YB new stock pitches (Tue, Aug 18)

Deckers Outdoor (DECK), owner of the Hoka and Uggs brands, trades at ~$93/share (~$13bn market cap), down from its FY24 peak above $200, having been unloved since shares got too expensive at >25x EBITDA and ~40x P/E before growth slowed and multiples reset. The company grew rapidly in prior years (>15% topline, near-doubling EPS FY23-FY25), with FY26 revenue and EPS up 10% YoY (Hoka +16%, Uggs +8%), but guided to modest FY27 growth (~7% topline, ~4% EPS) and HSD growth with double-digit EPS growth through FY30 fueled by organic growth plus buybacks. Hoka has grown from ~20% of revenue in FY21 to ~50% in FY26 and is likely to exceed 50% soon, with DTC growing ~17% YoY (vs. 3% wholesale), and Uggs reportedly coming back into fashion; notably most global peers (Adidas, Nike) have barely grown, while Asics and ON trade at heady multiples. The core thesis rests on excellent capital allocation: an asset-light model with high margins, minimal capex, FCF approximating operating income, and essentially 100% of FCF returned via buybacks (US$1.1bn last fiscal year at an average $102.43/share), with the board pledging at least 80% of FCF going forward, all supported by a zero-debt balance sheet with ~US$1.6bn net cash (~12-13% of market cap, excluding ~$100m tariff refunds). On valuation, with ~138m shares and ~US$11.4bn EV, FY26 operating income of ~US$1.26bn and FCF of ~US$1.18bn imply ~8.8x EV/EBIT and ~10-11x FCF (~10% yield)—cheaper than peers despite superior capital allocation and FCF conversion (peer median ~8% FCF yield two years out); historically buying DECK when it traded below wholesale partner Dick's (DKS) EBITDA multiple has worked well. Management's ~$10 EPS guide for FY30 at a 15x multiple on a Y+2 basis implies a ~$150 stock (~70% upside) plus an additional ~$10 of net cash, making DECK an attractive bargain for the patient investor.

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MegaChips Corp (TYO 6875), a fabless semiconductor company designing custom ASICs, trades at ¥11,250 (market cap ¥158.3bn / $1bn) yet owns ~10% of U.S.-listed SiTime (NASDAQ: SITM) worth ¥16,920/share after-tax, plus ¥2,923/share of NCAV, totaling ¥19,842/share and giving zero credit to the operating business—making this a sum-of-the-parts discount story. Additional financial assets (a Macronix stake and private Morse Micro, carried at book value, potentially IPO'ing on the ASX at $600m AUD) add ~¥2,604/share (~¥1,784 after a 31.47% tax haircut), while the standalone operating business (77% of revenue from Nintendo, a 30+ year relationship since the N64 era; only 328 employees) is conservatively worth ¥892/share at 5x the FY27 operating profit target (revenue ¥42.0bn, operating profit ¥2.5bn, though Q1 already generated ¥1.058bn adjusted), and could reach ¥3,568/share if FY2030 targets (¥10bn operating profit) are hit. Management is aggressively buying back stock (share count reduced from 17.07M to 14M since May 2025), funding repurchases with SiTime sale proceeds (400,000 shares sold at $779.5), explicitly stating shares are 'too cheap' and targeting ¥20bn in buybacks in FY27 alone, while also allocating SiTime proceeds into growth investments, startups, and M&A (management earned credibility acquiring SiTime for $200M in 2014, now worth $21bn), and plans to cut its SiTime stake from ~10% to 5% by FY2030. Investors collect a 2.3% dividend. The key risk is SiTime's stock performance, as SiTime is a richly valued (~$21bn) AI-exposed growth stock whose collapse could erase the discount; the author remains unhedged. The author prefers MegaChips over the similar Sanken Electric (which owns 32% of ALGM) because MegaChips' remaining business is simpler, better, and not capital-intensive or loss-making. The author bought MegaChips after SiTime rose 30% while MegaChips barely moved, treating it as a slightly above-average basket-sized bet.

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LENSAR ($LNSR, $8.27/share, $226M fully diluted market cap, $191M EV) is a micro-cap medtech company developing cataract laser systems, with its next-generation robotic ALLY system driving a US market share gain from 14% to 23.4% over 3.5 years since its August 2022 launch, reaching ~200 installed systems; share gains came from replacing competitive first-gen lasers (with ALLY performing 27% more procedures annually than the national average per laser) and nearly 50% of Q4 2025 placements coming from Femto-naive surgeons, expanding the overall market. Alcon had agreed to acquire LENSAR for up to $430M (8x revenue), but the FTC signaled opposition since Alcon is a major FLACS competitor, leading both sides to mutually terminate the deal; the stock tanked below pre-deal levels as backlog and placements collapsed, primarily because international distributors (unlike US direct-sales customers) froze tenders amid uncertainty over post-acquisition distribution, a slowdown management expects to take several quarters to reverse, with Europe a key target. Despite this, Q2 results confirmed a strong underlying business: an annualized recurring revenue run-rate of ~$55M (from procedure licenses and consumables, with Q3 seasonally weakest due to summer holidays), 52% normalized gross margin, and ~$2.5M normalized adjusted EBITDA (excluding a one-time $1.1M tariff refund), operating near EBITDA breakeven while scaling. Trading at ~2.9x EV/revenue run-rate versus Alcon's agreed 8x, the author sees a potential $80M+ run-rate business by year-end even without immediate international recovery. Key risks: North Run Capital holds the warrants/preferred shares, two board seats, and ~45.4% voting power (controlling major decisions); international distributor re-engagement could lag or fail; future acquirers may hesitate after the FTC-driven termination; rising OpEx (to support placement velocity) means the $2.5M EBITDA is not a fixed floor; Q3 combines seasonal weakness with higher OpEx risking a dip in confidence; plus standard reimbursement, competitive, and regulatory risks. After watching from the sidelines, the author is confidently becoming a shareholder, viewing it as one of the highest-quality micro-cap medtech businesses with third-party validation of a higher multiple and a strong high-margin recurring revenue base.

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