Sharing My Watch List
Hi everyone, hope everyone is enjoying the nice start to the summer, hopefully with some outdoor exploring.
Today I wanted to share the top names on my watch list, with a short description per sector or name, instead of my usual deep dives into a single stock or sector.
Disclaimer: For all of these stocks I have at least a small starter position so there is a certain amount of talking my book. Please do you own due diligence!
Offshore Drillers - no new offshore rigs being built, and day rates rising which will translate to increasing free cash flows
Tidewater (TDW) - Best management team; Major share buybacks initiated to close valuation gap
Valaris (VAL) - Best combo of modern fleet, cheap valuation, and clean balance sheet
Noble (NE) - Preferred choice if you are looking for high yield in offshore space
Seadrill (SDRL) - Most likely to be acquired among the major publicly traded offshore stocks
Oil & Gas (excluding offshore)
Profrac (ACDC) - Likely management buyout target; Drastic undervaluation versus market value of frac fleet
Mammoth Energy (TUSK) - Trades for less than net cash
Cenovus (CVE) - Lowest valuation among major Canadian oil sands producers; Turnaround opportunity
Antero Resources (AR) - My preferred play on North American liquefied natural gas boom (low cost, huge asset base, savvy management team, and natural gas liquid exposure)
PBF Energy (PBF) - Beaten down refinery name that should benefit from recently announced domestic refinery closures as well as recovery from fire at Martinez refinery (as well as insurance payout)
Chord Energy (CHRD) - Clean balance sheet and good management team committed to shareholder returns; Double digit free cash flow yield even at current low oil prices
Coal Miners
Alpha Metallurgical Resources (AMR) - If met coal prices recover the buyback machine can turn back on at a massive scale given current discounted share price
Warrior Met Coal (HCC) - Lowest cost met coal producer with big growth option in Blue Creek
Core Natural Resources (CNR) - Blended exposure to met and thermal coal with management signaling for huge buybacks on the horizon
Shipping
ZIM Integrated (ZIM) - trading for 2x my projected 2025 earnings which is nuts!
Danaos (DAC) - trading for roughly 0.5 times net asset value and less than 4x earnings, with profitable charter backlogs locked up for next few years
Teekay Tankers (TNK) - 35-40% of market cap in net cash, and new tanker supply at lowest level in decades (similar to offshore rigs)
Banks
Citi (C) - Trades at large discount to tangible book value; turnaround in progress
Flagstar (FLG) - Former New York Community Bancorp assets, with big discount to tangible book value near $18/share, and proven CEO Joseph Otting at the helm who successfully turned around and sold IndyMac after the Great Financial Crisis
Barclays (BCS) - Exposure to Europe with discount to tangible book value and improving operational results
Housing
ReMax (RMAX) - Asset light franchise model with significant earnings potential once housing market thaws
St. Joe’s (JOE) - Irreplaceable land assets along Florida Panhandle which is one of the fastest growing areas in the US
Rocket Companies (RKT) - Management has assembled a digital behemoth across the housing / mortgage value chain, and earnings potential will become evident once housing market thaws
Consumer
JAKKS Pacific (JAKK) - Big upside if China tariffs are resolved, trading for 4-5x normalized earnings with several big movie hits on the way
Kohl’s (KSS) - Trades significantly under land/warehouse value, and has received multiple buyout offers way above current share price in last few years
Warner Brothers (WBD) - Huge cash flow potential, and dividing company along legacy business and new streaming business can unlock additional value
Industrials
Celanese (CE) - Chemical markets at cyclical lows, and asset disposals and cost savings measure should allow company to handle debt load
Pitney Bowes (PBI) - Trades for 15-20% free cash flow yield, with heavy buybacks on the way; Upside potential from additional privatization of US Postal Service
Cooper Standard (CPS) - Huge torque to recovering auto production
Stellantis (STLA) - Cheapest of the major automotive OEM’s, with world-class brands. Need to improve execution and focus on the profitable brands
Healthcare
Novo Nordisk (NVO) - There is enough room in weight loss drug market for both Eli Lilly and Novo Nordish; Quintessential Growth at a Reasonable Price (GARP) stock
United Healthcare (UNH) - Too much pessimism baked in when stock price fell below $300/share although turnaround could take some time. Optimistic on new CEO Stephen Helmsley who was architect of UNH’s success in 2010’s.
Technology
Paypal (PYPL) - Cash flow monster with additional growth opportunities in Paypal, Venmo, and Braintree
Uber (UBER) - Huge network effect moat, and delivering on cash flow potential after bringing in some adults into the room (e.g. CEO Dara Khosrowshahi). Robotaxis would more logically plug into Uber’s strong network versus competing with Uber
NU Holdings (NU) - Proven fintech growth stock with best-in-class cost structure to effectively scale profitably. Huge growth runway to serve underbanked population in Latin America
China - small weighting but some really cheap stocks with strong business models and cash flow if you are willing to stomach the geopolitical risk
Alibaba (BABA)
JD.com (JD)
Watch out! There could be a big waterfall ahead!