🤖📈 Top Trade Ideas For June 23
A stock with 50% upside and a 7% dividend, 2 new hedge fund purchases, and much more...
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Our AI read and summarized 201 articles today from all over the internet to find the best trade ideas to help you make more money in the stock market.
What you’ll find in this email:
💰 A stock with 50% upside and a 7% dividend
🐻 The bearish v bullish case for PARA
🏦 2 new hedge fund purchases
🤖📈🚗📱 Much more…
DiDi Global: Potential Upside If The Market Recognizes Its Intrinsic Value
Ticker: (OTC: $DIDIY) | Current Price: $2.88 | Price Target: $5.80 (+100%)
🚗 Ride-sharing | 🏷️ Undervalued | ✏️ Blog Post | 📈 Long Idea
The market valuation of DiDi Global on the OTC market does not accurately reflect its true value, and there is a significant discrepancy between the perceived value of DiDi by market participants and its actual intrinsic value. When DiDi lists on the Hong Kong stock exchange in the future, this discrepancy will be resolved, potentially doubling the current investment when the market eventually adjusts and recognizes DiDi's intrinsic value. DiDi is the market leader in China's ride-sharing industry with a 91% market share in 2018, and its strong presence and dominance in the industry have created a robust flywheel network, making it challenging for competitors to challenge its position. Despite facing a significant test to its network moat in 2021 and 2022 due to a cybersecurity review, DiDi still maintained a remarkable market share of 70% in 2021. DiDi's stock has been trading at low valuations due to the cybersecurity review and subsequent delisting of its app, which created uncertainty and caution among investors. The re-listing of DiDi on a major stock exchange, such as the Hong Kong exchange, has the potential to trigger a significant revaluation of the company's stock. The author estimates DiDi's minimum fair valuation to be $19 billion and maximum fair valuation to be $147 billion. The long-term shift towards robot-taxis could greatly influence the operations and business models of companies like DiDi, potentially reducing or eliminating the driver's share of revenue and increasing profitability. The re-listing of DiDi on a major stock exchange is not certain, and the specific timeline for its relisting remains uncertain.
Why I Am Buying Verizon Stock
Ticker: $VZ | Current Price: $35.85 | Price Target: $54 (+50%)
📞 Telecommunications |💰 Dividend | ✏️ Blog Post | 📈 Long Idea
Verizon's stock has underperformed the market and industry since 2017 due to secular headwinds and softening profitability metrics. However, the stock is undervalued and offers an attractive forward dividend yield of above 7%. Verizon has invested in new technologies related to 5G telecom generation, making it well-positioned to absorb favorable secular trends. The company's financial performance has been stable over the past decade, with a modest revenue CAGR and declining margins. Verizon's Q1 earnings missed on the top line, but the company recently implemented price increases that have the potential to generate higher revenues. The author believes that Verizon stock is a great investment opportunity with immense upside potential and assigns it a "Strong Buy" rating. The author uses a discounted dividend model (DDM) valuation approach and projects a fair share price of $54 with a 47% upside potential for the stock. Even with no dividend growth, the stock still looks undervalued with a fair share price of $38. However, the industry faces risks related to limited options for revenue growth, susceptibility to disruptive technological change, and regulatory changes.
Paramount Pullback Provides Larger Margin Of Safety
Ticker: $PARA | Current Price: $15.30 | Price Target: N/A
🎥 Media/Entertainment | ✏️ Blog Post | 📈 Long Idea
Paramount expects a weak 2023 due to peak content spending for their streaming transformation and cyclical ad weakness reducing near term free cash generation. Despite this, comparing PARA to the Time Warner acquisition in 2018 and industry peers suggests a large margin of safety. The dividend cut is a prudent move given the current lack of free cash flow generation combined with the interest rate environment. Buffett's recent commentary on PARA could indicate that it is a similar play to his purchase of the Washington Post 50 years ago, where he helped unlock shareholder value. PARA may be an acquisition target, but this is pure speculation. The company is burning cash right now and may need to keep spending heavily on content to remain competitive, which could impact shareholder returns. Interest rates are much higher than they were a few years ago, which could impact the sale price of the company if investors are looking at it as a potential acquisition target. Shari Redstone has a controlling interest in the company and may not act in the best interest of shareholders, but there are signs that this could be changing. Recent selling pressure is due to knee-jerk reaction to dividend cut, not informed investor decision making. Management has been transparent about cash burning year due to peak streaming investment. It doesn't make sense to continue paying a dividend not supported by free cash flow. PARA appears cheap on a normalized EV/FCF basis relative to industry peers. The author started a position in Paramount.
