Speaker 1 (00:07):
Hi guys. Welcome back to a Better Way to Wealth. I’m Tim Melvin. Thank you so much for watching. Now, everybody else in the world these days is giving you guys a watch list. These are the stocks I’m going to watch right now. Well, while everybody else is watching stocks, waiting for them to do some sort of trick, we’re going to give you a hot list. These are stocks that I think you can buy right now and have an opportunity to book some really massive profits. So let’s just jump right in. I’ve got four great stocks for you today that I think can make you a great deal of money. We’re going to start with one, Just Eat Takeaway, ticker G R U B, and these guys are a food delivery service based in the Netherlands. They do business all over the world, near as I can tell it’s everywhere but the United States. They’re not in here competing with Door Dash and Uber and GrubHub and all those folks.
And they’re starting to add some grocery services as well. Now, if you compare the valuation on Just Eat Takeaway to some of the US food delivery services, it’s night and day, I mean, this stock appears to be very undervalued, not the only one that thinks so. An activist fund over in Europe, Cat Rock Capital, has filed papers. They own a good deal of the stock. They think that the stock price is lagging because of insufficient communication from management and excessive promotional spending. They think that the company should consider selling itself to one of the larger food delivery services like Uber GrubHub or Door Dash here in the United States, that it might make a better fit to be run by management that’s clearly had great deal of success delivering food and groceries. Now, looking at this, it’s 12 times normalized earnings, which is ridiculously low for a company with the growth potential that is in front of Just Eat Takeaway.
Remember they’re doing business all over the world. So this company can be a 25%, 30% grower in terms of revenue and eventually cash flows. And to be priced at 12 times normalized earnings is just absolutely ridiculous. Again, Cat Rock and I are not the only ones that think so. When you look at the shareholder list, there’s some brilliant people in here making a bet that this stock is going to go a lot higher. They include Seth Klarman at the Baupost fund, just an absolutely legendary value investor. And then you’ve got Chase Coleman over at Tiger Global, who has been one of if not the most successful technology investors of the last 20 years. It was spun out, of course, a Tiger Management, Julian Robertson, his old hedge fund operation. So the stock is sitting there, it’s trading around $19 a share.
Just as it sits I think it’s north, well north, of $40 a share would be a much more appropriate stock price for this company. There may be additional activist pressure for them to sell this company. And again, I think that would probably happen in the low $30s, just right on the bat. I can’t see the company going for less than that. Downside appears very minimal because the stock is incredibly cheap. So Just Eat Takeaway, Netherlands company, the symbol is G R U B, and there’s an activist driven opportunity that could catapult this stock a lot higher over the coming weeks and months. Into my next next pick. This is going to shock you guys. It’s a small bank, it’s LCNB Corporation, symbol is L C N B. And it is out of Lebanon, Ohio, which is in between let’s call it Cincinnati and Dayton, right in that area. They have 33 offices about $1.8 billion in assets.
This is also another activist situation, but this is not a big activist fund. This is a local businessman John Lane, who also ran an investment management firm for 15 years, now has a small company, doing financial counseling and life advice type services seems to be very successful. He’s been on the board of some banks and savings and loans in the past. And he and his wife have accumulated a little bit over 5% of the stock and intend to have discussions with management about things that they could do to get the stock price a lot higher over the next few years. I’m going to presume that discussion is going to also consider selling the bank since we are starting to see the great consolidation trade kick back in now that we have vaccines and COVID is trying really hard to become a distant memory in spite of our best efforts to keep it around.
So I think that there’ll be a little pressure on the bank to at least consider having some M&A discussions. In the meantime, guys, this is just a nice cheap bank stock. The loan portfolio is primarily in commercial real estate and residential real estate in their home market area. That has the job of underwriting the loans, make sure I’ve got these numbers right, Which just 0.18% of all assets are non-performing assets. And just 0.25% of all loans are currently delinquent right now. They’ve done a good job of making sure that they only lend to people that are capable and willing to pay the money back on a timely basis. So it’s sitting here, it’s at 90% of book value. 10 times earnings. Management is pretty shareholder friendly. We got a 4.3% dividend yield, even if they don’t sell the bank there’s a lot of upside.
