Investment Pitches

Pitch Summary:
CTT has made additional progress on many fronts this year. In May, it announced solid 1Q results well ahead of expectations and raised its full-year guidance. 1Q EBITDA was €40 million, and full-year guidance, which appears conservative, implies EBITDA of €140 million. Again, this EBITDA compares to a roughly €500 million market cap, and enterprise value, adjusting for the bank and real estate, of close to zero. Also in May, CTT formalized its real estate monetization plan, entering into a series of agreements to sell assets. It started by announcing a €40 million-plus asset sale at valuations in line with my estimates for the portfolio (€200 million). In June, CTT announced the resumption of its share buyback program. CTT has been buying back approximately 10% of the daily trading volume in its stock, every day, since then. The company has also seen recent insider buying. And just this week, it announced another solid earnings report in which it announced that first half EBITDA came in at €80 million and first half free cash flow was approximately €50 million. Yes, this company is trading at around a 10% free cash flow yield on just first half results! And that is despite having almost all of its market cap covered by its real estate and bank holdings. CTT is making progress executing on its operating and capital allocation plans, yet the market seems to be snoozing. Ongoing buybacks, the closing of the first real estate transaction, and continued operating improvements are all potential catalysts for the stock in the second half of the year.

BSD Analysis:
The manager presents CTT as a compelling sum-of-the-parts opportunity with multiple value catalysts. The Portuguese postal monopoly trades at approximately €500 million market cap while generating €140 million annual EBITDA guidance, with the manager noting enterprise value approaches zero after adjusting for bank and real estate holdings. Key catalysts include real estate monetization (€40+ million asset sale confirming €200 million portfolio value), aggressive share buybacks at 10% of daily volume, and insider buying activity. The company generates a 10% free cash flow yield on first-half results alone, while the bank and real estate assets essentially cover the entire market capitalization. Management's capital allocation strategy includes systematic buybacks, asset monetization, and operational improvements, creating multiple paths to value realization despite current market neglect.

Pitch Summary:
Clarus is an example of a situation in which I believe the market is incorrectly extrapolating recent challenging results far into the future. While perhaps not exactly trading at "trough on trough," the current approximate 7x EBITDA multiple on depressed earnings (in at least two of its three segments) puts it close. Black Diamond Equipment, Clarus' largest segment, may only generate $10-15 million of EBITDA this year, as the US wholesale market is soft (REI and its peers entered the year with too much inventory), but I believe its normalized earnings power is in the 10-16% EBITDA margin range on $250 million of normalized sales, or $25-40 million of normalized EBITDA. I believe Clarus remains a highly asymmetric stock. Downside is perhaps around $7/sh, while upside could be to well over $20/sh over the next few years. I think you really have to make punitive assumptions to get to the current stock price, while reasonable assumptions about the value of the business yields upside of 50-100%+. Private market value, which I believe is a solid benchmark for valuation, is probably twice where the stock is trading. I think Clarus' bullet business is worth $200-300 million. Rhino Rack and the overlanding businesses could be worth over $200 million. And Black Diamond is probably worth somewhere in the range of $250-$500 million. This gets us $600 million on the low end and $1 billion on the upper end, or $13 to $24 per share.

BSD Analysis:
The manager views Clarus as a classic contrarian opportunity where the market is over-extrapolating temporary headwinds. The thesis centers on cyclical depression in outdoor retail, with REI and peers carrying excess inventory, temporarily suppressing Black Diamond's performance. The manager projects normalized EBITDA margins of 10-16% on $250 million sales for Black Diamond, significantly above current depressed levels. Using sum-of-the-parts analysis, the manager values the bullet business at $200-300 million, Rhino Rack/overlanding at $200+ million, and Black Diamond at $250-500 million, yielding $13-24 per share versus current trading levels. The asymmetric risk-reward profile shows limited downside around $7 per share but substantial upside potential exceeding $20 per share, representing 50-100%+ returns.

Pitch Summary:
Cadre Holdings, which we purchased just under two years ago at its IPO, has continued to execute well. The business' "mission critical products with recurring demand characteristics" set the backdrop for the company to maintain a favorable price/cost spread; margins have expanded and should continue to do so. Cadre rhymes a bit with APG in that I think it can quietly generate exceptional returns as it steadily grows, expands margins, and executes accretive acquisitions.

BSD Analysis:
The manager expresses confidence in Cadre Holdings' execution since its IPO investment approximately two years ago. The investment thesis is built around the company's mission-critical products serving first responders, which creates recurring demand characteristics and pricing power. The manager highlights expanding margins and expects continued margin expansion due to favorable price/cost dynamics. The comparison to APi Group suggests expectations for steady, compounding returns through organic growth, margin expansion, and strategic acquisitions. The "mission critical" nature of body armor and protective equipment provides defensive characteristics and recurring revenue streams from government and institutional customers.

