Top trade ideas (Wed, Nov 8)

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👋 Good Morning!

Our AI read and summarized 230 articles and found:

  • New hedge fund purchases of Paypal and Casella Waste Systems (stock ideas)

  • GM halts production of Cruise driverless vans (news)

  • Berkshire Hathaway’s owner manual (resource)

  • Two small-cap foreign investment ideas (stock ideas)

  • and more…

Thanks for reading! As always, feel free to respond to this email with any questions or feedback. I read all the responses.

Connor

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TODAY'S SPONSOR

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FEATURED TRADES
HEDGE FUND

🥇 PayPal: Stable Q3, New CEO Has Started Fixing Things

PayPal is an American company operating a worldwide online payments system that supports online money transfers and serves as an electronic alternative to traditional paper methods.

Ticker: $PYPL | Price: $55 | Price Target: $121 (+120%) | Timeframe: end of 2026

🏦 Financial Services | 📈 Bullish Idea

Following the release of PayPal's Q3 2023 results, the company's shares experienced an 8.6% increase in two days, although they are down nearly 25% year-to-date and more than 80% from their 2021 peak. The report acknowledges past misjudgments but underscores the positive changes expected with new CEO Alex Chriss. Despite a slightly worse-than-expected Q3, key financial metrics such as Total Payment Volume, Net Revenues, and Transaction Margin Dollars demonstrated some growth. Importantly, Alex Chriss shared his initial thoughts on PayPal's strategy, focusing on core areas, cost reductions, profit-accretive growth, and improved financial reporting. The company is also undergoing a C-suite reshuffle with new CFO and CTO appointments. The stock is seen as undervalued, offering limited downside, and it's estimated that a return to 10% EPS growth from 2025 and a P/E of 20 could result in a 115% total return by 2026. The analysis indicates that PayPal's current valuation doesn't reflect its turnaround potential and positions it as a buy opportunity.

Read the full article here. Read time: 8 min

HEDGE FUND

🥈 London Company Small/Mid Cap new position: Casella Waste System

Casella Waste Systems, Inc., together with its subsidiaries, operates as a vertically integrated solid waste services company in the northeastern United States.

Ticker: $CWST | Price: $79.13 | Price Target: N/A | Timeframe: N/A

♻️ Waste Services | 📈 Bullish Idea

CWST is the 5th largest waste company in the U.S., and it’s the #1 player in the dense Northeast. CWST is vertically integrated and has significant rural market exposure (~70%) versus its peers. The Northeast hasn’t approved a new landfill permit in 30 years, so the scarcity value of landfills combined with CWST’s vertical integration has given it significant pricing power. We’re attracted to CWST’s leading position in a stable business with high degree of recurring revenue. It has low leverage and is family owned. Plus, as a smaller player in a consolidating industry, CWST could possibly be acquired by a large player in the future.

Read the full article here. Read time: 7 min

ANALYST REPORT

🥉 Shopify: Solid quarter after exit from logistics

Based in Ottawa, Canada, Shopify provides a cloud-based commerce platform for small and medium-sized businesses. The company's software provides customers with a single view of multiple sales channels, including web-based and mobile online platforms, physical retail locations, social media storefronts, marketplaces, and other venues.

Ticker: $SHOP | Price: $61.66 | Price Target: $80 (+30%) | Timeframe: N/A

💻 E-commerce Software | 📈 Bullish Idea

Shopify Inc. (NYSE: SHOP) receives a solid BUY recommendation from Jim Kelleher, CFA, with a target price of $80, backed by its impressive third-quarter performance in 2023, outperforming consensus with $1.71 billion in revenue and non-GAAP diluted EPS of $0.24, $0.10 above expectations. This marks Shopify's second consecutive quarter of GAAP profitability. Post-exit from the delivery and logistics business, now operated by Flexport, Shopify has seen a boost in margins and can now better focus on merchant services in the burgeoning AI era with its Shopify Magic suite. The company is on a growth trajectory with a 22% year-over-year increase in gross merchandise volume, signaling robust business activity as it heads into the holiday season. Despite a 75% plunge in 2022, SHOP has rebounded 77% year-to-date in 2023, outpacing peers. The restructuring, including a 30% workforce reduction, and strategic shift away from low-margin logistics have improved margins and operating efficiency. With an expanding merchant base, innovative AI tools like Sidekick, and a focus on global expansion and customer relationships, Shopify is positioning itself as a category leader. Financial strength remains high, with substantial cash reserves, even as the company carries a considerable debt load. Management, under CEO Tobias Lutke and President Harvey Finkelstein, is steering Shopify towards long-term growth, but risks from the logistics divestment remain, although minimized by the partnership with Flexport. Shopify does not pay dividends, focusing instead on growth and stock repurchases to offset option dilution.

Read the full article here (paywall). Read time: 9 min

POLL - FEATURED TRADES
+3 POINTS FOR VOTING IN POLL - WEEKLY TOURNAMENT

Which featured trade idea was your favorite?

