I'm Buying The Dip On These Stocks

[00:00:00] Speaker 1: So yesterday I posted my MercadoLibre Q3 2026 earnings analysis video and explained why I am buying more Melly shares. However, funny enough, the top comments on that video were not about MercadoLibre at all. They were about road or construction partners because construction partners fell 20% yesterday after they announced their preliminary Q4 results and initiated their fiscal year 2027 guidance. This is obviously not ideal. I mean, I've been talking about road on my channel for the past few months. I have made it a decently large position in my portfolio and I have shared that I am continuing to buy the stock. And I'll just tell you guys right now, I am continuing to buy the stock because I, I simply do not think that this level of reaction from the market is at all justified as we're going to get into. I got a lot of questions about road yesterday and I'm trying to do my best guys. It's earning season and I'm trying to think about what the audience wants to see the most. For example, Brookfield Asset Management reported their earnings this morning. And I'm not going to talk about BAM today because everything was fine, right? The stock is doing fine. It's still up. And the earnings in general were in line with pretty much everyone's expectations. So TLDR BAM is fine. But what I think people want to know about is the stocks that are getting hit hardest. And I also want to talk about those ones because the stocks that get hit hard after what I think are fine reports are where I believe the best buys are. And those are the stocks that I am actually buying. So getting back over to road, I know that it looks scary that the stock was down at 20% yesterday, but I also think that it is important to zoom out a little bit, right? This stock was trading for about $80 per share just over the past couple of weeks. And then it saw a nice little rally to about a hundred dollars per share. And then after the preliminary results, it fell back down to about 80 bucks. Now it's about, it's at about 77 at the time of recording this video. So it's basically flat over the past couple of weeks. Now it just gave back that little rally that the stock had. So yeah, ideally the stock would not give back that rally, but as I'm sure you guys know, if you've watched my channel, I am not a short-term trader and I am absolutely trash at knowing where stocks are going to go in the short term. What I think I'm good at and why I think I have an audience is because I'm a long-term thinker, because I think that if you can think long-term, then that is really where you can find a lot of opportunities in the market, especially in a market like this, because it's very clear that the market is extremely hyper fixated on short-term events. And I think that this is another perfect example of how short-term the market is thinking right now. TLDR, if you're looking for someone who's going to tell you how to make money in the short term, that's not my channel. That's not what I do here. And I want to properly set your expectations. I'm someone who tries to find a value over the long-term, but with my little ramble out of the way, I'll actually, first, I just want to show you guys that tuna is still here. I got some comments saying we haven't seen tuna in a while. So tuna is still here. He's still alive. We're chilling. But with that being said, let's now hop into the video. I don't want to share what happened with road construction partners. All right. So we're going to start off by taking a look at the release that came out yesterday. And again, road gave its preliminary results for the fourth quarter earnings that are coming up here in the next couple of weeks. And then they also gave us their guide for 2027. As I said, the market did not like this release right here. The market was not okay with these numbers. So first off in this guide road is still expecting to grow its revenues by 30%, net income by 40%, and EBITDA by 23% in fiscal year 2026. So for their full year results, that is what they have done this year. So this business is still growing tremendously. They have also completed seven acquisitions this year, and they grew 7% organically. However, they had an unusually wet Q4, and diesel prices spiked significantly in the quarter, which caused their margins in the fourth quarter to take a hit. However, they believe that the long-term thesis of the business is still intact. They have strong momentum, and they are expecting to grow revenue and EBITDA by another 15% in fiscal year 2027. So they are still expecting the business to continue growing. That being said, they're expecting revenue to come in at $3.67 billion, which is near the top end of their existing guidance. However, EBITDA is now expected to be $522 million, for this year, which is down about $40 million from their previous guidance. EBITDA is still expected to be up 23% for the full year, though. Their EBITDA margin is expected to be about 14.23% versus 15.1% last year, though. So the story here is that EBITDA and margins are being hit due to less work days from wet weather and higher diesel costs. They then gave us their 2027 guidance, and it's for about $4.25 billion in revenue, $175 million in earnings, $602 million of EBITDA, with a 14% to 14.5% EBITDA margin. They're also expecting 7% organic growth again for the next year, which is baked into this guidance. They also say that in the second half of 2027, they see margins strengthening again due to being able to properly price in the higher diesel costs into their upcoming and renewed contracts. They are also continuing to execute on their long-term margin