Investment Pitches

Pitch Summary:
Golden Entertainment (GDEN): The company is a pure play Nevada focused casino operator following the divestiture of non-core casino assets located outside of the region. The Nevada event calendar remains robust driven by the Stanley Cup Final, Formula 1 racing and Super Bowl as well as a recovery in the mid-week convention market. Substantial investments in their STRAT property should drive incremental revenue at higher margins for the next several years.

BSD Analysis:
The manager initiated a position in Golden Entertainment based on its focused Nevada casino strategy and favorable operating environment. The company's divestiture of non-core assets outside Nevada has created a pure-play exposure to the state's robust gaming market. Nevada's event calendar provides strong demand drivers, including high-profile sporting events like the Stanley Cup Final, Formula 1 racing, and the Super Bowl, alongside a recovering mid-week convention market. The substantial capital investments in the STRAT property represent a key catalyst, expected to generate incremental revenue at higher margins over multiple years. This capex program should drive meaningful returns on invested capital. The focused geographic strategy, combined with Nevada's strong event calendar and the STRAT investment thesis, supports the bullish investment case for this new position.

Pitch Summary:
Open Lending (LPRO): Better-than-expected volumes drove earnings outperformance and jump-started the stock. Its credit union customer base appears well positioned for continued growth in near-prime auto lending, a positive indicator.

BSD Analysis:
The manager presents a bullish view on Open Lending based on strong operational momentum and favorable market positioning. The company exceeded volume expectations, translating into earnings outperformance that catalyzed significant stock appreciation. Open Lending's focus on the credit union customer segment appears strategically advantageous, as these institutions are well-positioned to capture growth in the near-prime auto lending market. This customer base provides a stable foundation for continued business expansion. The 49.26% quarterly return on a 1.73% portfolio weight contributed 0.62% to relative performance, making it the third-largest contributor despite its smaller position size. The combination of volume growth, earnings beats, and favorable end-market positioning supports the positive investment thesis.

Pitch Summary:
API Group (APG): The stock benefitted from solid results marked by nearly 10% revenue growth and good margin execution. The company's recurring, inspection services-based business profile may also have helped the stock as investors embraced resiliency in the face of economic uncertainty.

BSD Analysis:
The manager highlights APi Group's strong operational execution and defensive business characteristics. The company delivered robust financial performance with nearly 10% revenue growth while maintaining disciplined margin execution, demonstrating effective operational leverage. The recurring nature of APi's inspection services business provides revenue stability and predictability, which becomes particularly valuable during periods of economic uncertainty. This defensive profile likely attracted investors seeking resilient business models amid macro headwinds. The stock's 21.26% quarterly return on a 4.08% portfolio weight contributed 0.64% to relative performance. The combination of growth, margin discipline, and recurring revenue streams supports the bullish investment thesis.

Pitch Summary:
Encompass Health (EHC): The inpatient rehabilitative care operator reported strong volume growth as overall health care utilization trends began to normalize. The company has staffed for growth and this likely helped it take share. Labor rates have started to ease, a positive sign for future profitability while expansion projects provide visibility for additional earnings and cash flow growth.

BSD Analysis:
The manager presents a bullish thesis on Encompass Health based on operational momentum and improving fundamentals. The company is benefiting from normalized healthcare utilization trends, driving strong volume growth in its inpatient rehabilitation facilities. Management's proactive staffing strategy appears to be paying dividends through market share gains. The easing of labor cost pressures represents a significant margin tailwind, particularly important given healthcare's labor-intensive nature. The company's expansion pipeline provides clear visibility into future earnings and cash flow growth, supporting the investment case. At a 4.51% portfolio weight with a 25.5% quarterly return, this position contributed 0.86% to relative performance, making it the top contributor for the quarter.

