FA Alpha Weekly Digest 04 15 2024

Wall Street’s stock picks can’t be trusted and the advertising bias of the mainstream financial media makes their news only sensationalist-driven. Gain an edge by knowing the trends that matter and some of the mispriced stocks in the market.

We bring you the FA Alpha Weekly Digest, a roundup of FA Alpha’s unique and unparalleled equity, credit, and macroeconomic insights over the past week.

In today’s digest, we’ll cover corporate borrowing, Park Aerospace (PKE), Atlas Energy Solutions (AESI), GameStop Corp. (GME), and Par Pacific (PARR).

The corporate push to evade recession

Corporate borrowing has experienced an unprecedented surge, initially driven by private equity-backed firms. However, this trend has expanded to include both investment-grade and high-yield public corporations. In the first quarter alone, a remarkable $606 billion was raised through debt issuances, representing a 40% increase from the same period in 2023 and reaching levels not seen since 1990. Despite high-interest rates, companies are continuing to borrow, leading to a significant reduction in debt maturities for 2024 and 2025. Despite this, it is important to keep an eye on how long higher interest payments can be sustained.

This company supports aerospace giants from behind the scenes

Park Aerospace, a manufacturer of advanced composite materials, is a key player in aerospace and defense despite its lower profile. They supply materials for jet engines and aircraft structures. Their products are also used in commercial aircraft and even NASA missions. Park Aerospace benefits from both new production and the need to maintain aging aircraft, leading to strong financial performance. With military modernization and aviation on the rise, Park Aerospace is well-positioned for continued growth.

This company triumphs in the post-invasion energy chaos

The Russian invasion of Ukraine in 2022 sparked a global energy crisis, disrupting Russian natural gas exports to Europe and causing sharp increases in oil, LNG, and hydrocarbon prices. Amidst this turmoil, companies like Atlas Energy Solutions (AESI) seized opportunities in key North American shale basins. AESI, a major player in the Permian Basin, experienced significant growth of 250% increase since 2021, and net income rising from $4 million to $162 million. In February 2024, AESI bolstered its position by acquiring Hi-Crush to expand its proppant capacity and solidifying its leadership in the Permian. With projections indicating sustained strength in global hydrocarbon demand and prices, AESI's integrated platform and low-cost assets position itself for continued success.

Beyond the squeeze?

GameStop's stock price soared in early 2021 due to a Reddit-driven short squeeze, but has since fallen back to earth. The company is struggling to adapt to the digital shift and faces significant losses. While chairman Ryan Cohen is leading an e-commerce pivot, profitability remains elusive and the future of the business seems uncertain. Store closures are a necessary move that further pressures GameStops’s physical retail.

This company capitalizing on the global shift in energy supply

Sanctions on Russian energy exports due to its invasion of Ukraine have resulted in the global energy crisis. Despite a recent dip in prices, energy demand remains robust, particularly in Europe, where efforts to reduce reliance on Russian imports create opportunities for U.S. exporters. Par Pacific, with its diverse assets and focus on optimization, stands to benefit from this shifting landscape. Its financial performance is closely tied to oil and refined product prices, with potential for significant earnings and stock price growth as demand continues to rise.

We hope you find this week’s FA Alpha Daily articles insightful.

See you next week as we talk about another set of interesting names.

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