YB new stock pitches (Fri, Jun 13)

BGC Group, Inc. (BGC) is a leading interdealer broker trading at 8.2x 2025E earnings (55¢ on $1) with a potential $16 target price (45% upside). The company benefits from higher trading volumes across asset classes, digitization driving higher margins and ROIC, and expansion in energy markets, particularly after acquiring OTC Global Holdings on April 1, 2025. Key catalysts include Howard Lutnick's required divestiture by May 19, 2025 under Senate Ethics rules (likely engineered to maximize value), OTC acquisition accretion (potentially at a lower effective price due to cash generated between announcement and closing), and potential bank deregulation under Trump (reducing capital requirements for Treasury trading). The business offers 12-15% base IRR through 2027-2029 from organic growth and cash generation, with potential for 24-37% IRR if multiples expand to 15-16x earnings. BGC has reduced diluted shares outstanding by 12% since 2020 and maintains strong competitive advantages in the oligopolistic interdealer broker industry, providing marketplace services for bonds, energy, commodities, and currency markets.

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NL Industries (NL) trades at a 39% discount to its sum of parts, which includes $232 million in Kronos Worldwide (KRO), a low-leveraged TiO2 producer valued at 6x 2025 EBITDA versus Tronox's 7.4x; $259 million in CompX International (CIX), a niche lock/boating parts manufacturer; and over $50 million in net cash. KRO benefits from German exposure and owns North America's lowest-cost plant after a strategic $185 million acquisition of Venator's JV share. KRO trades at 6x 2025 EBITDA consensus and 10.3x consensus earnings, with substantial upside potential if market fundamentals improve. Both NL and CIX pay consistent dividends, with NL having a history of special dividends. The main risk for NL stems from ongoing lead lawsuit liabilities from its former legacy business, though the company has never had a legal judgment against it.

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ARKO is an unloved convenience store roll-up trading at $4.65 with a $530M market cap, yielding 11% FCF and featuring 30% insider ownership led by CEO Arie Kotler. The company operates 1,300+ convenience stores and distributes fuel to nearly 2,000 others across four segments: Retail ($276M operating income), Wholesale ($80M), Fleet Fueling ($50M), and GPM fuel distribution ($98M). ARKO is pivoting to a 'dealerization strategy' that shifts underperforming stores to franchisees while maintaining fuel supply relationships, expecting $20M in incremental operating income with reduced capex requirements. The company generated $138M TTM FCF ($60M normalized), has begun store remodeling to improve food service offerings, and is executing share buybacks. Key risks include $866M in junk-rated debt plus $200M in finance leases, declining same-store merchandise sales (down 7%), and potential EV disruption to the gas station model. The stock is down 50% since its 2020 SPAC IPO, but management's strategic shift away from acquisitions toward capital efficiency could drive a re-rating.

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