YB new stock pitches (Fri, Jun 19)

I'm long $BAH (Booz Allen Hamilton), which the Street mistakenly prices as a vanilla IT consultant when it's really the 5th pillar of national security. The market is underpricing Defense and Intel revenue growth: contractors capture 34% of the discretionary budget, $BAH has ~1.5% market penetration as of CY'25, and the DoW FY27 budget calls for 61% and 19% YoY increases in RDT&E and O&M spending, yet consensus bakes in ~2% real growth—Booz just needs to protect against a 20% share drop. Its moat comes from a mosaic of details: 77% of employees hold security clearances, over 20% (>5,000) are dedicated to cyber/data analytics, it's the largest supplier of AI solutions to the USG, and it has survived Snowden, the 2013 sequestration, a False Claims Act case, and DOGE—even winning a 'Countering Weapons of Mass Destruction' contract and being 1 of 12 named vendors on the Golden Dome interceptor program, with most work done inside SCIFs alongside the intel/military communities plus a growing monopoly on proprietary government AI data. A talent flywheel helps fill the Pentagon's 20,000+ cyber professional gap, paying entry-level cyber analysts ~$86k versus a mid-level GS-12's ~$75k. CEO Horacio Rozanski, a former 1991 intern, is a proven capital allocator (ROIC >17%) and the largest individual shareholder who buys back shares rather than pursuing non-accretive acquisitions, and the firm has a $400mm commitment to the a16z mega fund to bring commercial tech to the warfighter faster. After a 57% drawdown, $BAH trades at ~11.7x earnings, ~9.5x EV/EBITDA, and pays a ~3% dividend, with the mispricing stemming from hard-to-model classified, IDIQ-heavy revenue and ignored margin lift as contracts shift from cost-plus to fixed-price; targets are base ~$125 (+58%), bull ~$166 (+109%), bear ~$71 (-11%), roughly 6:1 reward-to-risk. Risks include slow, unpredictable government procurement cycles and a larger beating to the Civil segment (with ICE funding and VA budget TAM growth offering downside protection), though Booz's 'people in elevator' model lets it adjust headcount and has grown revenue and EBIT per employee for years; there is no hard catalyst, making this a 2yr+ play.

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LENSAR (LNSR) is a U.S.-based micro-cap medical device maker that sells the ALLY Adaptive Cataract Treatment System, a femtosecond laser used by ophthalmic surgeons to treat cataracts. The stock languished for nearly two years after a 2022 dispute between third-party payers and healthcare providers in South Korea—its largest market outside the U.S. and Europe—eliminated procedures there and hurt sales, but the company reinvigorated growth to record highs following the FDA clearance and August 2022 commercial launch of the ALLY system. ALLY now holds nearly 20% of U.S. procedure volume (+5.8 p.p. since launch) and has grown installed systems at a 4% quarterly rate, with a high-margin recurring revenue component tied to completed procedures driving margin expansion as the company matures. Recent clearances in Taiwan and the EU should further fuel international growth, and LENSAR has inflected to breakeven adjusted EBITDA and positive free cash flow with no debt and roughly 17% of its market cap in cash. With continued execution and an international push, the author believes LNSR could nearly double over the next three years. The author is long LNSR.

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Cboe Global Markets ($CBOE), the largest US options exchange operator and owner of the VIX and exclusively-listed SPX options (under a license with S&P Dow Jones Indices through a 2032 renewal), is down 33% from its recent high to around $264 despite posting its best quarter ever—Q1 2026 net revenue +29% to $728.9M, total revenue $1.272B (+6%), operating income $505.6M (+35%), net income $385.7M (+54%), diluted EPS $3.66 (adjusted EPS $3.70 vs. $3.37 consensus, a 9.8% beat), adjusted EBITDA +41% to $541M with a 74.2% margin (+6.1pts), and operating cash flow doubling to $1.96B—because the market fears Kalshi's CFTC-approved (June 2nd) Bitcoin perpetual futures threaten its core derivatives business; the author argues this is misplaced since Kalshi is fighting cease-and-desist orders in Nevada, New Jersey, and Maryland, facing first-ever CFTC insider-trading enforcement, congressional product-restriction efforts, and a possible 15-state geofence, while its retail Bitcoin products don't compete with Cboe's institutional SPX/VIX moat (Options segment generated $467.6M, the bulk being SPX, with 0DTE SPX options making up 59% of 2025 SPX volume and index options ADV up 29% to 6.1M contracts, plus a PDT-rule elimination in June 2026 expanding the retail pool). Catalysts include SpaceX options launching June 16th and setting a 14-year first-day record (~2M contracts vs. Meta's 364K in 2012) plus leveraged SPCM/SPCG ETFs, expected OpenAI (Q4 2026) and Anthropic (October) options listings post-IPO, extended single-stock options trading hours starting July 13th (~20 names including all MAG7), a Mini-SPX prediction-market contract launching before June 30th to move directly into Kalshi's territory, and $100-120M in annualized savings (including $40-50M from the $300M TMX divestiture of Canadian/Australian businesses) not yet in raised full-year guidance of low-double-digit to mid-teens organic revenue growth; risks include 64% of net revenue tied to the Options segment and the 2032 SPX license renewal (though SPX volume grew 300% over five years), uncertain Kalshi regulatory precedent extending to other assets, and options market share slipping to 29.1% (from 31.1%) and US equities to 9.8%. Insider activity is mixed (a pre-scheduled 10b5-1 sale by Director Froetscher and an Intent-to-Sell by Fitzpatrick, no open-market buys since June 2nd), but Cboe pays a $0.72 quarterly dividend, continues buybacks, and hired an SVP Head of Government Relations; the author has initiated a new position of 200 shares at a $269.35 average, viewing it as a buy.

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