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Introduction
The ‘Undercovered’ Dozen is a Seeking Alpha editor-curated series highlighting 12 undercovered stock articles on our platform for you to have another source for idea generation.
Today we’re looking at articles published between August 16th – 22nd.
Take a look at what these less-covered stocks might hold for you. And please join the conversation below to share what you think: are any of these worth following up on?
| Ticker | Rating | Analyst |
| DNN, DML:CA | Buy |
Bang For The Buck |
Denison Mines Corp. (DNN) is a Canadian high-quality uranium development company with several interesting assets. The company is listed in the U.S. and Canada (DML:CA). I have covered Denison a few times, with my first article on the company in 2020.
More recently, the stock has taken a beating along with most uranium equities following some general market turbulence, a slight pullback in the spot price of uranium, and a poor overall sentiment for uranium stocks.
This has caused the valuation to now be very attractive, as the price of Denison has corrected more than the spot price of uranium. It is also worth pointing out that the long-term contract price for uranium, which is probably more relevant to Denison, has continued to climb unabated to now above $80/lb. That is a 16-year high for the long-term contract price.
| DCTH | Strong Buy | Alex Pitti |
When I wrote my bullish Delcath Systems, Inc. (DCTH) article in November 2023 there was a lot of investor angst heading into the HEPZATO KIT launch in Q1 2024. It had received FDA approval in August 2023.
I believe some funds sold the stock following the positive catalyst to cash out in what was a very bad medical device trading environment in the late summer/early fall of 2023. Regardless of what caused the stock to fall, investor stress was high due to the extensive training process required to administer HEPZATO KIT. This isn’t a drug that gets high sales almost immediately upon approval. It’s a device drug combination therapy that requires a team of doctors including an interventional radiologist, perfusionist, and anesthesiologist to watch a procedure and do one under the watchful eye of experienced users of the technology. Then the hospital formulary and value analysis committees need to review PHP before it is used.
Delcath is now through the hard part of the launch. New launches will go smoother since doctors will have more colleagues to lean on when discussing how the first few procedures went.
| ARQ | Buy |
Courage & Conviction Investing |
I’ve been long shares of Arq, Inc. (ARQ) and its predecessor company, Advanced Emissions Solutions, since February 2021. Back then, with nearly $5 per share in cash, and a once lucrative tax credit business sunsetting, the company announced a Strategic Review, during the first half of 2021. At that time, almost all market participants, myself included, thought the business would be sold, for perhaps between $8 and $10 per share. Nearly eighteen months later, instead of a clean cash sale, Advanced Emissions Solutions announced a stock merger with Arq, Inc.
Post this announcement, all hell broke loose, as Mr. Market was (incorrectly) positioned for a clean cash sale. Advanced Emissions Solutions shares cascaded lower, from the mid-low $6s, and eventually, finally bottoming out in the low $1s. Perhaps, the market felt both betrayed and duped by the Strategic Review outcome as well as upset that the goalposts seemingly got completely moved, by management’s Arq, Inc. merger. Although the Arq, Inc. merger made longer-term sense, and they owned strong patents and a 30-year supply of bituminous coal, the vast majority of market participants bolted for the barn door. Essentially, no one wanted to wait a few more years nor did they want to take on different and a new host of risks (project risk, balance sheet, execution risk, financing risk, etc.).
Perhaps one of the more unusual companies out there, NET Power Inc. (NPWR) “is a clean energy technology company with a mission to globally deliver the Energy Trifecta: clean, reliable, and low-cost energy” according to its website. They do so by making technology that combines natural gas with oxygen, and mixes the two with CO2 to produce energy, and then recapturing the remaining CO2. This is my simple way of putting what is a pretty innovative process in the global energy market, in my view.
Making a bold bet on the future of clean energy, NET Power is making steady progress on their vision to transform natural gas into clean energy. What NET Power is doing is both unique and effective, a bold bet on making energy both clean and affordable, in my view. Investors who believe in this story are looking long-term, as NET Power currently does not generate significant sales or profits. However, I believe the upside potential is impressive and view the historically lowly-priced shares as a good buying opportunity.
Bavarian Nordic A/S (BVNRY) (BVNKF) is a Danish biotechnology company specializing in the development, manufacturing, and commercialization of vaccines for infectious diseases and immuno-oncology therapies. Bavarian Nordic’s proprietary MVA-BN technology platform is the key asset that enables vaccine development. A featured vaccine is Jynneos. It is the only FDA-approved vaccine for both smallpox and monkeypox in the U.S., with corresponding approvals in the EU and Canada (Imvanex and Imvamune, respectively). The company also has vaccines approved for rabies (Rabipur) and tick-borne encephalitis (Encepur). MVA-BN RSV is in late-stage clinical trials for RSV, a $5.8 billion market expected to grow at a CAGR of 12.8% over the next few years.
