High signal stocks #10 (Feb 15)

Hello and happy Sunday!

I added 14 stocks to the High Signal Stocks list. Only a few of them have active stock pitches on Yellowbrick, which Premium subs can see in the Elite Investor Feed (link). I also added the write-ups from a couple of very High Signal Q4 fund letters to that feed.

The High Signal List had an okay week last week, outperforming the S&P -0.34% to -1.17%.

That increased the overall outperformance to nearly three points in just two months.

Below is a free overview for everyone. YB Premium subs get four more overviews, plus the link to the spreadsheet with all of the High Signal Stocks in the YB PREMIUM PITCHES section.

As a reminder, these are AI summaries. They include citations for the data, but should be double-checked. They are just meant to be quick overviews to help you determine if you want to dig in deeper.

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Varonis Systems (VRNS) - Price: USD 25.36 | Market Cap: USD 2.98B | EV/Sales (NTM): 3.3x | Net Leverage: USD 640M net cash

Varonis Systems operates a data security platform that discovers, classifies, and protects enterprise data across on-premises and cloud environments, monetizing via a SaaS subscription model that recently generated USD 131.9 million in 2025 free cash flow. While the consensus prices VRNS at a discounted 3.3x NTM EV/Sales due to perceived friction from the announced end-of-life of its legacy self-hosted business by December 31, 2026 and the software sell-off, our variant perception is that the market is overlooking the high-quality growth of the core SaaS engine, where SaaS ARR excluding conversions grew 32% YoY to USD 449.7 million in Q4 2025. Why now: The "forced" migration of the remaining self-hosted base acts as a catalyst that, combined with the February 2026 acquisition of AllTrue.ai to secure AI workloads, will drive upsell and retention as customers consolidate onto the unified SaaS platform. With SaaS ARR now representing 86% of the total USD 745.4 million ARR, the drag from legacy churn is diminishing, positioning the stock for a re-rating closer to high-growth security peers at approx. 6x EV/Sales, implying approx. 80% upside. Key risks include higher-than-expected churn from single-use legacy customers and execution risks in integrating recent acquisitions like Cyral and SlashNext; the thesis is disconfirmed if SaaS ARR growth excluding conversions decelerates below 20% or FY2026 revenue misses the USD 722 million guidance floor.

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Thanks for reading!

Connor

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What are high signal stocks?

Yellowbrick tracks thousands of investors and collects 10,000+ stock pitches each year. The stock pitches from the best investors are put in the Elite Investor Feeds on Yellowbrick (link).

However, many stocks owned by great investors are never publicly pitched by those investors. This email (and the corresponding spreadsheet) tracks all stocks that I know are owned by good investors (whether that good investor has pitched them publicly or not).

YB ELITE INVESTOR PITCHES

YB PREMIUM SUBSCRIBERS ONLY

New stock pitches from Yellowbrick Elite Investors that were added to the website this week. Fewer than 5% of the 3,000+ investors we track qualify as an Elite Investor.

This section is locked for Yellowbrick Premium subscribers only. You can upgrade to Yellowbrick Premium here.

HIGH SIGNAL STOCKS

YB PREMIUM SUBSCRIBERS ONLY

AI overviews (with data citations) of new stocks added to the High Signal Stocks list.

This section is locked for Yellowbrick Premium subscribers only. You can upgrade to Yellowbrick Premium here.

YB PORTFOLIO UPDATES

YB PREMIUM SUBSCRIBERS ONLY

Updates to the Yellowbrick Tracking Portfolio, which holds 30-40 positions that are owned by Yellowbrick Elite Investors. Fewer than 5% of the 3,000+ investors we track qualify as an Elite Investor.

This section is locked for Yellowbrick Premium subscribers only. You can upgrade to Yellowbrick Premium here.

THAT’S ALL FOLKS

Thank you so much for reading today’s email!

If you ever have any feedback, suggestions, or questions, you can just reply to this email or email me at [email protected].

Connor

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