YB new stock pitches (Wed, Jan 22)

JAKKS Pacific (JAKK) is a toy company trading at <6x EPS with 25% of its market cap in net cash and a 15% FCF yield. The company has diversified from Disney with new deals (ABG, Sega, Nintendo), expanded internationally, and reduced seasonality. Management projects $7 EPS potential by 2026/27, supported by a strong movie lineup including Moana 2, Wicked, and Sonic 4. The company is poised for capital return, with a significant shareholder gaining board representation. JAKK has takeover potential, with previous bids from Meisheng Cultural, Jazwares, and Just Play. Risks include tariffs, box office dependence, and retail concentration (63% of revenue from Walmart, Target, and Amazon). The stock has a $40 price target based on 8x 2025E EPS. Q4 2024 earnings could surprise positively due to conservative estimates. Compared to peers, JAKK is deeply undervalued, trading at 3x estimated 2025 EBITDA versus Funko at 8.5x.

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Grayscale Ethereum Classic Trust (ETCG) is trading at a 43% discount to NAV, offering a potential opportunity for investors. Ethereum Classic (ETC) hashrate surged after Ethereum's transition to proof of stake in September 2022, but the ETC price has not yet caught up. Historically, hashrate and price have been correlated in proof of work cryptocurrencies, suggesting potential price appreciation for ETC. Catalysts for ETCG include ETC price rising to match hashrate, ETF approval, and conversion from a closed-end fund to an ETF. The current bullish crypto sentiment and the timing within the bitcoin halving cycle provide additional tailwinds. While ETCG's 2.5% management fee is a consideration, the significant discount to NAV offers a margin of safety. The investment is presented as a small asymmetric bet with high upside potential, suitable for a portion of a portfolio that an investor is willing to risk.

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Associated British Foods plc (ABF.L), a globally-diversified conglomerate with a $17.8 billion USD market cap, is trading at 10.6x NTM P/E, a decade-low multiple despite record results. The company's operations include Primark (55% of LTM operating profit), Grocery (25%), Sugar, and Ingredients, with 65% of profit generated outside the UK. ABF achieved a record £1.9B EBIT and has invested £1.1B in capex over 3 years, exceeding D&A for growth. Management has reduced share count by 5% while maintaining a 3.1% dividend and occasional special dividends. The market appears to misunderstand ABF as a UK grocer, overlooking its diversified global operations and strong financial performance. With substantial net cash, a strong working capital position, and continued growth investments, ABF presents an undervalued opportunity in a blue-chip conglomerate.

Read the full article here. Read time: 2 min