Investideas

What's the idea? The consumer food service market in China is huge and estimated to equal about US$650 billion. Despite slowing growth rates, witnessed over the last couple of years, the market is highly fragmented and Yum China can increase its market share. Yum China plans to expand its restaurant network from current 15,000 to 20,000 units by 2026. It will allocate from $2.3 to $3.0 billion of capital expenditure to reach this goal. Moreover, the company will continue to experiment with menu items and store formats to drive net sales. Development of the digital ecosystem is another pillar of the company's strategy. Yum China constantly improves its technologies to increase operational efficiency of supply chains and inventory management as well as boost digital orders, which positively impacts both margins and revenue. Yum China is a growth company so its current cash returns to shareholders are relatively modest. However, the management demonstrates commitment to return excess cash to shareholders, increasing returns in the future, which is a positive signal for long-term investors.

What's the idea? Full Truck Alliance operates in the Full Truck Load (FTL) and Less Truck Load (LTL) markets, which are projected to grow at a compound annual growth rate (CAGR) of 5.9% and 6.9%, respectively, between 2024 and 2030. Weak digitalization of the Chinese market: Full Truck Alliance has an opportunity to scale the business by replacing offline players in the Chinese logistics market. A good time to enter: heavy rains in China caused Full Truck Alliance's capitalization to drop 25% from summer peaks, but the weather had only a limited impact on the company's business. In Q2 2024, the number of active average monthly shippers rose to a record 2.7 million (+32.8% y/y). Revenue from the company's relatively new transactional business increased 63.3% to nearly ¥1 billion by the end of the reporting period. In March 2024, Full Truck Alliance adopted a share buyback program with an authorized amount equivalent to $3.55% of the company's market capitalisation.

What's the idea? The IT infrastructure observability market is expected to grow at 11.7% per year. Dynatrace offers leading solutions in this area. Although Dynatrace and Datadog compete for leadership in the field of IT observability, Dynatrace with its modest relative valuation represents greater value to investors than its main competitor. The company demonstrates high customer retention rates, reflecting strong demand from current users. The strengthening of the sales team and a new market entry strategy allowed the company to focus on larger deals and expansion opportunities within the current customer base, as well as on active partnerships with system integrators and leading cloud providers. Purchasing a combination of stocks and options gives the investor the opportunity to significantly increase potential returns with minimal potential risk growth. We recommend buying CALL options on DT shares with a strike price of $52.5 and an expiration date of 17/01/2025. The cost of the option will be approximately $3.10, while the purchase of one contract will cost $310.0 as option deals are for 100 shares.

What's the idea? A successful Digital, Delivery, Drive-Through strategy allows Arcos Dorados to consistently increase restaurant sales ahead of the competition and above inflation. The company plans to renovate and open 40–45 restaurants by the end of the year, with the 37 locations opened in Q2 2024 already contributing to sales growth. The company increased its market share by 2.9 percentage points at the end of Q2 2024. Arcos Dorados renewed its franchise agreement with McDonald's for the next 20 years. The company is rapidly growing its loyalty programme membership, which has surpassed 11 million in less than a year. The Latin American fast-food restaurant market is expected to grow from $78.56 billion to $151.27 billion between 2024 and 2030, at a compound annual growth rate (CAGR) of 9.8%. The size of the prepared food delivery market in the region is forecast to grow from $13.49 billion to $17.93 billion, at a CAGR of 7.37%.

What's the idea? Dropbox provides software for organizing remote work, which has now become the dominant model in the market. The company will launch a new product, Dash, in the next six months, which could have a positive impact on its results. The purchase of a combination of shares and stock options gives an investor the opportunity to increase the potential return without an equal increase in the potential risk. We recommend buying CALL options on DBX stock with a strike price of $23 and an expiration date of 17/01/2025. The option will cost around $2.1, while one contract will cost around $200, as options are traded for 100 shares.

What's the idea? The middle market remains a crucial part of the US economy, contributing one-third of private-sector GDP and employing some 48 million people. However, traditional banks have been increasingly reluctant to lend to middle-market companies. According to the NFIB, less than 25% of smaller businesses had their credit needs met in early 2024, the lowest level since 2022. Blue Owl's diverse portfolio, valued at $12.4 billion as of March 31, 2024, includes investments in 31 industries. Despite challenges such as rising borrowing costs, the company's high weighted average total yield has allowed for stable interest income growth, supporting its dividend payouts.

What's the idea? The global agricultural industry in 2024 has been characterized by both rising demand for commodities and significant challenges. Demand for grain, oilseeds, and meat has surged, contributing to rebuilding stocks-to-use ratios for corn and soybeans. However, the industry faces hurdles such as a 3% decrease in corn planted acreage in the US, severe flooding in Brazil's Rio Grande do Sul affecting soybean production, and the impact of corn stunt disease in Argentina, expected to reduce corn planting. Corteva's financial performance has mirrored these industry challenges. In Q2 2024, the company reported operating earnings of $1.83 per share, exceeding analysts' expectations of $1.72 per share, but net sales of $6.11 billion were below analysts' projections of $6.16 billion.

What's the idea? The active training of neural networks requires a qualitative increase in computing power, which leads to higher demand for Rambus' products. McKinsey predicts that the global economy will need 8.6 million to 13.6 million new memory chips by 2030 just to develop neural networks, which implies a growth rate of nearly 50%. Market Research estimates that the global market for memory interface chips will grow from $1.04 billion in 2023 to $3.58 billion by 2029, representing a compound annual growth rate (CAGR) of 22.77%. In late 2023, Rambus launched a new generation of memory interface chips that increased chip bandwidth by 50%. In addition, last year the company optimized chip power consumption with DDR5 chips (PMICs) and introduced a new solution for quantum cryptography. Rambus is implementing a share buyback program with an authorized amount equal to 6.32% of the company's market capitalisation.

Stable high oil prices have sparked renewed interest in offshore projects, particularly in deepwater hydrocarbon exploration and production, driving long-term demand for related services. Helix Energy offers a suite of services that are in demand with increasing capital and operating expenditures in the offshore industry. The company provides complementary and diversified services to both the oil and gas and renewable energy industries. Increased capital expenditures by customers for production enhancement and trenching provide a strong growth impetus for the company's two main segments, boosting both revenue and operating margins. Management notes the long-term nature of the trends observed, supported by a solid order book.