Pitch Summary:
Argent is an industrial conglomerate with about 24 underlying operating units across South Africa, the United Kingdom, and the United States. Its resilience is underpinned by vertical integration, self-sufficiency, and diversification across products and geographies. I strongly believe that the market has been wrong on this one for a while now. Argent is not a hot AI stock. Maybe that is one of the reasons it is totally ignored by the market. Yet, as a real-world-economy stock, Argent's earnings growth would make many a tech stock blush. As illustrated by the below chart, EPS has grown at a CAGR of 40% over the past 5 years. The South African subsidiaries span steel trading and processing, specialty manufacturers of underground mining scrapers, industrial lifting equipment (e.g., cranes), bulk steel products such as gates and fencing, and concrete mixing and distribution. They also include additional manufacturing companies with strong brands locally and internationally. The UK subsidiaries comprise a number of specialist manufacturers of fuel storage solutions, (including mobile fuel storage systems for the international aviation, maritime, and vehicle industries), a range of industrial doors, shopping carts and trolleys, and iron and wooden gates for the consumer market. The US operation manufactures speed control "retarder" systems for classification/ marshalling rail yards that separate out freight cars among various tracks. Our strategy is to turn over as many rocks as possible in inefficient corners of the market. We uncovered an informational advantage by digging deeper than everyone else. For a very long time, Argent used to be a low return on capital value trap. But about 5 years ago, a new strategic shareholder took over the capital allocation of the group. In typical Will Thorndike's The Outsiders fashion, Argent disposed of low return assets, streamlined working capital, repaid debt, bought back loads of shares on the cheap, and made higher return on capital, earnings-accretive acquisitions. I first met the new strategic shareholder in 2019 and he mapped out Argent's capital allocation journey during our discussion. In May this year, we were both in Omaha and again talked for hours, spending a great deal of time on Argent. Argent is a cash gusher, under competent operational management, with one of the smartest capital allocators in the background directing the flows. By still framing Argent in the same box as used years ago, the market is totally oblivious to the fact that the Argent of today is a globally diversified, high growth business compounding through a combination of organic growth and smart capital allocation. The business is virtually debt free and is firmly on a path of sustainably higher returns on equity. It is evident that Argent is a much better quality business today than it was 5 years ago. Yet the market is actually placing a lower valuation multiple on the business today. This company is a great example of market inefficiency. It is small (market cap of R900m or $50m), underfollowed (only covered by one private independent analyst), under-owned (institutional ownership is less than 1% of shares outstanding), branded a "SA Inc" company (yet 60% of earnings is international non-SA), and misunderstood. At R16 per share, it is trading at a sub-4 PE and price-to-book of 0.6. We believe this is too low for a globally diversified company with exceptional capital allocation likely to continue growing earnings at 15-20% per year. Peter Lynch wrote in his 1989 book One Up on Wall Street that "[t]he P/E ratio of any company that's fairly priced will equal its growth rate" and used an inverse PEG ratio as a heuristic to determine the attractiveness of a company's valuation. EPS growth/PE of about 1 is fairly valued. EPS growth/PE equaling about 2 is attractive and a buy. EPS growth/PE around 3 is rare and you should back up the truck. In Argent's case, we are presented with a Lynch metric of about 4! Argent is another example of a global company trading at South African discounts.

BSD Analysis:
The manager presents a compelling turnaround story for Argent Industrial, emphasizing the transformational impact of new strategic leadership over the past five years. The thesis centers on exceptional capital allocation that has driven 40% EPS CAGR through asset optimization, debt reduction, aggressive share buybacks, and accretive acquisitions. The manager highlights significant market inefficiencies, noting the stock trades at sub-4x P/E and 0.6x book value despite 60% international earnings exposure and projected 15-20% annual earnings growth. The diversified industrial conglomerate operates across three continents with vertical integration providing defensive characteristics. Using Peter Lynch's PEG methodology, the manager calculates an extremely attractive valuation metric of 4x, suggesting substantial upside potential. The investment represents a classic value opportunity in an underfollowed, under-owned small-cap with improving fundamentals and exceptional management.

Pitch Summary:
IDT announced a placement ($5 million) and share purchase plan ($2 million) to raise up to $7 million. The proceeds of the capital rising will be used to fund the company's capital expenditure program, as well as provide working capital to fund anticipated growth. Funds managed by Sandon Capital were strong supporters of the placement and we have subsequently increased our ownership in the company from ~14% to ~17%. We believe the new Board and management team at IDT are implementing a strategy that will be instrumental in maximising the value of the privileged pharmaceutical manufacturing assets that IDT owns.

BSD Analysis:
IDT Australia has completed a $7 million capital raising to fund growth initiatives and capital expenditure, with Sandon Capital increasing their ownership stake from 14% to 17% through participation in the placement. The fund manager expresses confidence in the new board and management team's strategic direction for maximizing value from IDT's pharmaceutical manufacturing assets. Sandon views IDT's manufacturing capabilities as privileged assets within the pharmaceutical sector, suggesting competitive advantages or regulatory barriers to entry. The capital injection provides working capital to support anticipated business growth and necessary infrastructure investments. The management team's strategy appears focused on optimizing the utilization and value extraction from existing manufacturing capabilities. Sandon's increased ownership demonstrates strong conviction in the turnaround potential under new leadership. The pharmaceutical manufacturing sector offers defensive characteristics with potential for margin expansion through operational improvements.

