YB new stock pitches (Fri, Mar 14)

Finance of America Companies Inc. (NYS:FOA), with a market cap of $178 million and trading at $18.00 per share, is the leading reverse mortgage player with a 37% market share following its AAG acquisition in 2022. Despite rate volatility, FOA grew reverse mortgage originations by 19% year-over-year to $1.9 billion in 2024. The company trades at 0.57x P/B, a discount despite positive adjusted net income, cost reductions, and product innovation. FOA stands to benefit from demographic tailwinds, with 10,000 baby boomers retiring daily and $14 trillion in home equity available. The reverse mortgage industry is now better regulated, and regulatory complexity deters smaller players while reputation risk keeps larger players away. Although FOA is sensitive to higher rates and home values, the potential upside as rates fall is considered significant and worth the risk. The stock was initially added to the watchlist based on a recommendation from Twitter user @SFarringtonBKC.

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Amentum Holdings (AMTM), a recent spinoff from Jacobs, is trading at $17, down from $30 post-spin, making it the cheapest in its peer group at <10x FY25 FCF and the lowest FY25 EV/EBITDA. The company has diversified defense and space contracts with a 7.8% EBITDA margin, the lowest among peers. AMTM is highly leveraged at 4x, but management plans to reduce this using strong FCF. CEO Steven Demetriou recently purchased $2M in shares, signaling confidence. A BofA secondary offering at $16.50 is creating selling pressure. The stock's underperformance is partly due to concerns about defense spending cuts, though AMTM's diversified portfolio may provide some insulation. Management aims to expand margins to 8-9% in coming years. The potential catalyst is deleveraging, which could boost equity value by 50% if $1B in debt is paid down over two years while maintaining firm value.

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NextVision Stabilized Systems (NXSN.TA), an Israeli drone camera maker, has experienced a 96% CAGR since its 2021 IPO, with a focus on defense and 72% margins. The company has generated over $100M in operating cash flow and trades at 18.5x 2025E EPS. Strong tailwinds include global rearmament and the shift towards autonomous aircraft. NXSN sells to 40+ countries and is a technology leader in miniaturized EO/IR cameras. The company's products are platform-agnostic and can be used on various unmanned vehicles. NXSN's competitive advantage lies in its low SWaP2 (Size, Weight, Power, and Price) technology and strong customer relationships. The company is likely to beat its $160M 2025 revenue guidance based on current order pacing. Despite faster growth and higher margins, NXSN trades at a discount to comparable companies, suggesting it may be undervalued.

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