Pitch Summary:
APG has quietly quadrupled since our first purchase in April 2020, and doubled since we added to the position in September 2022, when we brought it into our top five positions. It has executed exceptionally well, demonstrating the quality of its business through Covid and since. Obviously, my mistake has been to have this position sized too small over our holding period. That said, I believe it can double again over the next few years. By 2026, with EBITDA at over $1 billion, a 15x multiple would take the enterprise value north of $15 billion and the market cap to around $13 billion, or about $55 per share.

BSD Analysis:
The manager maintains a strong bullish stance on APi Group, highlighting exceptional execution through challenging periods including COVID-19. The investment thesis centers on continued operational excellence and growth trajectory, with the manager projecting EBITDA to exceed $1 billion by 2026. At a 15x EBITDA multiple, this translates to a $55 per share target price, representing potential for the stock to double again. The manager acknowledges undersizing this position as a mistake, given the stock's quadruple performance since initial purchase in April 2020 and doubling since adding to the position in September 2022. The pitch emphasizes the quality and resilience of APi Group's diversified services business model.

Pitch Summary:
The Fund's Q1'23 letter outlined my reasoning for reinitiating a core position in LMB, a HVAC–focused specialty contractor. The company has historically sold most of its work through general contractors but has been transitioning towards building owners. I continue to be impressed by the new CEO's vision for the existing business and future M&A opportunity. LMB has a net cash balance sheet and is currently benefiting from a strong demand environment, allowing it to be even more selective with new engagements (higher quality, higher margin projects). It is using this environment to be long-term greedy by developing and strengthening its relationships with the types of customers who most highly value LMB's expertise–operators of mission-critical infrastructure. I expect LMB to continue expanding margins meaningfully over the next few years, while deploying its FCF into highly accretive M&A.

BSD Analysis:
The manager presents a transformation story for Limbach, highlighting the strategic shift from general contractor relationships to direct building owner partnerships under new leadership. The investment thesis centers on LMB's transition to higher-margin, higher-quality projects by focusing on mission-critical infrastructure operators who value specialized HVAC expertise. The company's net cash balance sheet provides financial flexibility during a strong demand environment, allowing selective project acceptance and strategic positioning for long-term relationships. The manager expects significant margin expansion as the business model evolution takes hold, combined with accretive M&A opportunities funded by growing free cash flow. This represents a classic operational turnaround story with new management driving strategic repositioning toward more profitable customer segments and industry consolidation opportunities.

Pitch Summary:
As a leader in the alternative asset management space, KKR has seen tremendous growth in AUM from just shy of $200 billion when I first highlighted the company in the Fund's Q2'19 letter, to over $500 billion today. Additionally, dry powder has grown from $60 billion back then to over $100 billion currently. Importantly, many of KKR's businesses remain subscale relative to their potential, including real estate, infrastructure, credit, Asia, and democratized products for high-net-worth individuals. Within a reasonable period, I believe KKR's AUM can still grow several multiples relative to its current levels. Currently, KKR's realizations have slowed, meaning that performance and investment income have declined significantly, and there is very little visibility on when they may come back. However, these earnings are simply deferred rather than lost.

BSD Analysis:
The manager maintains a long-term bullish view on KKR despite near-term earnings headwinds from slowed realizations. The investment thesis centers on KKR's dramatic scale expansion, with AUM growing from under $200 billion to over $500 billion since 2019, while dry powder doubled to $100 billion. The manager identifies significant runway for continued growth across multiple subscale business lines including real estate, infrastructure, credit, Asia, and wealth management products. The key insight is that current depressed performance fees represent deferred rather than lost earnings, creating a temporary valuation discount. KKR's market leadership position in alternative assets and multiple avenues for AUM growth support the manager's conviction that assets under management can grow several multiples from current levels. This represents a classic cyclical play on alternative asset management with secular growth tailwinds.

Pitch Summary:
As a global leader in the flex office market, IWG is transitioning towards a capital-light business model, which I discussed in the Fund's Q3'22 letter. Despite the negative perceptions associated with the office market, IWG stands to benefit from high office vacancies, as landlords are pushed to explore capital-light managed partnerships with IWG. Recently, a large UK-based investment firm turned into a forced seller of its holdings when its founder was accused of sexual assault. Following the accusations, several of the fund's counterparties terminated their relationships while redemption requests from investors accelerated. The fund owned a significant position in IWG that would have likely taken it many months to liquidate in the open market. Over the last few weeks, a UK-based trading house put together some block trades to help clean up this forced seller. I believe that the near-term pressure associated with this has been alleviated.

BSD Analysis:
The manager presents a contrarian bull case for IWG, arguing that negative office market sentiment creates opportunity for the flexible workspace leader. The key thesis involves IWG's transition to a capital-light managed partnership model, where high office vacancies actually benefit the company as landlords seek flexible solutions. Recent selling pressure from a forced seller due to unrelated scandal created a temporary buying opportunity, which the manager believes has now been alleviated through block trades. The investment relies on IWG's market leadership position and the structural shift toward flexible work arrangements, despite broader office market headwinds. The manager sees value in the misunderstood business model transformation and expects a potential US re-listing to unlock valuation. This represents a classic contrarian play where negative sentiment masks underlying business model improvements.

