YB new stock pitches (Mon, Aug 25)

Delek US Holdings (DK), with a $1.5bn market cap and $343m enterprise value, is an integrated downstream energy refiner operating four refineries in the southern U.S. with 302,000 barrels per day capacity. DK's 63% stake in subsidiary Delek Logistics (DKL) is worth $1.46bn, more than offsetting DK's EV. The company trades at just 1.0x mid-cycle EBITDA of $333m (management estimates $343-493m including $150m in corporate cost cuts) and generates approximately $140m in annual FCF ($300m with cost savings). DK has petitions for small-refinery exemptions (SRE) from 2016-2024 worth potentially $1.8bn, with a possible $900m payment if granted 50% relief. The DOJ recently indicated the EPA is preparing to issue decisions soon. Management's value creation plan includes debt reduction, share buybacks, and DKL unit repurchases from DK. The price target of $58 (+135%) is based on 3.5x mid-cycle EBITDA, compared to peers trading at 6x, with future catalysts including debt reduction to sub-1.0x leverage, increased dividends, and potential SRE proceeds that could be worth almost 3x DK's current stub enterprise value.

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GAMCO Investors (GAMI), Mario Gabelli's asset management firm with $33.4 billion AUM, trades at 5.2-5.7x operating income with $150 million in excess cash and zero debt. Despite headwinds from passive investing and value strategy underperformance causing revenues to decline from $422 million in 2014 to $233 million TTM, AUM appears to have stabilized after years of 5% annual outflows, potentially slowing to 2-3%. The company is aggressively returning capital to shareholders, including 19% of market cap in 2024, and at current repurchase rates of 500,000-1,000,000 shares annually, the public float of 2.37 million A shares will be depleted within 2-5 years. When 83-year-old Gabelli eventually retires, his contractual 10% of pre-tax profits ($41.5 million annually over the past decade) will significantly boost earnings. Risks include accelerated AUM outflows, operating leverage causing deeper EBIT declines, severe market downturns affecting revenues, and declining share liquidity as buybacks continue.

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Flat Capital AB (FLAT-B.ST) offers retail investors unique access to elite startup deals through Klarna founder Sebastian Siemiatkowski's network, with a portfolio including OpenAI, SpaceX, xAI, and Harvey (which recently completed an upround). Trading at a 50% premium to NAV compared to peer Destiny Tech100 at 4x NAV, FLAT recently closed an oversubscribed SEK600 million rights issue at a 50% premium to Q1 NAV, attracting high-profile investors like H&M's Karl-Johan Persson and IKEA's Mathias Kamprad. The company maintains a low 1% expense ratio with only two full-time employees, and holds >50% of NAV in cash ready for deployment. Key catalysts include Klarna's rumored September IPO (a top holding), the appointment of a new CEO with deep investment experience (current CEO leaving by year-end), and expansion into the defense sector. The investment case primarily rests on Siemiatkowski's network and deal-making abilities, with speculation that he might leave Klarna post-IPO to run FLAT full-time.

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