Pitch Summary:
After announcing in April 2022 that inflation was expected to significantly increase the capital cost of its Mardi salt & potash project, BCI finally updated the market as to the quantum of these costs. The capex required to complete the project has increased ~60% from ~$1 billion to ~$1.6 billion as a result of inflationary pressures and a redesign of parts of the project. Despite the significant increase in capex, the economics of the project remain attractive, with steady state earnings (EBITDA) now expected to be $384 million annually, up from the previous estimate of $256 million. BCI expects to execute project finance documentation in the next few months and that will be followed by an equity raising in the December quarter to fund the increased expenditure required for the construction of the project. Pleasingly, BCI is progressing offtake arrangements with potential customers, and we expect these customers may also contribute towards the increased equity required to fund the project.

BSD Analysis:
BCI Minerals has provided clarity on the Mardi salt and potash project's revised economics following significant cost inflation, with capital expenditure increasing 60% to $1.6 billion. Despite the substantial capex increase, the project's fundamentals remain compelling with annual EBITDA expectations rising to $384 million from $256 million previously. The improved earnings profile suggests strong underlying commodity pricing and project optimization despite inflationary pressures. Sandon Capital views the project economics as still attractive, with financing arrangements progressing toward completion in the coming months. The development of offtake agreements with potential customers provides both revenue certainty and potential equity funding sources. Customer participation in project financing would reduce dilution risk while validating the project's commercial viability. The December quarter equity raising represents a key milestone for project advancement and construction commencement.

Pitch Summary:
FWD announced that Rio Tinto (RIO) had exercised its right to secure additional rooms at FWD's Searipple Accommodation Village in Karratha. RIO had previously secured the supply of 250 rooms per night for its exclusive operations and also had an option over additional rooms. The additional rooms have been secured on a take or pay basis and are expected to generate a further $100m to $120m in revenue for Fleetwood from 1 April 2024 until 30 April 2027. We are pleased with the longer duration contracted revenue and expect further accommodation agreements at Searipple over the coming months as a result of planned activities in the oil and gas and green energy sectors in northwest WA. The immediate opportunity is for Searipple to provide worker accommodation for the construction of Perdaman's ~A$6bn urea project to be built on the Burrup Peninsula. Regardless of whether FWD wins this contract (or part thereof), the contracted revenue and earnings outlook is very solid for the medium term.

BSD Analysis:
Fleetwood has secured a significant contract extension with Rio Tinto for additional accommodation at their Searipple Village, generating $100-120 million in guaranteed revenue through April 2027. The take-or-pay structure provides revenue certainty and demonstrates the quality of Fleetwood's accommodation assets in strategic mining locations. Sandon Capital views the extended contract duration positively, providing medium-term earnings visibility in the cyclical resources sector. Additional opportunities are emerging from planned oil, gas, and green energy projects in northwest Western Australia. The potential Perdaman urea project represents a substantial near-term catalyst worth approximately $6 billion in construction activity. Even without securing the Perdaman contract, the existing contracted revenue base provides a solid foundation for future growth. The strategic location of Searipple positions Fleetwood to benefit from the broader resources and energy transition investment cycle in the region.

Pitch Summary:
During the month, we launched our latest campaign - MFG. MFG is an Australian-based global funds management company that manages funds across three categories: Global Equities, Infrastructure Equities and Australian Equities. The company was established in 2006 and became a leading asset management franchise in Australia, especially among retail investors and independent financial advisers. However, investment underperformance as financial markets emerged from COVID-19 and then personnel change led to a loss of confidence and substantial fund outflows. Today, market perceptions of MFG are negative, and we believe the company to be deeply undervalued and misunderstood. A large portion of MFG's current market capitalisation is accounted for by cash and investments that we consider non-core. We believe this provides considerable downside protection for our investment. In order to stabilise the business, and return to strong long-term profitability, we have made five recommendations to the MFG Board. These include (1) Return excess capital to shareholders (2) Prioritise the existing business (3) Review the cost base (4) Provide further Share Purchase Plan (SPP) relief, and (5) Accelerate Board renewal and improve Board diversity. Should the MFG Board adopt our recommendations, we expect the market price and value of MFG shares to improve significantly.

BSD Analysis:
Sandon Capital has initiated an activist campaign targeting Magellan Financial Group, viewing the asset manager as deeply undervalued following significant fund outflows and performance challenges post-COVID. The fund manager believes negative market sentiment has created a compelling opportunity, with MFG trading below intrinsic value due to substantial cash and non-core investments providing downside protection. Sandon's five-point turnaround plan focuses on capital return, operational efficiency, cost reduction, and governance improvements. The activist approach targets stabilizing the business model while returning to sustainable profitability. The thesis centers on unlocking value through strategic restructuring and improved capital allocation. Management changes and board renewal are viewed as catalysts for restoring investor confidence. Sandon expects significant share price appreciation if their recommendations are implemented by the board.

