YB new stock pitches (Mon, Jun 22)

Fuel Tech ($FTEK), trading at $1.35, is an asymmetric play on data center gas turbine demand, operating through two segments—APC (NoX control) and Fuel Chem. Its key product, SCRs, are largely mandatory for behind-the-meter (BTM) data center deployments of both large and small gas turbines, and FTEK is being pulled into bids on GE and CAT units as gas turbines return to vogue after years of dormancy. After the stock ran from $1.20 to over $3 in 2025 on excitement and round-tripped back when deals failed to materialize quickly, FTEK announced its first deal in early May—$10m for SCRs on GE Vernova turbines with a municipal utility—validating its technology, though investors were unimpressed. Management sees 8-10 near-term opportunities, ranging from 2-5 units to 30-40 units at $1-3m per unit, implying deal sizes of $2-15m up to $30-120m, with continued inbounds (predominantly from CAT) signaling strong interest. Gross margins should run ~35-40%, and since FTEK outsources manufacturing to third parties, it can scale quickly with fixed SG&A and meaningful operating leverage; now roughly at break-even, every incremental $10m of deals should equal ~$3.5m of EBITDA. With ~$1/share of cash (~75% of market cap) and a book value of ~$1.20 (its February low), downside is limited to ~10-20% if no further deals materialize, while $50m of awards would generate >$15m of EBITDA at <1x EBITDA, implying multi-bagger upside. The CEO (Vince) is described as honest and non-promotional but acknowledges limited visibility into bids. The set-up resembles $TGEN, which delivered after delays and saw its stock rip back. The author is long.

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W5 Solutions ($W5.ST) is an under-the-radar Swedish defence tech company operating across three core areas plus high-margin services: Training (live-fire systems and simulation with smart targets and data analytics, including a SEK 700M framework deal with the Swedish Armed Forces), Power (rugged batteries, chargers, and hybrid gensets for mission-critical operations), Integration (mobile shelters, boosted by the KT-Shelter acquisition, plus full systems integration), and Service & Support (long-term maintenance, upgrades, and spares generating recurring revenue with contracts up to 20+ years). The business benefits from sticky government/military and contractor customers (Kongsberg, KNDS), high barriers via certifications and relationships, and a mix of lumpy big-ticket projects and predictable aftermarket revenue. CEO Evelina Hedskog targets SEK 1 billion in sales and a 10% EBIT margin by end-2027 (≥20% organic growth plus M&A), supported by strong momentum: Q1 2026 sales up 53% YoY, order intake of SEK 402M (+267%), and backlog of SEK 828M (more than doubled). Recent wins include a SEK 148M Kongsberg order, SEK 126M KNDS simulators, and a first hybrid power order, while the KT-Shelter acquisition (completed May 2026) adds shelters expertise and Finnish market access with cross-selling potential. Geopolitical tailwinds (Ukraine, Nordic/European defence build-up) and rising export orders provide structural growth and strong backlog visibility for 2026-2028. Risks include execution/ramp-up risk pressuring margins, lumpy contracts and delays, regulatory/export controls and geopolitical sensitivity, acquisition integration, and supply chain pressures, though these are largely mitigated by the backlog and sticky relationships. Trading at ~SEK 48 (market cap ~SEK 840M) versus an analyst average target of ~SEK 87-90, the bull case is that hitting or beating 2027 targets drives a significant re-rating, making the setup compelling for patient investors.

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d'Alba Global (483650.KS), a new position for the Baron Emerging Markets Fund, is a South Korean premium K-Beauty skincare brand best known for its flagship white truffle–based franchise (facial mist spray, sunscreen, and cream). Unlike most K-Indie peers chasing viral ingredients and launching new products every cycle, d'Alba has built a cohesive, ingredient-led brand identity supporting premium pricing and industry-leading repurchase rates. By leveraging Korea's sophisticated, high-speed OEM ecosystem, the company maintains a structurally asset-light model with best-in-class gross margins and a competitive speed advantage over global incumbents. The fund sees d'Alba as one of the few K-Beauty brands positioned to evolve from a single hit product into a durable global franchise, supported by a 'masstige' tailwind and three compounding growth levers: a massive geographic runway in the U.S. and Europe where the brand is still in its infancy; a channel expansion from online-first B2C into global offline retailers, with B2B mix targeted to scale toward 50% by 2028 (a meaningful margin lever given B2B margins are roughly triple B2C); and product extension into higher-ASP premium lines and more localized SKUs that reduce concentration of the core mist franchise. The fund expects revenue and earnings to compound at 25-30% through 2030, effectively tripling earnings within the next four years.

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