expansion objectives, which are building in better markets, vertically integrating the business, and increasing their scale. They then say that they have already completed three acquisitions in their fiscal year 2027, which we are only five weeks into, so they are still acquiring a lot of businesses. And ultimately, they remain confident in the long-term growth opportunity, margin expansion, and shareholder value creation. And I completely agree. Now, I used Muse to make me a chart of RODE's historical adjusted EBITDA on a quarterly basis, including the upcoming fourth quarter guided numbers. And in this chart, you can see that for the fourth quarter, RODE is expecting to have flat year-over-year EBITDA growth. So for this one quarter, it's going to be a weaker one, but it's still not a decline to EBITDA. It's just flat year-over-year growth specifically for the fourth quarter. I then got Muse to make me a trailing 12 months EBITDA figure, and to include the fiscal year 2027 guidance as a straight lineup throughout the year. And here you can see that RODE is still producing a record amount of EBITDA, and it is still expecting to grow 15% next year. And I do not think that this warrants a 20% drop to the share price, especially when the share price was already in a correction. This business is still growing, and it is still producing a record amount of EBITDA. Additionally, RODE is guiding for 15% revenue growth next year, which means that they need to grow revenue by a total of $555 million. They said that they are guiding for about 7% organic growth, which works out to $257 million of revenue growth. And keep in mind that they have also grown roughly 9% in the most recent quarters and over the past couple of years. So 7% organic revenue growth is below what they have been doing in recent history. In the third quarter of this year, they also quoted that they have $140 million of acquired revenue growth already coming in for the next fiscal year. They acquired an additional three companies already in fiscal year 2027 since this year started, which should produce an estimated $120 million of revenue based on those companies' employee counts. This means that RODE only needs about $50 million of additional revenue to hit their 15% revenue guidance. To put this in perspective, if they do one into two more bolt-on acquisitions for the remainder of the entire year, then they should already be hitting their top-line guidance. And again, they already acquired three in the first five weeks of this fiscal year. So ultimately, I think that the fiscal year 2027 guidance will be beaten on revenue pretty comfortably. And I think that they're now giving safe guidance due to what has happened this year. I do not think that they want to miss guidance again. Now, while we're talking about guidance, I got Muse to go and take a look at all of RODE's historical guidance at the beginning of the year and how their numbers actually ended up through that year to see if they beat, hit, or missed their guidance. And historically, RODE has a pretty good track record with their guides. They have met or beaten guidance six out of the last eight years since they have been a public company. In 2021, they had a record wet fourth quarter. And in 2022, they were experiencing higher inflation and energy price shocks. Now, in 2026, they raised guidance three times every quarter this year. But then they had both bad weather and energy price shocks that hit them in one quarter. Overall, though, they do have a good track record, but the business can clearly face short-term headwinds that are out of their control. This next chart is another one that I got Muse to make. And this is a visual of their historical guidance versus reality. And you can see the two years where they missed and how much they beat guidance in 2025. What's also interesting, it's RODE's initial EBITDA guidance for 2026 this year was $520 to $540 million. So they're actually still on track to hit their initial guidance that they set out at the beginning of the year, but they are going to miss their updated guidance that they put out. But the reason that I am buying more shares of RODE is simply because I think the stock is way too cheap now. RODE is now trading for 8.4 times trailing 12 months EBITDA, which is lower than in 2022's bottom of 11.8 and is now back to levels that have not been seen since COVID, all the way back in 2022. In 2022, RODE was actually seeing its EBITDA decline. And in 2020, we were obviously going through a very uncertain period and the market was crashing. But today, RODE's margins are higher and expected to remain relatively high even into 2027. And the business is still expecting to grow 15% next year. So I do not think that it deserves to trade for lower multiples than it did in 2022 when its profits were actually declining or in 2020 when we were having a stock market crash. In other words, I think that this is a very large overreaction by the market, but that is the earning season that we are in. And this again is another reflection of how short term the market is thinking. The market absolutely sold off construction partners stock yesterday because it's clear that they're going to miss their Q4 guidance and the numbers are going to come in a little bit weaker than they thought. But I think that this is so clearly a short term bump in the road, pun intended, because just to put it simply, I don't think that wet weather or rising diesel prices is going to disrupt the long-term potential of this business. Like when we're in 2030, I plan to hold this business until 2030 at least. And when we're in 2030, I really do not think that high