YB new stock pitches (Mon, Feb 23)

Academy Sports and Outdoors (ASO), the second-largest U.S. sporting goods retailer with 300+ stores across 21 states, operates in a $175 billion addressable market and has executed a successful turnaround since Chairman Ken Hicks became CEO in 2018, growing revenues from $4.8 billion to $6 billion, expanding gross margins from 28.6% to 34%, and increasing adjusted EBITDA from $300 million to $650 million LTM while generating 30% ROIC and retiring one-third of outstanding shares. The company trades at approximately 6x adjusted EBITDA and 9x P/E with a high single-digit free cash flow yield, net debt of only $200 million, and $3.8 billion market cap, offering significant upside to a price target of $100 (12x 2028 adjusted EPS of $8) from the current $56 share price. Key catalysts include stabilizing comparable store sales (Q2 FY25 posted +0.2% comps, Q3 FY25 declined only 0.9% despite broader pressures), disciplined new store expansion targeting 20-25 stores in 2026 with 20%+ ROIC and 4-year payback periods, an expanded Nike/Jordan partnership across 145 stores driving high-single-digit comps, a growing higher-income customer base (now 40% of sales from households earning $100k+), leadership in differentiated outdoor categories (firearms, camping, fishing, hunting, grilling) where competitors have retreated, a highly cash-generative business model that has produced nearly $4 billion cumulative cash from operations over six years (close to current enterprise value), over $500 million remaining in share repurchase authorization, strong positioning in six of the top 10 fastest-growing U.S. MSAs, a 'Ft. Knox' balance sheet enabling internally-funded growth, excellent management under CEO Steve Lawrence (Hicks' hand-picked successor) with Hicks remaining as Executive Chairman, a broad assortment spanning 79% national brands and 21% private label across outdoor (30% of sales), apparel (27%), sports/recreation (23%), and footwear (20%), investments in loyalty programs and customer data capabilities to compete with Dick's Sporting Goods' recent outperformance, and potential strategic or financial buyer interest given ASO's strong geographic position in smaller markets. Primary risks include continued negative comparable store sales, sustained consumer pressure from inflation disproportionately affecting ASO's lower-income customer base, new store underperformance, poor capital allocation decisions, exposure to firearms-related financial and reputational risks (approximately 5% of sales), and severe economic downturn, though the business demonstrated resilience with positive comps during the Great Financial Crisis and the sporting goods category has proven less discretionary than often assumed.

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Kioxia Holdings Corporation (285A.T), a new position, is a Japanese pure-play NAND Flash inventor trading at under 9x estimated FY2027 EPS, representing a compelling entry point for what the investor believes is a 'super-cycle' asset. The company, formerly Toshiba Memory, manufactures critical non-volatile memory chips used in smartphones and Enterprise SSDs for AI data centers. Unlike typical memory cycles where rising prices trigger supply floods that kill rallies, a structural shift in supply dynamics makes this cycle different: as the industry moves to advanced 3D NAND stacks with over 300 layers, the equipment intensity and physical footprint per wafer have skyrocketed, creating a 'natural capacity shrink' where cleanroom space is maxed out, preventing suppliers from aggressively expanding volume even as prices rise and supporting a 'stronger for longer' pricing environment. Two major catalysts have validated the thesis: Kioxia extended its Joint Venture with SanDisk (Western Digital), securing approximately $1.165 billion (¥175 billion) in cash payments that significantly de-risk the balance sheet, and the company released Q3 earnings guidance forecasting operating profit for Q4 (January-March 2026) to surge to ¥436-526 billion, implying a potential tripling of profit quarter-over-quarter driven by insatiable AI data center storage demand. With the new fiscal year beginning in April, the investor believes Kioxia is entering a period of exponential earnings growth that the market has not yet fully appreciated, and the combination of AI-driven demand, physically constrained supply, market aversion to highly cyclical industries, and the single-digit entry multiple creates an exceptionally attractive risk-reward profile.

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ProPetro (PUMP), an oilfield services company with a legacy pressure pumping business, has entered the behind-the-meter (BTM) power generation market through its ProPwr subsidiary, which provides onsite generation via small turbines and reciprocating engines for oil & gas and data center industries. The company currently has 240MW contracted (60MW with a hyperscale data center customer, the rest in the Permian) on long-term contracts (10-15 year tenors emerging in the industry), targeting 750MW by 2027 and 1GW by 2030, though management recently increased 2027 guidance to 550MW and 2028 to 750MW, making the 2030 target likely conservative. The BTM power opportunity has emerged from grid constraints preventing data centers from accessing power quickly enough, with alternatives like nuclear and heavy-duty gas turbines either too slow or heavily backlogged, leaving packaged mobile generators as the fastest, most proven solution. Recent long-term contracts from competitors (Williams at 12.5 years, Solaris at 10 years with 5-year extension option, VoltaGrid at 15 years) validate that BTM power is not a temporary bridge solution but rather a sustainable business model, as data centers are unlikely to return generators even after grid connection due to continuing power needs from scaling sites, increasing rack densities (10-20x growth expected over 3-5 years), load variation challenges that grids cannot handle, and potential cost parity with rising transmission upgrade costs. ProPwr's leadership team (Travis Simmering and Dave Bosco) previously built Dynamis Power to over 500MW under contract and secured ProPwr's first 60MW hyperscale contract within their first year, set to go live in Q1 2026, with potential for significant expansion if execution proves successful similar to Solaris's trajectory from 80MW to over 1GW with XAI. The stock trades at a 15% FCF yield on contracted capacity alone with a net cash balance sheet (post-raise: $105m net cash, $1.26bn enterprise value at $11.26/share), while a sum-of-the-parts valuation suggests the base completions business (currently generating ~$150m annual FCF at trough Permian conditions, worth ~5x EBITDA) is being valued appropriately but ProPwr (worth 9x EBITDA based on comparable multiples from contract compression at 9.5x, IPPs at 12-13x, with JPM using 8x for competitor Liberty's business) is receiving almost zero value despite contracted capacity. The 2-year base case price target is approximately $35 (3-4x upside), with 10x potential over 5-8 years if execution is strong, based on reaching 1.5GW by end-2030 (conservative given current 230MW/year run-rate). Key catalyst is securing another data center contract in 2026, either an extension of the existing hyperscale contract or a new large-scale deal, with the recent capital raise suggesting preparation for a larger 'chunky' contract that could significantly accelerate deployment timelines. This is a new position representing an enormous portion of the investor's net worth.

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