YB new stock pitches (Tue, Dec 23)

Molina Healthcare (MOH), a Medicaid-focused HMO serving 5.6M+ members across 21 states with Medicaid driving ~75% of premiums, has declined 45% year-to-date to ~$160 despite remaining profitable while industry peers post losses, maintaining a medical loss ratio 250bps better than the industry and expecting $16/share from Medicaid in 2025. The company faces transitory margin pressure from post-COVID redeterminations that created a sicker population pool, driving 400bps of industry MLR expansion over two years, but management views current headwinds as temporary since Medicaid pricing resets over time through contractual mechanisms that restore margins to target levels. MOH only needs ~130bps of Medicaid rate improvement to return to 4.5% target margins (compared to peers needing much more to reach breakeven), with each 100bps of Medicaid MLR improvement worth $4.50 in incremental EPS, and normalized 4.5% margins equating to $30+ EPS versus the current ~$160 price. The company demonstrates operational excellence by winning ~80% of new contracts and ~90% of re-procurements, targeting 11-13% annual premium growth with $8.65 per share in embedded earnings from new contracts and two-thirds of forward revenue growth already secured through recent wins in GA, OH, MI, MA, and ID. MOH has deployed $2.3B over the last six years on acquisitions at an average 5.5x EBITDA generating ~30% ROE, while maintaining a seven-year average ROE of 37% including goodwill, and has repurchased $1B year-to-date including 5.3% of shares in the last quarter alone with an additional $500M term loan for more buybacks. Bulls see the stock reaching $675 by 2028 (representing 4.2x current price and 225% upside) based on applying a 15x multiple to $45 in potential 2028 EPS, while bears worry about prolonged margin pressure and regulatory risks in the Medicaid managed care environment.

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Myers Industries (MYE), an industrial manufacturer selling reusable containers, pallets, and storage systems to B2B customers across Material Handling, Lawn & Garden, Engineered Products, and Distribution segments, is executing a Focused Transformation Program targeting $20 million in annual cost savings (with $19 million already identified) while selling its lower-margin MTS distribution unit to improve margins and simplify operations. The company serves mission-critical markets including factories, warehouses, agriculture, infrastructure, and military customers through brands like Buckhorn and Akro-Mils, with products that become embedded in customer operations creating sticky demand. Q3 results showed progress with gross margins improving 150 basis points to 33.9%, free cash flow more than doubling to $21.5 million, and net leverage declining to 2.6x toward the target range of 1.5-2.5x. Trading at approximately $19.50 per share with a $725 million market cap, the stock trades at roughly 13x 2026 estimated earnings of $1.47, with analysts expecting $1.01 EPS in FY25. Management expects the MTS divestiture to notably improve consolidated margins, with key catalysts being execution of the distribution business sale and realization of identified cost savings. If the company can sustainably earn around $1.50 per share and receives an 18-20x earnings multiple, the stock could reach approximately $30 per share, representing significant upside from current levels.

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Tianjin Development Holdings Limited (0882.HK) is a Hong Kong-listed municipal holding company trading at an extreme discount to asset value, with a HK$5.4 billion cash pile (~2x market cap) and stakes in Otis China (elevators), Tianjin Port, utilities, and pharma. The company is majority-owned by the city of Tianjin and has been consistently net cash, building its position through asset sales including HK$1.4 billion from toll roads in 2010 and HK$600 million from selling subsidiary Tianduan in 2021. The core thesis remains that the stock trades at an extremely high discount to asset value, with potential catalysts including cash deployment (historically averaging one deal annually from 2008-2021 equivalent to at least 20% of current market cap, though no major acquisitions since 2015) and stabilization/improvement of the elevator business as Otis China, the main profit contributor, has struggled due to China's real estate crisis but may recover as the sector stabilizes from 2026 onwards. Management has increased dividends by 50% since 2021 but is viewed as overly conservative in capital allocation, with the fund manager expecting eventual cash deployment into acquisitions while maintaining that the likelihood of large capital destruction seems low, making this a case of 'value as its own catalyst' despite the absence of clear catalysts.

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