45 Comments
Apr 21, 2023Liked by Overlooked Alpha

Nextdecade LNG just got all its permits approved yesterday by FERC. It has secured enough SPA deals to finance and build trains 1,2,3 of its Rio Grande LNG facility. POTEN has leaked that a 4 mmbtu and equity deal is in the works with TotalEnergies. FID expected in June and construction work will be done by Bechtel. Ticker $NEXT

I think it'll be the next $LNG

https://www.msn.com/en-us/news/us/nextdecade-surges-as-ferc-approves-rio-grande-lng-project/ar-AA1a7b7o

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Apr 19, 2023Liked by Overlooked Alpha

WOLF as the play on electrification (EVs, renewable energy, industrial motors, etc.). Silicon Carbide (SiC) will be the material of choice for electrification as Silicon was to digitization. WOLF is the leader in SiC manufacturing (~60% market share) and has 30+ years of experience working with SiC going back to their legacy business in LED. At current levels, I prefer the market leader that is WOLF over COHR.

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Apr 19, 2023Liked by Overlooked Alpha

Stone (STNE) is the 4th largest merchant acquirer in Brazil. The other 3 (Cielo, Rede, and Getnet) are owned by big incumbent banks that used to control ~90% of the acquiring market. Over time, Stone has evolved from an acquirer to a provider of integrated financial services (acquiring, banking, credit, and insurance) as well as software to micro, small, and medium businesses (MSMBs).

Stone has a unique distribution model in the form of Stone Hubs (smaller and leaner version of bank branches). The physical proximity helps Stone build personal relationships with the merchants that are paramount to selling products and services to MSMBs in Brazil. Stone Hubs benefit from economies of scale, which makes it difficult for new competitors to replicate this model.

Acquiring is a commodity business with low switching costs. But, Stone offers Shopify-like software at little to no cost to manage the inventory, orders, and fulfillment across multiple channels (i.e. physical store, online store, marketplaces, social media, etc.) to increase the switching costs. Tightly integrated banking and credit products result in higher switchings cost as well.

Stone currently trades at an enterprise value (EV) of $3B. Stone has a very profitable business model and it’s expected to reach 30%+ net margin at maturity (they had gotten there in the past). If you normalize earnings at 30% net margin for the current annual revenue of $1.8B USD, the earnings will be ~$550M USD. In other words, Stone is currently trading at a normalized P/E of ~5.

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Apr 19, 2023Liked by Overlooked Alpha

$DUOL

Currently 50% growth and > 40% bookings growth. Accelerated user growth for 4 quarters in a row - now over 50 million MAUs.

Most of the revenue from subscriptions and the rest from ads, high margin (73% gross margin - and rising).

Large TAM (international and outside languages). Optionality they are showing right now, by now they already have 3 apps (Language, literacy, Math) and additionally the Duolingo English Test, which is now recognised by 3,800 institutions.

Moat by: Network effect (more users, more data, better algo for memory and learning, also heavily gamified = both evidence-based learning), strong brand (duolingo Owl, #1 in the field), switching costs (progress and streak).

And they are very very disciplined with costs. S&M runs mostly on social media, where duolingo is brilliant (one of the top TikTok accounts), and word of mouth (spent only 14m at the time to reach 25m users). RnD they are also very effective and efficient. Therefore already profitable now. In the long term, EBITDA margins of 35% are targeted.

Founder-led, mission-driven (to develop the best education worldwide and make it universally available), big moat and still at the beginning of their growth.

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Apr 19, 2023Liked by Overlooked Alpha

Worth doing some research into Kooth, listed on the London AIM market (KOO)

They are a global leader in youth digital mental well-being. Over the last 20 years they have developed a tech platform & have gradually expanded its use across the UK’s NHS service, growing ARR to £18.6m at the end of 2022.

The catalyst for a potential 10 bagger is their expansion into the US market. Last month they were name primary vendor to build & operate a digital mental health platform for the state of California as part of their $4.7b investment into youth mental health;

https://www.dhcs.ca.gov/formsandpubs/publications/oc/Documents/2023/23-13-CYBHI-3-15-23.pdf

They beat 450 vendors to this contract award which is a very notable achievement for a small cap. Full contract details are due to be announced in Q2 but it’s already been flagged as having a ‘highly material’ impact on ARR from 2024 onwards & will be transformational to the company.

Further, in September 2022 they were awarded a $3m pilot contract by the state of Pennsylvania to roll out the tech to 150k students;

https://www.koothplc.com/article/pennsylvania-general-assembly-announces-usd3m-mental-health-pilot

Early feedback is extremely positive;

https://eu.goerie.com/story/opinion/columns/2023/04/06/web-based-program-students-mental-health-care-kaufer-bizzarro-representatives-pennsylvania-budget/70075596007/

In early 2023 multiple US states have announced similar initiatives to California & Pennsylvania (NY, NC, VA to name three). So the potential market for the sector leader is large (TAM estimated at $1b+ in 2022, however recent announcements have likely doubled that at a minimum).

Fundamentals:

- Current market cap is £95m / $120m, the company has $10m cash & no debt.

- FY22 results showed 21% growth, were P&L breakeven but with a small operating cash inflow

- Gross margins are healthy at around 70%

- 33m shares in issue with insider ownership of ~42%

- Shares have risen 55% since the Californian contract announcement but are only trading 10% above the level it IPO’d in 2020.

