YB new stock pitches (Wed, Sep 30)

Aaon’s roughly 50% share-price decline creates an opportunity as data-center demand, repriced backlog and new capacity set up a multi-year earnings and margin recovery. Q2 BASX backlog was $1.43B, up 185.4% year over year, with total backlog of $1.97B; improved pricing should begin converting from backlog in 2H26 and support further margin gains into FY27. The Memphis facility, operating at 20% capacity as of Q2 and expected to ramp fully over three to five years, is the largest multi-term growth and margin catalyst, while Longview optimization could improve yields over two to three years. The $144 base-case target at 26.64x FY27 EV/adjusted EBITDA assumes a 200-basis-point gross-margin improvement by FY29. Scenario targets range from $82 if inflation outpaces pricing and gross margin falls 108 basis points, to $163 if gross margin improves 425 basis points. The central risk is continued gross-margin pressure from inflation, logistics costs and lower-priced legacy backlog, which could impair operating leverage and earnings progression.

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Autotrader is the dominant UK online marketplace for mostly used cars, with an estimated 75-80% market share, exceptional profitability and the largest buyback yield among the UK portal stocks reviewed, supported by a major committed repurchase program. AI-agent fears surrounding products such as Meta’s Muse have weighed on portal shares, while Autotrader’s P/E and EV/EBIT multiples are at absolute lows, around half their historical means. The disruption risk appears overblown in the near term because agents would still need access to current listings, company connections and transaction infrastructure, while incumbent platforms can restrict inventory access. Autotrader was initiated at a 1% portfolio weight within a 3% UK portal basket; the basket seeks 30-50% total upside including dividends over 15-18 months if some normalization occurs, with potential UK portal M&A an additional possibility. Risks remain substantial: the market may continue treating portals as AI losers regardless of fundamentals, and Amazon plans to enter the UK market in 2026, although its US automotive-marketplace results have so far appeared mixed.

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Verisk’s shares have nearly halved in just over a year even though its core business has changed little. The company is largely subscription-based and deeply integrated into critical insurance-industry workflows, making concerns about AI disruption less applicable. Estimate reductions have instead reflected a softer, cyclical pricing environment for insurers and calm weather in 2025 and early 2026, which reduced Verisk’s modest transaction-revenue mix because fewer storms generate fewer claims and less analytical work. These factors are viewed as transitory and insufficient to justify the full multiple compression. The stock sits two standard deviations below its 10-year mean, leaving meaningful upside if it recovers even one-quarter to one-third of that deviation through a normal course of events. Verisk could also be relatively defensive in a market selloff or against Moody’s if high rates continue to pressure bond issuance; the bar for a 25% return in a pair trade is considered modest. Still, past valuations in the high-30s P/E were excessive for a mature company, so any absolute mean-reversion case should remain conservative.

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