YB new stock pitches (Thu, Nov 27)

Aduro Clean Technologies Inc. (ADUR), a pre-revenue cleantech company trading between $3-$17.66 over the past year with high volatility due to its tiny float and event-driven trading, has achieved a breakthrough validation where one of only four global steam cracker licensors successfully ran oil from mixed contaminated plastics directly in their pilot cracker without hydrotreating, achieving stable furnace operation and yields comparable to fossil feeds. This eliminates the $400-500 per tonne hydrotreating costs that plague pyrolysis competitors and delivers 85% crackable yield versus 65% for pyrolysis, potentially generating $5 million additional annual revenue per 25,000 tonne plant. The company has secured a brownfield demonstration site in the Netherlands for €2 million designed for 8,000 tonnes per year with expansion potential to 25,000 tonnes, targeting contaminated feedstocks that others cannot process and potentially receiving tipping fees instead of paying $600-700 per tonne for clean materials. Ladenburg Thalmann initiated coverage with a $19 price target and Buy rating, though the author identifies mathematical errors in their revenue calculations that understate per-plant revenue by 25-32% (showing CAD$23-28 million instead of CAD$30-37.5 million based on their own assumptions), suggesting the corrected target should be in the mid-$20s. The company operates as a technology licensor rather than plant operator across three business lines: chemical recycling ($120B TAM), heavy crude upgrading ($50B TAM), and renewable oils conversion ($121B TAM), with the licensing model offering higher margins and lower capital intensity, though significant execution, financing, and commercialization risks remain.

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Corporativo Fragua (FRAGUAB.MX), the parent company of Farmacia Guadalajara, operates a successful 'superpharmacy' model combining specialized pharmaceuticals with essential grocery items across 2900+ stores in all 32 Mexican states, delivering 3500% USD returns since 2000 (15% CAGR) and outperforming other Mexican companies like Walmex, FEMSA, and AMX. The company currently trades at 10x trailing P/E, the lowest multiple in over a decade, on temporarily depressed earnings as aggressive expansion ($4.7B capex vs $1.2B depreciation) has compressed operating margins by 70 basis points, though management attributes most margin compression to new store costs rather than inflation. The bull case centers on margin normalization and multiple expansion as new stores mature, given management's track record of achieving 20%+ returns on capital for new locations and the potential for both earnings growth and P/E re-rating from current trough levels. Key risks include exposure to Mexico's political instability, peso devaluation (halved since 2005), cartel issues, weak rule of law, competition from FEMSA Health, Farmacias del Ahorro, Walmex, and Oxxo, potential store saturation, ongoing inflation at 3.5% continuing to pressure margins, and the possibility that new stores may not achieve historical performance levels, though the company's unique superpharmacy niche, management's strong execution track record, and current low valuation provide a margin of safety.

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OMSE Energy Technologies Inc. experienced a dramatic 60-70% surge following the initial investment recommendation, only to completely round-trip back to the original entry price, creating an interesting investing psychology case study around herd-mentality bias. The Q3 earnings were fine, with management explaining that current results were depressed below normal levels due to abnormally large orders from their Saudi customer in the first half of the year, typical of small cap volatility. The CEO indicated that demand remains strong with a solid backlog, but provided a non-committal response on capital allocation, stating they would use proceeds for organic growth, joint ventures, and acquisitions while keeping doors open for any opportunities. The company trades at a dirt cheap valuation despite the business fundamentals appearing sound according to management's assessment.

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