Investment Pitches

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 position as the world's largest biotech with superior returns in a capital-intensive industry. The manager emphasizes family control as a key advantage, enabling long-term strategic thinking and avoiding value-destructive acquisitions that plague competitors. Recent pipeline setbacks have created a valuation opportunity, which FMI views as temporary given Roche's strong R&D track record in first-in-class and best-in-class drugs. The conservative approach of forecasting growth through 2027 based solely on existing assets, without pipeline contributions, provides significant upside optionality. The dual revenue streams from pharmaceuticals and diagnostics leadership offer diversification and stability. FMI believes the market is undervaluing Roche's durable growth prospects, creating an attractive entry point for a high-quality company with proven execution capabilities and strong competitive positioning in areas of significant unmet medical need.

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 market leadership with only 5% market share in North America, suggesting significant runway for growth through market consolidation. Scale advantages create competitive moats against smaller regional competitors, while the shift toward higher-margin software and services should drive margin expansion over time. Current fundamentals reflect cyclical IT spending weakness, which FMI views as temporary rather than structural. The manager expects double-digit EPS growth as spending normalizes, supported by strong execution and market share gains. Trading at reasonable multiples on depressed earnings, CDW offers an attractive risk-adjusted way to participate in long-term technology growth trends while avoiding the pitfalls of direct technology investments.

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 market-leading 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. With shares down 40% from 2022 highs, the manager views current recession fears and AI disruption concerns as overdone, creating an attractive entry point. The asset-light model generating strong returns on capital and free cash flow, combined with disciplined capital allocation through buybacks and dividends, supports the investment thesis. FMI's confidence stems from historical precedent showing accounting demand growth despite technological advances, suggesting AI fears may be overblown.

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 bullish stance on Roche emphasizes the company's exceptional position in biotechnology, highlighting its ability to generate superior returns in a capital-intensive industry where most peers struggle. The manager credits family control and superior R&D capabilities for enabling long-term strategic thinking and avoiding value-destructive acquisitions common among pharmaceutical peers. Recent pipeline setbacks have created a valuation opportunity, which FMI views as temporary given Roche's strong track record in developing first-in-class and best-in-class drugs. The investment thesis doesn't rely on pipeline success, as the manager forecasts growth through 2027 based solely on existing assets and the diagnostics business. This conservative approach provides downside protection while maintaining upside optionality from pipeline contributions. The combination of durable revenue growth, attractive valuation, and quality management makes Roche a compelling value opportunity in the biotechnology 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 investment thesis for CDW centers on the company's unique positioning as a technology distributor that provides exposure to IT growth without the typical risks of direct technology investments. The manager emphasizes CDW's defensive characteristics, avoiding the short product cycles and intense competition faced by technology manufacturers. With only 5% market share in North America, significant runway exists for expansion through competitive advantages derived from scale and size. The margin expansion opportunity through higher-value software and services sales adds another growth vector. Current fundamentals reflect cyclical IT spending weakness, which FMI views as temporary rather than structural. The valuation appears attractive on depressed earnings, with the potential for double-digit EPS growth as spending normalizes. This represents a classic value play on a quality business experiencing temporary headwinds in a large, growing market.

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 market-leading position in professional staffing and its strategic evolution beyond traditional staffing services. The manager highlights RHI's technological investments in AI and matching capabilities as key differentiators driving market share gains in a fragmented industry. The asset-light business model generates strong returns on capital and industry-leading margins, while the Protiviti consulting division provides diversification and reduces cyclicality. At 40% below 2022 highs, the valuation appears attractive given recession fears and AI disruption concerns that the manager views as overdone. The company's disciplined capital allocation through reinvestment, buybacks, and dividend increases supports long-term value creation. FMI's thesis rests on the premise that demand for accounting professionals has historically grown despite technological advances, suggesting current AI concerns may be overblown.

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 highlights Roche as a rare biotech company that consistently earns above its cost of capital, distinguishing it from industry peers that typically struggle with returns. The manager attributes Roche's superior performance to its exceptional R&D organization and family control structure, which enables long-term strategic thinking and avoids the value-destructive large acquisitions common in the sector. Recent pipeline setbacks have created a valuation opportunity, which FMI views as temporary and typical for companies pursuing first-in-class drugs in high unmet need areas. The investment thesis doesn't rely on pipeline success, as FMI forecasts revenue growth through 2027 based solely on existing drug portfolio and diagnostics business. Any pipeline contributions would provide upside to base case projections, with research suggesting several meaningful opportunities ahead. The market appears to undervalue the company's durable revenue growth profile, creating an attractive entry point for this high-quality biotech leader with proven execution capabilities.

