YB new stock pitches (Fri, Nov 8)

Valero Energy Corporation (VLO) is a leading oil refiner diversifying into renewable energy, with strong financials, high free cash flow, and low debt. While 65% of its PP&E is in oil refining, the company is expanding into renewable diesel, ethanol, hydrogen, and carbon capture. Valero outperforms the S&P 500 long-term, despite oil price volatility. With a PE ratio of 11.5, it presents an attractive valuation. The company's core business remains oil refining, generating $136.4 billion in revenue compared to $3.8 billion from renewable diesel and $4.4 billion from ethanol. Valero's non-vertically integrated structure allows for higher margins but exposes it to oil supply risks. The company's process power in refining efficiency and its counter-positioning strategy of focusing on midstream and downstream operations contribute to its competitive edge. Risks include oil price volatility and reliance on external crude oil sources. Management is actively returning cash to shareholders through dividends and share buybacks while maintaining sufficient capital for operations and growth.

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Parsons Corporation (PSN) is a defense and infrastructure company with a 75-year history, specializing in cybersecurity, intelligence, and critical infrastructure protection. The company has successfully pivoted from lower-margin construction projects to higher-margin, high-growth areas, building a differentiated talent base in control, communications, computers, cyber, intelligence, surveillance, and reconnaissance spaces. Parsons is the leading player in the Middle East market, accounting for 20% of its revenues, with significant potential for infrastructure projects in Saudi Arabia, Qatar, and UAE. The company is well-positioned to capitalize on tailwinds in cybersecurity, artificial intelligence, and environmental remediation. Management has demonstrated strong execution in repositioning the business, complementing its legacy positions in missile defense and traditional federal services with a focus on high-end capabilities in the cyber domain.

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WillScot Mobile Mini (WSC) faces significant challenges following the failed McGrath acquisition. Utilization rates have dropped to concerning levels (62.1% for modular, 58.1% for storage), while CapEx has increased 10% YoY despite a 12% decrease in units on rent. The company's financial model is under pressure, with flat EBITDA, eroding free cash flow, and looming debt maturities ($525M in June 2025, $1.5B in June 2027). Competition from United Rentals threatens WSC's large project segment, and the Value-Added Products and Services (VAPS) growth opportunity appears overstated. The company's chronic underinvestment in its fleet has led to increased CapEx requirements, contradicting the 'optional CapEx' aspect of the bull thesis. Rising provisions for credit losses (18.2% of gross receivables) raise concerns about potential accounting issues. With its acquisition-driven model disrupted and fundamentals weakening, WSC's survival is questioned, given the industry's history of bankruptcies due to asset mismanagement.

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