Pitch Summary:
Compagnie de L'Odet (ODET) (owned by E72DT) the group holding company, in our opinion, does not currently trade at a major discount to the market price of Bolloré. ODET is a 100-bagger since the 1992 backdoor listing into SEPA, is still the patriarch's favoured exposure and hasn't been adulterated with other holdings to any extent. Of course, the discount to real value blows out dramatically as the more realistic view of the pricing of Bolloré shares is applied, and also trades at 60% below a sum of the parts valuation. We can calculate a value of ODET at ~€3750/share on a sum of the parts basis, and haven't been blind to recent "aggressive" (by ODET standards) accumulation by its immediate parent, Sofibol. Because of the structure of the Bolloré Galaxy, somewhat bizarrely, despite the 100-bag, ODET is still cheap. ODET is the main equity owner of Bolloré, with 69.1% of the shares after the recent buyback. In turn Bolloré owns 35.6% of ODET; the main owner of ODET is the company one step up the cascade, Sofibol, which has recently been acquiring small amounts of shares to add to its 55.3%. Adding in Bolloré's cross holding of 35.6% and other small "galaxy" holdings, the public owns a mere 7.4% (488k shares) of ODET. Hence, as with Bolloré, the discount is up around the 60% mark to see through value. If there is one comment and subsequent activity that has stirred Bolloré aficionados in the past few weeks it was the apparent comments by Vincent Bolloré at the ODET AGM (14 June 2023) about the ODET share price being too low and that "he would do something about it". Since then, Sofibol the next company up the cascade owning over 57% of ODET has been buying more aggressively than seen in some time. It is noteworthy that Bolloré does not DIRECTLY own the shares in ODET – they are mainly owned by Compagnie du Cambodge (19%), Société Industrielle et Financière de L'Artois (5.6%) and Financière Moncey (4.9%). As is the case with the squeeze out of Socfin, where Bolloré are giving their voting rights to Hubert Fabri to facilitate the squeeze out, we ponder if it is in the throes of happening here. The problem with a squeeze out – legal action by the highly committed and intelligent minorities who are very aware of the significant upside in ODET. A squeeze out at €2,500 – still a large discount to our valuation – would require about €1.2billion. But remember from the Delmas-Vieljeux deal, Bolloré is reluctant to get into a dispute with outside experts and market regulators, especially "at the end of the game"

BSD Analysis:
East 72 identifies Compagnie de L'Odet as an exceptional value opportunity within the Bolloré complex, describing it as a "100-bagger since 1992" that remains undervalued despite its remarkable track record. The manager calculates ODET trades at a 60% discount to sum-of-parts valuation, with fair value estimated at €3,750/share versus current levels around €1,554. The investment thesis centers on ODET's position as Vincent Bolloré's "favoured exposure" and primary control vehicle for the Bolloré empire, owning 69.1% of Bolloré SE. Recent aggressive accumulation by parent company Sofibol, following Vincent Bolloré's AGM comments about the share price being "too low," suggests potential corporate action. The manager notes the possibility of a squeeze-out transaction, though acknowledges legal complexities given sophisticated minority shareholders. With only 7.4% public float and the patriarch's demonstrated commitment to value realization, ODET represents a concentrated bet on Bolloré family value creation at the apex of their corporate structure.