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Yesterday’s Poll Results (link):

🟩🟩🟩⬜️⬜️ Clearwater Analytics ($CWAN) [36%]

🟩🟩🟩⬜️⬜️ Ferguson ($FERG) [34%]

🟨🟨⬜️⬜️⬜️ Eversource Energy ($ES) [30%]

Your Thoughts:

  • 🔎 nick*** ($CWAN): Any company working in insurance and analytics right now is primed for growth. The insurance industry is reeling with tech-enabled claims litigation and they need analytical programs to better prepare for incoming, often frivolous, lawsuits

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

STOCK MARKET NEWS

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DAILY QUIZ
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Which online platform was originally called "AuctionWeb"?

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Yesterday’s Question (link): What was the original name of the company now known as PayPal?

Answer: Confinity. It originally was security software before they realized their security was good for sending money. They then changed the name to Paypal and then merged with Elon’s company X.

LINKS YOU'LL LOVE
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The NYSE trading floor in the 1980s

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SECRET QUESTION
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If you read this far, reply to this email with your answer to gain points for the weekly tournament. (Or if you’d rather not answer but still want the points, you can just reply and say hi!)

Secret Question: Any specific sector that has you particularly interested? I think a lot of banks and small/mid-cap companies are getting interesting. Also Chinese tech stocks if you believe their government will be even semi-intelligent.

WEEKLY TOURNAMENT

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🏆 This Week’s Leaderboard

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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

London Company Small/Mid Cap new position: Vail Resorts

Vail Resorts, Inc., through its subsidiaries, operates mountain resorts and regional ski areas in the United States. It operates through three segments: Mountain, Lodging, and Real Estate

Ticker: $MTN | Price: $225.01 | Price Target: N/A | Timeframe: N/A

🎿 Ski Resort | 📈 Bullish Idea

MTN owns 41 ski resorts and regional ski hills across North America, Australia & Europe. MTN has aggregated quality assets in a supply-constrained industry. Its scale and diverse portfolio offers a competitive advantage. Its season pass program, Epic Pass, promotes customer loyalty and generates recurring revenue. We believe MTN’s growth outlook is favorable and aligns with trends favoring outdoor and experience-based tourism. MTN has a solid balance sheet and trades at an attractive valuation coming out of a disappointing ski season

Read the full article here. Read time: 7 min

BLOG POST

Kulcs-Soft (BUSE: KULCSSOFT)

Kulcs-Soft is a Hungarian Accounting Software business founded in 1989 by Tibor Kulcsár, providing its software to small and medium-sized companies across both desktop and cloud channels.

Ticker: BUSE: KULCSSOFT | Price: 1,930 HUF | Price Target: N/A | Timeframe: N/A

💻 Accounting Software | 💰 7.8% Dividend | 🇭🇺 Hungary | 📈 Bullish Idea

Kulcs-Soft, a Hungarian Accounting Software business founded in 1989 by Tibor Kulcsár, evolved from a custom-built solution to address specific customer problems to a standardized program. The company provides its software to SMEs through both desktop and cloud channels. It has gradually introduced cloud functionality considering cost-effectiveness and their established customer base. Tibor Kulcsár owns >93% of the company but has shown a commitment to shareholder value through strong earnings growth and a dividend payout strategy. The current CEO, Ervin Szabo, appointed in 2016, has accelerated growth and improved margins. Over the last 12 years, earnings have compounded at 17.4% p.a. with an average dividend yield of 6.2%. Recently, the dividend yield was 7.8%, with the EPS growing from 151 in FY2022 to 170 in the LTM. Kulcssoft's offerings are complex, with material only available in Hungarian, making it difficult to have a strong understanding of the business. Despite this, Kulcssoft has shown consistent earnings and growth.

Read the full article here. Read time: 2 min

VALUE INVESTORS CLUB

MAGELLAN AEROSPACE CORP - MAL.TO

Magellan Aerospace Corporation, through its subsidiaries, engineers and manufactures aeroengine and aerostructure components for aeroespacial markets in Canada, the United States, and Europe.

Ticker: $MAL.TO | Price: 7.45 CAD | Price Target: 12.50 CAD (+68%) | Timeframe: N/A

🛩️ Aerospace | 🏭 Manufacturing | 📈 Bullish Idea

Magellan, a Canadian aerospace supplier, is poised for growth, benefiting from the expected uptick in commercial aircraft production and supply chain improvements. Its enterprise value of $490 million is a mere 3x normalized EBITDA of $156 million, potentially offering a 15-17% FCF yield by 2025/2026, with a stock value of $13-$14 at a 10% FCF yield (86% potential gain). Downside risk is mitigated with a tangible book value of $11.75 and NWC per share of $6.00, coupled with a clean balance sheet. Magellan's diversified global business and consistent performance in the aerospace industry make it an enticing investment opportunity. With a fairer valuation in line with industry peers, the stock could reach $12.50, providing nearly a 70% upside.

Read the full article here. Read time: 4 min

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