YB new stock pitches (Mon, Nov 3)

Kirby Corporation (KEX), the largest inland marine transportation provider in the U.S. with a transportation network more than twice the size of its nearest competitor, moves bulk liquid products including petrochemicals, black oil, refined products, and agricultural chemicals while also supporting engines, transmissions, and related equipment through its distribution and aftermarket service business. The company has a long track record of profitability and consistent free cash flow generation, but recent results faced pressure as barge utilization softened due to regional refining mix changes, negatively impacting pricing which serves as a key driver of long-term earnings. Despite these near-term challenges and lower Street earnings revisions, the investment thesis remains intact due to confidence in Kirby's favorable supply-demand dynamics and growth potential, prompting an addition to the position during the period.

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GXO Logistics is a contract logistics company with 95%+ renewal rates serving blue-chip clients like Nike, Apple, and Amazon through 3-7 year contracts, operating as their warehouse and supply chain backbone with 50% of warehouses automated using robotics and AI technologies. The company generated $12.7B in LTM revenue with 16% growth (6% organic, 6% M&A, 4% FX), expects $13.2B in FY25 revenue growing at 13%, but operates on razor-thin margins of 2-4% due to cost-plus contract structures, with net debt of ~$2.5B. Growth catalysts include expanding into higher-margin verticals like aerospace (targeting $150B global MRO market), healthcare (won largest NHS contract ever in $34B market), and reverse logistics ($823B market growing 18% CAGR to $3.2T by 2032), plus the recent Wincanton acquisition adding $60M in EBITDA synergies. The bull case centers on GXO trading at 0.46x NTM sales versus peers above 1x, benefiting from the global outsourced logistics market growing 9% annually to $2.2T by 2033, high switching costs creating strong moats, and automation driving margin expansion and contract stickiness. Bears cite customer concentration risk (40% revenue from top 10 clients), M&A execution risk, high CapEx requirements for automation, and macro slowdown exposure. The company targets $22.4B EV (~100% upside) based on reaching $1.61B EBITDA in FY29 (16.4% CAGR) through 8% revenue growth to $17.9B and margin expansion from 7.2% to 9%, applying a 14x EV/EBITDA multiple justified by the shift toward higher-margin robotics and automation services.

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RBC Bearings Incorporated (RBC) is a leading specialty bearings, gearing and motion control products provider with over 70% of revenue derived from sole- or primary-sourced components, underscoring its critical role in customer supply chains. The company's strategy of producing ahead of demand supports strong delivery performance and quality, while proprietary design software enhances product engineering. RBC is well-positioned to benefit from the production ramp-up of next-generation aircraft through long-term contracts with Boeing and Airbus, as well as steady aftermarket demand for maintenance and repair. The company recently issued a positive outlook supported by a strong backlog and the successful integration of its VACCO acquisition, both of which signal continued growth potential, prompting the addition to the position during the quarter.

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