YB new stock pitches (Wed, May 28)

Frontera Energy Corporation (FEC.TO) is a uniquely positioned small-cap energy company with dual operations: E&P producing 40k-42k BOE (90% oil) and infrastructure assets (35% pipeline stake in ODL and Puerto Bahia port) generating $120-130M in EBITDA. At $3.60 per share, the company has an EV of $490M versus a fair value estimate of $880M ($11.35/share). The infrastructure assets are valued at 4-5x EBITDA ($490M), while the E&P assets, despite limited 10-year reserve life and high water cuts, are conservatively valued at 2x EBITDA ($600M). With $210M in net debt, the equity is significantly undervalued. The company's top shareholders (Catalyst Capital and Gramercy, controlling 57.5%) are motivated to return capital, having launched a sales process for infrastructure assets that is now likely on hold due to crude price declines. Key risks include Colombian political issues under President Petro's leftist government (though a moderate government is expected in 2026), the revoked Guyana license where $200M was spent with no return, and crude price volatility. Catalysts include potential infrastructure asset sales, capital returns through premium self-tenders, and a new moderate Colombian government.

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Grocery Outlet (GO), a 425-unit Western-focused discount grocer, is poised to benefit from tariff-driven inflation pressuring mid/lower-end consumers. Currently trading at 5.8x EBITDA, GO is undervalued compared to peers like Kroger (8x), Sprouts (17x), and TJX/OLLI (15x). The company operates a unique Owner/Operator model where Independent Operators invest $350k while GO finances buildout and inventory, splitting gross profit. Unlike traditional grocers, 50% of GO's inventory comes from 'close out' purchases, similar to OLLI/TJX, making it less exposed to tariffs. GO's counter-cyclical business historically sees same-store sales increase when consumers face wallet pressure, as demonstrated during 2021/2022 and the Great Financial Crisis. The stock has underperformed due to a sloppy ERP implementation beginning in 2H 2023, which disrupted inventory forecasting and hurt traffic and margins for 18 months. Catalysts include pickup in inflation and operational improvement under respected CEO Jason Potter, who recently set a low bar by reducing medium-term unit growth guidance. With a price target of $40 (representing 3x upside) and recent insider buying, GO could re-rate to peer-level multiples of 15x EV/EBITDA.

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InMode Ltd. (INMD) is an Israeli medical aesthetic device manufacturer with a $918.4M market cap and $411.1M enterprise value, specializing in proprietary radiofrequency (RF) and electromagnetic technologies for minimally invasive and non-invasive treatments including skin tightening, fat reduction, body contouring, and women's health procedures. Despite generating a 24.5% ROE, the stock trades at just 6.4x P/E, or approximately 3x P/E when excluding its substantial net cash position. Management has demonstrated confidence in the company's value through an aggressive share buyback program that has retired roughly 30% of outstanding shares over the past two years with no indication of slowing down. The primary risk factor is that InMode's core invasive treatment technology faces growing competition from non-invasive alternatives, raising questions about the company's ability to adapt its technology stack or diversify within the evolving aesthetic treatment landscape, an area that requires further analysis.

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