Stock Thoughts

An Investment in Knowledge Pays the Best Interest

Benjamin Franklin

 

PAAS Has Glittering Prospects with Asset Optimization

• 2.64% dividend yield, new capital allocation policy pending.
• Increasing demand in the industrial sector, especially for electrification and photovoltaic cells, is expected to continue driving silver demand.
• 2023 estimates project significant increases in output in silver and gold: 21-23 Moz of silver (a 19% YoY increase) and 870-970 Koz of gold (a 63% YoY increase).
• Development in silver with La Colorada Skarn, approval expected in 2H23. The gold expansion focuses on Phase 3 of the Jacobina mine, which could boost production significantly by 2025.
• PAAS divested from several non-core assets, expecting to save over $80 million annually in maintenance charges and increase its cash position by almost $600 million while still retaining specific royalties.

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BTG’s Golden Horizons with Growth Footing

• 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.

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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.

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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.

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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.

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Aging Demographics and Medicare Advantage Growth Heal Outlook for Healthcare Sector

• On a secular basis, a demographic shift toward an older population has tailwinds in care needs and individual spending per visit. Medicare Advantage (Medicare Part C) will grow to become the largest payor by 2026.
• Healthcare is recession-resistant, with the largest payors, Medicare and Medicaid, being price agnostic toward care.
• A concentrated effort in the sector to expand margins through rate increases, cutting administrative costs, and reducing contract labor.
• US spending on healthcare will grow at a 7.1% 5-year CAGR – outpacing GDP by an estimated 240bps.

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LHX Growth Prospects Take Off with Space wins and Defense Spending

• 2.72% Yield.
• Huge backlog which expanded by 25% year over year to $25 billion. Increased book-to-bill to 1.18x across the entire company.
• Global rearmament campaign, NATO militaries ex United States increasing equipment spending by 24.9% year over year. The US approved the largest defense spending package in history.
• Expanding the total addressable market in space, with a 1.7x book-to-bill, and the acquisition of Aerojet Rocketdyne, adding $2 billion per year in revenue.

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VFC Has Deep Value Proposition with a 6.2% Dividend Yield

• 6.2% dividend yield.
• Stock has pulled back 81% from January 2020 and now represents a deep value proposition with low PE and a big dividend yield.
• VFC’s strongest brands, Vans and The North Face, are pivoting to a more digital DTC (Direct-to-Consumer) presence.
• VFC is guiding towards a minor recovery for this 2024 holiday season and is entering the holiday season in an improved logistical and inventory position.
• Despite headwinds, there is significant brand recognition and value in VFC’s premium retail brands.

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Cheap Pureplay and Short Term Expansion Yields Long Term Cashflows for EQT

• Earnings and Dividends are expected to ratchet higher with Mountain Valley Pipeline opening by 2024.
• Dividend Yield 1.36%, extensive share buyback regimen with $1.4 billion in repurchases left open.
• Pure player in one of the cheapest gas basins in the world. EQT produces 6% of total US natural gas output.
• Acquisition of Tug Hill, adding 800 MMcfe/d* in capacity while reducing firm-wide breakeven by $0.15/MMbtu*.
• Favorable natural gas conditions expect a shortfall in supply compared to demand. EIA expects 16% increase in global demand year over year.

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Video: Gold Stocks That are Attractive from a Valuation Perspective: NEM, GFI, GOLD, BTG

• 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.

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Gildan’s Vertical Integration Provides Sustainable Opportunity

• Dividend Yield 2.48%, robust share buyback program.
• High-margin, vertically integrated player with facilities in trade-advantaged countries in Central America and the Caribbean.
• Near-term volatility in cotton markets subsiding, increase in underwear and hosiery sales partially offset consumer reluctance to spend on activewear.
• Sustainable Growth initiative, hoping to capture consumer shift toward ESG clothing sources while continuing to expand the company’s core competencies.

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