🐻 Bearish v 🐂 Bullish
Company: Paramount ($PARA)
Bullish Reasons:
Strong Market Position: Paramount Global operates as a mass media company, which creates and distributes content across a variety of platforms to audiences around the world. It provides online sports betting, online casino, daily fantasy sports product offerings, and other consumer product offerings, positioning it well to capitalize on the growing online gaming market
Strong Brand Portfolio: Paramount Global has a strong portfolio of brands, including CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Interactive, and CBS Films, as well as the company's digital streaming services, CBS All Access and CBSN
Future Content Pipeline: Paramount+ has a strong slate of content coming up, including the UEFA Champions League Final, all of the PGA Tours FedEx playoff cup events, Big 10 Football, and the return of the NFL and SEC. This could attract more subscribers and increase viewer engagement.
Bearish Reasons:
Competitive Landscape: The streaming industry is highly competitive with players like Netflix, Disney+, Amazon Prime Video, and HBO Max. Paramount+ will need to continuously invest in content and technology to stay competitive, which could increase costs.
Increased Costs: Paramount's adjusted OIBDA decreased $55 million, as revenue growth was more than offset by higher costs to support growth in their streaming services including content, advertising, distribution, employee, and technology costs. This could impact the company's profitability
Net Loss: The company reported a net loss attributable to Paramount of $1.118 billion, which could be a concern for investors.
V.F. Corporation: VF Has Been Troubled Recently, but Its Brands Provide a Competitive Edge
Ticker: $VFC | Current Price: $18.94 | Price Target: $60 (+216%)
👕 Apparel | 🏷️ Undervalued | 📝 Research Report | 📈 Long Idea
VF Corporation owns several well-known brands, including The North Face, Timberland, Vans, Dickies, and Supreme. VF's competitive position is strong, with a focus on actively managing its brand portfolio through acquisitions and divestitures. Vans has strong potential for growth, while The North Face is expected to benefit from product innovations and brand extensions. VF's long-term growth targets for Timberland and Dickies are less certain. VF is exposed to mass-market retail in the U.S., which may require distribution changes due to store closures. The fair value estimate for VF is $60 per share, with lower EPS and sales growth forecasts for fiscal 2024. VF faces high uncertainty due to inconsistent results and unfavorable market conditions. VF has taken on significant debt, but its debt is manageable, and it has a history of generating free cash flow. VF has a good record of managing its portfolio of brands and has delivered consistent returns to shareholders over the past 15 years. The company is considering a sale of three of its smaller brands, JanSport, Eastpak, and Kipling.
Polen Capital starts new position in Teleperformance
Ticker: (OTCMKTS: $TLPFY) | Current Price: $83.69 | Price Target: N/A
📞 Customer Service | ⬆️ Growth | ✉️ Investor Letter | 📈 Long Idea
The author has taken a new position in Teleperformance, a leading outsourced customer service provider. The company's business model combines outsourced, human capital-intensive services with an underpenetrated and highly fragmented market opportunity. Teleperformance has a sticky, sustainable business due to switching costs, with an average client partnership duration of 13 years and a 95% customer retention rate. The company offers better outcomes at lower costs than in-house alternatives and serves many of the world's largest enterprises. The customer services market is an underpenetrated opportunity, with less than 30% of addressable workloads outsourced. Teleperformance is expected to grow revenue at a high-single-digit rate with moderate margin expansion and can allocate capital to M&A or share repurchases. The author estimates that the company can grow total returns at a low-to-mid teens rate.