Pitch Summary:
DNTL, the largest dental practice operator in Canada, with over 500 practices, continues to remain a stable, growing, and cash-generative business, as I explained in the Q1'23 letter. The company's strategic review process ended without a sale, which led to a drop in the share price. This presented an excellent opportunity for us to significantly increase the Fund's position. DNTL has margin upside, as well as a long reinvestment runway where it can redeploy its free cash flow into practice acquisitions at attractive returns.

BSD Analysis:
The manager maintains a bullish stance on dentalcorp following a strategic review that concluded without a sale, creating a buying opportunity as the stock declined. The investment thesis rests on DNTL's market-leading position as Canada's largest dental practice operator with over 500 locations, providing defensive healthcare services with recurring patient relationships. The business model generates stable cash flows that can be reinvested into accretive practice acquisitions, creating a long runway for growth. The manager views the failed sale process as temporary noise that created an attractive entry point to increase the position size. With margin expansion opportunities and a fragmented acquisition landscape, DNTL offers both defensive characteristics through essential healthcare services and growth potential through continued consolidation of the Canadian dental market.

Pitch Summary:
As outlined in the Fund's Q4'21 letter, BFIT is the largest low-cost gym operator in Europe, with approximately 1,300 locations and four million members. After experiencing significant member attrition during COVID, the company's mature locations are finally expected to surpass pre-COVID membership levels and profitability this year. Having nearly tripled its location count over the prior six years, BFIT plans to continue growing locations by 15%+ for the foreseeable future. Given the robust unit economics and rapid paybacks, the company is well-positioned to internally fund this growth and eventually return capital to shareholders, as well. Since new locations are unprofitable until they ramp, the company's reported profitability significantly understates its steady-state earnings power. This discrepancy should gradually decline as more locations mature, allowing free cash flow to significantly outpace location growth in the coming years. Nearly all the company's revenues are driven by recurring monthly membership fees. Better yet, low-cost gyms have historically demonstrated resilience during economic downturns as people trade down from high-cost options. Additionally, many small private European gym operators, still financially unstable post-COVID, lack access to capital markets like BFIT. Therefore, in the event of a severe recession, BFIT stands to gain from reduced competition, leading to accelerated membership growth, more attractive new locations, and more favorable lease terms. The company's CEO, who holds a 15% stake in the company, was a cofounder of HealthCity in 1984, which eventually acquired BFIT in 2013. He is an excellent operator who is highly aligned with us.

BSD Analysis:
The manager presents a compelling bull case for Basic-Fit based on post-COVID recovery and structural growth opportunities. The thesis centers on BFIT's dominant market position in European low-cost fitness, with 1,300 locations serving 4 million members through recurring subscription revenue. The key insight is that rapid expansion masks underlying profitability, as new locations dilute reported earnings until they mature. With 15%+ annual location growth planned and strong unit economics, the manager expects free cash flow to significantly outpace expansion as the portfolio matures. The defensive characteristics are particularly attractive - low-cost gyms benefit from trading down during recessions while financially weak competitors exit the market. Management alignment through 15% CEO ownership and proven operational track record since 1984 adds confidence to the investment thesis.

Pitch Summary:
One investment where I've been a patient long term holder over much of the past 5 years has been NVR. NVR is one of the largest homebuilders in the US, operating in over 30 markets. There are several attributes that are underappreciated about NVR. First and foremost, it's not your normal land-owning homebuilder: NVR options their land which leads to outsized returns and less risk by having less capital tied up in land. Many homebuilders cite the positives of owning land such as more control over the entire building process and higher margins. NVR mitigates the lack of control inherent in their option strategy by working extremely closely with local land developers. These partners appreciate NVR's trustworthiness, pristine balance sheet and quick turnarounds. As one developer tells me, "They do what they say they'll do and they honor their commitments to buy a set number of lots." While owning land may lead to higher margins during most economic times, it takes up much capital and is incredibly illiquid. It's also likely worth much less during tougher economic times…exactly when you might want to have more cash on hand. NVR is so focused on not owning the land that they even refuse to own the model homes for each community – instead, they'd rather free up the capital and pay an above market rent to a local resident who's willing to own it. The model homeowner also may receive the benefit of that home's price rising as NVR further builds out the community, creating a win-win for all parties. Another underappreciated advantage is having a dominating presence in select markets. NVR has a huge share (>20% in largest markets) in some of its largest markets which leads to local economies of scale. Through their market share concentration, vertical integration, and tight SG&A control, NVR is often the low-cost producer in their markets. In NVR's case, the most often cited advantage they possess is not owning their land. This seems like a simple and easy to replicate advantage. However, it's hard for larger homebuilders to clone when a part of their culture and profitability is tied to land ownership. A new company can organize this way but will not only struggle to access capital, they'll face NVR's less visible moats, such as its network of partners who can help with issues like local permitting. Of course, NVR's success is much more than any one factor and is due to doing several little things well. For example, their excellent balance sheet and long-term approach allow NVR to keep investing and opportunistically enter new markets during more difficult economic environments. NVR's returns on incremental capital have been fantastic. Over multi-year time periods, they have averaged well north of 30%...not surprising, given that the business requires little capital and turns its inventory so quickly (4-5x per year). NVR also scores well on Buffett's retained earnings test. Since 2010, its market cap has grown greater than $16B while retained earnings have grown ~$400M. This indicates that the earnings reinvested in the business are creating significant value for shareholders. Not surprisingly, this has shown through in the stock's return over the last 10 years with NVR rising >6x or ~21% CAGR. I remain confident that over long periods of time NVR will remain well run and continue to gain market share. It's not hard for me to pencil out a mid-teens IRR from today's prices. While the housing market seems to be under-supplied, anything can happen in the short term with the economy and housing market. I consider position-sizing more so with NVR than other companies, and it's an investment that is less likely to be Right Tail's largest position after a longer period of company fundamental and stock price outperformance.

