YB new stock pitches (Wed, Feb 5)

Thryv Holdings (THRY) presents a GoodCo/BadCo setup, with a fast-growing SaaS business (38% of revenue, 20%+ growth) hidden within a declining Yellow Pages segment. The company is transitioning to a pure SaaS model by 2028, with SaaS expected to become the primary business this year. Despite this transformation, THRY is significantly undervalued at 2.2x 2025E revenue, compared to peers trading at 12-15x. The SaaS segment offers business management software for SMBs, generating recurring, sticky revenue with 70%+ gross margins. Management projects $1bn in revenue by 2027 with 20% EBITDA margins, and $4bn by 2032. The stock's undervaluation is attributed to poor overall revenue screening and misclassification as a Communication Services company. A potential re-rating to 4x 2025E revenue could lead to a $38 price target, implying 100%+ upside. Key risks include recession impacts on SMB clients, potential value-destructive M&A, and SaaS growth slowdown post-Yellow Pages conversion.

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Société Générale (GLE.PA) presents an attractive investment opportunity, trading at 45% of tangible book value and 4.2x 2026 estimated EPS. New CEO Krupa is focusing on improving shareholder returns through divestitures, cost-cutting, and driving fee-related revenue. The company's online bank subsidiary, BoursoBank, shows significant growth potential. SocGen has reduced risk in trading businesses, leading to less volatile revenue streams, and has sold foreign banking subsidiaries to reduce complexity. The French retail bank unit is expected to improve due to accelerating loan growth, lower deposit rates, and insurance in-flows. Publicly listed subsidiaries account for 40% of SocGen's market capitalization, presenting potential divestiture opportunities. Management is expected to announce additional cost-cutting measures, raise ROE targets in 2025, and initiate share buybacks. The stock has underperformed the European bank index over the past three years (-4% vs +55%), suggesting potential for catch-up. This shift towards prioritizing shareholder returns could lead to a revaluation similar to recent trends observed in Japanese companies.

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Private credit CLOs are showing signs of increased risk, mirroring pre-GFC subprime conditions. The Cliffwater Corporate Lending Fund (CCLFX) demonstrates a significant rise in payment-in-kind (PIK) loans, from 0% in 2020 to 11.54% in 2024. This trend suggests a peak credit environment with high default risk. The ANTR 2018-3A CLO, for example, has 77.21% of its loans rated Caa3. An opportunity exists to short this market by purchasing credit default swaps on subordinated tranches rated investment grade, with potential spreads ranging from 0.5% to 2%. However, the lack of an established derivatives market for private credit CLOs and the complexity of negotiating ISDA agreements present challenges. The prevalence of PIK loans and covenant-lite structures in the current market echoes warnings from investors like Michael Burry and Howard Marks about pre-crisis conditions, indicating a potentially lucrative but risky short opportunity.

Read the full article here. Read time: 3 min