YB new stock pitches (Mon, May 11)

Clarus Corporation (CLAR), a new position, is an outdoor equipment company trading at approximately $100 million market cap with $37 million net cash, no debt, and $175 million in core revenues from its Black Diamond Equipment brand. The company's Adventure segment, representing 30% of revenue, is a value destroyer with SG&A at 44-47% compared to the core Outdoor segment's 30%, and management has misallocated capital through three failed acquisitions in five years while allowing share count to increase 26% since 2018. The activist thesis proposes divesting or shutting down the Adventure segment, which would bring the company nearly to operating income breakeven, and deploying the $37 million net cash plus divestiture proceeds into buybacks representing approximately 37% of market cap. The core Outdoor segment alone is valued at $105 million+ using a conservative 0.6x price-to-sales multiple, exceeding the entire current market cap and demonstrating the conglomerate discount. The proposed strategy includes engaging an investment bank to sell the Adventure division within 60 days, announcing a minimum $20 million buyback program within 60 days, and initiating a strategic review within 12 months to explore a full sale of the company, with the potential upside of at least 60% through activist intervention. Key risks include the possibility of no buyer for the Adventure segment, though shutdown would still eliminate recurring losses, and management resistance, which could be overcome through proxy fights given the share count and board structure, while low trading volume limiting buyback impact could be mitigated through special dividends.

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Copart (CPRT), trading at $33.23 with a $31.9 billion market cap, operates a salvage vehicle auction duopoly with IAA, controlling the market for totaled cars through 200+ owned yards globally and 750,000 registered buyers bidding via its VB3 platform. The company generates owner earnings of approximately $1.81 billion ($1.89 per share) versus $1.78 billion in net income after adjusting for growth capex (primarily land acquisition), delivering 20%+ ROIC and trading at 17.6x owner earnings with a 17% margin of safety to base-case intrinsic value of $40 (defensive $29, upside $56). The moat consists of three interlocking layers: an irreplaceable land network assembled over 40 years that's impossible to replicate due to modern zoning restrictions, a self-reinforcing network effect from the industry's deepest buyer pool driving higher auction prices, and switching costs from insurance carrier system integration. Under founder Willis Johnson and current CEO Jay Adair (son-in-law), management has maintained operational discipline with capital allocation focused entirely on land and yard expansion, significant insider ownership, and strong psychological alignment, though voting power is concentrated in the founder family. Tailwinds include rising total-loss frequency from expensive-to-repair vehicle sensors and technology, international expansion in early stages (UK, Germany, Spain, Brazil, Middle East) offering a multi-decade reinvestment runway, and land carried at historical cost that significantly understates replacement value. Key risks include potential IAA/Ritchie Bros competitive pricing aggression, vehicle price normalization compressing revenue per unit, possible EV repairability improvements reducing total-loss rates in 5-10 years, and governance concentration with limited shareholder recourse. The thesis breaks if Copart loses two or more top-five insurance carrier relationships within 12 months, signaling eroded buyer pool advantage. Expected base-case CAGR is 12-13% over 5-10 years (18-20% upside case with international acceleration and multiple expansion to 24x, 2-4% defensive case with multiple contraction to 16x), representing a fair price for a quality compounder with the investor taking a position, though deeper value would exist at $28-30.

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Remedy Entertainment (REMEDY.HE), trading at €180 million market cap with €34 million cash and Q1 2026 revenue of €13.1 million with +€5 million positive free cash flow, is positioned for a transformational catalyst with Control Resonant launching in Q2/Q3 2026. The company has abandoned multiplayer experiments (incurring tens of millions in write-downs) to refocus on its core strengths in narrative-driven single-player games, with a proven track record including Control 1 (6M+ lifetime units, €100M+ revenue from €30M budget) and Alan Wake 2 (2M+ units in 14 months, profitable despite €70M budget and digital-only distribution). Control Resonant represents a structural shift with 100% revenue retention through self-publishing (vs. 45% royalty previously), 50% of the ~€50M development budget co-financed by Annapurna, day-one multi-platform launch on Steam/PC/PS5/Xbox, and expansion into the action RPG genre which has proven capable of 3M-20M+ unit sales (comparable to Dragon's Dogma 2's 3M, Cyberpunk 2077's 13M, and Black Myth: Wukong's 20M units). Using ~€42 net revenue per unit after platform fees on €60 ASP and €30-50M marketing budget, the bear case (2M units, €84M net revenue) implies €135M-€270M valuation at 5-10x EV/EBIT, base case (5M units, €210M net revenue) implies €815M-€1,630M valuation, and bull case (10M units, €420M net revenue) implies €1,765M-€3,530M valuation versus the current €180M market cap, representing +300-600% upside potential at conservative 5-8x EBIT multiples compared to European gaming peers trading at 8-17x (Frontier 9.8x, CD Projekt 14.9x post-2027, Paradox 17x, Pullup 8.2x). Additional unpriced catalysts include Max Payne 1&2 Remake royalties expected in 2027 with Rockstar/TTWO, potential film/TV adaptations through Annapurna, Control 1 catalogue halo effect, Asian market penetration (new CEO actively pursuing China), and €40M p.a. from catalogue and Max Payne development fees. Risks include launch delay beyond Q2/Q3 2026, execution risk on the ARPG genre shift (sub-80 Metacritic could dampen sales), marketing effectiveness as first major self-published title without major publisher distribution, and potential for complete launch failure, though downside appears limited given cash position and development fee income.

Read the full article here. Read time: 7 min