YB new stock pitches (Thu, Sep 25)

StoneCo Ltd (STNE), a Brazilian fintech company, is trading at 14x earnings with 20% EPS growth potential and has gained approximately 70% since March due to strong fundamental execution rather than hype-driven performance that has characterized many of its peers. The author previously identified the stock as 'asymmetric upside hiding in plain sight' in March, a thesis that has since played out as the company outperformed both peer companies and broader markets through real operational execution rather than speculative momentum. The investment case is particularly compelling for investors interested in Brazil or financial services exposure, especially given the weakening USD which benefits Brazil-focused investments, though the author notes the stock's continued attractiveness despite its significant year-to-date gains. - link

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goeasy Ltd. (GSY.TO), a Canadian subprime lender trading at approximately $5 billion in market capitalization, is suspected of sitting on approximately $300 million in improperly delayed credit losses through systematic accounting manipulation, with the true net charge-off rate estimated at 15% versus the reported 9%. The company has allegedly suppressed delinquencies through payment 'skips,' partial payments, and loan 'rewrites' that allow borrowers to remain classified as 'current' despite missing payments for up to 24 months, evidenced by exploding interest receivable balances that reached 42% of quarterly interest income versus a historical 14-17%. Key accounting changes include removing the 180-day automatic charge-off rule for secured loans in Q424, suddenly reclassifying 8% of loans from higher-risk to 'low-risk' categories in Q224 despite declining credit scores, and moving approximately $18 million in expenses to deferred acquisition costs. The company's secured loan portfolio, representing nearly 50% of the book, shows concerning 6-7% delinquency rates for loans over 90 days past due with poor recovery rates around 10%, while the median TransUnion credit score of 585 (equivalent to approximately 558 FICO) represents the lowest credit quality among comparable subprime lenders yet produces the lowest reported delinquency rates. Recent executive departures include CEO Jason Mullins and CFO Hal Khouri, with Khouri's sudden resignation notice in September 2025 occurring after his first-ever stock sale, while the company has halted share buybacks since April 2025 despite previously promoting them to investors. The analysis estimates that acknowledging these delayed losses would result in approximately $100 million from overdue charge-offs and $200 million from hidden delinquencies, potentially reducing annual earnings by 63% versus expectations and threatening debt covenants, while the estimated 'true' adjusted ROE is approximately 6% versus the reported 20-30% range.

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We used excess cash to initiate a position in Entegris, Inc. (ENTG), a well-diversified semiconductor spending play that sells chemicals (gases), filters, and containers for handling chemicals and chips, with high switching costs across its client base. We believe ENTG is well positioned for future growth and should benefit from greater spending, with growth in wafer starts and higher content per wafer as additional positives.

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