YB new stock pitches (Fri, Nov 28)

Cellebrite DI Ltd. (CLBT) is a duopolistic 'Rule of 40+' software company trading at 16x 2027 FCF, representing a steep discount to software and government intelligence/cybersecurity peers despite having exceptional cash flow dynamics that convert 130-140% of EBITDA into free cash flow. The company is successfully transitioning from selling to law enforcement into a full 'case to closure' software platform, with key growth drivers including Guardian cloud evidence management system (growing >100%), Pathfinder AI analytics (growing 25%), and the recent Corellium acquisition acting as a revenue accelerant and strategic 'acqui-hire' strengthening federal agency ties. CEO Tom Hogan is implementing longer-term growth drivers like the recently released Investigator product and expanding from strong penetration in Forensic units into large Investigative Units, with 2026 expected to bring revenue growth reacceleration from resurgent federal spending and the company's Inseyets upgrade cycle. Two activist investors (ValueAct and True Wind Capital) at majority shareholder Sun Corporation materially increase the likelihood of a full company sale within two years, while the bull case targets $33 per share (~90% upside) if growth re-accelerates to 25% with 50% incremental margins, as the market is expected to recognize CLBT as a true 'platform' story in 2026, typically resulting in multiple expansion.

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Smith & Wesson Brands (SWBI), a leading U.S. gun manufacturer alongside Sturm & Ruger (RGR), trades below $10 versus an $18 average buyback price and offers 100%+ upside over 3-5 years as the gun market recovers from its current downcycle. The company operates in a structurally growing industry with mid-single-digit+ volume growth despite cyclical 50%+ peak-to-trough declines, and is currently in the third year of the latest downcycle. SWBI's complicated history includes $400 million in accessory business acquisitions that were later spun off as American Outdoor Brands (AOUT), and management burned $200 million on share repurchases at peak prices during FY21-22. The company has completed a $200 million headquarters relocation and management is refocusing on recapturing market share lost to RGR, which has overtaken SWBI in terms of guns sold and revenue during the recent downturn. Key risks include sustained market share loss, suboptimal capital allocation, and continued market downcycle, while catalysts include potential dividends and buybacks, possible acquisition, and most importantly a cycle turn in gun demand.

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Top Group Software Ltd (TOPG.TA), an Israeli software company with a $93 million market cap, trades at 18x trailing P/E despite achieving a 17% compound annual growth rate in both revenue and earnings over the past decade. The company generates 77% recurring revenue and has demonstrated exceptional long-term performance through both organic and inorganic growth strategies. Their proprietary software products represent the highest margin and fastest growing segment compared to third-party sales and IT services, creating potential for significant operating leverage as this trend continues over the coming years. The stock appears undervalued due to illiquidity issues, presenting an attractive investment opportunity given the company's strong fundamentals and growth trajectory.

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