We recently had a very fun stock debate between Sean, Borwen, and Chloe (SCB). During the debate, we discussed three unknown stocks off investors' radar that should be worth your attention.
At Buffett Online School, we believe in investing in great companies that you understand, and utilising Free Investing Resources to kickstart your investment journey is one of the best ways to learn. Here is a summary of the discussion.
Unknown Stocks No.1 -- Darling Ingredient (Borwen's Pick)
1. Company Overview: Darling Ingredient is the largest publicly traded company that converts edible by-products and food waste into sustainable products. They are also a leading producer of renewable energy.
2. Waste to Value: Darling Ingredient's ability to turn waste into valuable products, such as animal feed and renewable energy, makes them an exciting and sustainable company.
3. Market Presence: With over 260 facilities across North America, Darling Ingredient is a major player in the industry. They process approximately 15% of the world's meat industry waste.
4. Revenue Streams: The company generates revenue from multiple segments, including $1 billion from food ingredients, $2 billion from animal feed, and $635 million from the smallest but most exciting segment.
5. Growth and Profitability: Darling Ingredient has shown consistent year-on-year growth in revenue and net profit. They have achieved double-digit net profit margins and have implemented vertical integration to reduce costs and maintain a competitive advantage.
6. Cash Flow: The company boasts healthy cash flow, with a significant amount of free cash flow generated each year.
7. CEO Outlook: The CEO expressed satisfaction with the solid start in 2023, even in the face of inflation. Darling Ingredient falls under the consumer defensive category, making it resilient to market fluctuations.
8. Diamond Green Diesel: The partnership with energy company Valero in Diamond Green Diesel is a key focus for the company. It is expected to gain tremendous momentum and capitalize on the growing market for sustainable aviation fuel.
9. Key to Success: Darling Ingredient's vertically integrated supply chain and market dominance make it challenging for competitors to enter and disrupt their business.
Overall, Darling Ingredient's ability to convert waste into valuable products, its strong financial performance, and its focus on sustainable aviation fuel position the company for continued growth and success.
Unknown Stocks No.2 -- Essilor Luxottica (Sean's Pick)
1. Market Dominance: Luxottica has a market share of over 40% in the lens market and 25% in global sunglasses, making them the leading manufacturer in the eyewear industry.
2. Strong Brand Portfolio: Luxottica owns well-known brands such as Ray-Ban and Oakley, which contribute to its market dominance and profitability.
3. Financial Stability: The company has shown stable financial performance, with consistent earnings per share (EPS) growth over the years, except during the COVID-19 pandemic.
4. Economic Moat: Luxottica's economic moat is built on brand power, a strong distribution network, innovation, economies of scale, and barriers to entry, helping it maintain a competitive advantage in the global eyewear market.
5. Undervalued Stock: The price-to-earnings (P/E) ratio for Luxottica is relatively low, indicating that the stock may be undervalued. Additionally, the price-to-book value suggests that the company's stock is undervalued based on historical data.
6. Guru Focus Analysis: Guru Focus rates Luxottica's value rank as 7 out of 10, indicating potential investment opportunity. The price-to-book value analysis also suggests that the stock may be undervalued.
Overall, Luxottica's market dominance, strong brand portfolio, financial stability, and potential undervaluation make it an intriguing investment option in the eyewear industry.
Unknown Stocks No.3 -- General Mills (Chloe's Pick)
1. Strong Financials: General Mills has shown increasing free cash flow, earnings per share (EPS), and higher net margin compared to competitors like Kellogg. This indicates a healthy financial position.
2. Diversified Product Range: General Mills offers a diverse range of products, including cereals, snacks, yogurt, and pet food. This diversification contributes to the company's stability and market presence.
3. Market Share: General Mills has a significant market share in international sales, North American food services sales, and pet food sales. This demonstrates their broad market reach.
4. Fair Valuation: The company's price-to-earnings (P/E) ratio is considered fair, reflecting its status as a household brand and the demand for staple foods regardless of economic conditions.
5. Investment Opportunity: General Mills' stock has dropped, presenting a potential opportunity for investors. Combined with the company's stability and technical analysis support, it offers a chance to reduce risk and potentially earn higher returns.
6. Dividend Payout: General Mills pays consistent dividends with a yield of around 3%, making it attractive to income-seeking investors.
7. Historical Performance: Holding onto General Mills' stock for the past five years has yielded a 70% return, showcasing its long-term growth potential.
Overall, General Mills' strong financials, diversified product range, fair valuation, and dividend payout make it an appealing investment option in the consumer staple industry.
If you want to watch the full debate and hear how we challenge each other's stock picks, here's the full video!
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