YB new stock pitches (Thu, Feb 26)

Sanofi (SAN.PA), a €100B+ market cap pharma company generating over $50B in revenue and $10B in net income with healthy margins (75% gross, 28% EBIT), is being ignored by the investing community despite delivering 8% constant currency revenue growth over the last 5 years and 10% growth in 2025, along with a 5%+ dividend yield backed by 30+ consecutive years of dividend growth and over €5B in buybacks last year. The company guides for high-single-digit sales growth in 2026+ with EPS growing slightly faster than sales and profitable growth continuing for at least five years, though recent sell-side downgrades cite concerns about growth trajectory in the 2030s and CEO transition uncertainty. A new CEO with 5 years of experience leading a $65B competitor and prior Sanofi experience (2003-2010) starts in 2 months and has significant firepower: approximately €12B from monetizing a remaining 48% stake in a spun-out business and another €13B from re-leveraging from 0.3x (expected YE2028) to 1x, totaling €25B (20% of market cap) for potential deployment toward buybacks, M&A, or growth investments over the next 3 years. Despite these fundamentals, the stock has delivered a -20% total return over 12 months and sits within 5% of its 3-year low, trading at 9.5x 2026 PE, 9x 2027 PE, 8.2x 2028 PE, and 7.2x 2030 PE versus a historical 10-14x range averaging 12x, making it the cheapest large-cap defensive growth stock globally and the only one trading on a single-digit 2027 PE with a double-digit FCF yield. The stock's low implied volatility (24) and liquid options market make Dec 2027 at-the-money calls attractive, with potential returns of +360% if the multiple recovers to the 5-year historical average of 12x PE (implying 46% stock upside and 57% total return), +240% if the stock recovers to its March 2025 52-week high (35% upside, 11x 2028 PE), and profitability requiring only 5% annual stock appreciation, with calls gaining 120% value for every multiple turn above 9x PE at expiry. Historically, Sanofi's longest period without making new highs is 28 months, which from the March 2025 peak would be July 2027, well before the Dec 2027 option expiry.

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Wealthfront Corporation (WLTH) is a capital-light investment management company growing approximately 20% annually and trading at 6-7x EV/FCF, with shares down over 40% since its December 2025 IPO due to VC selling. The company, founded in 2008 by Benchmark Capital partner Andy Rachleff (who owns 11.5% and didn't sell in the IPO), manages $93 billion in platform assets across 1.8 million accounts with only 400 employees, having tripled assets since a $1.4 billion UBS acquisition was mutually terminated in 2022. Wealthfront operates as a next-generation banking and investment service offering automated investing, direct indexing with tax-loss harvesting, and cash accounts, with approximately 75% of revenue coming from Cash Accounts that earn a 0.60% net interest margin and provide customers up to $8 million in FDIC insurance through 32 partner banks. The company maintains over 40% EBITDA margins with 90%+ FCF conversion, holds about one-third of its market cap in cash with no debt, and trades at a discount to the 2022 UBS valuation despite tripling platform assets since then. Key risks include potential headwinds from interest rate cuts that could cause deposit flight or NIM compression, though management believes customers may simply migrate funds to other Wealthfront products rather than exit the platform entirely. The company compares itself to Charles Schwab's early growth trajectory, with Schwab now trading at 16x NTM earnings with $11.6 trillion in client assets, suggesting potential for significant long-term appreciation as Wealthfront continues its 10-20% annual growth with strong margins and a long runway ahead.

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Montana Aerospace (AERO.SW), a pure-play aerospace supplier trading at $25 CHF with a market cap of €1.7 billion, serves all major commercial aircraft programs with a 50/50 revenue split between Boeing and Airbus and between narrowbody and widebody aircraft, deriving 80% of revenue from commercial aviation. The company became pure-play aerospace after divesting its E-mobility business in June 2024 and energy division in September 2025, and now trades at 8x 2026 EBITDA versus peers at 14x+, with a net cash balance sheet. Montana's aerospace division has significantly outperformed the industry, growing revenue at a 28% CAGR from 2020-2025 versus 14% for aircraft OE deliveries, with 90% of products single-sourced under long-term contracts that include commodity pass-through and small price increases over time. The company expects 20% annual earnings growth driven by the OE delivery ramp (aircraft deliveries projected to grow +17% in 2026, +11% in 2027, and +9% in 2028), with management targeting 20% EBITDA margins near-term and 25% longer-term, and should generate $485 million in free cash flow from 2026-2028 for M&A and buybacks with minimal maintenance capex of $30 million annually and a sub-10% tax rate. The stock recently declined from $35 to $22-$24 on misunderstood 2026 guidance that appeared as a cut from >$250 million to >$185 million EBITDA, but the core aerospace business outlook actually improved to $225 million after accounting for the $50 million energy divestiture and $40 million in non-core tariff and currency impacts, with management using conservative assumptions including a 1.19 Euro rate and flat Boeing 737 production despite Boeing's stated plans to increase output. Key catalysts include a planned dual US stock listing to improve visibility and inspire analyst coverage (currently only a few European analysts and one small US bank cover the stock), beating conservative 2026 guidance, initiating buybacks, and tuck-in acquisitions. The founder Michael Tojner owns 45% with top shareholders including Brandes Investment Partners, T Rowe Price, and Capital Group, and management has expressed confidence in execution with recent insider purchases including from Co-CEO Michael Pistauer. The 2-year price target of $75 (+200%) is based on 14x 2028 EBITDA of $350 million ($300 million organic plus $50 million from acquisitions), with risks including operational execution, 30% currency exposure without natural hedges, concentration in Boeing and Airbus, and founder control limiting hostile takeover potential, though the author notes larger aerospace companies like Precision Castparts and Howmet would likely be interested acquirers at significantly higher prices.

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