Pitch Summary:
From the viewpoint of financial structure, rather than (say) technology innovation, if there is a more interesting company on the planet than the French conglomerate Bolloré, we are yet to find it. In its current form, Bolloré is a 40+ year history and playbook of every investment banking skill ever taught: cheap acquisitions, expensive sales, spin outs, squeeze outs, arguments with regulators, corporate raids and greenmail; buybacks, share swaps, buying then selling, selling then buying, and growth from the ground up. Political connections and disconnections. A supposedly retired patriarch who has moved upstairs to the "passive" controlling entity in a separate building adjacent to the Bois de Boulogne. It's also a structure which is rarely seen and dissuades the lazy analyst; it's not a Brookfield with part subsidiaries and management fees, but an entanglement born of paranoia over control, a relationship with a special investment banker and an acquisition of a bumbling establishment bank which itself had compartmentalised everything into over 800 companies. To do justice to Bolloré's full history would require an encyclopaedic sized manuscript. No-one has written it yet since it requires not only the skill of writing, the genius of accounting and math and a preparedness to irritate a significant media owner. You have to track back through public archives which are not always in good order from the relevant period; to be fair, given legendary French bureaucracy, some actually are! In contrast to the myriad takes on Berkshire Hathaway – an enterprise built on enviable stock investment skills and business acquisitions, not least to provide insurance cash flow – Bolloré is the company enterprising investment banking students at business schools around the world should study. Bolloré has been fuelled by a sense of history, strong organic growth and smart acquisitions, part funded by spectacular corporate raids in the 1980's and 1990's. It's a bit of an anti-establishment company – due to its Brittany roots - which has picked off (some of) the upper echelons of corporate France and itself become the establishment – a little like the planet's current richest individual, Bernard Arnault with whom there is a mild intertwining of interests. Moreover, when you play in the Bolloré family stadium, you play by their rules. Share prices in the Bolloré complex tend to move in "waves" reflecting a specific corporate action, but as a minority shareholder, if you don't do your homework, you seem to be fair game to be perfectly legally disadvantaged. As the latest documentation supplied by an independent expert for a Bolloré transaction illustrates clearly, it is not intended to provide insight and analysis, merely the statutory requirement. As we discuss later, there is an easy way to not be disadvantaged. So why write such a lengthy piece on the company dredging back through 40+ years of history? Firstly, we are lucky that in the fledgling history of the Dynasty Trust, the "restructure" of Bolloré is occurring as the 71year old patriarch, Vincent Bolloré applies the "finishing" touches to his life's work. Secondly, we already have positions in three of the group companies and – subject to risk management - could foresee investing in others. Thirdly, it's interesting – any finance student should become familiar with elements of the story. We like to learn too. But fourthly , in its 201st year, Bolloré is moving towards honing down its size, given the sale and now pending sale of its two largest operating businesses, to leave a highly liquid but unwieldy corporate structure, ripe for capital management initiatives. Fifthly, Bolloré is perhaps the ultimate example of the type of company in which we look to invest Dynasty Trust's funds. It is fabulously run by an effective family group, has historically operated in intriguing industries but is complex and so gives an opportunity to the investor who works harder at unravelling the structure. There are double, triple and quadruple discounts available, which when interrogated potentially offer major price upside. It's where a small investing team working diligently can potentially do the job. Finally, and importantly, when companies like this which have traditionally traded at large discounts to NAV start to self-liquidate, it is inevitable that the discounts will close up – perhaps only slowly, but they will. These initiatives are likely to see the puppeteer, Vincent Bolloré, from his position as "President-directeur général" of Compagnie de L'Odet, Bolloré's largest shareholder using not dissimilar skills to optimise the future corporate structure. Indeed, the recently closed Bolloré buyback offer is straight out of his 1990's playbook. The independent expert in the latest deal thinks it's a great idea for you to sell your Bolloré shares back to the company (family controlled) at a significant discount to what WE (and many other independent writers) think they are worth. It's the epitome of what investing in these family controlled companies is often (not always) about: forget the dialogue – just follow the money. Whether it's the top company, not a controlled subsidiary, or just doing what they do, not what an external party thinks. In the latest Bolloré deal, as we shall see, the smart money has not sold its Bolloré shares; it's actually BUYING ODET shares. Bolloré itself (owned by E72DT) is ridiculously underpriced, partly as a result of the continued misunderstanding of the Treasury control loop, but also the lengthy appraisal process of selling Bolloré Logistics to CMA CGM which liquifies the group to the tune of a further €5bn. If it fails to complete, some of the analysis postulated will look foolish and the patriarch's legacy won't be easily completed. If it is consummated, we value Bolloré at ~€13/share before applying any kind of conglomerate discount. If the patriarch is willing to countenance a heavier GROSS debt load adjacent to his favoured exposure in the Galaxy (Compagnie de L'Odet) an acquisition of Vivendi once the logistics deal completes and the assorted conditions of Vivendi's 57% Lagardère purchase are met. On any reasoned analysis, Bolloré shares are extraordinarily cheap, with the current share price and market capitalisation virtually backed by the shareholding in UMG, let alone €6.2bn of net cash IF the logistics transaction is consummated. It is clear that equity analysts struggle with the Treasury control loop implications, even years after Muddy Waters showed how to deal with it.

BSD Analysis:
East 72 presents Bolloré as the ultimate complex value opportunity, describing it as a 201-year-old French conglomerate with an unparalleled history of financial engineering under patriarch Vincent Bolloré. The manager argues the company is "ridiculously underpriced" due to analyst confusion over its treasury control loop structure and pending €5bn logistics asset sale to CMA CGM. The thesis centers on multiple layers of discount - the complex shareholding structure creates valuation opacity that rewards diligent analysis. With the logistics divestment, Bolloré will hold €6.2bn net cash while trading at a market cap essentially backed only by its UMG stake. The manager calculates fair value at €13/share before any conglomerate discount, representing significant upside from current levels. The investment case relies on Vincent Bolloré's track record of value-creating corporate actions and the inevitable discount closure as the company simplifies its structure. This represents a classic East 72 investment - a family-controlled entity with hidden value requiring deep structural analysis to unlock.

