Three New Additions to the Portfolio
The twin momentum system delivered 3 new names this month that cleared both the fundamental and price momentum screens simultaneously. Each carries the insider alignment that defines this portfolio at its best. We are adding Starz Entertainment Corp (STRZ), RideNow Group (RDNW), and Shimmick Corporation (SHIM). The write-ups below explain the thesis for each position in full.
Starz Entertainment Corp (STRZ) — New Addition
There is a version of this story that Wall Street tells badly. A streaming company with a net loss, a pile of debt, and declining linear subscribers spinning out of a larger conglomerate sounds like precisely the kind of situation sophisticated investors should avoid. The version of this story that actually matters is different. Starz Entertainment completed its separation from Lionsgate Studios on May 7, 2025, began trading as STRZ on the Nasdaq, and spent the first year of its independent existence demonstrating that the core business is substantially more durable and more profitable than its former parent structure allowed investors to see. Calendar 2026 is when the numbers start telling that story properly.
The company operates as a premium content destination with particular strength among women and underrepresented audiences, carrying franchise properties in the Outlander universe, the Power universe, and a growing library of owned originals.
That last point is the strategic pivot that changes the calculus entirely. Starz spent years as a licensing business, paying studios for the right to air their content and then watching that content generate value for someone else on the back end. The new strategy is ownership. When Starz owns the IP from inception, it controls the cost structure from day one, retains global monetization rights, and builds an asset base that compounds in value rather than depreciating with each expiring license.
The first wholly owned major original, Fightland, premieres July 31, 2026, produced in partnership with Sky as a co-commission partner. A second owned original, an untitled Black Rodeo family drama set inside the thriving world of the Black Rodeo circuit in Texas, has been greenlit with production beginning this fall. These are not yet the scale of franchise that anchors a streaming service long-term, but they are the first bricks in a wall that management is building deliberately. The company's stated target is 60% slate ownership by 2026, a threshold that fundamentally restructures the margin profile of the business.
The Q1 2026 numbers reflect a company in transition rather than a company in trouble, and understanding the distinction matters. Revenue was $306.9 million for the quarter, below the prior-year comparable which included the transition-era accounting, but adjusted OIBDA was $58 million and improving sequentially. Unlevered free cash flow was $81 million, a swing of $147 million versus the prior-year period. That is not a number produced by a failing business. The company also exited its Pay-2 agreement with Universal during the quarter, a library deal where the high subscriber overlap with Amazon meant the Starz audience was already watching the same titles elsewhere. Exiting an expensive agreement that was not generating incremental viewership is the kind of disciplined decision that management teams with real ownership make. Management with no skin in the game would have kept the deal to protect their content volume metrics.
On the insider alignment question, STRZ is an interesting case. Aggregate insider ownership sits at approximately 16.83%, which is not the dominant concentration seen in some of our other positions, but the composition of that ownership matters considerably. CEO Jeffrey Hirsch owns more than 400,000 shares directly including unvested RSUs and purchased an additional 10,000 shares in the open market on May 14, 2026, at $20.72 per share, the same week the Q1 earnings were released. CFO Scott MacDonald bought 17,180 shares on the same day. These are not obligatory RSU grants or mechanical compliance transactions. These are discretionary open-market purchases by the two people who know the business best, made in the same week they reported results to the public. Byron Allen, owner of Allen Media Group, acquired an 11% stake in March 2026 at a price of approximately $13.86 per share, paying $25 million for shares previously held by Steven Mnuchin. Allen is not a passive investor. He built one of the most significant independent media businesses in the country and he does not write $25 million checks on companies he does not believe will be worth considerably more.
The shareholder rights plan adopted in March 2026, designed to give management time to execute the transformation without being disrupted by opportunistic acquirers, signals that the board sees value ahead that the current share price does not yet reflect.
Full-year 2026 guidance calls for positive OTT revenue growth, low single-digit adjusted OIBDA expansion, and unlevered free cash flow of $80 to $120 million. Leverage is expected to exit the year near 2.7x. Management explicitly stated that 2027 is setting up as a significant year for margin expansion and improved free cash flow as restructuring benefits compound and owned originals begin contributing at scale. CEO Hirsch described 2026 as a financial inflection point. We are inclined to agree. The stock trades near $23, the 52-week range spans from $8.00 to a high above $22, and the momentum signal that brought it to our screen is grounded in a fundamental narrative that is just beginning to run. We buy here, sized modestly in recognition of the transition risk, and we watch the Fightland premiere and the owned content pipeline closely as our leading indicators.
