SPOK Holdings ($SPOK)
SPOK Holdings, Inc. is a provider of communication solutions including call center operations, emergency management, mobile healthcare communications, and paging services, mainly for healthcare, government, and large enterprise customers. The company operates primarily through its wholly-owned subsidiary, Spok, Inc.
Ticker: SPOK | Price: $16.46 | Price Target: N/A
Market Cap: $329M | Timeframe: N/A
🚗 Communication Software | 🏥 Hospitals/First Responders | 💰 8% Dividend | 📈 Bullish Idea
Idea Brunch, the weekly newsletter where professional investors shares a couple of their stock pitches (it’s where this pitch is from), is offering Yellowbrick Road readers a 20% discount for life (link).
SPOK Holdings (NASDAQ: SPOK — $312 million). This is a pager and communication software business, targeting hospitals and first responders. They turned the ship in the past two to three years and returned to generating significant cash flow. While you might think pagers are dying, the business has a clear plan on how to sustain itself. Regardless, the growth in the software business is accelerating. SPOK matches plenty of our checklist criteria (long operating history, profitability, good management, etc.). Therefore, we believe it should not trade anywhere near the current levels. The stock sold off a bit recently, and it will face tough quarterly comps in the next two quarters, but they are unlikely to drop the momentum they built so far. The stock still has over 8% dividend yield, which is being covered by the cash flow and then some. Even just a 5% yield valuation gives you a healthy upside. The blue sky scenario is that SPOK eventually gets a valuation closer to Vocera, a business focused on similar products for nurses. Vocera was acquired for $3bn at over 13x its revenues. SPOK is now selling at EV/S of about 2x.
Read the full article here. Read time: 1 min
BLOG POST
Durability of Kinsale’s growth
Kinsale Capital Group, Inc. (ticker: KNSL) is an American insurance company specializing in the excess and surplus lines market, offering property, casualty, and specialty insurance products for individuals and businesses.
Ticker: KNSL | Price: $395.04 | Price Target: $702.70 (+78%)
Market Cap: $9B | Timeframe: 4 years
💸 Insurance | 💰 0.56% Dividend | 📈 Bullish Idea
Kinsale Capital Group ($KNSL), currently at $397.43, has outpaced the S&P 500 with an 18.55% increase since the last review. Despite past growth rates of around 40%, the company’s CEO, Michael Kehoe, projects a more conservative 15-20% growth moving forward. Given the E&S industry's expected slowdown to 8% annual growth, KNSL is predicted to excel with a slightly increasing 0.15% market share each year, alongside potential spillover from the $1 trillion P&C industry and new types of risk. Kinsale's low expense ratio of about 20% compared to an industry average of 30-35% is partly due to their technology leverage and centralised operations, not to mention their selective small account focus within the E&S market. Predicting a continuation of their growth trend, my 4-year price target for KNSL is set at $702.70, assuming 23.3% revenue growth and extrapolating from a projected EPS of $22 by FY27 with a P/E of 32, a slight decrease from the current 34 to add conservatism.
Read the full article here. Read time: 7 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results:
🟩🟩🟩⬜️⬜️ Energy Select Sector SPDR Fund [38%]
🟨🟨⬜️⬜️⬜️ ARIS Water Solutions ($ARIS) [34%]
🟥⬜️⬜️⬜️⬜️ Miller Industries ($MLR) [28%]
Your comments:
💦 emoj*** ($ARIS): A sustainable solution company is always attractive when there is true value added.
MARKET OVERVIEW
Today’s market overview is sponsored by Vantage Point. Regretting 2023? Here’s how to make 2024 your best trading year ever. To promise 107% gains in 15 days on every trade is one thing A.I. can’t do, but I do guarantee the opportunity to access the best information available. Learn more in this FREE LIVE A.I. Market Training.
Are you short-term bullish or bearish on the market? |
Yesterday’s Poll Results: 68% bullish
Another very bullish day, though Intel missed earnings after hours which caused the news sentiment to fall a little bit and may make tomorrow a less bullish day in the market. The news sentiment fell below the 7-day average for the first time in a week and Yellowbrick Road readers fell back below 70% bullish. But all of the indexes still ended the day green and the Fear v Greed index remained in the Extreme Greed segment.
STOCK MARKET NEWS
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Microsoft lays off 1,900 workers, nearly 9% of gaming division, after Activision Blizzard acquisition - CNBC
Thursday's GDP report expected to show the U.S. economy at a crossroads - CNBC
Intel stock sinks as early 2024 outlook comes up short - CNBC
Comcast shares rise on earnings beat, better than expected broadband performance - CNBC
Humana stock plunges on dismal 2024 forecast, as insurers face soaring medical costs - CNBC
Apple smartphone shipments in China shrink 2.1% in fourth quarter - IDC - Reuters
GDP grew a surprisingly strong 3.3% in latest quarter, far better than expected - New York Post
Macy's Stock Surges on Report of Another Buyout Bid - Barrons
Capital One's profit drops on higher credit loss provisions, FDIC charge - Reuters
OpenAI's Altman to meet chipmakers Samsung, SK Hynix execs on Friday -sources - Reuters
FEATURED INSIDER TRADE
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10% Owner at KalVista Pharmaceuticals, Inc. ($KALV)
The 10% Owner purchased 99,129 shares at $12.53/share ($1.24M total) which increased their holdings by 2.2%. The current price is $12.16 (-2.9%). Their median purchase size is $1.76M and this is their 7th largest purchase out of 10 all time. (trade link)
Historic Returns
1m returns: 86% weighted | 17% median | 100% win rate (4/4)
3m returns: 46% weighted | 30% median | 50% win rate (2/4)
6m returns: 19% weighted | 3% median | 50% win rate (2/4)
1y returns: 37% weighted | 20% median | 50% win rate (2/4)
Note: 6th purchase in the last month. I believe they have some trial data expected to come out this quarter
QUIZ
+3 POINTS - WEEKLY TOURNAMENT
What does the financial term 'alpha' represent in investing? |
Yesterday’s Question: The term "unicorn" in the venture capital industry refers to a startup company valued at over what amount?
Answer: $1 billion
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+15 POINTS - WEEKLY TOURNAMENT
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WEEKLY TOURNAMENT
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🏆 This Week’s Leaderboard
elija**** (153 points)
tommyt*** (153 points)
plv33**** (153 points)
Scoring
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MY OTHER FREE NEWSLETTERS
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