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Pullback is excellent entry. Second-derivative trade on AI revolution. Leading independent power producer in US, ~5M customers across 20 states. Half its business is in Texas, which is ground zero for power-hungry data centres. Yield is 0.7%.
Likely to sign an agreement with a hyperscaler. Power prices increasing. Can foresee upgrade to credit rating, which lowers cost of capital. Trades at a fairly undemanding 10-10.5x enterprise value to EBITDA.
Private equity (used to be called leveraged buyouts). An American version of Brookfield is a way to conceptualize it. Manage $640B of private equity. Organic growth bolstered by recent acquisition, which takes them into insurance and annuities. Rapidly growing capital markets business. Secular advantage of private market flows are outpacing public market flows. Yield is 0.6%.
(Analysts’ price target is $168.67)We like KSI, and we even covered the name in one of our latest podcast episodes (link to our discussion on KSI can be found here).
KSI is a $630M healthcare SaaS company that provides solutions for data and document management. Good sales growth is expected over the next few years, although it is not yet profitable. It generates positive free cash flows, has a strong balance sheet, strong gross margins, and we feel it is at the turning point of becoming profitable. Overall, we like the name and have it in our Growth model portfolio.
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The stock has made a bit of a 'round trip' from its recent highs but considering its strength, market share, financial position and growth, at 23X earnings (with $77B cash) we think it is buyable for investors who can look beyond the current market volatility (which will end, one day).
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We would look at P/E (61X, vs 3-year 72X), P/CF (72 vs 70X) and earnings growth (18% vs 30%). Overall growth rates have slowed as the company gets bigger, but free cash flow has surged anf the company has $4B net cash. The stock is down 6% YTD. We think $475 would look good.
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Losing Money in the Stock Market: Buying Fads
You know what we are talking about here. Nearly every investor has been caught buying a fad that didn’t work out. Cannabis? Check. Electric vehicles? Check. Dot-com companies (for the older folks)? Check. When there is a fad that is attracting investor attention and money it is important not to get caught up. Yes, there are often good companies doing well, and that’s how the fad or bubble is created in the first place. But investors can focus on smaller companies and there are always promoters and brokers willing to extol the virtues of a sector or specific businesses. Stick to the fundamentals. Don’t pay 100 times sales for a tiny company just because it is in a ‘hot’ sector!
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Management's been on a charm offensive in Japan. Excellent serial acquirers, financially disciplined. A sensible deal to be had. Constructive outlook doesn't hinge on a deal. Strategy is to lure shoppers in with cheap fuel, then sell merchandise at high margins. Selling alcohol in Ontario has helped same-store sales. Yield is 1.1%.
(Analysts’ price target is $84.80)Almost 20% ROE. Grew earnings 12% compound rate over last decade. Undemanding multiple of 16x PE. Great combo of value and growth.