RideNow Group, Inc. (RDNW) — New Addition
The powersports industry does not get many column inches in the financial press. That is generally an advantage for the investors paying attention. RideNow Group is the largest powersports retail group in the United States, operating 48 dealerships across 12 states and offering motorcycles, ATVs, side-by-side utility vehicles, personal watercraft, and snowmobiles from manufacturers including BRP, Polaris, Harley-Davidson, Yamaha, and Kawasaki. The company was formerly known as RumbleOn, Inc., changed its name to RideNow Group in August 2025, and simultaneously changed its ticker to RDNW. The name change was not cosmetic. It reflected the completion of a strategic transformation that shed the legacy vehicle transportation brokerage business, which was wound down and ceased in December 2025, leaving behind a pure-play powersports dealership operation.
Pure-play is an understatement. RideNow believes itself to be, and by the data appears to be, the single largest powersports retail group in the country. That scale matters in this business. The relationship with OEM suppliers, the access to floorplan financing, the ability to source pre-owned inventory through the proprietary RideNow Cash Offer platform, and the negotiating leverage with lenders all benefit from being the biggest buyer in the market. On May 18, 2026, the company announced the expansion of its Wells Fargo floorplan facility, adding $35 million in capacity and bringing total available credit to approximately $400 million. The additional $35 million includes $115 million dedicated to new vehicle inventory for Polaris, Indian, and Suzuki, plus a new $20 million allocation specifically for pre-owned vehicle inventory. Getting Wells Fargo to expand your credit line is an endorsement from a lender with full visibility into your operations.
The Q1 2026 results, reported May 14, were the kind of quarter that reminds you why the momentum signal fired. Powersports revenue grew 6.4% to $260.4 million versus the prior year. On a same-store basis, revenue grew 13.1%, driven by a 16.3% increase in unit sales. Gross profit was $71.6 million, up 8.3%. SG&A as a percentage of gross profit fell from 90.9% to 86.7%, the operating leverage beginning to manifest as the business scales. Net loss improved 55.7% to $4.3 million from $9.7 million in the prior year. Adjusted EBITDA was $9.3 million, up from $7.0 million. These numbers are all moving in the right direction at the same time, which is the pattern that the momentum screen is designed to catch.
The stock has delivered 231.8% in returns over the trailing year, running from a 52-week low of $1.46 to a recent high of $8.22. DA Davidson raised its price target to $9 from $6 following the Q1 report while maintaining a Neutral rating. The Neutral rating at a company generating 13% same-store sales growth and 55% year-over-year loss improvement is an interesting analytical position. We will let the business results argue for themselves.
Insider alignment here is the kind that wins over time. 3 major stockholders control 53.4% of the company's voting power. Aggregate insider ownership is approximately 34% of shares outstanding, with Mark Tkach holding 18% of common stock and William Coulter holding approximately 14%. These are not passive financial investors who bought into an index fund that happened to include RDNW. These are founders and substantial owners whose entire financial outcome is tied to the same thing yours is: whether RideNow Group executes. The CFO who joined in October 2025 received PSU awards with performance triggers at $11, $17, and $23 per share, requiring 20 consecutive trading days above each threshold. The management team has set its own compensation benchmarks well above where the stock currently trades. That is the definition of alignment. They do not get paid unless you get paid first.
The risks are real and worth naming plainly. Total debt is $218.8 million and the credit agreements require refinancing during 2026. The company has disclosed material weaknesses in internal controls that it is working to remediate. The powersports business is seasonal and sensitive to consumer discretionary spending, which is under pressure from the current rate environment. Related-party leases on 26 properties at $16.9 million of annual base rent represent a recurring connected-party obligation that bears monitoring. None of these are fatal concerns for a business growing same-store revenue at 13% and improving its EBITDA trajectory every quarter, but they are reasons to size this position with discipline and watch the balance sheet closely. The momentum screen got us here. The fundamental trajectory will determine how long we stay.
