YB new stock pitches (Thu, May 15)

Virtus Investment Partners (VRTS), a multi-boutique traditional investment manager, trades at compelling valuations of 6.5x P/E and 3.0x EV/EBITDA (or 4.0x adjusting for seed/CLO investments), with minimal leverage at 0.3x net debt/EBITDA. The company offers a 5.6% dividend yield and has been aggressively repurchasing shares (2% in Q1 alone), with potential to increase leverage by 1.0x EBITDA to repurchase up to 30% of outstanding shares. VRTS benefits from recurring revenue streams, high free cash flow, and a strong balance sheet with only $100 million in net debt, plus $140 million each in seed investments and CLO equity investments. The company has grown through acquisitions, providing centralized sales and operational support to its investment affiliates. Key risks include challenged asset flows as active management falls out of favor compared to passive strategies, an uneven track record with past acquisitions that may not have delivered anticipated returns, and uncertainty while waiting for flows to improve or management to take more aggressive action.

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Swatch Group, the second-largest luxury watchmaker globally, presents a compelling value opportunity at its historic profit lows, with an asset value of $25.5 billion compared to its $9 billion market cap. The company boasts exceptional 80% gross margins and holds inventory valued at $9.1 billion alone, which could generate $3 billion in cash if reduced from 7 to 4 years of coverage. Swatch's Chinese exposure has decreased from 40% to 25% of sales, while US business has grown to 18%, reducing geographic concentration risk. Though the Apple Watch has impacted the entry-level segment, it poses minimal threat to Swatch's higher-end brands where the market has grown 3.5x over 20 years. The company maintains a conservative 3% dividend yield with significant upside potential, as net cash covers the dividend four times over, making this cyclically-depressed business an attractive buy.

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eXoZymes, Inc. (EXOZ) has developed a revolutionary cell-free biomanufacturing platform using engineered exozymes (enzymes that function outside cells) to produce chemical compounds more efficiently than traditional cell-based approaches. The platform addresses a $1.4T total addressable market spanning pharmaceuticals, nutraceuticals, biofuels, and specialty chemicals. After a decade of development, EXOZ's technology is ready for commercialization, with impressive yields and titres far exceeding cell-based methods—demonstrated in scientific publications showing 88-104% yields for terpenes and 95% yield for isobutanol. The company recently launched its first subsidiary, NCTx, focused on N-trans-caffeoyltyramine production for liver and gut health applications, with a joint venture announcement expected later this year. EXOZ has secured strategic partnerships with the DOE's NREL division and received a $2M grant from DOD's BioMADE initiative. With strong IP protection and a management team of industry veterans and scientific co-founders who maintain 68.24% insider ownership, EXOZ is positioned for growth. The company has $8.51M cash (as of March 31, 2025), operates with high capital efficiency, and is currently trading at early-stage valuation after its November 2024 Nasdaq listing at $8 per share.

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