Interactive Brokers Is Undervalued and Warrants a Narrow Moat
Ticker: $IBKR | Current Price: $79.56 | Price Target: $113 (+41%)
🏦 Brokerage | 🏷️ Undervalued | 📝 Research Report | 📈 Long Idea
Interactive Brokers caters to a niche client base of institutional clients, including hedge and mutual funds, proprietary trading groups, introducing brokers, and financial advisors. Its clients are more sophisticated and trade more frequently than those of its competitors. The company generates revenue from trading commissions and net interest income, with a sizable international business. Bulls say that Interactive Brokers benefits from high interest rates, active trading clients, and high client growth from international markets. Bears say that lower interest rates and lack of diversified services could be detrimental. The author assigns a narrow Morningstar economic moat rating based on cost advantage and a fair value estimate of $113 with a 10-year CAGR of around 10% for both revenue and operating profit. The author expects a gradual contraction in the company's overall revenue per trade and client assets per account, with net interest income having the most growth potential over the next decade. The author assigns a High Morningstar Uncertainty Rating to Interactive Brokers due to its high fixed cost base and commission revenue being impacted by various factors. The company has a Standard Morningstar Capital Allocation Rating, with a sound balance sheet, fair investment decisions, and mixed capital return strategy.
Bank of N.T. Butterfield & Son: Great Bank At A Steep Discount
Ticker: $NTB | Current Price: $27.92 | Price Target: $40 (+43%)
🏦 Banking | 💰 Dividend | 🏷️ Undervalued | ✏️ Blog Post | 📈 Long Idea
The Bank of N.T. Butterfield has a bear case and a bull case. The bear case is that the bank has high losses on its balance sheet from owning long-duration bonds that are currently underwater, and if forced to liquidate its portfolio today, the bank would be worth significantly less than its current trading price. The bull case is that the bank can hold its bonds to maturity and come out fine, and at its current price, investors own a dominant franchise at less than 6x earnings, a 6.4% dividend yield, and a long history of above-average management, profitability, and credit risk management. Butterfield is the largest bank in both Bermuda and the Caymans and has more than 50% market share in Bermuda specifically. The bank's investment portfolio is more than 95% AAA-rated bonds, primarily U.S. treasuries and agency bonds, and its lending portfolio has the vast majority in residential mortgages, primarily against houses and condos in Bermuda and the Caymans. Despite concerns over mark-to-market losses in the banking industry, the bank's strong balance sheet and record operating profits will aid in waiting out the current downturn and letting its bond portfolio recover. The author believes that N.T. Butterfield is not prone to a bank run, the recent concerns are overblown, and shares are a deep value at the present price.
tinyBuild: Building Something Big
Ticker: (LON: $TBLD) | Current Price: $33.08 | Price Target: N/A
🕹️ Gaming | ⬆️ Growth | 🏷️ Undervalued | ✉️ Investor Letter | 📈 Long Idea
The author is bullish on tinyBuild, a video game developer and publisher, and believes it is undervalued with potential for growth. TinyBuild's success is attributed to its vertical integration, high percentage of owned IP, focus on franchises, and emphasis on in-game purchases and monetizable events. The company takes a multimedia approach, emphasizes a portfolio approach, and uses a test-first framework to allocate capital. TinyBuild uses an \"aquihire\" method to acquire development teams and operates with a decentralized structure. The CEO's large ownership stake, strong culture, and emphasis on people are cited as key strengths. TinyBuild is currently trading at less than 4x EV/OCF, has no debt or senior securities, and has deals with Microsoft and DevGAMM. Investing in tinyBuild is seen as an opportunity to invest in a high-quality company at a low price with a top-tier management team.