And we collect a generous dividend while we own the stock. So LCNB Corporation, little bank, Lebanon, Ohio. There’ll be some activist pressure in the stock insiders, by the way, do own 12% here, they’ve got skin in the game. They have an incentive to do the right thing, whether that be buy back stock, you get the stock price higher that way, or consider an M&A transaction that sells the whole bank probably for close to 140% of tangible book value currently trading at 90. So there’s a lot of upside in shares of LCNB Corporation. So we got Hil International, H I L, is my next pick. And I’m pretty familiar with this company. It’s been around a long time. They do construction and project management, and they’re a global company and they’re in kind of all aspects of construction management. It’s buildings, water systems, roads, energy structures, both traditional and renewable.
It’s a pretty good business. The problem here is it’s a pretty good business. It’s been fairly poorly run for several years now. Now there’s signs that the business might be starting to turn around. They’re going to be free cashflow positive for the full year 2021. But the truth of the matter is this is a potentially great business. They’re in infrastructure, they’re in buildings. They’re doing renewable energy project consulting and management all over the world. They’ve managed some large complex buildings, including the rebuild of World Trade Center in New York city and the towers in Abu Dhabi. It could be a great business, should be a great business, would function better in my opinion, as a division of a larger engineering and construction firm. And we’re starting to see some activists take initial positions in the stock, hopefully we’ll see them kind of step up file 13Ds and try to lean on management because the stock really does need to be sold.
It’s just not operating very efficiently. A transaction in my opinion would occur at about twice the current stock price. Maybe even a little bit higher. That’s how undervalued I think the stock is at current prices. So it’s an opportunity for patient aggressive investors to make a very large profit from a great business that’s being very poorly run in my opinion. So Hil International, the symbol is H I L. And I got one more pick for you. I really like this one. I think you will too. This is 180 Degree Capital Corporation. The symbol is T U R N. This is an investment manager and hedge fund sponsor that primarily invest in — this should sound familiar to most of you by now — small cap, deep value situations. And they do like to take a hands-on activist approach with the companies in which they invest. They’ve done a fantastic job.
So the returns have been very high since inception in 2016. They have handily beaten the S&P 500, the Russell 2000, and any other index you want to drag out and throw at them. They’ve done a fantastic job of managing the portfolio. This is a totally ignored company trading at a large discount to its net asset value. Right now it’s trading at just 69% of the value of all the stocks, bonds, cash, office furniture, everything else that goes into the business. That is a huge discount. You would make about 50% if this thing just traded up to the value of the stuff that they own, we have almost continuous persistent insider buying. As you know, as deep value guys, I’m sure they recognize that their own company is deeply undervalued. So what you have here, you’re going to buy this at a discount to the net asset value.
These guys are doing a great job managing money. So the net asset values should continue to grow at a very high rate. So we’re just going to be trying to have the value of the price, catch up to the value and the value is going to keep trying to run away from it. So we could get large long-term gains in this as the net asset value increases and the discount between the current price and that net asset value eventually begins to narrow from the very wide levels. So this is kind of an opportunity really, to almost invest in a hedge fund via a public market security, because you should be able to get the same type of returns and exposure to the same deep value corporate activist approach that their hedge fund investors get. So that’s my final pick 180 Degree Capital. Symbol is T U R N. And I think it is a fantastic, long-term holding for just about anybody out there. So anyway, that’s a Better Way to Wealth. I’m Tim Melvin, and that’s my hot list for these this week for stocks that I think you could buy right now and have an opportunity to make enormous long-term profits. Thanks for watching guys. We’ll see you again soon.
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