BSD Analysis:
The manager presents a compelling bull case for NVR based on its unique asset-light business model that options land rather than owning it outright. This strategy provides superior capital efficiency and risk management compared to traditional homebuilders, generating returns on incremental capital exceeding 30% and inventory turns of 4-5x annually. NVR's dominant market share (>20%) in select markets creates local economies of scale and positions the company as a low-cost producer through vertical integration and tight cost controls. The manager emphasizes NVR's competitive moats extend beyond the land optioning model to include strong developer relationships, pristine balance sheet, and local permitting expertise that would be difficult for competitors to replicate. Historical performance validates the thesis, with NVR delivering 21% CAGR over the past decade while growing market cap by $16B on only $400M of retained earnings. The manager projects mid-teens IRRs from current levels and expects continued market share gains, though acknowledges cyclical housing risks and suggests position sizing considerations. The investment exemplifies the fund's patient, long-term approach to owning high-quality businesses with sustainable competitive advantages.

Pitch Summary:
We purchased our first shares of Chevron in March of 2020 at ~$76 per share. We doubled down seven months later in October at ~$73 per share. We exited in May of 2023 at a price of ~$150 per share. We also received 22% of our cost basis back in dividends during our ownership. Our total return was ~+127% over 3 years (+31% annualized). The story of buying Chevron was simple capital cycle theory. It's easy to forget, but four of the top ten largest companies in the world in 2010 were oil companies. Around that time, the oil industry had been pouring a ton of money into capital expenditures. This led to an eventual supply glut. Oil prices dropped. The heat of competition evaporated the pool of industry earnings. ESG concerns exacerbated energy industry woes. The term "uninvestable" was applied, which always causes my ears to perk up. In a sign of capitulation, on August 31st, 2020, Exxon Mobil was removed from the Dow Jones Industrial Index (after 92 years) and replaced with Salesforce. Covid was the final straw. A shut down world uses a lot less fuel. US crude finished April 20th, 2020, at -$37 a barrel. It was rumored enterprising individuals were being paid to fill up their swimming pools with oil. This is what peak pessimism looks like. I just had to get comfortable that oil and gas weren't going away permanently. That the industry faced a cyclical problem, not a secular one. I knew from simple physics how hydrocarbons support our entire modern world. We wouldn't have transportation, electricity, food, plastics, chemical feedstocks, fertilizer, etc. Unless humanity accepted going back to lifestyles of the 1700s, we weren't getting off hydrocarbons any time soon. I just needed the fortitude to buy, and trust in reversion to the mean. We bought Chevron in the darkest days of Covid. I looked back at the numbers in 2008 when oil prices were high and the company was humming with healthy cash flow. It was an attractive business in those salad days. Could it return to form? We bought more later in 2020. I was already concerned about inflation and interest rates rising. There were likely unintended consequences of all the global government stimulus. I saw the oil companies as potentially cheap hedges. Buying below book value when oil prices were depressed, we were betting that oil would normalize and Chevron would be making a reasonable profit again. As Baron Rothschild summarized a lifetime of market experience: "Buy assets; sell earnings." And sure enough, Chevron saw a dramatic improvement in the business. Revenues bottomed at $16 billion in Q2 2020. They grew to $65 billion two years later. Profits followed suit. Chevron made $42 billion in 2022, eclipsing 2008's $35 billion. The fundamentals came back faster than I would have predicted. As oil prices recovered and the share price of Chevron increased, my thesis was forced to shift from "this company will benefit from reversion to the mean of oil prices" to "this company has well run operations and intelligent capital allocation." I didn't feel like I was going out on a limb betting that oil prices should probably be positive. But I don't have much of a view on today's oil prices in the $70s. Your guess is as good as mine where we go from here. Chevron's operations are still quite strong. But unfortunately, they failed the capital allocation test for me. In May of 2023, I reviewed the results of Chevron's buyback program over the last eight quarters. I noticed the company had reduced shares outstanding by 34 million, but had also issued $5.3 billion in stock based compensation to employees and management. My rough math was that $14 billion had gone out the door to retire 34 million cumulative shares. That equates to $421 per share. Compare that to the average stock price over that time of $142 per share. This is poor stewardship of the outstanding claim tickets representing ownership in our company. Management was getting over on shareholders, hardly an uncommon occurrence in Corporate America. An uncomfortable amount of the economics were leaking from the owners to management. We exited in late May 2023.