However, there have been significant global developments that may alter their full-year outlook. On Wednesday, the World Health Organization [WHO] declared the monkeypox outbreaks in Africa a “global emergency.” To date, “more than 14,000 cases and 524 people have died,” implying a death rate of up to 4%, or one in every 25. Bavarian’s vaccine, Jynneos, is approved in the US and Europe for monkeypox. But it is not widely available, especially in places like Africa where access to healthcare is poor, which can result in outbreaks.
| PACS | Buy | Disruptive Investor |
I am initiating coverage on PACS Group, Inc. (PACS) with a “Buy” rating and a three to five-year investment horizon. PACS stock was listed in April and I believe that the stock is a hidden gem.
As an overview, PACS Group is a provider of skilled nursing and assisted living facilities in the United States. As of Q2 2024, the company had 248 healthcare facilities, that include 30 senior living operations. Further, the company has a presence in 13 states and has shown aggressive growth through acquisitions, and as SNF facilities mature, growth is likely to remain healthy.
From a price-action perspective, PACS stock was listed in April at $21. The healthcare provider has been in a gradual uptrend and currently trades at $39. With the stock trading near 52-week highs, it makes sense to wait for some corrections before considering long-term exposure. I must add that a forward price-to-earnings ratio of 25.2 does not look expensive. However, some correction is likely after a rally of almost 85% since April 2024.
In this article, we catch up on the BDC Blue Owl Capital Corporation III (OBDE) and discuss its latest quarterly result. We also highlight the announced merger with its sister BDC Blue Owl Capital Corporation (OBDC) and why it is a good result for OBDE. For the quarter, OBDE and OBDC delivered a total NAV return of 2.1% – slightly below the average so far in the sector.
OBDE industry focus is in Tech, Insurance, and Healthcare – fairly typical non-cyclical sector overweights. OBDE trades at an 11.5% total dividend yield and a 9% discount to book.
There are several positives for OBDE in the merger proposal. For one, the stock has been trading at a lower valuation than OBDC of 5-6% in absolute terms, currently trading at a 4% lower valuation. In the base case scenario of the NAV for NAV merger, this is the likely uplift for OBDE shares if the resulting company continues to trade at the OBDC valuation – which we expect given OBDC’s larger size and stronger market “brand”.
The Other Five Fit For Mention
Tempus AI: Deploying AI In Precision Medicine; Initiate With ‘Buy’
| TEM | Buy | Hunter Wolf Research |
Tempus AI, Inc. (TEM) provides an end-to-end diagnostic platform connecting clinical, molecular, and image data for physicians and pharmaceutical companies. The company’s key competitive advantages include broad data collection, a genomics platform, and intelligent diagnostics, positioning Tempus uniquely in the healthcare technology industry.
Repsol: Undervalued And Offers A 7% Dividend Yield
Repsol, S.A. (OTCQX:REPYY) a Spanish oil and gas firm, offers a ~7% dividend yield and new growth projects in the U.S. and Mexico. The company is heavily investing in renewable energy projects, with plans to reach 1500 stations with 100% renewable diesel availability by 2025. Despite risks like delayed project productivity and low-energy prices, Repsol’s aggressive shareholder remuneration policy and discounted valuation make it a Buy.
After Strong Q2, PagSeguro Stock Still Looks Cheap
Some LatAm fintechs offer growth potential with cheap valuations, such as Nu Holdings, but alternatives like PagSeguro Digital Ltd. (PAGS) have more attractive valuations. Although like Nu Holdings it also delivers accelerated growth and good prospects, this cheap valuation comes with a catch. PagSeguro doesn’t have nearly as many moats or quality operations as Nu Holdings, which makes the thesis more risky and balances out the relationship between risk and return.
Journey Energy: A Series Of Unfortunate Events
Journey Energy Inc. (OTCQX:JRNGF) is a hybrid company, participating or planning to participate on both sides of the energy equation-upstream E&P and direct consumer electricity provider, with a twist. The twist is that they are using some of their gas to power the power plants. Journey is also seeking to grow its power generation business. The company seems like a fairly low-risk bet for investors with a bit of patience for all this fun with numbers to achieve escape velocity.
FREYR Battery: Pessimism Could Be Entirely Priced In
| FREY | Buy | Deep Value Investing |
FREYR Battery, Inc. (FREY) represents a buying opportunity for speculative investors with a contrarian investment style. In my view, all the pessimism and skepticism about their near-term milestones is fully priced in. Therefore, any positive announcements regarding their 2025 revenue and EBITDA goals could shift market sentiment, and consequently increase the share price by a significant amount.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
Read the full article here
