Stock Thoughts
An Investment in Knowledge Pays the Best Interest
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Camping World Ready for Strong Upcycle
• 2.44% Yield.
• Strong market share growth, moving from 18% to 25% in a single quarter.
• Aggressive expansion campaign, hoping to add just over 100 locations by 2028, largely through acquisitions.
• Largely finished with inventory management ahead of the market, with 90% of inventory now containing the cheaper 2024 models.
• Internal actions to move SG&A expenses back from 80% of gross profit back down to 70%, which should provide incremental net income margin gains.
AHR Set to Grow 6.5% Yield with Demographic Tailwinds and Expansion
• 6.5% Distribution Yield.
• Strong demographic tailwinds in the US, with the over 80 population increasing by more than 50% by the end of the decade.
• Occupancy rates are trending above pre-COVID average, with AHR reporting 91% weighted average occupancy.
• Seeking to offload an additional $50 million in non-core assets to fund expansion and purchasing the remaining interest in its largest operator.
• Strengthened balance sheet by going public. Debt now has a 4.89% weighted average interest and a 9.7-year average term.
Exxon’s Growing Dividend Supported by Great Assets and Prodigious Free Cashflow
• 3.3% Dividend Yield.
• Free cash flow machine that will repurchase 8.7% of outstanding shares by 2025.
• Permian acquisition will expand US footprint by double, targeting 2 million barrels per day by 2027.
• Large Guyana development plans in one of the lowest cost basins in the world, with more than 1.5 million barrels per day in planned capacity.
• Free cash machine with little debt, Guyanese development could make up as much as 20% of FCF to 2040.
Video: Alerian MLP ETF Provides Energy-Backed 7.7% Yield Without a K-1 Filing Headaches
• 7.7% distribution yield (not tax advantaged) for MLPA.
• Pipelines are experiencing substantial tailwinds from increased natural gas for electricity.
• Limited natural gas pipeline expansions due to regulatory constraints allow existing pipelines to operate at or near full capacity.
• Existing pipelines are able to have some pricing power as pipelines are the bottleneck with substantial gas at the wellhead needing transportation to end markets.
• MLPA’s structure allows it to avoid annoying additional tax paperwork. You get the underlying LPs distributions but without a form K-1.
Video: Strong 11% Yield for LexinFintech Emerging Market Opportunity
• 11% dividend yield.
• Provides consumer and small business loans to the Chinese market.
• New risk officer implementing improved pricing and credit metrics, high tech loan selection process.
• Trading at a massive discount to tangible book value, with tangible book value sitting at $7.59, compared to a stock price of $1.66.
• We expect earnings to be $0.95 this year, with $1.10 in earnings next year. This less than a 2.0x P/E which would make it an incredibly cheap stock.
• However, there are risks such as the Chinese regulatory system and increasing US-China Tensions.
Video: TC Energy (TRP) Has 7.2% Yield With Strong Natural Gas Demand Tailwinds
• 7.2% Dividend Yield.
• We expect earnings growth of around 3-4% for the foreseeable future, making it an attractive dividend grower.
• Primarily in natural gas pipelines, spinning off its liquids pipelines.
• Natural gas pipelines are volume based shielding them from the volatility of natural gas prices thus lower business risk.
• On a secular basis we expect strong growth in natural gas demand powered by increased electricity consumption propelled by data centers with artificial intelligence and electric vehicles.
• Green energy sources like solar and wind still need backup natural gas generation to generate power when weather is not permitting or there is a surge in grid demand.
TC Energy: Running Leaner with Same Great 7% Yield
• 7.19% dividend Yield.
• High returns on regulated assets, a favorable asset structure combines the stability of a utility with the opportunity of a midstream.
• Currently, 80% of its business is rate-regulated, 17% are long-term contracts, and only 3% are variable.
• Secular tailwinds for LNG demand globally, with Coastal GasLink expected to make its first export in 2025.
• Taking a lean operational footing, spinning off liquids segment, and divesting from assets to reduce debt burden.
9% Dividend Yield for LexinFintech Value Opportunity
• 9% expected dividend yield.
• New risk officer implementing improved pricing and credit metrics.
• 8.5 million active borrowers and 42 million with an open credit line serving the rapid growth of the Chinese consumer market.
• LX expects cheaper origination and funding costs to remain low, falling below 6% in February 2024, and enhancing profitability.
• Expect continued cost leverage, with expected cost per originated loan decreasing at a faster rate than volume growth over the long term.
Carter’s Commands Children’s Clothing Market
• 4.6% dividend yield.
• Largest market share in baby and children’s clothing in the US, holding 10% market share.
• Collaboration with major retailers like Walmart, Amazon, and Target have helped expand wholesale operating margin by 540bps to 24%.
• Despite a downturn in customer volume, CRI’s retail locations are seeing higher conversion and per-customer unit growth.
• Better mix is expected in wholesale as firms continue to wind down inventory and return to “just-in-time” inventory management.
Uber: Driving Success with Network Effect and Improving Financials
• Uber’s long-term strategy of focusing on scale first and profitability later is starting to pay off, as it has seen significant growth and has been added to major stock indices.
• The company’s ability to operate across multiple platforms and channels efficiently has allowed it to cross-sell effectively and capture and retain more customers.
• Uber’s recent upgrade to BB+ outlook positive and its achievement of GAAP profitability have positioned it for aggressive expansion and lower interest rates, which could further drive its growth and market dominance.
Video: Oil Demand Continues to Grow – These Oil Stocks Should Benefit From Continued Secular Tailwinds
• Demand for oil continues to grow, only stopping around the COVID Crisis, reaching pre-pandemic demand levels in 2023.
• China and Europe are both bottoming out and beginning their recovery, which should provide further tailwinds.
• We favor crude over natural gas, given that natural gas is a byproduct of oil production, which can lead to supply gluts.
• The past down cycles bankrupted many E&P companies and made the survivors more conservative.
• Hence, there is insufficient capital development for expansion, meaning supply will not overshoot demand.
• Hydrocarbons are still dominant in transportation, and we feel that the developing world will buoy continued demand growth.
Video: Gold’s Upward Move Still Underpriced in These Dividend Gold Stocks
• The price of gold reached a record high in April 2024, driven primarily by inflation from excess federal debt monetized by the Fed.
• Gold stocks have also made a move upwards, but we feel that they are still discounted due to the current effect of high gold prices on their earnings and free cash flow.
• We like B2Gold (BTG), Newmont (NEM), Gold Fields (GFI), and Barrick (GOLD).
• We own these stocks, and they pay out a dividend with an attractive valuation.
• As gold prices move higher and the effect cascades down into these companies’ bottom line, we feel they will be priced higher by the market.