BSD Analysis:
The manager executed a classic contrarian value play in Chevron, purchasing shares during peak pessimism in March 2020 when oil traded at negative prices and the energy sector was deemed "uninvestable." The thesis was grounded in capital cycle theory - recognizing that excessive industry capex had created oversupply, but that cyclical downturns eventually reverse. The manager's conviction was based on the fundamental reality that hydrocarbons remain essential to modern civilization, making the downturn cyclical rather than secular. Buying below book value during depressed oil prices, the position generated exceptional returns of 127% over three years plus 22% in dividends. However, the manager demonstrated disciplined selling when capital allocation deteriorated, specifically noting that share buybacks at $421 per share versus average trading prices of $142 represented poor stewardship. The exit decision, despite strong operational performance, reflects sophisticated understanding that management behavior matters as much as business fundamentals. This case study exemplifies patient contrarian investing combined with rigorous capital allocation standards.

Pitch Summary:
Spark is a global purveyor of dating apps. They own niche brands like J-Date, Silver Singles, and Christian Mingle. The company surfaced on our radar after a friend who runs a small cap activist fund brought it to our attention. Our first purchase was February 2021 at a price of $7.45. We bought more in July and August of 2021, and again in June of 2022. We sold our last shares in March of 2023 at a price of $0.80, a disastrous outcome. The initial thesis was simple enough: Spark would be acquired by one of their bigger competitors. At that time, Spark represented 7% of the revenue and 3% of the profits of the entire dating app industry. Their market cap was just 0.5% of that total. Not a bad setup. We were betting that Spark's fundamentals would hold out, or even improve, and they'd be purchased at a premium. We've had previous winners which rhymed with LOV. Unfortunately, the company's revenue continued to decline, profitability was intermittent, and management churned. Little surprise, the stock price mirrored the decaying business prospects. We bought our last shares in June of 2022 as the drumbeat for a sale increased. A prime example of Mr. Buffett's observation that good businesses throw off easy decisions for owners, while bad ones present conundrums. By March of 2023, I'd called it quits. The prospects of Spark haven't improved. The newest CEO recently resigned. Since we sold, the stock is down another -70% as this letter goes to print. It might be a grand slam from here, if the right buyer came along. But this cat who sat on the hot stove likely won't be sitting on that cold stove either.

BSD Analysis:
The manager's thesis on Spark Networks was based on acquisition potential, given the company's small market cap (0.5% of industry total) despite representing 7% of industry revenue and 3% of profits. This created an apparent value disconnect that suggested takeover appeal. However, the investment became a cautionary tale of deteriorating fundamentals undermining the acquisition thesis. Revenue declined consistently, profitability became sporadic, and management turnover created additional instability. The manager's decision to average down multiple times reflected conviction in the acquisition scenario, but ultimately demonstrated the risks of betting on external catalysts when underlying business quality is poor. The position was eventually liquidated at an 89% loss when it became clear the business deterioration made acquisition unlikely. This case study illustrates the importance of fundamental business quality over purely statistical cheapness. The manager's disciplined exit, despite the painful loss, shows proper risk management when an investment thesis breaks down.

Pitch Summary:
During the quarter I built a position in Distribution Solutions Group ("DSGR") ahead of their rights offering. In addition to exercising our basic subscription rights I put in for over-subscription and was pleasantly surprised to receive additional shares. DSGR is a specialty distribution platform formed when Lawson Products combined with two privately held entities, Gexpro Services and TestEquity in early 2022. Lawson is a North American industrial MRO distributor serving 80k customers across a range of industries including manufacturing, automotive, government/military, and construction. Lawson maintains cabinets at the customer location that they frequently restock with a myriad of low-ASP products. This allows their customer to reduce downtime and streamline product management. Gexpro is a global specialty distributor of highly specified products serving manufacturers in various markets including renewables, power generation, aerospace/defense, and consumer/industrial. Lastly TestEquity is a global distributor of electronic production supplies and test and measurement solutions into aerospace/defense, industrial electronics, semiconductor production, and wireless communication. In aggregate these can be described as low churn, highly recurring business models. While DSGR is organized as a platform company with the three entities retaining prior leadership, they have a strong a focus on leveraging the benefits of the three entities. This includes things like corporate synergies in IT and insurance, leadership incentives for cross-selling, and enhanced go to market strategies. Since they closed the merger, DSGR has grown revenue organically at a mid-teens rate and consolidated EBITDA margins have expanded nicely. Importantly, DSGR has a fully built-out M&A team with a disciplined investment framework around risk and returns and a developed pipeline. Management is fully aligned with shareholders as they own 10% of the company, while the former owner of Gexpro and TestEquity, Luther King Capital Management ("LKCM") owns another 65%. LKCM has significant experience investing in distribution companies and brings financial expertise to the table. In March of this year DSGR announced that they would acquire Hisco and merge it with TestEquity. Hisco is a mission-critical distributor that serves electronic assembly, aerospace/defense, medical and other industrial customers with things like adhesives/sealants/tapes, soldering, and cleaning supplies. While Hisco's product mix differs from TestEquity, there is alignment on the industries they serve and their supplier base. This should enhance their customer value proposition and provide for cross-selling opportunities. Operationally the two companies have meaningful overlap and there is the opportunity for consolidation. Furthermore, Hisco's Mexican footprint will benefit TestEquity in supporting nearshoring trends. DSGR made this acquisition at a stated EBITDA multiple of just 9.4x with the potential to bring it down to mid-7x when accounting for synergies. It was funded it with debt as well as cash raised from the aforementioned rights offering. LKCM exercised their subscription rights and put in for over-subscription as well. DSGR is currently trading around 9x pro forma EBITDA. This seems like a reasonable valuation for a company with a strong management team and board of director's executing a thoughtful acquisition plan in a fragmented industry.

