YB new stock pitches (Fri, Nov 22)

Cassava Sciences' ($SAVA) Alzheimer's drug simufilam is likely ineffective and impossible to work, making SAVA an attractive short opportunity with a price target of $2-3 per share based on cash value. The drug's poor pharmacokinetics, including weak brain penetration and a short 4-hour half-life, severely limit its potential efficacy. The proposed mechanism of action, inhibiting protein-protein interactions between filamin A and associated receptors, is implausible given the drug's small size. Clinical trials have shown ineffectiveness, with a controlled withdrawal study yielding a p-value of 0.45, indicating random results. Additionally, SAVA's Phase III trial is treating symptomatic patients, which is problematic given the 98% failure rate of recent Phase 3 Alzheimer's trials and the need for earlier intervention. These factors, combined with the challenging nature of Alzheimer's disease treatment, suggest that simufilam is highly unlikely to succeed.

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Mondelez International (MDLZ), a leading consumer staples company with a strong presence in chocolate and biscuits, is currently undervalued at 18x P/E, a 14% discount to its 5-year average. The company's Q3 results beat expectations, with volumes recovering and price increases stabilizing. Despite high cocoa prices, which have impacted margins, Mondelez maintains strong brand loyalty and market share gains. The company offers a 3% dividend yield with a 10% 5-year CAGR. Management reaffirmed FY24 guidance and expects 2025 revenue growth of 3-5%, excluding the chocolate segment. Cocoa prices remain a key concern for 2025, potentially leading to negative EPS growth, but are expected to normalize by 2026. With a $87 price target for 2026, Mondelez presents a potential 14-17% annual return, making it an attractive defensive investment opportunity in the consumer staples sector.

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Trinity Bank (TYBT) is a one-branch Texas bank with an impressive track record, having achieved a 9% book value CAGR and 17% EPS CAGR since 2003. The bank's success is attributed to its strong culture, focusing on efficiency (50% efficiency ratio), quality relationships, and low-risk lending. Despite a recent CEO change, the management team remains strong. TYBT currently trades at historically low price-to-book ratios, presenting a potential opportunity. The bull case suggests a 2% ROA and 20% ROE potential, while risks include potential culture changes and stock illiquidity. Investors can expect a 13-25% IRR based on various scenarios. The bank's conservative approach has allowed it to navigate challenging periods successfully, including the 2008 financial crisis and recent interest rate hikes. TYBT's loan portfolio consists primarily of commercial and industrial loans, supplemented by a securities portfolio of AAA-rated municipal bonds. The bank's focus on efficiency, quality relationships, and low-risk lending has resulted in consistently high ROA and ROE, outperforming local, state, and national peers.

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