YB new stock pitches (Thu, Dec 26)

Textron Inc. (TXT), based in Providence, Rhode Island, is a diversified manufacturer with four main segments: Textron Aviation, Bell, Textron Systems, and Industrial. The company holds a near-duopoly position in light and medium business jets, benefiting from increased demand for private air travel post-COVID-19. Textron's Bell segment is introducing new commercial helicopters and has secured a potentially $100 billion-plus, multi-decade contract with the U.S. Army to replace the UH-60 Black Hawk helicopter with its V-280 tiltrotor aircraft. The company's efficient operations and product development have driven market share gains across its segments. Textron's aviation segment produces Cessna business jets and Beechcraft turboprops, while its systems segment focuses on unmanned aircraft and other military equipment. The industrial segment manufactures specialized vehicles and auto parts. With a strong track record of operational improvements and increasing market share, Textron is well-positioned for future growth. Long-term, the company may consider merging its aerospace and defense core with a larger defense company.

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Public Service Enterprise Group (PSE&G), ticker PEG, is a hybrid utility company with regulated utilities and unregulated nuclear power operations. The company's regulated utilities provide consistent, steadily growing returns, while its unregulated nuclear subsidiary offers potential upside from increased power prices. PSE&G's nuclear plants produce carbon-free, reliable electricity, which commands a premium in the market. The company is currently in discussions for 20-year long data center sales contracts, similar to those recently announced by peer companies. These contracts are projected to provide a 20% or more upside to PSE&G's earnings over the next few years. The stock was purchased at an attractive price relative to its earning power and has been a strong contributor to the portfolio's performance over the past three months.

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Consensus Cloud Solutions (CCSI) is an undervalued SaaS company trading at 5.2x P/E with a 24% FCF yield. Despite a 45% drop since its spin-off from Ziff Davis, CCSI's Corporate segment (60% of revenue) is growing at a 9% CAGR, offsetting declines in the SoHo segment. The company boasts high margins (80% gross, 50% EBITDA) and negative working capital. Management is focused on deleveraging from 2.9x to 2.0x net debt/EBITDA by 2026. CCSI's cloud fax solutions cater to healthcare, legal, and government sectors, with the VA contract presenting growth potential. Risks include high leverage, potential disruption from larger competitors, and regulatory changes. The stock offers 70-100% upside potential through multiple re-rating, Corporate segment growth, and continued share buybacks. Management's capital allocation, including debt repurchases and a $100M share repurchase program, supports the investment thesis.

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