BSD Analysis:
The manager presents DSGR as an attractive specialty distribution platform benefiting from strong recurring revenue characteristics and disciplined M&A execution. The company combines three complementary businesses serving industrial MRO, electronic components, and test equipment markets with demonstrated mid-teens organic growth and expanding margins post-merger. Management alignment is strong with 10% ownership and backing from experienced distribution investor LKCM holding 65%. The recent Hisco acquisition at 9.4x EBITDA (potentially mid-7x with synergies) demonstrates disciplined capital allocation in a fragmented industry ripe for consolidation. Cross-selling opportunities and operational synergies across the platform should drive margin expansion. The 9x pro forma EBITDA valuation appears reasonable for a company with recurring revenue streams, experienced management, and clear M&A runway in specialty distribution markets.

Pitch Summary:
One new addition to the book has been Endeavor Group Holdings ("EDR"). EDR is a conglomerate of various entertainment assets led by legendary executive Ari Emanuel. Its properties include owned sports (primarily the UFC), events, and talent representation. Earlier this year EDR announced that it would merge the UFC with the WWE to form a new publicly traded company called TKO Group Holdings ("TKO"). From a business perspective this makes a ton of sense as EDR will assume management and control the vote with 51%. While Vince McMahan has created tremendous value at WWE, he has always been a polarizing figure and more recently has faced sexual misconduct allegations. With WWE television rights deals coming due next year it makes sense to bring a proven industry leader like Emanuel to the helm. Furthermore, EDR should have strong negotiating power by combining the WWE with the UFC, an increasing popular and mainstream sport. Given that WWE is currently a publicly traded company, we already have a public mark on TKO. At 16x EBITDA TKO seems to be fairly priced, perhaps at a small discount. If you believe that the value of live sports will continue to grow, which I do, then this should be a nice investment over time. It still seems like early innings for UFC growth and there is the potential for EDR to improve monetization at WWE. For instance, Emanuel is on record saying that the rate card for SmackDown is 30% cheaper than the rest of the Friday night lineup. Backing out the value of TKO, the remaining EDR business is currently trading at <5x EBITDA which seems entirely too cheap. Roughly 40% of EBITDA comes from their events business where they own, operate, or represent more than 800 events annually. This includes owned properties in sports (Miami Open, Madrid Open, Euroleague Basketball), fashion (New York Fashion Week), and art and collectibles (Frieze, Barrett-Jackson). They also serve as the manager for high-profile events like Wimbledon, the Super Bowl, the Olympics, the Premier League, and the Final Four. As consumers continue to place a premium on experiences this business should grow as well. Another 50% of their EBITDA comes from their ownership of William Morris Agency ("WME"), one of the largest talent representation businesses. In 2021 they represented clients in 8 of the 10 top box office grossing films, arranged 330 scripted series, closed 150 new book deals including 87 best sellers, and represented 3 of the 4 headliners at Lollapalooza. While growth has been spotty over the past 5 years, this is a high return on capital, industry leading business that should deserve a decent multiple. As I write this, reports have emerged that WME competitor, Creative Artists Agency, is in talks to sell itself for $7bn; while it is hard to say what this implies for WME, it highlights the value of this business. A large reason for the depressed valuation of EDR is the fact that conglomerates typically trade at a discount to their sum of the parts. To EDR's credit they recently closed on the divestiture of IMG Academy and are using part of the proceeds to repurchase stock. The private equity firm Silver Lake is a large shareholder and understands how to unlock value after taking Dell through multiple stages, culminating with the spin-off their majority ownership in publicly traded VMWare. It is not unfeasible that a similar situation ensues here when TKO becomes eligible for a tax-free spin.

BSD Analysis:
The manager presents a compelling sum-of-the-parts valuation argument for Endeavor Group Holdings, highlighting the upcoming UFC-WWE merger creating TKO Group Holdings where EDR will maintain 51% control. The thesis centers on the remaining EDR business trading at an attractive sub-5x EBITDA multiple after backing out TKO's value. The manager emphasizes EDR's diversified revenue streams including a robust events business managing 800+ annual events and ownership of premier talent agency WME. Key catalysts include potential value unlocking through asset divestitures, share repurchases, and possible tax-free spin of TKO similar to Silver Lake's previous VMware transaction. The investment benefits from experienced leadership under Ari Emanuel and growing demand for live sports content and experiential entertainment. The conglomerate discount presents an opportunity for value realization through strategic corporate actions.

