Tetra aiming to double revenue by 2030: Volpe

Key Concepts

• Tetra Technologies: Oil field service and industrial company transitioning to a chemical focus, with growth in battery electrolytes and water purification.
• Modine Manufacturing: Climate solutions provider specializing in thermal management for data centers.
• Selenino Therapeutics: Biotechnology company with a drug approved for Prader-Willi syndrome.
• Revenue Growth Targets: Specific financial projections for companies discussed.
• EBITDA Growth: Earnings before interest, taxes, depreciation, and amortization growth.
• Hyperscalers: Large cloud computing providers (e.g., Amazon, Microsoft, Google).
• Technological Moat: A company's competitive advantage derived from its technology.
• Active Management: Investment strategy involving direct selection of securities, as opposed to passive indexing.
• Prader-Willi Syndrome: A genetic disorder characterized by excessive eating.
• Vicet XR: Selenino Therapeutics' drug approved for Prader-Willi syndrome.
• Hyperphagia/Polyphagia: Insatiable hunger.

Tetra Technologies: Transition and Growth

David Vulpi, deputy chief investment officer and portfolio manager at Emerald Advisors, identifies Tetra Technologies as a top pick. The company, historically an oil field service provider, is undergoing a significant transition to become an industrial player. While still involved in oil field services, the majority of its future revenue is projected to come from two primary components:

• Electrolytes for Long-Duration Batteries: Tetra is supplying electrolytes to a major manufacturer of long-duration batteries, particularly those used in data centers. This segment is expected to experience "aggressive very very strong growth" starting next year.
• Water Purification for Oil Field Operations: The company is a leader in purifying water generated from oil field and fracking operations. This addresses a growing problem in Texas, where traditional saltwater disposal wells are prone to causing earthquakes. Tetra's purified water is being repurposed for irrigation for livestock and other land uses.

Financial Projections: Tetra Technologies has set a goal to double its revenues in the next 5 years and triple its EBITDA.

Modine Manufacturing: Data Center Thermal Management

Modine Manufacturing is highlighted for its role in climate solutions, specifically in thermal management for data centers. Vulpi emphasizes Modine's significant growth potential, stating that Emerald Advisors, as a "growth shop," seeks companies with "tremendous growth."

• Market Position: Modine is described as one of the leaders in providing cooling solutions for data centers, which generate "incredible heat."
• Revenue Growth: The company is projected to reach $2 billion in revenues by 2028, up from $644 million this year from its data center business. Modine has already raised its guidance twice this year, suggesting a strong likelihood of continued upward revisions.
• Competitive Advantage: Modine is a supplier to two of the top five hyperscalers and is expanding geographically. It possesses a "good technological moat."
• Demand Drivers: The increasing capital expenditure by hyperscalers continues to drive demand for cooling and thermal management solutions, a market where Modine is a leader.

Selenino Therapeutics: Active Management in Biotech

Selenino Therapeutics represents a shift in focus to the biotechnology sector, where Vulpi advocates for active management over indexing.

• Company Focus: Selenino Therapeutics is a biotechnology company with a drug approved earlier this year.
• Approved Drug: The drug, Vicet XR, is approved for Prader-Willi syndrome, a genetic disorder characterized by excessive overeating (hyperphagia/polyphagia). The condition significantly impacts lifespan, with affected individuals often living only into their mid-30s.
• Market Opportunity: Vicet XR faces "literally no competition" and is well-received by prescribers.
• Financial Performance and Projections:
  • First quarter revenues were $32 million.
  • Estimates for the current quarter were $48 million.
  • Vulpi anticipates revenues to exceed $72 million for the current quarter.
• Drug Profile: Vicet XR is noted for being "very very well tolerated" with a "good safety profile."
• Disease Context: While Vicet XR is specifically for Prader-Willi syndrome, hyperphagia can be an associated aspect of other conditions, such as diabetes. However, Selenino's primary focus and growth driver is Prader-Willi syndrome.

Conclusion

David Vulpi presents three distinct investment opportunities: Tetra Technologies, Modine Manufacturing, and Selenino Therapeutics. Tetra Technologies is positioned for significant revenue and EBITDA growth through its expansion into battery electrolytes and water purification. Modine Manufacturing is a leader in the critical and growing market of data center thermal management, with strong revenue growth projections. Selenino Therapeutics offers a compelling growth profile in the biotechnology sector with its well-tolerated and competitively advantaged drug for Prader-Willi syndrome, underscoring the value of active management in this space.