diesel prices are still going to be an issue. And I think that rain is going to continue being volatile and they may have some weaker, you know, quarters, but I just don't think that's really going to matter, you know, from year to year or from quarter to quarter. So what I'm trying to say is to me, this is so obviously a short term event that is not going to impact the long-term fundamentals of this business. And I think that once diesel prices start to come down and, you know, they can work in higher deals of prices into their upcoming contracts and renewals, then I think it's almost obvious that the margins are going to re-expand. And by the end of next year, I would not be surprised if margins are back to 15%. And by that time, if road can actually grow its revenue by 15% or more, and the margins can re-expand, then the fourth quarter for fiscal year 2027 is going to see massive year over year growth numbers. And by then the market is probably going to love this stock. So I am personally viewing this period where the share price is down and its multiples are selling for literally pandemic levels. I'm viewing this as a period where I get to continue building extremely low prices before the market finally jumps back in and says, oh, we're still needing to maintain roadways. Roads still need to be built. And this company went through a short-term margin compression for one to three quarters, and now everything is fine again. And by that time, they're going to have acquired more businesses. They're going to have vertically integrated more, and their terminal margin may actually be higher than it was even previously in this year. That's what it comes down to. You know, I think that this was absolutely not worth a 20% correction to the share price and for the stock to trade for pandemic level prices. So now what I want to show you is my DCF on road because I have updated my DCF. And let me just load up my saved DCF right here. So I now have them doing $520 million and trailing 12 months EBITDA because that is the number they gave us. Over the next five years, I'm saying that they will grow EBITDA by 15% annually and trade for 13 times EBITDA. Now, historically, you can see that their long-term median since they have been a public company is about 15 times EBITDA. So 13 times EBITDA is still below their long-term historical median. And I think that this is also a little bit more conservative. And with these inputs right here, I get a 24.3% compounded annual growth rate to the share price over the next five years. And again, I think that this is more on the conservative side. Now, if road can actually hit its 2027 projections of $1 billion in EBITDA by 2030, and if they can get back to their historical average of 15 times EBITDA, then the stock could produce a 30% compounded annual growth rate from its current share price. So if they can actually hit these numbers, then I think that the stock could produce tremendous returns over the next few years. Just for conservative sake, let's say that road only grows by 10% annually over the next five years. And let's say that it trades for 10 times EBITDA. This would be a massive, massive miss to their current 2030 targets. And also 10 times EBITDA would be a 33% discount to how the stock has historically traded. And even in this scenario, the compounded annual growth rate from today's share price would still be about 13%, which I think is a very fair and pretty good return still. So even with numbers that I think are extremely conservative, the stock is now giving me a pretty good return. And this is why I have more conviction in the business as the share price has come down, because as the share price has fallen, the business now does not need to deliver as much for the share price to deliver a good return. And that is what long term investing is about. So yes, I have added to my road position. And I think that this is just a little bit ridiculous from the market. And over the long term, I am fully expecting this business to more than fully recover, and for it to be just fine. So with that being said, let's now move on to the second stock that I have added. And I did buy this one over the past about week or so. And this one is new bank. Now new bank, I will be doing a full video on it after it reports its earnings, I believe on November 12. So next week, but the TLDR for new bank, is I simply think that the stock is too cheap right now. This stock is trading for about 16 times trailing 12 months earnings, and about 11 times forward earnings, while it is still growing its revenues and earnings by 50 to 56%. And it is actually seeing accelerated growth. New bank, I believe also has a tremendous runway because it is just getting started in Mexico. And Mexico does not have digital banking, their population, a very low percent of them even have credit cards. And Mercado Libre and new bank are the two companies that are going in and digitizing Latin America's economy. And over the next 20 years, I believe that these businesses are still going to be growing and compounding a 10 forward multiple for 50% growth is too cheap for me to ignore. Now the stock fell off recently because of the elections that happened in Brazil. But as I shared in my Mercado Libre video yesterday, I think that this is a non-event because over the long term, political parties are going to change. And I think that good businesses are going to be able to compound through any political regime. Additionally, the person who won in Brazil is the same guy who's already been in power. So to put it another way, nothing has changed. New bank and Mercado Libre have been operating just fine under this