Pitch Summary:
New purchase Clean Harbors fits the bill across all these attributes. The environmental and industrial services company specializes in transporting, treating and disposing of hazardous waste through its waste treatment and disposal facilities. Due to the high regulatory burden of entering the hazardous waste disposal industry, the company has been able to establish itself as the industry leader, while industry consolidation is helping it achieve strong pricing power. The company's strong free cash flow generation and idiosyncratic growth opportunities add to the resiliency of the portfolio against major market disruptions.

BSD Analysis:
ClearBridge added Clean Harbors as a new position, attracted to its defensive characteristics and market leadership position. The managers emphasize the company's dominant position in hazardous waste disposal, an industry with significant regulatory barriers to entry that create a protective moat around the business. They highlight how industry consolidation is enhancing Clean Harbors' pricing power, suggesting improving profitability dynamics. The investment thesis focuses on the company's strong free cash flow generation, which provides financial flexibility and supports dividend sustainability. ClearBridge values the idiosyncratic growth opportunities within the environmental services sector, which should provide portfolio diversification benefits. The managers view Clean Harbors as adding resilience to the portfolio during potential market disruptions, fitting their strategy of owning companies with either exceptional balance sheet strength or resilient profit and loss statements. This position aligns with their focus on finding differentiated business models outside of mega-cap technology stocks.

Pitch Summary:
For example, we added a new position in Marvell Technology, a networking and storage semiconductor company in the 5G, data center and automotive ethernet end markets. In addition to being seen as one of the main beneficiaries of future AI-related data center buildouts, we believe the company's crucial supplier position at the nexus of high-growth technology sectors leaves it exceptionally well-positioned to be a long-term compounder for the portfolio, and this potential is not reflected in its current valuation.

BSD Analysis:
ClearBridge initiated a new position in Marvell Technology, viewing it as a compelling value opportunity in the semiconductor space. The managers highlight Marvell's strategic positioning across multiple high-growth technology sectors including 5G infrastructure, data centers, and automotive ethernet markets. They specifically cite the company's potential to benefit from AI-driven data center expansion, positioning it as a key supplier in the artificial intelligence infrastructure buildout. The investment thesis centers on Marvell's role as a critical component provider at the intersection of several secular growth trends. ClearBridge believes the company is well-positioned to be a long-term compounder, suggesting strong fundamental prospects. The managers emphasize that this growth potential is not adequately reflected in the current valuation, indicating they see the stock as undervalued relative to its prospects. This position aligns with their strategy of finding opportunities outside mega-cap technology stocks.

Pitch Summary:
During the quarter we continued to build out our recently initiated position in Capital One, a leading bank and consumer credit company. Early in the second quarter we took advantage of continued weakness in the banking sector to continue rounding out the position. Since then, shares of Capital One have recovered nicely. Whereas Silicon Valley Bank and First Republic were tripped up by their interest rate risk, Capital One has de minimis interest rate risk. Because Capital One is a large credit card issuer, however, it does undertake material consumer credit risk. We believe it is a best-in-class operator that can manage this risk adroitly, but we acknowledge Capital One's business is inherently volatile. We mitigate this risk through the size of the position in the portfolio. We believe Capital One can deliver attractive returns over the cycle as credit cards have historically been one of the most profitable areas in financial services.

BSD Analysis:
ClearBridge opportunistically built their Capital One position during banking sector weakness, distinguishing the company from failed regional banks. The managers emphasize Capital One's minimal interest rate risk compared to Silicon Valley Bank and First Republic, which failed due to asset-liability mismatches. As a leading credit card issuer, Capital One faces consumer credit risk rather than interest rate risk, which the managers view as more manageable given the company's operational expertise. The investment thesis relies on Capital One's best-in-class credit risk management capabilities and the historically high profitability of the credit card business. The managers acknowledge the inherent volatility in consumer lending but mitigate this through position sizing. They expect attractive cyclical returns from a company operating in one of financial services' most profitable segments.

