Growth Stock Thoughts
An Investment in Knowledge Pays the Best Interest
Benjamin Franklin
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.
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.
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.
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.
EXPE and BKNG: Travel Titans Poised for Record-Breaking Year
• Booking Holdings (BKNG) and Expedia Group (EXPE) are leading players in the Online Travel Agency (OTA) market, with BKNG dominating the European market and EXPE holding a larger share in the US.
• Both BKNG and EXPE are investing in AI to drive personalization of offerings and new large-scale rewards offerings.
• Travel spending is on the rise, with consumers prioritizing travel over other expenses, indicating a strong rebound in the travel industry.
• The alternative accommodation market is a key growth area for both companies, with EXPE’s Vrbo and BKNG’s expansion in non-hotel offerings.
REPX: Sustainable Growth with Strong Free Cash Flow
• 5.22% dividend yield, maintained even at $40/bbl WTI.
• Strong free cash flow, at $75/bbl WTI REPX expects $100 million in FCF for 2024.
• Estimated 18.3% production gowth for 2024 without a meaningful increase in costs.
• REPX is actively deleveraging its balance sheet, targeting 60% of free cash to debt reduction.
• Strong geographic position, operating in a lower-cost and lower-decline rate location compared to the median Permian field.
RTX Capitalizes on Secular Trends to Drive Dividend Growth
• 2.6% Dividend Yield should grow with earnings.
• Increased military spending by the US and NATO allies, driven by geopolitical tensions, is expected to fuel sustained growth in RTX’s defense segment.
• As commercial aviation recovers and aircraft average age ticks up, RTX stands to benefit from both new equipment and overhaul services.
• $5.5 billion in free cash flow generated in 2023 and an estimated 16.7% CAGR in free cash flow to 2025 provide a solid foundation for returns and expansion.
• A 12% year-over-year growth in backlog, now at $196 billion, and a book-to-bill ratio of 1.28x for 2023 indicate strong future revenue potential across all segments.
MVP Pipedream Becomes Reality and Unlocks New Market for ETRN
• 5.7% dividend yield, with emphasis on maintaining dividend at the current level and using free cash to pay down debt.
• The Mountain Valley Pipeline is expected to be completed in mid-2024, providing access to Transco markets and Henry Hub and 2 Bcf/d in transit capacity.
• ETRN’s projected EBITDA for 2024 is $1.3 billion, representing an approximate 23% increase year over year.
• ETRN’s network includes 1,120 miles of gathering assets and 940 miles of transmission assets with a 12-year weighted average contract life.
• The total expansion project backlog is expected to add $300 million in yearly EBITDA, a 23% increase.
Everest Reaches Peak Performance with Rising Premiums and Business Expansion
• 1.9% dividend yield, EG is targeting >17% shareholder return.
• Gross written premium growth of 20.9% year over year, with a combined ratio of 90.9%.
• EG expects to invest more in reinsurance underwriting opportunities in 2024, aiming for a combined ratio target of 89-91%.
• Strong earnings growth, with a continued hard market in reinsurance and new specialty lines in the primary insurance business.
• Sustaining catastrophe reinsurance share at 7% of business, realizing 45% increase in catastrophe reinsurance rates.
Foot Locker Laces Up for Off-Mall Move
• Foot Locker is shifting from mall-based to off-mall ‘new format’ stores to attract a broader customer base.
• It has started partnerships with leading brands like Puma and Reebok and a renewed Nike partnership.
• NBA sponsorship to boost brand loyalty and engagement, tapping into the massive global basketball fanbase.
• Eyeing growth in the Asia-Pacific region and India, targeting the burgeoning middle-class population and their increasing purchasing power.
• The current economic environment has decreased earnings and margins, but the foundation is set for recovery as the consumer spending upcycle takes hold.
