Stock Thoughts

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Sibanye-Stillwater Hopes to Offer a Metal Mosiac

• 8.54% Dividend Yield.
• Diversifying away from gold into PGMs (Platinum Group Metals) which are critical for batteries. Electrification transformation coupled with automotive tailwinds will drive demand.
• Despite short-term challenges, SBSW’s diversified investments position it for future growth.
• A notable demand-supply gap in the Lithium and Nickel markets by 2030 highlights an emerging opportunity in the battery metals sector.

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Walgreens Boots Alliance Accelerates Healthcare Segment Despite Headwinds

• Current Dividend Yield 6.22%.
• WBA is scaling in the healthcare service sector and is expected to boost adjusted operating income in FY24, with sales growth increasing 22% to $2 billion in this segment.
• Growth in commitments from insurance payors, adding 2 million additional customers to the network.
• Significant cost savings program targeting $800 million for FY24, bringing the total to $4.1 billion in cost savings since FY19 This does not include the nearly $5 billion in divestitures since FY22.
• Continued commitment to dividend even amidst stronger-than-expected headwinds.

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Toyota Drives Up Battery EV Production Targets

• Despite the current high prices and shortages in the automotive market, Toyota expects strong unit and net income in FY24 and new expansion in North America opening by FY25.
• Pledges will expand BEV (Battery Electric Vehicle) production to reach 1.5 million by 2026 and 3.5 million by 2030.
• Announced a buyback and dividend policy change, with a $2 billion per year maximum repurchase agreement and a dividend policy reflecting cash-on-hand.
• Strong management, willing to sacrifice short-term revenue gains for long-term customer loyalty and sales volume.
• Vehicle unit sales are expected to increase 7.8% companywide. Revenue is expected to increase by 2.5-5% for FY24 depending on Forex.
• Due to a more favorable mix of EVs and alleviating supply constraints will boost operating income, growing it 9.6% year over year.

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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.

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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.

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Sell Alert: Broadcom (AVGO)

Broadcom (AVGO) has been sold as the stock has spiked to well above our estimate of value. AVGO has stock has gotten caught up in the AI (Artificial Intelligence) bubble and is due to retrace in our opinion.

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Perrigo Outlook Healed by Repositioning

• 3.3% dividend yield, 100% operating cash flow conversion and further growth in EPS expected for FY23.
• Repositioning toward consumer-facing health brand progressing with divestitures and acquisitions. Power player in consumer staples.
• Tax situation resolved, $974 million in losses mitigated.
• Potentially game-changing approval with Opill prescription birth control approved for moving to OTC (Over The Counter) usage.
• Baby formula operation is undergoing expansion to allow for an additional 100 million units in volume per year, in the face of global shortages of baby formula.

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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.

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Video: AT&T has 6.3% Dividend Yield. Stock Pullback Provides a Good Entry Point for Dividend Investors

AT&T (symbol T) has streamlined its business by divesting AT&T TV, Warner Media, and DirecTV. Fiber expansion and streamlined business combined with cost improvements of $6 billion in run rate should drive improved profitability. However, we do have concerns about the debt level and the company’s ability to reach its FY25 goals. AT&T offers income generation and an option on the expectations that a streamlined business will produce better profitability which should drive near-term earnings improvements even though the secular long-term growth potential is very modest.

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