Pitch Summary:
Decisive Dividend is a new investment in the fund and the stock has been very strong as of late but still appears cheap and we believe it should trade well over $10/share. The company acquires small profitable industrial companies like wood burning stove businesses and varying metal & plastic fabrication shops. DE is currently the best stock we can find that balances both growth and yield. DE has a dividend yield of 6.9% with expected EPS growth of +40% this year and +30% in 2024. They increased their monthly dividend by 14% in June after increasing it by 17% just a few months before. We think they will continue to increase the dividend regularly as they have now shown a strong ability to buy and integrate. The stock should trade at a much higher multiple and we think it will close the gap as investors realize the company is a compounder versus an industrial yield play.

BSD Analysis:
The manager presents Decisive Dividend as an exceptional combination of growth and income, describing it as "the best stock we can find that balances both growth and yield." The company's acquisition strategy focuses on small, profitable industrial businesses including wood burning stove manufacturers and metal/plastic fabrication shops, creating a diversified portfolio of cash-generating assets. The investment case is compelling with a 6.9% dividend yield supported by aggressive EPS growth projections of 40% in 2023 and 30% in 2024. Management's confidence is evident through recent dividend increases of 14% in June following a 17% increase months earlier, demonstrating strong cash flow generation and capital allocation discipline. The manager believes the market is misclassifying the company as a traditional yield play rather than recognizing its compounding growth characteristics through successful acquisitions and integration capabilities. With a price target above $10 versus current levels, the manager expects multiple expansion as investors recognize the sustainable growth profile and dividend growth potential of this industrial roll-up strategy.

Pitch Summary:
Hammond Power is a new investment in the fund. They design and manufacture transformers (enables electrification) and they have been in business for over 100 years and now have 1,400 employees in 21 global locations. Sales have currently hit an inflection point because the electrical grid worldwide is not even close to being able to handle the demand that new technology is demanding from the grid. Transformers are essential in all electrical grids and are used in generation; transmission; distribution; and within commercial, industrial and residential settings. Hammond has 25% market share in North America with a good backlog, strong free cashflow and high ROI expansion opportunities in Guelph, Ontario, and Mexico. The stock should re-rate higher as margins and free cash flow continue to expand.

BSD Analysis:
The manager identifies Hammond Power as a compelling new investment positioned to benefit from the global electrification megatrend and grid infrastructure inadequacy. With over 100 years of operating history and 1,400 employees across 21 global locations, the company brings established expertise to a market experiencing unprecedented demand. The investment thesis centers on the critical role transformers play across the entire electrical grid ecosystem, from generation through residential distribution, as aging infrastructure struggles to meet modern technology demands. Hammond's dominant 25% North American market share provides competitive advantages and pricing power in a supply-constrained environment. The company demonstrates strong operational execution with solid backlog visibility, robust free cash flow generation, and high-return expansion opportunities in strategic markets including Guelph, Ontario and Mexico. As electrification trends accelerate and grid modernization becomes imperative, the manager expects margin expansion and free cash flow growth to drive multiple re-rating higher from current levels.

Pitch Summary:
We recently had a call with Sangoma's Chairman and Interim CEO. In their most recent quarter, they reported 18% revenue growth with service revenue growing 37% and EBITDA margins of 19.4%. Their SaaS revenue grew 10% organically and now represents 81% of revenue. They are well along the path of bringing on a new CEO who should be able to improve communication to the market plus have the experience of running a business at a much more significant scale than where Sangoma is now. Their team and market data confirm that growth and margins should remain strong. They don't see erosion from a margin perspective going forward and they aim for 10% organic growth but most likely can do better than that. The stock is currently trading on 3x EBITDA, roughly 4x cash earnings, and seems to have bottomed around the $5/share level.

BSD Analysis:
The manager presents a compelling value opportunity in Sangoma based on strong operational performance and attractive valuation metrics. Recent quarterly results demonstrate robust growth with 18% total revenue growth and accelerating 37% service revenue growth, while maintaining healthy 19.4% EBITDA margins. The business model transformation toward SaaS is progressing well, with recurring revenue now representing 81% of total revenue and growing 10% organically. Management's guidance for 10% organic growth appears conservative given recent momentum, suggesting potential for upside surprises. The pending CEO transition represents a positive catalyst, with the new leader expected to bring scaled business experience and improved investor communication. At current valuations of 3x EBITDA and 4x cash earnings with the stock appearing to have bottomed around $5, the risk-reward profile appears highly favorable. The combination of strong fundamentals, recurring revenue growth, and compressed valuation multiples creates an attractive entry point for patient investors.