leader. And I believe that they will continue to grow and operate just fine again with him because again, I don't think that anything's really changed. So I don't think that the sell-off that new bank has seen recently is really justified. But again, the market is very emotional right now and very short-term thinking. So the market sold off the stock dramatically down to a point where again, it's forward price to earnings ratio is now only 10.8. Now I've also been asked by a lot of people why I am buying new bank over SoFi. This is one of the main questions that I have received. So let me show you my thinking here. This chart that you're taking a look at is the comparison between new bank's revenue and SoFi's revenue growth since 2020. And you can clearly see that new bank has been able to scale its business much, much more rapidly. New bank has been compounding its revenue by 81.2% over the past six years versus SoFi's 47%. And don't get me wrong. SoFi is still growing very, very well, but new bank it, I just think is clearly in a category of its own. Now let's also take a look at these two businesses, net income and the growth rates and overall growth to their net income. And here you can see that in the trailing 12 months, new bank has produced $3.6 billion of earnings and SoFi has reported already. So there are $737 million of earnings in the trailing 12 months now, but you can clearly, clearly see that new bank is producing about five times the amount of earnings as SoFi and new bank's earnings are growing tremendously faster. That's really what it comes down to. New bank is growing significantly faster than SoFi and it is producing a lot more earnings today. Now what's interesting about this is if we take a look at the forward price to earnings ratio of both of these businesses, and let's zoom in here a little bit, then we can see that new bank is currently trading for that about 10.8 forward price to earnings ratio. And SoFi is trading for about 20 times. So SoFi is trading for double the price multiple as new bank, despite new bank being the larger business that's growing faster and also growing its earnings at a faster rate. And in my opinion, has a much more wide open market opportunity to continue digitizing the Latin America market. So to put it simply, every way that I look at new bank versus SoFi and new bank comes out on top. I think that it's the better business with a longer runway. That's growing faster, producing more earnings and trading for half of the price. Now, the other thing that I have done is I kind of baited people on social media to say that new bank is looking very cheap in the market. And the responses that I got were that obviously it's looking cheap because it is a foreign bank. Banks do not have high multiples. I agree. And foreign stocks also do not have high multiples. I agree. So you combine that and then people say that, well, the stock is actually fairly valued today. Here's my rebuttal. New bank historically has actually traded for up to 41 times earnings, even up to 46 times earnings. Even just back here in 2025, this thing was trading for 33 times earnings. The stock trading for 16 times earnings is a brand new occurrence that has not happened before. This is, this is like an anomaly for this bank. Now let's also take a look at a forward price to earnings ratio because new bank's peak forward PE was about 30. And even back in 2015, it was routinely trading for 20.7 times forward earnings, which is what SoFi is trading for today. So when I take a look at history, I think that the argument and the data actually shows us that new bank has commanded the same multiples and premiums as even SoFi. I just think that the market is more bearish towards new bank because of maybe some macro headwinds in Brazil, which Mercado Libre basically just disproved or not affecting these businesses. And then also the new election that just happened in Brazil that sent new bank stock down like another 20 to 30%. But when I take a look at the underlying fundamentals of this business, I think that it looks phenomenal. And I think that this business is going to continue growing. And ultimately what it comes down to is that a 10 forward price to earnings ratio, I really do not think that this business is pricing in a lot of growth. And even if it does continue to grow by 15 to 20% annually from here, then I think the stock could produce 15 to 20% annual returns, obviously. And then if we get some slight multiple expansion, then that's even more upside. Yeah, I think the market is getting new bank wrong right now. And I think that the stock is simply too cheap for me to ignore. So I have started a position, it's still a very small position in my portfolio. But if the stock does, if the stock stays down here, then I plan on continuing to grow it and buy some more. But I also do not think that I'm going to make this one a huge position in my portfolio, because I do have Mercado Libre, and these ones kind of have similar risks to them. So I'm kind of doubling down on the risk a little bit since they have kind of the same macro factor, basically. But yeah, those are the two stocks in addition to Mercado Libre that I have been buying this week. This market is crazy. This market is extremely short term focused. But as someone who can ignore the volatility, remain rational and focus on the long term fundamentals, it is also a market where you can find some truly interesting opportunities. So try to stay rational and long term focused out there. And with all that being said, thank you so much for tuning in. As always, I truly do appreciate it. And I hope to see you again in my next video.