YB new stock pitches (Fri, Mar 28)

Kohl's Corporation (KSS) presents an investment opportunity with its stock trading below liquidation value and a 50% short interest. New CEO Ashley Buchanan is focused on a customer-centric revival, simplifying operations and completing the Sephora rollout. Despite conservative FY25 guidance (EPS $0.10-$0.60, sales -5-7%), Kohl's has a strong free cash flow history, averaging $1B annually over the past decade. The company's real estate portfolio is valued between $4-8B, while its actual debt is only $1.8B, contrary to market perceptions. Kohl's faces no additional debt obligations until 2029 after refinancing July maturities. The intrinsic value ranges from $22 to $70 per share, based on real estate assets minus debt. Key catalysts include potential real estate monetization, improved operational efficiency, and possible buyer/activist investor interest once stability is achieved. However, investors should be cautious of retail challenges and allocate accordingly.

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Ondo InsurTech (ONDO.L) is an InsurTech leader in water leak prevention, trading at 6x 2025e ARR with a market cap of £45M. The company's Leakbot solution detects micro-leaks, offering significant ROI for insurers and improved customer retention. Ondo projects 70% YoY ARR growth to £7.5M in FY25, driven by U.S. expansion with partners like Nationwide and Liberty Mutual. The addressable market includes 13M homes, with potential for £240M ARR from just two partners. Ondo benefits from 80% gross margins and negative working capital. Key catalysts include U.S. market penetration, partnerships with top insurers, and potential expansion into fire prevention. Risks involve execution challenges, customer concentration, and potential dilution. The bull case suggests a 65% CAGR from 2025-27, with a potential valuation of £2.8B. Management targets operational breakeven by 2025, with strong cash generation potential.

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Solesence (NANX), a formulator of SPF makeup products, trades at 14x 2025e EPS and is poised for growth with sales expected to exceed $40M in 2024. The company's proprietary zinc oxide formula has driven rapid expansion since 2017, with Q3 gross margins reaching 36%. Solesence benefits from industry trends favoring mineral sunscreens and SPF makeup, as well as continued growth from its largest customer, Colorescience. Management projects double-digit growth in 2025, despite strong comps. An impending uplisting to a major exchange could serve as a catalyst, potentially leading to a 30x P/E multiple and 115% upside. Risks include customer concentration (Colorescience accounts for 34% of sales), potential tariffs on Chinese ingredients, and possible industry shifts away from zinc oxide. The company's strong market position and growth prospects are balanced against these risks, making it an attractive investment opportunity in the expanding SPF makeup market.

Read the full article here. Read time: 6 min