YB new stock pitches (Mon, Jun 8)

Leatt Corporation (LEAT) is a new ~6% position entered at $12.14, an off-road protective gear maker founded by Dr. Christopher Leatt (inventor of the neck brace), headquartered in Cape Town, South Africa, selling through 61 global distributors, 698 US dealers, and its own DTC channel. The bull thesis rests on market share gains: after four brutal years of post-COVID destocking, competitor Dainese collapsed (€100M loss in 2024, handed by Carlyle to creditors), while Leatt grew 41% in 2025 even as Fox Factory and Polaris refuse to call it a recovery, signaling genuine share gain rather than a cyclical rebound. Q1 2026 (May 12) was a blowout: revenue $19.51M (+27% YoY, sixth straight double-digit quarter), net income $1.77M (+58%), operating cash flow $4.55M, cash of $17.19M (+30%), with DTC up 49%, helmets up 59% (main driver), and body armor up 25%; the stock jumped 17% on the print. Management says it can reach $70-80M in revenue without significantly raising operating expenses from the current $22M base, demonstrating real operating leverage (operating margins are 7% today versus a 2021 peak of 20%). Valuation: a base case (10% growth, 42.5% gross margin) yields 2027 EPS of $1.32 (+120% upside from $12), and a bull case (15% growth) yields $1.66 EPS (+176% upside). Risks include the founder's ~80% voting control via Series A Preferred shares (alignment but binary risk), China sourcing/tariff exposure, and reverse operating leverage if the cycle fails to recover. Research credited to Cliff Note #140 from MS Microcaps.

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Frontier Energy (ASX:FHE) is a government-backed, 'too big to fail' renewables play in Western Australia's isolated, grid-short power market, which has ~22 TWh of demand, no interconnectors, retiring coal, and needs roughly 10 TWh of new generation by 2031 and 15 TWh by 2035. Frontier is building a combined solar-and-battery project with a final nameplate of 1,000 MW solar and 660 MW battery storage, designed to absorb cheap daytime power and dispatch it during evening peaks; fully permitted Stage One will construct 132 MW solar plus 82 MW battery storage, with A$310m capex (plus A$16.9m contingency), a 30-year life, A$72.5m average annual revenue, A$62.5m EBITDA, and a 6-year payback, with four more expansion phases offering optionality funded by Phase 1 cash flow. The thesis hinges on dual subsidies that cover debt service and opex, creating a downside floor: (1) WA's Reserve Capacity Mechanism, under which Stage One was assigned 88.06 MW of Capacity Credits and locked in a fixed A$360,700/MW price (CPI-indexed) from October 2027 to September 2032, worth ~A$32m/year (A$160m+ contracted, after which pricing floats annually); and (2) the federal Capacity Investment Scheme, a long-dated revenue floor/ceiling (90% of shortfall below floor, return 50% of gains above call) providing revenue protection to 2042. The company just placed A$110m at A$0.20 to fund Phase 1's equity, giving a pro-forma market cap of A$220m and an EV of ~A$360m, or ~6x Phase 1 EV/EBITDA. Bull case: once Phase 1 is operational and throwing off A$62.5m EBITDA, Frontier should exit micro-cap status and either become a buyout target for an infrastructure fund or re-rate to larger ASX peers, implying a 2-3x return over five years (potentially more with growth). Risks include post-2032 floating capacity pricing (deemed unlikely to fall materially given the WA shortfall) and confidential CIS floor/ceiling terms. The author views this as a low-downside, high-upside winner for power exposure given the government-created put and WA's guaranteed energy shortfall.

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Kraft Heinz (KHC, adding to position) is trading at among the highest dividend yields in its history and at an all-time low multiple, with Warren Buffett's Berkshire remaining the largest shareholder; new Berkshire CEO Greg Abel recently committed his confidence to Kraft's new CEO's 'revised' strategy after calling off the corporate split, which Berkshire did not support. The company remains dominant in almost every North American grocery store with iconic, instantly recognizable brands like ketchup, cream cheese, and mayonnaise, and is unlikely to be overtaken by private label given both brand preference and its size and scale advantage, which afford higher margins and greater cost scalability than smaller peers. The new CEO, coming off a major win selling Kellanova to Mars at a large premium, recently purchased $5 million of shares and is reportedly working with Berkshire's Abel on strategy. With the sector out of favor and Kraft Heinz the sector leader, buying at cycle lows with Berkshire's backing is likely to eventually attract investor attention.

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