Pitch Summary:
We published our report on Tucows in our April newsletter and the stock is up ~75% off the bottom that month. That being said, it is currently trading around $40/share and we strongly believe it is worth $100/share. The stock actually declined ~14% in June and has since recovered most of that decline. The reason for the temporary downturn seems to be the US Government announcing their $42.5B BEAD program. "The federal government has allocated nearly $42.5 billion to expand broadband connectivity across the United States, a move that could spell a windfall for broadband equipment and service providers." Tucows will be able to participate in these funding programs and it appears like the stock sold off on the headline of this program with people not understanding the full extent of what it meant.

BSD Analysis:
The manager maintains a strong bullish stance on Tucows despite recent volatility, reiterating a $100 price target versus current trading levels around $40. The investment thesis appears centered on the company's positioning to benefit from the $42.5 billion federal BEAD (Broadband Equity, Access, and Deployment) program for US broadband expansion. The manager suggests the market initially misunderstood the program's implications, causing a temporary 14% decline in June before recovery. With the stock already up 75% from April lows following their initial report, the manager sees continued upside of 150% to reach fair value. The federal broadband infrastructure spending represents a significant tailwind for Tucows' fiber internet business, potentially driving accelerated growth and margin expansion. The manager's confidence in the $100 target suggests strong conviction in the company's ability to capture meaningful market share from government-funded broadband initiatives.

Pitch Summary:
Reitmans is undergoing a significant change that hasn't yet been recognized by the market. Investors are slow to recognize inflection points and the combination of Covid, bankruptcy restructuring, and the death of the CEO, has resulted in new management, new culture, and a new outlook. This major turning point has set the company to focus on profitability. Their bonuses are now tied to operating profit and all indications appear for them to be very profitable in their seasonally strongest Q2 & Q3 earnings. They improved margin dollars delivered in the quarter, SG&A as a percent of sales is heading in the right direction and foreign exchange appears to be going from a headwind to tailwind. With further research we have lowered our estimated value of their head office to $30m but have kept the value of the distribution center and adjoining land. Our initial estimate was strictly based on price per square foot but the actual building is older and less comparable to market rates. This isn't our base case but for illustrative purposes, if Reitmans traded on the average multiple of the 9 comparable companies below (11.7x earnings) the stock would be $15.00/share (which is a 400% return). We're not saying that it is currently worth that much but the margin of safety is considerable, especially considering we're not factoring in cash and land value. We continue to add to our investment in Reitmans while hedging the retail consumer exposure by shorting more expensive competitors with stretched balance sheets. Management seems to be on board to uplist to the TSX and their next two quarters are their seasonally most profitable which should show the ability to be consistently profitable each year. These should be the catalysts needed to rerate the stock much higher.

BSD Analysis:
The manager presents a compelling turnaround thesis for Reitmans, emphasizing the transformational impact of new management following COVID-19 restructuring and CEO transition. The investment case centers on a fundamental shift toward profitability-focused operations, with management incentives now tied directly to operating profit rather than revenue growth. The manager highlights improving operational metrics including margin expansion, declining SG&A as a percentage of sales, and favorable foreign exchange tailwinds. At current valuations of 2.2x NTM earnings versus peer average of 11.7x, the stock trades at a significant discount despite superior sales growth of 7.3% versus peer average decline of 1.7%. The manager's valuation framework suggests substantial upside potential to $15/share (400% return) if the company achieves peer-level multiples, though this represents an illustrative scenario rather than base case. Key catalysts include upcoming Q2/Q3 earnings in seasonally strong quarters and potential TSX uplisting, which should drive institutional recognition and multiple expansion.

Pitch Summary:
We significantly increased our weighting in Lassonde Industries (ticker: LAS/A CN) this quarter when the stock declined to multiyear lows. Recent sales growth has been robust due to sharp price increases for the company's fruit juices and drinks. Gross margins have been pressured by soaring input costs for apple and orange concentrate, but price increases are beginning to catch up to cost inflation. Transportation expenses are also falling. The firm is engaging in a strategic overhaul to improve the performance of its U.S. operations, which account for 56% of revenue but have generated scant profitability. The U.S. segment delivered its first profit in a year last quarter. Fortunately, Lassonde's Canadian business is solid, and earnings exclusively from this geography were more than enough to support recent trading levels. Lassonde's shares sell for less than 6x normalized and 9x trailing EV/EBITA, and even these multiples are probably inflated by excessive inventories that will be partly worked down as the year progresses.

BSD Analysis:
Palm Valley significantly increased its Lassonde Industries position after shares fell to multi-year lows, presenting an attractive entry point for this Canadian beverage company. The investment thesis centers on the company's ability to pass through inflationary pressures via price increases while benefiting from declining transportation costs. The manager highlights a strategic turnaround in the underperforming U.S. operations, which represent 56% of revenue but historically generated minimal profits, with the segment achieving its first quarterly profit in a year. The Canadian business provides a stable earnings base that alone justifies current valuation levels. Trading at less than 6x normalized EV/EBITDA, the stock appears deeply undervalued, with the manager noting that even current multiples may be inflated due to excess inventory that should normalize. The position reflects Palm Valley's value approach of buying quality businesses during temporary operational challenges.