YB new stock pitches (Wed, May 20)

Modine Manufacturing Company (MOD) is recommended as a long position with a 5-year holding period, as RemainCo post-RMT spin-off represents the only public pure play on AI data center thermal management. The company's chillers business grew from $0 revenue in early 2025 to a $250-300M run-rate by Q4 fiscal 2026, with projections reaching $1B+ annualized revenue as production lines expand from 10 currently to an estimated 30 lines in approximately 2 years (double Street estimates for FY'27). This growth is driven by hyperscalers spending $250B more in CY'26, creating an incremental $4.5B data center thermal management market, of which Modine is positioned to capture over $1B annually due to competitors Vertiv and Schneider being distracted by other business segments. The company's $100M capex investment adds $1B in revenue capacity at over 150% incremental ROIC, with exceptional unit economics stemming from low customer price sensitivity (cooling represents 40% of data center OpEx) and geographic constraints on competition due to product size and customization. MOD's free air cooling chillers are necessary for modern AI data centers, transferring heat from rack-level Coolant Distribution Units while allowing facilities to recycle water at minimal cost. RemainCo trades below 8.0x NTM+1 EV/EBITDA compared to similar-quality peers like Vertiv, AXON, and nVent trading at approximately 25x NTM EBITDA, implying over 150% upside in the base case and potential 10x returns over 5 years at peer multiples. The primary catalyst is Q4 FY'26 results in mid-to-late May 2026, which should surprise Street estimates as the capacity ramp becomes evident, with the main risk being a slowdown in data center capex spending.

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Turning Point Brands (TPB), a legacy tobacco company transitioning to nicotine pouches through its ALP (50/50 JV with Tucker Carlson) and FRE brands, represents a high-margin, high-ROIC secular growth story currently masking its true free cash flow power due to front-loaded growth investments. The Modern Oral segment grew 266% in Q4 '25 and 133% in Q1 '26 to $52M, now comprising 42% of total sales versus just 12% in 2024, with management targeting 10% U.S. market share by 2030 ($1.5-2.5B in pouch sales versus $481M LTM total sales). The company is on-shoring a Louisville factory expected to qualify in H1 2027, which should push gross margins above 60%, EBITDA margins over 25%, and significantly improve FCF conversion through lower freight/duty costs, better logistics, and tariff avoidance. Currently trading at approximately $90/share with a $1.9B EV, the stock appears to trade at ~38x '26 FCF and ~17x '27 FCF on the surface, but when adjusting for ~$70-75M in contra-revenue (discounting, slotting fees, customer acquisition costs) and $80-105M in salesforce/marketing investments plus growth CapEx that depress near-term margins, shares trade at approximately 12x '27 FCF, which is too cheap for an asset-light business that at scale will produce 80% gross margins, 60% EBITDA margins, and 50% FCF margins rivaling software economics. Key catalysts include a new FDA commissioner (previous commissioner Marty Makary stepped down May 12th, removing a bottleneck), potential PMTA approval for ALP/FRE after nearly 6 years in review, and national/regional convenience store distribution deals (currently in 10,000 stores, up 10x from 1,000 in October 2025, but lacking presence at national chains like Casey's, 7Eleven, Circle K). Major risks include India tariffs until the 2027 facility ramp, Tucker Carlson key-man risk and his criticism of Trump potentially impacting FDA approval timing, potential FDA Marketing Denial Orders since ALP/FRE lack approval, margin deterioration from promotional discounting in a competitive market dominated by Zyn (60% share), On! (13-17%), Velo (7-10%), and Rogue (4%), state taxes on nicotine pouches, and a potential nationwide flavored pouch ban. The investor has an 8% allocation at $90/share, viewing this as a potential 7-10 bagger over 5 years with the bull case predicated on operating leverage as Modern Oral scales, manufacturing economics improve post-onshoring, and FCF generation becomes staggering in 2028 and beyond as the U.S. pouch market grows at an estimated 24.5-32.6% CAGR through 2033.

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indie Semiconductor (INDI) is a 2021 SPAC that manufactures chips for vehicles and presents a compelling short opportunity. Despite tripling revenue from 2020-2023, the company has never been profitable and saw barely any margin improvement. INDI carries $225 million in net debt and has not grown revenue in over 2 years. The company appears levered to European and Japanese automakers who are losing market share to China, despite management discussing AI, quantum computing, and humanoid robotics. The stock has nearly doubled off Iran war lows on no news while insiders have been selling throughout the past year. The thesis is that the market is blindly grouping INDI with AI winners when it is actually a losing bet on the struggling auto market, making it an attractive short candidate.

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