Growth Stock Thoughts
An Investment in Knowledge Pays the Best Interest
Benjamin Franklin
Insuring Success Through $380 Million in Cost Savings
• 1.38% Yield, $1 billion left on repurchase authorization.
• Expecting an increase in free cash flow in to $1 billion in 2024.
• WTW’s strategic cost-saving program aims to deliver $380 million in annualized savings by fiscal 2024.
• Strength in every business, with new clients and higher fees driving results.
• Demographic trends provide secular tailwinds.
HII Seas: Rearmament Continues to Propel Navy Spending and Improved Results
• 2.26% Dividend Yield.
• Total backlog of $49.5 billion up 5.7 % year over year. 5 years for shipbuilding and 2 years for Mission Technology.
• Naval shipbuilding is accelerating, with the Navy needing to build more than 55 ships to reach its 300-ship target.
• Mission Technology is an expansion area, with a segment book to bill of 2.4x.
• Largest military shipbuilder in the United States, benefiting significantly from naval rearmament.
Video: Riley Exploration Permian (REPX) Looks Attractive for Dividend at 4.5% Yield
• $6 EPS for E2023, with earnings rising to $9 for E2024 if oil prices stay elevated.
• Acquisition did add leverage to the balance sheet, but the company has strong free cash flow.
• Mostly, 60%, oil, which is beneficial with crude prices holding up better than natural gas prices.
• Dividend increase, expecting to make regular dividend payments on a go forward basis.
Everest Reaches Peak Performance with Rising Premiums and Business Expansion
• 1.9% dividend yield, EG is targeting >13% shareholder return.
• Natural disasters are becoming more frequent and more intense, with primary insurers facing restrictions on premium hikes.
• Reinsurance rates have sustained tailwinds, with Everest realizing a 26.9% increase in premiums.
• Even in the face of increased catastrophe claims, the combined ratio in all segments of the company has improved. Reinsurance combined ratio dropped 340 bps to 88.2%, and primary insurance dropped 120 bps to 91.5%.
• International expansion effort in the primary insurance area resulting in premium growth of 13.5% year over year.
CVS Offers Recession-Resistant Growth with Transformation
• 3.5% Dividend Yield, $14.5 billion in stock repurchase remaining.
• M&A period over, now focusing on integrating new businesses and strengthening the balance sheet.
• Healthcare as a sector is recession-resistant.
• Sees cost recovery by 2H24, with the conclusion of a cost optimization program expected to yield $700-800 million in savings.
• Expected addition of $2 billion to EBITDA by FY26 from Oak Street and a significant internal referral network from Signify Health.
Qualcomm Drives into the Future with Apple Renewal and Auto Deals
• 2.8% Dividend Yield, $5.5 billion in stock repurchase remaining.
• QCOM’s renewed agreement with Apple to supply 5G chips through FY26.
• The company anticipates significant growth in the Automotive sector, underscored by recent partnerships with BMW and Mercedes to supply infotainment chip systems.
• QCOM holds 140,000 patents across over 18 billion devices, an estimated 38% market share in RF IoT technology.
• Nuvia SoC ARM chipset to launch in FY24 for Windows, competing with Apple’s M1 and M2.
Gold’s Resurgence in a De-Dollarizing World
• China/BRICS is actively working to reduce global trade’s dependency on the US Dollar, settling international agreements in their currency, the RMB.
• The US faces numerous economic problems, from the credit rating downgrade to ballooning debt and an aging population.
• Central banks have significantly increased their gold purchases, with a 152% year-over-year increase in 2022, primarily driven by countries like China and Russia seeking to move away from the US dollar.
• Gold has been a historically stable value asset, now being one of the only options now that Treasuries are falling out of favor internationally hinting at its potential to reach unprecedented price levels.
Riley Exploration Explores New Area in New Mexico
• Strong expansion plans in the same basin in New Mexico, expecting 15% free cash yield from the project and the project being accretive in year 1.
• Expecting an 80% increase in production from FY22, with an 18% decrease in expenses.
• If oil prices stay in the $70 area, REPX expects $42-55 million FCF. Similarly, oil prices around $70 will have FY23 leverage at 1.8x debt to EBITDA.
• OPEC stated no oil output increases until FY24; EIA expects oil prices in the $80 range for 2H23 and 1H24.
Generac Generates Significant Opportunity with Acquisitions
• Increasing demand for uninterrupted power in the industrial space due to data requirements and increase in consumer demand due to the above-average outage hours the US has experienced over the last 3 years.
• 10GWh of currently installed capacity, with addressable market set to expand by 5x by FY25.
• Aggressive M&A to penetrate new markets, with each 100 basis point increase in penetration equating to $3 billion in total addressable market.
• Strong international growth should offset weakness in US domestic consumer market.
ALB: Doubling In Size Inside a Decade
• Second largest Lithium producer in the world.
• 3 Expansion opportunities within the next decade, expecting global lithium demand to surge by 275% by 2030.
• Favorable pricing above $20/kg has made >100 locations viable for expansion.
• Global focus on electrification creating surge in demand for Lithium.
ONSemi Sweet Spot for High Growth with Fab-Light Model
• Double Digit Secular Grower with Reasonable Valuation
• $16.6 billion in backlog, with $2.5 added in 4Q22.
• Divesting from low-margin industries and fabs, trading top line revenue for investing in high-margin products in markets with less competition.
• SiC (silicon carbide) leader, producing higher margin wafers in fewer facilities.
• Repurchasing $3 billion in shares to FY25, with $698 million in 1Q23. Targeting 50% FCF return to shareholders.
Video: Bloom Energy’s BE Growth Blooms with IRA. Profitable Hypergrowth is Possible.
• IRA (Inflation Reduction Act) should accelerate growth for fuel cells.
• Hypergrowth sector, 2050 neutrality targets, and 2030 reduction targets are approaching fast.
• $10 billion in total backlog, $2.8 in new product backlog.
• First commercialization in carbon capture, expanding hydrogen cells and electrolyzation to Europe. Large expansion in the maritime segment, first successful deployment of a Bloom energy cell on a vessel.
• IRA tax credits significantly incentivize new installations and expand existing modules. Offering $3/kg of hydrogen produced over the electrolyzer’s or fuel cell’s lifetime.