Pitch Summary:
During the quarter we initiated a position in Public Storage, the largest and most profitable company in the self-storage sector. Self-storage has been one of the best segments in real estate for several decades. The business enjoys high returns on invested capital, requires little maintenance capex and generates prodigious free cash flow. Public Storage sports a dividend north of 4%, has the highest-rated balance sheet among all publicly traded REITs and benefits from the scale of operating the industry's largest platform. After a couple of years of strong growth, year-over-year comparisons in 2023 will prove less flattering. We look through this lull and believe that earnings growth will reaccelerate in out years. On top of comparisons becoming easier, the industry is poised to benefit from a favorable supply-demand balance. Rising interest rates and labor and material costs have raised construction costs for new facilities, restricting supply growth and boosting the value of in-place assets. Restrained supply growth, coupled with a resilient consumer, bodes well for longer-term pricing and earnings dynamics, in our view. Our position is relatively small at this point, but we hope to build it out over time.

BSD Analysis:
ClearBridge initiated a position in Public Storage, viewing it as the dominant player in an attractive real estate subsector. The managers highlight the self-storage industry's exceptional characteristics: high returns on invested capital, minimal maintenance requirements, and strong free cash flow generation. Public Storage offers a compelling dividend yield above 4% while maintaining the strongest balance sheet among publicly traded REITs. The investment thesis centers on a favorable supply-demand dynamic where rising construction costs are constraining new supply, creating pricing power for existing operators. Despite near-term earnings headwinds from difficult year-over-year comparisons, the managers expect earnings growth to reaccelerate as comparisons ease and the supply-constrained environment supports pricing. The position sizing reflects a measured approach to building exposure over time.

Pitch Summary:
Taking advantage of post-earnings weakness, we initiated a position in Intuit, a provider of software for small business accounting and tax preparation under the QuickBooks and TurboTax brands as well as personal finance (Credit Karma) and marketing services (Mailchimp). We see a clear path to upside earnings revisions as the company expands new products that increase its total addressable market and drive average revenue per user growth.

BSD Analysis:
The manager initiated a new position in Intuit following post-earnings weakness, viewing it as an opportunistic entry point. The investment thesis centers on the company's diversified software portfolio spanning small business accounting (QuickBooks), tax preparation (TurboTax), personal finance (Credit Karma), and marketing services (Mailchimp). The manager expects upside earnings revisions driven by new product expansion that should increase the total addressable market and boost average revenue per user. This represents a classic growth play on a dominant software provider with multiple revenue streams and expansion opportunities. The timing of the purchase after earnings weakness suggests disciplined entry point selection.

Pitch Summary:
Nvidia is a good example of a select growth stock bought opportunistically where our long-term thesis has bloomed. We initiated the position in the fourth quarter of 2018 knowing that inference and training in the data center was an interesting although still early-stage growth driver. We knew that GPUs could be used to solve complex computing problems, but we didn't know how quickly the training and learning efforts by Nvidia's mega cap customers would hit an inflection point. Volatility in the gaming business created the entry point into the stock and we have built the position accordingly over time. Since the end of 2021, the stock's portfolio weight grew from 4.5% to a high of 7.2% earlier in the second quarter before we trimmed it to manage our overall position sizing. We will continue to monitor and adjust Nvidia's position sizing to manage risk. Despite the sharp run up, we believe the company's long-term runway remains compelling due to its advantaged positioning in a very large addressable market for GPUs. The current valuation looks expensive, yet Nvidia has real earnings and cash flow and the longer-term multiple looks more reasonable because of GPU pricing power.

BSD Analysis:
The manager presents a compelling long-term bull case for Nvidia built on early recognition of the data center GPU opportunity. The position was initiated in Q4 2018 with the thesis that inference and training in data centers would drive growth, though the timing of the AI inflection was uncertain. The gaming volatility provided an attractive entry point, and the manager has skillfully built the position over time, growing from 4.5% to 7.2% before trimming for risk management. Despite acknowledging current expensive valuation, the manager remains confident in Nvidia's advantaged positioning in the large GPU addressable market. The combination of real earnings, cash flow generation, and GPU pricing power supports the longer-term investment case even after the significant run-up.

Pitch Summary:
Roche is the world's largest biotechnology company and the global leader in in-vitro diagnostics. In an industry that struggles to earn its cost of capital, Roche is an outlier. Roche's superior return profile has benefited from a superior R&D organization and family control, which we believe has allowed management to take a long-term view and avoid the large, value destructive acquisitions that have hurt peer returns. Despite the R&D organization's long track record of success, there have been a few recent pipeline drug setbacks that have weighed on the stock and depressed the valuation. We view these as temporary setbacks which are common for an R&D organization that focuses on first-in-class or best-in-class drugs in areas of significant unmet need. Importantly, we forecast revenue growth through 2027 based solely on the existing drug portfolio and diagnostics business without any contribution from pipeline drugs. Any pipeline drug contribution would add to this underlying growth, and our research suggests there are a handful of meaningful opportunities. The market is underappreciating this durable revenue growth outlook. We feel that the current valuation is very attractive for this high-quality company.

