Growth Stock Thoughts
AN INVESTMENT IN KNOWLEDGE PAYS THE BEST INTEREST ~ Benjamin Franklin
LPI: Midland Basin Pure Play Prints Free Cash
• Low valuation should expand.
• Estimated Fair Value of $150 per share at a 5.0x PE.
• Free cash being used to delever and derisk the balance sheet.
• The roll off of lower priced hedges will boost earnings.
• Growing production.
• SPR (Strategic Petroleum Reserve) depletion cessation and a recovery in Chinese demand will in our opinion drive oil prices higher into 2023.
• High free cash being returned to shareholders with stock repurchase.
ROCC: Growth Consolidator Prints Free Cash
• Company is expected to get an FY22 EPS of $10, which could increase to $15 by FY24.
• Eagle Ford consolidator has a history of a high rate of return (60% ROE) by streamlining small operators.
• Growth Company in exploration and production.
• Growth Characteristics should demand at least a 10x PE.
• Oil pricing is expected to get a boost in 2023 from post COVID lockdown recovery in China and SPR (Strategic Petroleum Reserve) ending its release and possibly reversing to refilling.
Video: Laredo (LPI): Cheap Earnings with High Guidance Could Skyrocket With Oil Demand Increases
• Exiting cheap hedges, should see earnings boost as low price hedges roll off
• Increased production targets, oil prices are poised to reset higher as SPR repurchases lost reserves and Chinese demand increases.
• High earnings for the price, we estimated around 5.0x PE, delevering balance sheet quickly.
Video: Ranger Oil (ROCC): Strong Return on Equity For Eagle Ford Consolidator
• Company is expected to get a FY22 EPS of $10, which could increase to $15 by FY24.
• Eagle Ford consolidator, history of high rate of return (60% ROE) on streamlining small operators.
• No dividend, but the stock is undervalued at its present moment. We believe a 10x PE is a reasonable figure.
• Energy business getting a boost from Chinese oil demand rebound and SPR refill.
Video: Ring Energy: Looks Poised to Double with Short Squeeze and Free Cash
• Large short interest of float could create short squeeze.
• Low valuation could double to a 5.0x P/E and a $5.00 stock.
• Strong year over year performance driven by 100% increase in production and 243% in cashflow.
• Committed to improving leveraged balance sheet. Currently 1.4x with goal of under 1.0x.
• Stronghold acquisition is driving efficiencies and production growth.
• Biggest risk is commodity price exposure could crush REI’s cashflow and further strain its highly levered balance sheet.,
• Our view, is commodity prices should improve into 2023 as Strategic Petroleum Reserve (SPR) depletion is stopped, and Chinese demand comes back online as strict COVID shutdown policies eased.
[Ben Speaks at 35:30] Money Life with Chuck Jaffe: It’s ‘The biggest inflection point for most investors in their lifetime’
Benjamin Halliburton, founder and chief investment officer at the Building Benjamins investment newsletter, says that inflation and interest rates bottoming out last year after a decline/trend that lasted for 40 years has now put investors into a new territory, forcing them to consider areas and industries that benefitted from decades of disinflation. It’s the biggest inflection point of most investors’ lifetimes, he says, but it’s an adjustment that people will need to make to keep the profits rolling in the changed conditions they’ll see for years to come.
Video: BIDU and BABA speculative purchases. Both down 72% from their highs. Baidu and Alibaba too cheap.
BABA:
• Chinese e-commerce leader. 22% Revenue growth with significant pullback since high.
• Strong cash position of $45 billion.
• 70% of FY22 cash flow went toward repurchasing 63 million shares for $5.6 billion.
• Compelling base of growth businesses outside of e-commerce, including cloud computing, digital marketing, and media.
BIDU:
• BIDU stock has pulled back from its high of $283 in February 2021.
• Repositioning away from traditional advertising toward SaaS.
• Autonomous driving paving the way for the next decade in addressable market growth.
• Strong balance sheet and high cash flow coupled with a low valuation.
BABA: International Expansion and Domestic Success
• Stock decline over past two years creates inexpensive growth stock.
• Chinese e-commerce leader.
• 22% Revenue growth.
• Strong cash position of $45 billion.
• 70% of FY22 cash flow went toward repurchasing 63 million shares for $5.6 billion.
• Compelling base of growth businesses outside of e-commerce, including cloud computing, digital marketing, and media.
• Over 1.3 billion active annual customers, with 75% domestically in China and 25% global.
• Official cloud provider for Beijing Winter Olympics.
BIDU: Expanding Reach to Drive Growth
• BIDU stock has pulled back from its high of $283 in February 2021.
• Repositioning away from traditional advertising toward SaaS.
• Autonomous driving paving the way for the next decade in addressable market growth.
• First of-its-kind Robo-taxi service which has already delivered 280k autonomous fare-rides in China’s largest cities.
• Strong balance sheet and high cash flow coupled with a low valuation.
• Biden-Xi talks indicated a thaw in China-US relations after the countries agreed to more open dialogue.
ON Semi: Driving the Future of Automotive Automation
• Backlog grows $5.3 billion in 3Q22 to hit over $14 billion.
• Repositioning initiative to focus on free cash flow and margin growth, exiting inefficient product lines and focusing on long-term supply agreements with OEMs.
• Quickly growing total addressable market, particularly in automotive, where ON has swelled total value per vehicle to $715
• 50% of FCF targeted at share repurchases, strong customer base and strong long-term outlook despite shorter-term softness.