Stock Thoughts
An Investment in Knowledge Pays the Best Interest
Benjamin Franklin
Tencent’s 1.4 Billion Users Give It an AI Edge No Western Platform Can Match
• Chinese internet conglomerate spanning gaming, social media, fintech, and cloud computing, anchored by WeChat/Weixin with 1.4 billion monthly active users.
• Management guiding ~80% of earnings returned to shareholders via dividends and buybacks; forward dividend yield of 1.1% with an 18% proposed dividend increase.
• WeChat Pay processes over 1 billion commercial transactions per day, making Tencent a co-dominant player in Chinese digital payments alongside Alipay
• Largest gaming company in the world by revenue; international holdings include Riot Games (League of Legends, Valorant), Supercell, and significant stakes in Epic Games and Ubisoft
Best Buy is a A Covered Dividend at a Cyclical Trough
• 6.1% Yield
• Best Buy dominates the North American consumer electronics market and currently trades at a compelling 9.8x forward earnings.
• Computing and mobile sales grew 5.4% in Q4 FY26, the start of an AI-fueled device upgrade cycle.
• Appliance and home theater sales remain sluggish due to post-pandemic normalization and a sluggish housing market.
• The company boasts a rare net cash position for a traditional retailer, finishing FY26 with $1.7 billion on hand and credible, stable guidance for FY27.
Zscaler Scales Zero Trust and AI Agent Security
• Zscaler’s Zero Trust Exchange processes over 500 billion transactions daily, which creates a data advantage that vibe-coding cannot replicate.
• The AI Security segment reached $400 million in Annual Recurring Revenue three quarters ahead of schedule.
• Z-Flex purchasing program accelerates the land-and-expand strategy, driving over $175 million in bookings during the quarter ending October 2025.
• Recent acquisitions of Red Canary and SPLX expand the addressable market into AI governance and proactive security operations.
The New ONEOK is a Midstream Behemoth Built for Yield
• Compelling 5.4% dividend yield, supported by resilient fee-based cash flows.
• Recent acquisitions of Magellan, EnLink, and Medallion have solidified OKE as a top-tier diversified midstream operator.
• Approximately 90% of earnings are now fee-based, significantly reducing direct commodity price exposure.
• Trading at a discount to our intrinsic value estimate, particularly given the synergy potential from recent M&A.
• Long-term volume risk tied to energy transition pressures on refined products and regulatory hurdles for new infrastructure.
Block Is Back Thanks to Banking the Base
• Aggressive repurchase posture, renewing buyback agreement for 16.2% of outstanding shares.
• 58 million monthly actives on Cash App, with users who deposit a paycheck or spend $500+ per month through CashApp are 8.3 million up 18% year over year.
• 134% year over year growth in Cash App Borrow originations, maintaining loss rates below 3% while generating an approximate 30% return on invested capital.
• $67.2 billion in Gross Payment Volume (GPV) for Square, up 12% year over year, with mid-size enterprises now representing 45% of total volume.
• Management has implemented an absolute headcount cap of 12,000 employees and reorganized the company into a functional structure (centralized Engineering and Sales) to improve workforce crossover.
Americold Offers 8.6% Dividend Yield While Waiting for Market Thaw
• 8.6% Dividend Yield.
• 1.4 billion cubic feet of capacity across 235 warehouses, providing a globally diversified, hard-to-replicate cold-storage footprint.
• 18% US market share, 6% global market share.
• 60.0% of warehouse segment revenue under fixed contracts, anchoring cash flows through a soft volume and pricing environment.
• Development pipeline targeted at 10–12% ROIC, increasingly focused on build-to-suit and higher-growth international markets (notably Asia-Pacific).
• Near-term headwinds in 2026–2027 from excess capacity and weaker demand.
YUM China’s Big New Store Expansion Drives Strong Growth
• 2.3% dividend yield, 6.0% of shares authorized for repurchase.
• Pizza Hut’s successful pivot to value offerings, trading a 13% pricing reduction for a 17% traffic surge.
