YB new stock pitches (Thu, Aug 21)

Permianville Royalty Trust (PVL) is an 80% net profits interest royalty trust with 36,670 net acres in the Permian and East Texas Basins, operated by top-tier companies like Pioneer and BP. Currently trading at a $60M market cap, significantly below its $91M PV10 reserves value and $181M undiscounted future distributable income, PVL generates $3.3M in monthly revenue but has suspended distributions due to capex expenditures primarily in the Haynesville shale. Once distributions restart, expected by Q4 2025, the trust projects $9.6-10.8M in annual distributable income, translating to a 15-17% yield ($0.29-0.33 per unit). The trust's historical distributions reached as high as $1.75 in 2012 and approximately $0.40 in 2022-2023 (21% yield at current price). Key risks include continued capital expenditures and potential oil price crashes, but with new wells coming online and institutional-grade assets in premium basins, the stock could double once distributions resume.

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Village Super Market (VLGEA) is a regional grocer (NY, NJ, PA, MD) and the largest shareholder in Wakefern, America's largest retailer-owned cooperative sharing the ShopRite brand. The business has three segments: Grocery (primary income), Wakefern deposits (~15% of income with recent interest rate tailwinds), and a Real Estate JV with Regency Centers. VLGEA has an exceptionally strong balance sheet with -32% net debt/market cap that covers its negative working capital, and trades at an attractive ~11x trailing adjusted EPS with modest growth potential. The bull case includes GARP (growth at reasonable price), strong digital orders (+10% YoY), potential takeout following the chairman's July 2024 death, and the possibility of special dividends. The bear case suggests post-pandemic margins may normalize, potentially pushing the multiple to ~13x earnings. Capital allocation history shows some mishaps including the NYC gourmet garage acquisition, minimal buybacks, and potentially low-ROI store renovations, though the B share dividend discount saves ~$1.5mm annually. Management's personal guarantees necessitate conservative balance sheet management, and investors should note the stock's illiquidity with typically wide trading spreads.

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Lake Shore Bancorp (LSBK) is a small regional bank that recently completed its de-mutualization, trading at $12.66 per share, representing 0.7x book value ($17.89/share). With a $100M market cap and $75M in cash from the conversion, the bank has attracted activist investor Joseph Stilwell, who has accumulated a 9.4% stake around $12.10/share and has a history of pushing for buybacks and mergers in similar situations. LSBK's financials show room for improvement with a 72% efficiency ratio (versus industry standard of 55%) and 6% ROE, suggesting potential for cost-cutting measures. Risk factors include the loan portfolio concentration, with 70% of assets in loans, 95% of which are real estate loans, and over 50% in commercial real estate specifically, though the provision for credit losses is approximately 1% (1.3% for commercial loans). The bank's loan-to-deposit ratio is 88%, with 85% of deposits being interest-bearing, and with its cash and securities, it could withstand losing one-third of deposits before facing issues. Due to post-demutualization restrictions, buybacks are likely a year away and a potential merger approximately three years out, with the primary investment thesis being that the activist involvement will drive improvements in cost structure and loan book quality, eventually leading to share repurchases and an acquisition.

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