We hope you’re having a great week.

As expected, The Fed held interest rates steady. The current pessimism and uncertainty surrounding the global economy isn’t likely to change anytime soon.

The news isn’t all bad though! We know how to find the best stocks in this market.

Our data and models account for all the material and often-overlooked details found buried in company filings, which is precisely why our research generates alpha.

This week, we identified a Long Idea stock that could hold 40%+ upside potential even if the company’s profits were to decline. Think margin of safety meets strong risk/reward.

Below, we present a large excerpt from our latest Long Idea report published this week, available to Pro and Institutional members. You can buy the full report a la carte here.

We’re not giving you the ticker for this pick, but we are happy to share our hard work because we want you to see how good our research is.

This stock offers favorable Risk/Reward based on the company’s:

  • long-term revenue and profit growth,
  • growing market share,
  • shrinking sales cycle,
  • strong cash flow generation,
  • high shareholder return, and
  • cheap stock valuation.

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Steadily Taking Market Share

This company is in an advantageous position even as housing prices and interest rates remain high. The average sales price of new houses sold in the U.S. sits ~$404k in March 2025, up from ~$332k in February 2020, just before the COVID-19 pandemic sent home prices soaring. Entry-level homes, in which this company specializes, present a more viable and affordable option for any potential homebuyer.

In fact, the company’s homes closed (finished homes delivered to the customer) grew from 7,709 in 2017 to 15,520 in the TTM ending 1Q25. In turn, the company’s market share of U.S. new one family homes increased from 1.3% in 2017 to 2.3% in the TTM. See Figure 1.

Figure 1: Share of U.S. New One Family Homes Sold: 2017 – TTM

Sources: New Constructs, LLC and company filings

Potential for 4.8%+ Yield

This company started paying dividends at the beginning of 2023. Since then, the company paid $179 million (4% of market cap) in cumulative dividends and increased its quarterly dividend from $0.14/share in 1Q23 to $0.43/share in 1Q25. The company’s current dividend, when annualized, provides a 2.5% dividend yield.

Though this company started paying dividends relatively recently, it’s been returning capital to shareholders via share buybacks for much longer. From 2019 through 1Q25, the company repurchased shares worth $486 million (10% of market cap).

Since February 2019, the company’s Board of Directors has authorized the repurchase shares worth up to $750 million, with no specified expiration date. At the end of 1Q25, the company remains authorized to repurchase shares worth up to $264 million. Should the company repurchase shares at its TTM (ending 1Q25) rate, it would repurchase $115 million of shares over the next twelve months, which equals 2.3% of the current market cap.

When combined, the dividend and share repurchase yield could reach 4.8%.

Strong Cash Flow Generation Supports Capital Return

This company generates strong free cash flow (FCF) that covers both its share repurchases and regular dividend payments.

From 2019 through 1Q25, the company generated $1.1 billion (26% of enterprise value) in FCF while returning $665 million over the same time ($179 million in dividends and $486 million in repurchases).

We like companies that choose to return capital to shareholders instead of spending it on costly executive bonuses or acquisitions that rarely drive shareholder value creation. See Figure 4.

Figure 4: Cumulative FCF Since 2019

Sources: New Constructs, LLC and company filings

…there’s much more in the full report. You can buy the report a la carte here.

Or, become a Professional or Institutional member – they get all Long Idea reports.

I’ll keep sending information on quality sectors, industries, or specific companies until you’re ready to start your membership, but know that we expect this pick to outperform.

Interested in starting your membership to get access to all our Long Ideas? Get more details here.