Idea Roundup #2
A quick look at this week's most interesting ideas.
Welcome to this week’s Idea Roundup from The Market Beat, where I present a handful of interesting ideas I’ve seen throughout the week. Thank you for reading! If you enjoy this, please be sure to like the post and subscribe.
Also, be on the lookout for my next equity deep dive later this week!
1. Procter & Gamble (PG) PG 0.00%↑
Look, I hear you—you opened this email expecting to see some decent ideas, and you get… P&G? Well, hear me out. Procter & Gamble has been on a bit of a tear recently with a management team that is building a pretty solid track record of overdelivering after a soft 2022. The consumer staples giant reports earnings next week, and for the full FY2024 analysts expect GAAP EPS to increase 8.3% year over year against modest top-line growth of 3.5%.
Great. So, what makes this idea (and this upcoming earnings) interesting? Well, for one thing, the stock never quite recovered from its 2022 slump after forward revenue estimates dipped in the face of spiking inflation and interest rates.
Since the start of 2023, forward estimates have ticked up to new highs, but the stock hasn’t followed suit. Something to watch for next week!
2. The Duckhorn Portfolio (NAPA) NAPA 0.00%↑
This is one I’ve had my eye on for a bit, and will possibly be the subject of a deep dive in the future. Duckhorn operates wineries throughout California and after going public in 2021, things have been… not good.
Against the underperforming Russell 2000 (RTY), Duckhorn has done downright terrible with a 47% decline on a total return basis.
With this backdrop in mind, we have a potential value story. Duckhorn has a valuable portfolio of wineries (read: land) on its book (which cannot be adjusted up to reflect today’s current value, per accounting conventions), which are carried at certainly lower valuations than what they would sell for today. There’s an old saying about land here: they’re not making any more of it.
Despite the concern (?) that Americans are drinking less, Duckhorn’s portfolio seems to have a bit of a buffer—the company primarily provides mid-range options, which are generally perceived to be a little more robust, wine market-wise.
Lastly, the stock is cheap. Today it trades at 1x book value and ~12x forward earnings. I don’t know if it’s a good play today necessarily (the downtrend in the stock is more or less unbroken), but it’s one to keep an eye on for sure.
3. RH (RH) RH 0.00%↑
After a blistering performance in the early innings of the pandemic, RH has done some falling back to Earth. Today, the stock trades around ~$250 down from almost $750 per share. What makes this one interesting?
Well, remember that recession that was supposed to happen? The one we have all been talking about for what seems like 50 years? Well, it seems at the moment as though that isn’t going to happen. Sure, RH has been hit with some sudden pressure from its affluent customer base finally feeling the pinch of inflation, but that was bound to happen after a while. What I’m most interested in is what comes next.
Analysts have been slowly knocking down forward EPS estimates at RH for some time now:
Is that a great-looking chart? No, not really. But here’s the thing about human psychology—we tend to over-extrapolate. When things aren’t good, people believe things will stay bad forever. Conversely, when things are fine, people tend to believe that nothing will go wrong. I think the current dour outlook for RH could be a biiiit of a product of this thinking.
And can I even say dour…? FY2026 average estimates currently call for ~$16 per share in earnings—more than double NTM estimates, which implies a valuation against FY2026 earnings of 15.7x. For the right kind of investor, this one could be interesting. For a deeper dive on this check out this great write-up from
.
4. State Street Corporation (STT) STT 0.00%↑
The old guard of services to financial institutions makes the list this week. Why? Well, for one, it reports earnings this Friday, and the company has been on a hot tear for a while—18 of the last 19 quarters from State Street have been non-GAAP EPS beats.
Meanwhile, the latest round of beats hasn’t done much to move the needle for the stock overall, with the last five years seeing an underwhelming ~24% appreciation in its shares.
The result of all this? The stock seems cheap. It currently trades at 10x forward earnings, well off its 8x low in 2022, but still off its 12-13x high from 2020-2022. Management seems to think the stock is cheap as well—State Street has bought back almost 19% of shares outstanding in the last 5 years, and that figure jumps to almost 30% if you pull the lens back to 10 years.
Thanks for reading this week’s idea roundup! Be sure to like the post if you enjoyed it, it really helps with visibility. Cheers!
Disclaimer: Nothing in this article is intended to be investment advice. As of this writing I do not have any position in any stock mentioned in this article. This is a work of opinion and entertainment only. Do your own research and consult an investment professional prior to making any investment decisions.
I think it's very cool that you also include companies like Procter & gamble. I often feel like it's not cool enough to include them in Substack or other social media because they're not in and fashionable, yet they're such great companies and stocks!