YB new stock pitches (Wed, Oct 16)

WESCO International, Inc. (WCC) is a leading industrial distributor with significant pricing power due to its fragmented supplier and customer base. The company benefits from secular tailwinds in EV charging, solar energy, and data centers, with management targeting 5-8% sales growth and a 10% EBITDA margin. WCC's business model requires low capex, allowing for a $1 billion buyback program, with 4% of shares retired in H1 2024. The company offers a 17.5% forward return, comprising a 9.5% FCF yield, 4% organic growth, and 4% margin expansion. WCC's cash flow tends to be counter-cyclical during recessions due to inventory reduction. Management is focused on margin expansion through operational leverage, gross margin improvement, digital transformation, and acquisitions. The company's debt is split between fixed and variable rates, making it sensitive to interest rate changes. Key risks include rate sensitivity and acquisition integration challenges.

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MonotaRO Co., Ltd. (3064.T) is a leading B2B e-commerce platform in Japan's MRO market, offering 20 million items to over 8 million customers, with 95% of sales online. The company benefits from high barriers to entry due to scale advantages, advanced data analytics, and integrated purchasing management systems. MonotaRO's value proposition includes transparent pricing, same-day shipping for 500,000+ in-stock products, and the ONE SOURCE Lite service for large clients. Catalysts for growth include market share gains from inefficient competitors, increasing sales to existing customers through technological improvements, further penetration into enterprise customers, and expansion of higher-margin private label offerings. The company's attractive business fundamentals stem from a fragmented and inefficient market, high repeat order rates, and customer prioritization of reliability and convenience over price. Currently trading at a discount to estimated intrinsic value, MonotaRO presents a compelling investment opportunity with a three- to five-year horizon.

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NewtekOne, Inc. (NEWT) is trading at $13, representing a compelling long opportunity at <7x 2024 guided earnings of $1.95. As the largest player in the SBA lending market, NEWT benefits from the attractive 7(a) loan program, where 75% of loans are government-guaranteed and sold for an 11% gain-on-sale. The company's business model is misunderstood, with gain-on-sale earnings viewed as low quality despite their recurring nature. NEWT's core banking metrics show a 40%+ ROE, with a baseline 22.7% ROE expected to grow to 24-28%. Growth opportunities include 504 loans, a payments business, and an Alternative Lending Program. The company's net interest margin is improving, and funding is being optimized through deposit growth. Management projects a year-end NIM of 3-3.25%, up from 2.7% currently. With recent insider buying and potential for improved efficiency, NEWT is valued at a $20+ price target, representing 10x earnings. - link

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