YB new stock pitches (Mon, Jul 21)

IQVIA Holdings Inc. (IQV), formed in 2016 through the merger of Quintiles and IMS Health, stands as the world's largest contract research organization (CRO) with a substantial $30 billion backlog (up over 25% in three years). The company serves more than 10,000 customers, including 100% of the top 25 pharmaceutical companies and 75% of the top 80 small and mid-sized pharmaceutical firms, having helped develop over 70% of all FDA-approved drugs since its merger. Despite industry headwinds from persistent inflation, higher interest rates, policy uncertainty, and funding challenges for small biotech clients, IQVIA continues generating mid-to-high single-digit earnings growth. The company will produce approximately $2 billion in free cash flow this year (representing a high single-digit yield) and is strategically deploying this capital toward share repurchases and opportunistic M&A. Currently trading at a healthy discount to estimated fair value, IQVIA presents an investment opportunity despite the short-term challenges facing the CRO industry.

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Zoetis Inc. (ZTS), the global leader in animal healthcare, was recently added to the portfolio, offering products from medicines and vaccines to diagnostic testing for pets (70%) and livestock (30%) across 100 countries. The pet segment benefits from rising ownership trends and changing attitudes toward pet care quality that accelerated during COVID-19, with 7% more households owning dogs and 15% more owning cats over a four-year period. Despite key products like Apoquel still growing at double-digit rates after twelve years on the market, ZTS is now trading below the Russell 1000 Growth Index for the first time in ten years and has underperformed over the past 1-, 3-, and 5-year periods. The livestock business, which represents the majority of revenues in developing markets, continues to benefit from population growth and rising living standards driving increased meat protein demand. Zoetis has evolved into a larger, more profitable company growing at a similar rate as before, with the stock's underperformance primarily due to market sentiment rather than fundamental changes in the business.

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GCI Liberty (GLIBA/K), Alaska's leading telecommunications provider, operates primarily as a broadband business (70% of revenue) with 3,000 miles of undersea cable connecting Alaska to the mainland. Trading at a cheaper multiple compared to peers, GLIBA's EBITDA multiple should exceed Charter Communications' 7x given its full tax shelter, declining capital intensity, and superior free cash flow characteristics. The business faces challenges with approximately 40% of revenue tied to government programs (Universal Service Fund) under constant scrutiny, plus Alaska's economy being dependent on cyclical natural resource markets. John Malone serves as Chairman, providing strategic direction with a focus on M&A opportunities, leveraging the company's substantial tax shield (capped at $420 million) and minimal cash tax status. Management intends to maintain leverage around 3-3.5x while pursuing accretive acquisitions in the communications sector. The company benefits from its geographic moat, though satellite providers like Starlink pose a competitive threat. With declining capex intensity following the completion of the Alaska Plan investments and Malone's deal-making capabilities, GLIBA represents both a cheap standalone asset and a call option on future strategic opportunities.

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