Stockchase Insights

We would be comfortable buying IFC today. 
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It's always tough to catch a falling knife and investor frustration with LULU could see it fall further. But it has a strong balance sheet and at some point we think it could do a large share buyback. Also, with its brand and 12X valuation, we would not be surprised to see some activist investors get involved to shake things up at the company. 10X earnings ($135) we think would be very interesting in a correction. We should see support in the $145 to $148 range without a major market correction.
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Investing Psychology 101: Anchoring Bias

The anchoring bias is when an investor uses their information from a previous experience with a stock as a reference point for any future data. An example of this is if an investor had the opportunity to buy Stock A at $100 one year ago but did not act upon it and currently the stock price is $300. That investor, now seeing that the price has tripled, may only wish to buy Stock A close to a price of $100, as that is when they first could have bought it. The investor might feel that a share price of $300 is too expensive and that the stock price should come down to $100, however, the investors’ previous experiences are irrelevant to the share price as the company has likely continued to grow and generate revenue and become a more profitable and valuable company.
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The giant recent contract won by the company does require capital, and this is the main reason NBIS has raised close to $4 billion (including the stock issuance and convertible debentures). Considering the stock was only in the $90 range for 24 hours, we think the price is a good deal for the company. Seeing strong institutional investor support after a 50% gain in the stock is a very strong sign. It does not necessarily cap the stock. There are a lot of new shareholders, and if the company continues to execute well they will continue to support it and buy. If there is a second large contract then shares could still do very well. We would be very comfortable holding it after recent events. 
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We are typically cautious on China-based companies, but of course CGG shares are up 223% anyway this year, and market cap is now $9.5B. Earnings historically have been highly variable, but CGG is starting to see more growth and consistency. P/E is a decent 17X. Seven analysts follow the company, all at buys (average target price $18.86). The last quarter was good. The company has rebounded from operational disruptions and has shown significant production growth and expansion potential in 2025. China National Gold owns 40% of the shares, which can mean relatively low trading liquidity at times. Gold production this year is expected in the range of 77,162–83,592 ounces, at relatively low cost. We would consider it decent, but we would still prefer a North America producer such as AEM.
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We would be comfortable buying ATD at 18X earnings today, considering its solid long-term history and good outlook for continued growth.
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When Investors Like Dividends: Management Discipline

A company that pays a regular dividend has to have cash flow available for the payout, every single quarter. Knowing that investors are expecting a dividend, executives of the company have to show discipline. They cannot just randomly go on an expansion or acquisition spree without consideration of the cash flow requirements of that dividend, every three months. When an executive team looks at deals, they need to consider the long-term consequences. Any deal needs to be financed properly in order to make sure the current dividend can be paid. Any deal needs to be a good deal so that it does not impair the company’s dividend-paying ability in the future (and, preferably, allows the company to increase its dividend). Sure, non-dividend paying companies may have more capital available for growth, but this doesn’t mean the expected growth is going to pan out. We think this point is particularly valid at economic peaks, when confidence and stock valuations are high. We have seen many executives go on spending sprees at the exact wrong time (in hindsight). Companies paying dividends just seem to have more self control during ebullient times.
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EPS of $3.39 missed estimates of $3.81. Revenue of $1.74B missed estimates of $1.77B. Synopsys missed fiscal 3Q results due to a major shortfall in its Design IP business (25% of total sales), which fell 7.7% to $428 million, lower by about $125 million than consensus. The factors for the weakness included China export restrictions that disrupted design starts, with an impact on customers beyond the six-week BIS ban, challenges at a major foundry customer and road-map decisions that yielded unfavorable results. Design Automation grew 24% on traction in digital (Fusion Compiler) and its hardware-assisted verification. Fiscal 2025 revenue guidance of $7.045 billion at the midpoint is lower than expected, given Ansys' quarterly sales of $600 million. Mixed end markets remain, with industrial, autos and mobile trailing AI/high-performance computing. Some drop in the stock is certainly warranted, but 34% seems harsh. Good earnings growth is still forecasted, but investors are a bit skittish because of the new large debt level with the Ansys deal. We would not expect much for the balance of the year and would not add here, but we think it is still a solid company with a good overall outlook.
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The SCR offer has been improved by 10%, and this is not a big surprise. Now, we will need to see what the company says and whether CVE responds. Certainly it is 'better' than before but still might not be enough. We do not think this fight is over yet and we would hold shares for now.
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TRP P/E at 19X compares with its 10-year range of 12 to 19x so it is certainly on the high end of the range. EPS growth as noted is not going to be spectacular. The stock is trading for its yield of 4.74% and its safety going into a possible recession. Business is historically stable and the tax-adjusted yield is certainly attractive vs fixed-income alternatives. We are comfortable with it, but more as an income security and would not expect big gains here. It's up 33% in the past year and we doubt that rate is sustainable, certainly. The debt is nothing new of course, and common for the sector. Lower rates will help here. It has 13 BUYS, 10 HOLDS and 3 SELLS. Avg. target price $73.37. We would consider it 'buyable' slightly lower. Our main comment here references the 'riskier' note in the question. IF we head into a period of weakness, we would prefer to own TRP over dozens of other.
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Why Investors Like Dividends: Investors see dividend stocks as having higher valuations
This point is debatable. Most investors may believe that dividend stocks get higher valuations in the market but studies do not bear this out. Certain high-quality dividend growers (companies with a long history of increasing dividends) may receive valuation premiums, especially in low-interest-rate or uncertain economic environments, but this is not universally true. We think the investor belief here comes from the above point, that dividend stocks tend to be less volatile. So investors see them holding up better in a market downturn (which is true), and then naturally believe they are worth more in valuation terms (which they are not).
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OPEN is seeing a surge on a lot of media attention and hedge fund hype recently. On fund is hyping a 100X potential return so of course investors are paying attention on this.We would approach a name like this carefully. Revenues are far lower than where they were at the peak in 2022 and expected to further decline in 2025. The company also has negative earnings and negative operating cash flow. Momentum is most impressive in the stock, of course, with a 1000% three-month gain.  This of course does not mean it cannot continue to do well, but it should be viewed as high risk and exceptionally speculative. Like any 'meme' stock, OPEN can be expected to swing 50% or more either way, even in a day. There is a 25% short interest. We would not endorse it on fundamentals.
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Index inclusion is quite positive in the short term, but the impact tends to fade over time. Still, the likely benefit is credibility for APP, especially after this year's intense short seller attacks. Index buying will now be ongoing, and non-index managers will still have to watch it more closely as if it moves they will potentially lag index moves (if they do not own it). Liquidity will increase and volatility 'potentially' could decrease. There is still a big debate on the stock as to whether it is the next-big-thing or a smoke-and-mirrors show. The numbers are excellent, no doubt, and if they can be sustained we think the stock does very well.
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Total production fell 4%. We are not geologists or mining engineers, and 'water' issues are always very uncertain. The company has noted that the overflow has been resolved and stopes are being returned to normal. Investors are clearly not concerned, considering the giant gain in the stock this year. We have no reason to be wary of management's statements, but nature does have a way of throwing curve balls. But, so far so good in terms of the 'fix'. Regardless, the still very low valuation here of 7X earnings, and the strong sector, makes it interesting and we would be OK with a small position today.
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