YB new stock pitches (Thu, Jan 8)

The investor is building a position in NL Industries (NL), which trades at a 44% holding company discount that essentially makes the titanium dioxide business free. NL's holdings include a $246 million stake in CIX, a $157 million stake in KRO, a $13 million stake in VHI (1.1 million shares), and $55 million in deconsolidated unrestricted cash, totaling $471 million versus the market capitalization. The investor previously avoided the position due to concerns about Chinese titanium dioxide producers flooding the market but now believes the price is right given the substantial discount, where the holding company discount approximately equals the entire value of the titanium dioxide operations.

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The investor aggressively added to Asseco Poland S.A. (ACP.WA), a Polish VMS (Vertical Market Software) serial acquirer, building a 27.3% position size after the stock nearly doubled from their initial 115 PLN entry point. The investor added aggressively in September when the stock dropped below 200 PLN and again in November before earnings, with buying opportunities arising from increased AI disruption fears affecting VMS serial acquirers rather than fundamental business issues. The company's diversification across dozens of companies in different industries provides defensibility against AI disruption risks, and the investor expects a substantial special dividend from the sale of treasury shares to Topicus and the sale of Sapiens. The position size is expected to normalize to closer to 15% post-dividends, with no plans to increase the position further, and the investor anticipates being out of the name if/when AI risks materialize, believing Asseco will likely be larger and more profitable in 2-3 years due to its inherent diversification across varying levels of criticality and stickiness.

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FW Thorpe (TFW.L) is a 90-year-old family-controlled lighting manufacturer trading at £2.76 with a £312m market cap, 13x P/E, 8.3x EV/EBIT, and 8% FCF yield due to temporary European weakness and AIM inheritance tax changes creating forced selling. The company maintains 18% operating margins and dominates regulation-driven niches including emergency lighting (44% of revenue), cleanrooms, and hazardous environments where failure is unacceptable, with 43% family ownership providing alignment. Revenue has grown 9.1% over 10 years to £175m through acquisitions including Lightronics (Netherlands), Zemper (Spain), and SchahlLED (Germany), though recent performance shows flat revenue as SchahlLED declined 31% and Lightronics fell 17% due to German industrial recession and Dutch construction slowdown, while UK operations grew 6% and Zemper grew 13%. The EU fluorescent ban creates forced replacement demand, SmartScan technology provides 36% of revenue with recurring monitoring capabilities, and the company has delivered 23 consecutive dividend increases with £61.8m net cash funding expansion without debt. Key risks include potential permanent German/Dutch market weakness, the struggling Ratio Electric EV charging venture requiring restructuring, and management succession as Craig Muncaster now holds combined CEO/CFO roles. Bulls argue the market prices only 3% annual FCF growth versus historical 8.5% CAGR, with inverse DCF analysis suggesting 13% annual returns if 5% growth resumes, while bears worry about structural European decline and continued losses from diversification attempts.

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