• An aggressive expansion into lower-tier cities, where approximately 70% of new stores are opening, fueled by extensive franchising which is high ROC (Return on Capital).
• For the second half of 2025, YUMC expects to return $664 million to shareholders bringing the year-end total to approximately $1.2 billion.
• $1.8 billion is remaining on shareholder return of capital into 2026.
• Chinese government stimulus on consumer spending, especially in the service sector, would likely boost same store sales growth and re-rate the stock.
High Yield Cannabis REIT Positioned for Recovery as Weak Tenants Flushed Out
• 13.9% Yield
• Triple net lease structure provides strong 52.3% operating margins even factoring in tenant defaults.
• Conservative capital structure, 1.2x debt to EBITDA with $2.2 billion in unencumbered property.
• 8.3 million active leasable square feet, with 1.2 million leasable square feet under development.
• Early results from tenant refresh started in the quarter ending March 2025 are positive, with management expecting market normalization within 18-36 months.
• Captive base, with cannabis operators having limited financing opportunities for large-scale properties leading to long 13.5-year average lease periods.
Danaos Delivers 3.8% Sustainable Dividends at Extraordinary Low Valuation
• 3.8% Dividend Yield.
• DAC has 15 new methanol-fueled container ships under construction, all pre-contracted upon delivery, representing 27.2% capacity expansion set to fuel growth.
• DAC operates an 84-ship fleet with 471,500 Twenty Foot Equivalent (TEUs) of containerized capacity and 1,760,861 DWT of dry-bulk capacity.
• Excluding new ship construction capex, DAC generated $572.4 million in trailing twelve-month free cash flow.
• The company has 99% of operating days contracted through 2025 and 85% through 2026 giving the company great visibility.
US Sportsbook Leaders Flutter and DraftKings Post Double-Digit Growth Guidance
• Flutter’s FanDuel and DraftKings command a combined 66.1% market share in the $117 billion US sports betting market.
• DraftKings is guiding to 30% revenue growth for 2025, with adjusted EBITDA margins expanding from 3.8% to 13.5%.
• Flutter projects 28% US revenue growth for 2025, with adjusted EBITDA margins expanding to 15.2% from 8.7%.
• DraftKings expects net debt-to-adjusted EBITDA to decline below 1.5x by year-end 2025, with potential free cash flow positive achievement during the year.
• Flutter is already free cash positive, generating $805 million during 2024, with a net debt to adjusted EBITDA of 1.4x with $3.5 billion in cash on hand.
Shift4 Eyes 30% Annual Revenue Growth Through 2028 with Margin Expansion
• Shift4 is a fully integrated payment processor targeting underserved verticals like hospitality, restaurants and events.
• Management is guiding to >30% compound annual revenue growth to 2028 with at least 300bps of operating margin expansion.
• Shift4’s acquisition of Global Blue will accelerate European expansion and onboards a luxury-focused book of business.
• Global Blue holds a 70% market share in VAT refunds in Europe, with customers concentrated in luxury retail including LVMH and Burberry with an average customer relationship of over 20 years.
• Global Blue also holds a 20% market share in point-of-sale currency exchange in the EU, a 96.3% gross margin business.
• Shift4’s point-of-sale system maintains the highest customer satisfaction rate in the restaurant industry, with 99% restaurant retention.
Google’s Search Monopoly Remains Unshakeable Despite AI Hype
• Increased capital expenditure to $75 billion in 2025 in order to expand Google Cloud’s infrastructure, positioning the company for continued AI and cloud growth.
• Alphabet’s proprietary Tensor Processing Units (TPU) infrastructure provides significant cost advantages over competitors who rely on expensive Nvidia chips.
• AI tools are proving complementary rather than competitive to search, with hyper-specific AI queries creating new monetization opportunities through better ad targeting.
• Antitrust remedies like Chrome divestiture are technically impractical and would be punitive rather than beneficial to consumers, making them unlikely to succeed.
• The company maintains a fortress balance sheet with $95.7 billion in cash and $72.8 billion in annual free cash flow generation.