Shimmick Corporation (SHIM) — New Addition
The best infrastructure turnarounds follow a predictable pattern that most investors miss because they are watching the wrong numbers. A construction company comes out of a restructuring with legacy problem contracts bleeding cash, a backlog full of low-margin inherited work, and a balance sheet that reflects years of losses. The instinct is to wait for the bleeding to stop entirely before buying. By the time the bleeding stops, the stock has already moved. The game is to buy when the legacy damage is quantifiable and shrinking, the new work pipeline is composing itself at a different margin profile, and management has demonstrated the operational discipline to execute the transition. Shimmick Corporation is at exactly that point.
The company was separated from AECOM in 2023 and began life as an independent public entity with a portfolio that mixed high-quality strategic projects the new management team actually wanted with a collection of legacy noncore contracts inherited from the prior structure. Those noncore contracts included problem jobs in flood protection, lock replacement, and bridge work that generated massive losses through 2024. Full-year 2024 saw adjusted EBITDA of negative $61 million. That is the number that scared most investors away. The number they should have been looking at was the backlog composition and the book-to-burn trajectory, both of which were telling a completely different story.
By Q4 2025, adjusted EBITDA had swung to positive $4 million for the quarter and positive $5 million for the full year, a $66 million positive swing from the prior year. The full-year 2025 net loss was $15 million, an improvement from $81 million the prior year. The noncore project backlog, which had been the source of the hemorrhaging, was down to under 5% of the total backlog by the end of Q1 2026. When a construction company's problem projects represent less than 5% of its forward work, the problem projects are no longer the story.
The Q1 2026 results, released May 14 and 15, were the most important set of numbers this company has yet reported as a public entity. New awards booked during the quarter were $289 million, a sequential increase of $150 million from Q4 2025, and the book-to-burn ratio was 2.6, the highest achieved since the company went public. Total backlog ended the quarter at $944 million, up from $793 million at year-end 2025 and from $754 million at the end of Q3 2025. A backlog of $944 million against full-year 2026 revenue guidance of $550 to $600 million means the company enters the second half of 2026 with more than a year of work already in hand. Adjusted EBITDA for Q1 was $3 million, compared to negative $3 million in Q1 2025. Net loss improved 55% to $4 million. The trajectory is clear.
Management has guided 2026 full-year revenue of $550 to $600 million and adjusted EBITDA of $15 to $30 million, representing a 200% to 500% improvement over the 2025 baseline. The projects filling that backlog are concentrated in water infrastructure, electrical systems, climate resilience, and sustainable transportation, the exact sectors receiving the largest share of federal and state infrastructure investment in the current political and regulatory environment. The Santa Monica Pier rehabilitation and the Renton Transit Center project, announced in March 2026 at a combined value of approximately $78 million, are representative of the kind of complex, high-margin work that defines the Shimmick project portfolio. These are not commodity concrete pours. They are technically demanding, specialized engagements where Shimmick's operational expertise creates genuine competitive insulation.
The insider ownership at Shimmick is among the most concentrated in the small-cap universe, and it is not concentrated in the way that produces passive indifference. GOHO, LLC, the investment vehicle of Mitchell B. Goldsteen, owns 57.8% of the company, approximately 20.97 million shares with a current market value approaching $140 million. AECOM, the former parent, retains 18.5% of shares outstanding. Combined, those 2 entities control more than 76% of the company. Total insider ownership across all insiders is approximately 82.69%, which is the kind of concentration that makes institutional investors nervous and value investors interested. When a single decision-maker controls 57.8% of a company and that company enters a period of sustained fundamental improvement, the alignment of interests is essentially absolute. Goldsteen does not need the stock to move a little. He needs the business to compound, and he is holding enough shares that anything short of genuine operational success is a very expensive outcome for him personally.
The liquidity position, $34 million at quarter-end consisting of $15 million in cash and $19 million in credit availability, is the tightest element of the investment case and warrants honest acknowledgment. A construction company executing a backlog ramp requires working capital, and $34 million is not a wide margin for a business targeting $550 to $600 million in annual revenue. Management will need to manage cash cycles carefully as new projects ramp up their burn rates in the second and third quarters. The good news is that the backlog quality has never been better, the noncore bleed has essentially stopped, and every new contract being signed is Shimmick-originated work at margins the company controls from inception. This is a turnaround that has turned. The momentum screen found it at the right moment. We size conservatively in recognition of the liquidity constraint and watch the Q2 2026 results in August as our next inflection point.
The Flagship Report | May 2026 New Additions Supplement | Flagship Investment Research