Growth Stock Thoughts
An Investment in Knowledge Pays the Best Interest
Benjamin Franklin
StoneCo’s Elevated Take-Rate Yields $350 Million Buyback
• Recently announced $350 million repurchase agreement, representing more than 10% of shares.
• Despite pressure from low-cost payment architectures, STNE has been able to maintain a high take-rate thanks to value-added services.
• Management indicated it may sell off the software arm to run a more lean and transparent business.
• Obtained banking license in early 2024, allowing it access to cheaper funding and increases the stickiness of the business model.
• Brazil has a fragmented payments industry with ample cross-selling opportunities.
Despite Neuroscience Setback AbbVie has Strong Recovery Ahead
• 3.95% Dividend Yield.
• Stock dropped 17.3% on the failure of Emraclidine in Phase 2 Trials, a drug only projected to make up ~7% of revenues.
• Aggressively expanding oncology offerings, acquiring ADC (antibody drug conjugates, non-chemo cancer drugs) expert ImmunoGen.
• Expects to replace Humira revenue in 2025 with two new immunology drugs and grow to be more than $27 billion in annual revenues.
• Shifting focus in neuroscience to Alzheimer’s and Parkinson’s, areas with few effective on-market treatments.
Fidelity National Financial has Strong and Safe Dividend Despite Housing Market
• 3.3% Dividend Yield recently announced 4% dividend increase.
• Expects robust housing recovery in 2026, betting on a similar timeline for commercial real estate.
• #1 market share in the US for title insurance, in both agency and direct sales.
• F&G has secular tailwind in life and annuity from aging population.
• Despite downturn in housing market, FNF grew revenues by 8% over the first 9 months of 2024.
Total Energies Has Strong Free Cash Backed By High Yielding Growth Profile
• 5.3% Dividend Yield with 5% dividend growth.
• Strong long-term production profile, expecting a 4% CAGR output increase to 2030 with breakeven below $30/boe (barrel of oil equivalent).
• Long-term focus on LNGs (Liquified Natural Gas), expecting to grow export capacity by more than 50% by 2030, with 6 Mt/y (million tons per year) in long-term supply contracts signed with Asian importers.
• Trades at an attractive valuation at just 7.8x earnings.
• Committed to $2 billion in buybacks each quarter of 2025.
Global Payments Slims Down with SMB Focus
• Committed to repurchasing 2.3% of shares within the next quarter, on top of a modest 1.0% dividend.
• Strong presence in the SMB (Small-medium business) space, consolidating its 16 brands into one coherent entity.
• #1 commercial card processor in the US, processing more than 35 billion transactions annually across 830 million accounts.
• 70% attachment rate for new offerings to existing customers.
TDK’s Tech Surge Sparks Free Cash Potential
• TDK is leader in small solid state batteries and announced supply agreement with Apple
• Growth areas in wearables, phones, IoT (Internet of Things) and EVs (Electric Vehicles)
• Dominant market share in several areas, including in smartphone battery components, holding the #1 market share of 50-60%.
• Strong manufacturing and materials science expertise, first to bring silicon anode batteries to market in 2023.
• Targeting late-stage development products for M&A.
• Aggressive capital efficiency plan, potentially divesting business units that do not meet the 10% ROIC watermark.
Oshkosh’s Stable Dividend Driven by Long-Term Contract Wins
• 1.8% dividend yield.
• Secular tailwind from municipal underspending and defense rearmament.
• Revenue forecasted to grow 10.8% in 2024, driven by increased demand in the vocational segment.
• Expanding access business into Europe, trying to get ahead of tariffs.
Glass House Brands Offers Opportunity at Scale
• Largest producer of Cannabis in California, with approximately 1.5 million square feet of space for Cannabis and Hemp, producing over 500k lbs per year.
• Owns 5.5 million square feet of cultivation facilities, ready to hyper-sale once federal legalization or rescheduling occurs.
• Moving Cannabis across state lines could soon be legal with the DEA announcing its intention to potentially reschedule Cannabis from I to III, with an expected date in 2025.
• Some of the lowest production costs in the US, with ~$130/lb in cost expected for the full year 2024 with 50% gross margin.
• Improving competitive conditions in California as less efficient competitors withdraw form the market; both wholesale and retail markets are shrinking.
ADYEY Continues to Ride Secular Payments Growth with Land-and-Expand Strategy
• Adyen is increasing market share through new customers and greater wallet share per customer.
• Expected sales growth of 22% to 26% and earnings growth of 20% to 25% over the medium term.
• Long-term revenue growth driven by increased wallet share on existing customers, enhanced by very low 1% quarterly churn.
• 10% buyback authorized of outstanding stock by the end of November 2025.
• $1.7 billion in free cash flow in 2023 and $9 billion of cash on hand with no debt.
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.
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.
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.