- Likely trading at less that 2x FY24 ARR

A ten bagger would require a market cap of £950m / $1.2b, I suspect this could be supported by ARR of £200-300m & operating profit margins of ~20%, readily achievable in 5 years if they continue to execute.

Check it out;

https://investors.kooth.com/documents/?amp

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Apr 19, 2023·edited Apr 19, 2023Liked by Overlooked Alpha

$NTPIF. Could be a $0.00, but also easily a >10x with an enforceable legal win on the value of their real estate. Buyer beware/do your own work/think for yourself but plenty of vol and convexity.

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Apr 19, 2023Liked by Overlooked Alpha

$NAUT

$ORGN

key thesis :

massive TAM

Long bull of Biotech era..

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author

Our high-risk, high-reward choices have kind of sucked, to put it bluntly, but I think a couple I'm not quite ready to write off:

VWE might have found a bottom, as we wrote they have several years, and it's the kind of turnaround that's pretty easy for investors to ignore until it starts moving.

ADV has such a thin equity slice (~$400M market cap, ~$2.4B enterprise value) that it can 5x in a flash. Get EBITDA to $600M from $400M in '23 (another turnaround play at this point) and a bit of a multiple expansion and you're there. Slide in the stock of late however would suggest there's some mounting evidence that's unlikely.

Think this week's pick, COHR, has a blue-sky scenario where it does 8x-10x over a decade, something like that. If silicon carbide hits and they can track down Wolfspeed to be the market leader, that's definitely on the table.

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Apr 19, 2023Liked by Overlooked Alpha

Like most TAMs it is impossible to say. There is no such thing as accurate. However there are 92,000 people on the waiting list for kidneys. Multiply 90k x $50k and you get $4.5B. Add the other organs (+20%) and that makes it $5.4B. That’s super rough but it seems like the opportunity is there. I just hope the execution is up to it!

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author

These are all fantastic ideas, keep them coming!

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Apr 18, 2023Liked by Overlooked Alpha

Take a look at SAFE. They dominate the Ground Lease Business and given the coming credit crunch in CRE, SAFE is positioned to strike very attractive deals and to make bank.

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$AWE LN - AlphaWave. A great semi IP play with strong management team with proven track record, coupled with a misunderstood story / hit piece. Stock got destroyed on that hit piece while operations have been steadily moving in the right direction, customers adapting the technology and royalty revenues will start kicking in en masse... meanwhile indisers/ management / founders buying more stock.

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Apr 18, 2023Liked by Overlooked Alpha

Check out Transmedics (TMDX) at a $2.3B market cap. These guys are offering TOAAS - Transplanted Organs as a Service. OK, I made up the acronym but that is what they really do. Traditionally a donor organ will be placed on ice prior to implant. As a result about 75% spoil and can’t be used. TMDX has an incubator that doubles the shelf life. But they aren’t selling the device, they are selling the service and creating a logistics network to service high transplant hospitals. They currently service heart, liver, and lung and hope to get approval for kidney in a year. The demand for kidney is 4X the others combined. The Biden administration just announced plans to revamp the current process of procuring organs.

https://rollcall.com/2023/03/22/biden-administration-plans-overhaul-of-organ-transplant-system/

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Apr 18, 2023Liked by Overlooked Alpha

FLGT. Genetics business. Made a ton of money in COVID then collapsed. But still doign $600m+ sales and has products needed to grow

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Apr 18, 2023Liked by Overlooked Alpha

$PM -- a large cap; nicotine unit consumption rises as RRPs take over from combustion; revenue/margin per unit grows due to favorable taxation of RRPs; regular inflation-plus price increases; PM best positioned for RRPs and global mkt shr grows; multiple doubles to consumer staple multiple; plus dividends --> 10-bagger in 10 years (including dividends).

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Apr 18, 2023Liked by Joe 3MB, Overlooked Alpha

ENVX ...

will disrupt the entire battery space from wearables to EV... They are already selling samples to Samsung and I bet some other biggies in the mix...

Last mgmt team screwed up royally but this new mgmt team is seasoned with impressive pedigree

We know they have the batteries now they have to scale

Could be 100x if they execute

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author

When I look at my list of familiar stocks I don't see many realistic chances of a 10x. Can Adobe hit a 1.7 trillion valuation on the back of creators and AI? Not likely. Same with other large cap names. So I think the best opportunities are going to come from small caps and less well known names. I still like DLHC here due to its history of successful acquisitions and the market cap is only $143 million. But also I tend to lean towards secular trends like electric vehicles, anything related to electrification or sustainability. That's why I do like COHR here as well. Though I need to dig deeper into that space.

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Apr 18, 2023Liked by Joe 3MB, Overlooked Alpha, Vince Martin

$PGY

Fintech left for dead about to inflect profitably. 10x would get it back to SPAC pricing so not demanding. Insiders have been buying.

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Apr 18, 2023Liked by Joe 3MB

$NLCP

12+% dividend yield cannabis REIT

Large demand for sale leaseback capital in cannabis industry. 2-3% annual lease escalators + 10-25% growth from external acquisitions + multiple expansion to a 3-5% dividend yield can lead to returns in excess of 10x over the next decade.

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