BSD Analysis:
FMI's Roche investment thesis highlights the company's exceptional positioning in biotechnology, emphasizing its rare ability to generate returns above cost of capital in a challenging industry. The manager credits family control and superior R&D capabilities for Roche's disciplined approach, avoiding the value-destructive mega-acquisitions that have plagued competitors. Recent pipeline setbacks have created a compelling valuation opportunity, with FMI viewing these as temporary headwinds typical for companies pursuing first-in-class innovations. The investment case doesn't rely on pipeline success, as the manager forecasts growth through 2027 based solely on existing assets and the diagnostics franchise. This conservative approach provides significant upside optionality from any pipeline contributions. FMI sees the market undervaluing Roche's durable revenue streams and defensive characteristics. The combination of depressed valuation, quality management, and diversified revenue base across pharmaceuticals and diagnostics creates an attractive risk-adjusted opportunity in the healthcare sector.

Pitch Summary:
CDW is a simple business with strong returns-on-capital, serving a growing global information technology (IT) industry. As a reseller of IT solutions, the company gives investors exposure to technology growth without subjecting them to the short product cycles, cut-throat competition, and poor capital allocation decisions that are typically inherent in technology investments. While the largest player in the industry, CDW only commands a small ~5% share of the North American IT market. We believe they can capture more market share moving forward as their size and scale creates competitive advantages, making them difficult to compete against, particularly for the smaller regional players that make up the majority of the market. The company's margins should also expand over time as they sell more software, services, and solutions to end customers. CDW's fundamentals currently reflect a slowdown in North American corporate IT spending; we believe this will prove to be a cyclical headwind that will dissipate over time. Strong execution along with a recovery in customer spending should give CDW the ability to generate double digit earnings per share growth annually over our investment time horizon. We believe the shares are trading at reasonable multiple on depressed earnings.

BSD Analysis:
FMI's CDW thesis centers on the company's unique positioning as a technology distributor that provides tech exposure without typical sector risks like short product cycles and intense competition. The manager emphasizes CDW's defensive characteristics within the technology ecosystem, highlighting strong returns on capital and a simple business model. Despite being the industry leader, CDW's modest 5% North American market share presents significant expansion opportunities, particularly against fragmented regional competitors. The investment case relies on margin expansion through higher-value software and services offerings, moving beyond traditional hardware distribution. FMI views current fundamentals as cyclically depressed due to corporate IT spending slowdown, creating an attractive entry point. The manager projects double-digit EPS growth potential as spending normalizes, supported by market share gains and operational leverage. This represents a classic value play on a quality business trading at reasonable multiples during a cyclical trough.

Pitch Summary:
RHI is the market leader in professional staffing for small and medium sized businesses. The company has a premier temporary and permanent placement franchise in the field of accounting (Accountemps) and finance, while its Protiviti business has become a strong domestic and international consultancy. RHI's reinvestment in technology, including its national database, candidate performance scoring, and proprietary AI and matching capabilities are driving share gains versus fragmented competition. The business model is asset-light and generates consistently strong returns-on-capital, industry leading margins, and free cash flow. The less cyclical Protiviti business accounts for 30% of income. Capital allocation at RHI has been focused on reinvestment, share repurchases, and dividend increases. These factors should result in less overall cyclicality in EPS going forward. The shares are off 40% from its 2022 highs. We feel that the discounted valuation is reflective of current recession worries, which could lower demand for labor. Additionally, there are concerns around AI and the disruption that it could have on accounting. Our view is that the sentiment around the latter appears overdone, as demand for accountants has increased over time despite major advances in productivity tools.

BSD Analysis:
FMI presents a compelling bull case for Robert Half International, emphasizing the company's dominant market position in professional staffing and its strategic evolution beyond traditional recruiting. The manager highlights RHI's technology investments, including AI-powered matching capabilities, as key differentiators driving market share gains in a fragmented industry. The diversification through Protiviti's consulting business (30% of income) provides earnings stability and reduces cyclical exposure. FMI views the 40% decline from 2022 highs as creating an attractive entry point, with current valuation reflecting excessive pessimism around recession fears and AI disruption concerns. The manager's confidence stems from historical precedent showing accounting demand growth despite productivity tool advances. Strong capital allocation through buybacks and dividends, combined with the asset-light model generating superior returns on capital, supports the investment thesis. The pitch reflects opportunistic value investing in a quality franchise trading at depressed multiples.