YB new stock pitches (Tue, Oct 7)

OraSure Technologies (OSUR) is a medical device manufacturer trading at liquidation value with a $200 million market cap against $235 million in cash, making it essentially free on an asset basis. The company operates two main segments: diagnostics (HIV/HCV tests with 50% gross margins that grew 5.7% CAGR from 2016-2024, including the only FDA-approved at-home HIV and Hepatitis C tests) and sample collection (DNA stabilization technology with patents extending to 2040). Key catalysts include the December 2024 acquisition of Sherlock Biosciences for $5 million cash plus $20 million contingent earnout, which is developing an at-home Chlamydia/Gonorrhea test targeting the $1.5 billion CT/NG market with FDA approval expected by end-2025 and potential sales beginning in 2026, a $40 million buyback authorized over two years, and potential takeover interest. The company also made a $30 million Series B investment in KKR-backed Sapphiros and has $109 million in federal NOLs. Bull cases include the undervalued asset base, proven FDA approval track record for STD tests, substantial market opportunity for CT/NG testing, and option value from various investments. Bear cases and risks include excessive management compensation ($7 million annually for CEO), dependence on government funding (10% from academia, international HIV/HCV programs), potential disruption from current administration policies unfavorable to public health initiatives, and the company burning $50 million from $280 million to $230 million cash due to $20-25 million annual Sherlock development costs. The investment offers approximately 60% upside potential with limited downside given the asset backing.

Read the full article here. Read time: 9 min

Centene Corporation (CNC) experienced a devastating managed care reset in Q2 2025 when morbidity shocks drove the health benefits ratio to 93% versus 87.6% the prior year, causing management to slash EPS guidance to approximately $1.75 (with downside contingency of $1.25) and triggering a 40%+ stock decline. The crisis stemmed from simultaneous issues across both major business segments: ACA Marketplace risk adjustment created an $1.8B revenue shortfall with morbidity surging 16-17% year-over-year, while Medicaid costs were driven higher by behavioral health, home health, and GLP-1 drugs. Despite the operational turmoil, Centene maintains strong liquidity with $37.5B in cash and investments, $17.6B in debt with no maturities before 2028, operating cash flow of $1.8B, and a 400% regulatory capital ratio. The company faces significant policy risk from Trump's proposed Medicaid cuts that could impact 2-2.5M members (15% of the book) and reduce federal spending by $698B between 2026-2034, with CNC having the highest exposure at 65% revenue from Medicaid/Marketplace compared to peers. However, 88% of Centene's Medicaid book will be re-rated between July 2025 and January 2026, with ACA premiums already filed higher for 2026, suggesting the elevated HBR is temporary rather than permanent. The company carries $29B in goodwill/intangibles representing 35% of assets and faces optical risk from potential impairments, while benefiting from a dual platform that preserves membership as lives shift from Medicaid to Marketplace during redeterminations. Price targets range from a bear case of $35 (assuming EPS $3.50 in 2027 at 10x P/E), base case of $66 (EPS $5.50 at 12x P/E), to bull case of $98 (EPS $7.00 at 14x P/E), with present values of $27.9, $52.6, and $78.1 respectively at a 12% discount rate.

Read the full article here. Read time: 4 min

Novo Nordisk (NVO) operates in a weight loss drug duopoly alongside Eli Lilly but trades at approximately one-third the multiples of its competitor despite comparable fundamentals. The stock has fallen from DKK 1,000 to under DKK 400 over the past year after disappointing CagriSema trial results showed 23% weight loss versus the expected 25%, which triggered the CEO's departure and caused investor disappointment. A significant new trial for CagriSema is currently underway as the company works to rehabilitate the previously disappointing weight loss drug. While generic versions have gained some market share recently, the global market is still likely to be dominated by branded products as consumers trust known brands and major healthcare systems prescribe established brands to reduce risk. The market has not yet priced in the strong likelihood that Novo Nordisk and Eli Lilly will re-emerge as a genuine duopoly in the weight loss drug segment, and once recent worries fade, Novo Nordisk could reach comparable valuation to Eli Lilly, offering 50-100% upside potential from current levels.

Read the full article here. Read time: 2 min