YB new stock pitches (Tue, Aug 11)

Cannae Holdings (CNNE), a holding company trading at ~$14.78 with a $649.44M market cap, is a long thesis premised on its unjustified ~40% NAV discount (share price vs. NAV/share of $24.02-$32.59) narrowing following recent activist-driven governance reforms. Spun off from Bill Foley's Fidelity National Financial in 2017, CNNE fell out of favor after adopting an external management structure (MSA) with Foley-controlled Trasimene Capital and destroying ~$900M in shareholder capital via three failed SPAC mergers (System1, Paysafe, Alight, all down >90%), alongside self-dealing conflicts (a 2020 Oklahoma Firefighters lawsuit forced a 2023 settlement reducing fees) and a Nevada redomestication opposed by ISS. Activist Carronade Capital escalated pressure beginning December 2024, and despite CNNE granting Foley an off-market put right and equity-vesting protections, the December 12, 2025 AGM resulted in Carronade adding 2 of 4 nominees (Aboelnaga and Schaible, replacing directors with -128%/-134% relative TSR), a failed say-on-pay vote, and board declassification; CNNE also terminated the MSA, demoted Foley from CEO/Chairman to Vice Chairman, added independent directors (4 of 12 truly independent), and removed Foley's put right (in exchange for selling its 87% Brasada Ranch stake to a Foley entity). The story is now a clearer pivot to sports/entertainment assets with improved disclosure (monthly SOTP), highlighted by Black Knight Football Club (~27% of NAV, owning 100% of AFC Bournemouth, 100% of FC Lorient, 70% of Moreirense, plus strategic partnerships), which the author values at ~$445M gross fair value (vs. the stale $294.6M mark, implying 51% upside)—driven by Bournemouth's revenue growth to a projected 230M pounds FY26, improved Premier League placing (6th in 2026, each position worth 3.7M pounds in TV revenue), stadium/training investments, and a 3.1x Sportico revenue multiple; other holdings include Exeter Rugby Club (~2.5% NAV, acquired for 19.6M pounds), a 50% stake in JANA Partners (~11% NAV, sourcing deals and generating cash flow), and non-core assets like Alight and the declining restaurant group (O'Charley's, 99 Restaurants), which management is exploring divesting. With ongoing capital return (4.06% dividend, $0.15 quarterly, and 12M authorized buybacks that could reduce shares from 43.9M to 31.9M at ~$17), applying a conservative 30% target NAV discount yields ~54% upside. The key risk is value destruction given CNNE's history of poor investments, mitigated by management's sports/entertainment experience, non-core monetization, capital return, and activist/independent board oversight; catalysts include capital return/monetization announcements, continued sports/entertainment investment, updated disclosures, and the Q2 2026 earnings report.

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Barratt Redrow (BTRW.L), a UK housebuilder formed from the 2024 merger of Barratt and Redrow (with a heritage dating to the 1950s and having built 1 in 50 UK homes), was added to the author's portfolio in June and is viewed as a financially strong, inexpensively priced call option on an eventual UK housing recovery underpinned by robust demographics; the stock trades at ~11x P/E and <0.6x P/NAV, a discount to its post-Brexit vote, COVID-19 depths, and Liz Truss budget lows, supported by a fortress net cash balance sheet (~£772m, flat y/y). The bull case rests on the UK's superior demographics versus European peers (population projected to rise from 69.4m to 74.4m by 2100 with shrinking household sizes, currently 2.3 people/household), a concentrated and rational market structure (top five builders account for ~38% of the 172k units built in 2025) with landbanks acting as barriers to entry, likely falling interest rates (consensus sees 75bps of cuts from 3.75% to 3.00% by 2028), ongoing share buybacks while out of favour, and the potential for volume growth and margin expansion plus multiple re-rating when conditions turn. Following an activist campaign, management pledged to return £400m in FY2027 (primarily £386m of buybacks, plus a nominal 1p/£14m dividend). The bear case/risks include margin attrition (cost inflation of 3-4% outpacing minimal house price inflation), dampened demand from elevated mortgage rates (best 3-year fixed first-time buyer offer ~4.99%), policy uncertainty (seven UK PMs in a decade), planning bottlenecks, labour constraints (4.9% unemployment), and investor preference for elevated UK gilt yields (30-year above 5.6%). Recent results showed FY2025 completions of 16,565 (17,667 in FY2026, upper end of guidance), 9.0% ROCE, and H1 FY2026 operating margin down 90bps to 8.0%; FY2027 completions are guided at 17,700-18,200. The key drawback is that catalysts (rate cuts, housing recovery) are at least two years out, with flat profits expected from FY2026 to FY2028 before double-digit growth in FY2029, though the strong balance sheet allows patience.

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E-L Financial Corporation ($ELF.TO), a C$6.15 billion (345.6M shares x C$17.79) Toronto-based life insurance holding and investment company controlled for three generations by the Jackman family, offers geared exposure to equity markets at a steep discount to intrinsic value. ELF owns 99.5% of Empire Life (Canada's ~8th largest life insurer, founded 1923), runs a C$5.2B investment portfolio (including ~20% in Vanguard's VOO S&P 500 ETF), controls 57% of closed-end fund United Corporations (UNC.TO), and holds associated stakes in Algoma Central (35%) and Economic Investment Trust (25%); the Jackmans separately own 25% of UNC, 28%+ of ALC and 54% of EVT. Since a December 2023 Dynasty Trust pitch (when ELF traded at a 47% discount to reasoned value), the shares have returned exactly 100%, including three special dividends totaling C$3.15/share (split-adjusted), yet still trade at roughly a 40% discount to assessed value; excluding any Empire Life value, at C$17.79 investors pay ~23% discount to pre-tax NTA. Management is conservative and parsimonious, retiring equity since 2020 and favoring special dividends, with fewer effective shares outstanding than in 1970. The key concern is Empire Life, whose contractual service margin (CSM, under IFRS 17) has stagnated due to weak new business (replacing below 50% of CSM released to profit annually), high lapse rates on older products, and adverse actuarial assumptions—saved recently only by buoyant equity markets aiding its wealth-management products. Canada's 'big four' life insurers trade at ~2.37x tangible book plus CSM and 1.57x book plus CSM (three up over 100% since end-2023, aided by high-teens ROE), but Empire cannot warrant such multiples; valuing Empire's midpoint at C$3,277/share (~C$3.2B for the 99.5% stake) lifts ELF's estimated after-tax value to ~C$29.50/share, with a midpoint valuation of C$28.50 implying a current ~38% discount. Bull optionality includes a potential sale of Empire Life (ELF previously sold Dominion's general insurance business for over C$1B in 2013) and possible use of proceeds to buy out the ~31% (~107.4M shares, ~C$3.1B) minority, though the author views this as a 'really long bow.' The bear case is Empire's declining franchise ('slightly worn,' 'tarnished family silver') and the belief that Canadian life valuations are peaking. The author continues to hold ELF (and has at times held Economic Investment Trust for leveraged exposure), attracted by the diversified global exposure at a discount plus the embedded upside optionality.

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