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 presents CDW as an attractive way to gain technology sector exposure while avoiding the typical risks associated with direct tech investments. The manager emphasizes CDW's role as an IT solutions reseller, which provides technology growth exposure without the challenges of short product cycles, intense competition, and poor capital allocation common among tech companies. Despite being the industry leader, CDW holds only ~5% market share in North America, suggesting significant runway for growth through market share gains. The company's scale advantages create competitive moats against smaller regional competitors, while margin expansion opportunities exist through increased software, services, and solutions sales. FMI views current fundamentals as temporarily depressed due to cyclical IT spending weakness, creating an attractive entry point. The manager expects double-digit EPS growth over their investment horizon as spending normalizes and execution continues. Current valuation appears reasonable given the temporary earnings depression, offering compelling risk-adjusted returns for patient investors.

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 market-leading position in professional staffing and its strategic evolution beyond traditional staffing services. The manager highlights RHI's technology investments, including AI-powered matching capabilities, as key differentiators driving market share gains in a fragmented industry. The asset-light business model generates strong returns on capital and consistent free cash flow, while the Protiviti consulting division (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 argues that historical demand trends for accounting professionals have remained resilient despite technological advances, suggesting current AI-related concerns are overblown. Strong capital allocation through reinvestment, share repurchases, and dividend increases should drive long-term value creation and reduce earnings volatility.

Pitch Summary:
Fears about biotech funding and the sell-off in the broader life sciences area created an opportunity for us to invest in IQVIA during the quarter. IQVIA is a leading provider of clinical trials and health care technology and analytics formed through the merger of Quintiles and IMS Health in 2016. We believe that IQVIA is positioned at the heart of trends toward advanced therapeutics and personalized medicine and that it is the most levered contract research organization (CRO) to decentralized clinical trials requiring digital capabilities. We think that IQVIA has additional growth opportunities from delivering real-world evidence to biopharma companies and other health care providers using data and software to meet regulatory and reimbursement mandates. CEO Ari Bousbib has a strong track record on operations and capital allocation and significant skin in the game through his large equity holdings in the company. We were pleased to be able to add IQVIA to the portfolio near a trough multiple of less than 15x our estimate of normal earnings.

BSD Analysis:
Oakmark views IQVIA as a leading life sciences services company well-positioned for secular growth trends in healthcare. The fund sees the recent biotech funding concerns and broader life sciences sell-off as creating an attractive entry opportunity. IQVIA's unique positioning at the intersection of advanced therapeutics and personalized medicine provides significant competitive advantages. The company's leadership in decentralized clinical trials and digital capabilities positions it favorably as the industry evolves. Additional growth drivers include real-world evidence solutions that help biopharma companies meet regulatory and reimbursement requirements. CEO Ari Bousbib's proven operational track record and significant equity ownership align management interests with shareholders. At less than 15x normalized earnings during a cyclical trough, the fund sees compelling value in a market-leading franchise with strong secular tailwinds and experienced management.

Pitch Summary:
First Citizens BancShares is a leading regional bank with a history of solid financial results through the economic cycle. The company has a low-cost deposit franchise, a history of prudent lending and an attractive geographic footprint concentrated in Southeast and West Coast U.S. markets. First Citizens has produced impressive results over the last 14 years under the leadership of CEO Frank Holding. Specifically, the company has generated meaningful growth in tangible book value per share driven by strong operating results and accretive acquisitions. As a result, First Citizens has been one of the best-performing bank stocks over this period. Although we have owned First Citizens in the Oakmark Select Fund since early 2021, First Citizens' purchase of Silicon Valley Bank out of FDIC receivership this March drove a significant increase in both the intrinsic value and the market cap—thereby creating an opportunity for us to initiate a position in the Oakmark Fund. The stock is currently trading at a discount to its tangible book value per share and at a high-single digit multiple of our estimate of normalized earnings. We view this price as attractive for such a high-quality and well-managed banking franchise.

BSD Analysis:
Oakmark views First Citizens as a premier regional banking franchise with exceptional management and a strong track record of value creation. The fund highlights the bank's competitive advantages including a low-cost deposit base, prudent lending practices, and attractive geographic exposure to Southeast and West Coast markets. CEO Frank Holding's 14-year leadership has delivered impressive tangible book value growth through strong operations and accretive acquisitions, making it one of the best-performing bank stocks. The Silicon Valley Bank acquisition significantly enhanced intrinsic value while creating an opportunity to establish a position in the main fund. Trading below tangible book value and at high-single digit normalized earnings multiples, the fund sees compelling value in a high-quality franchise. The combination of proven management, defensive deposit franchise, and attractive valuation metrics makes this an attractive banking investment.

Pitch Summary:
Celanese is the world's largest and lowest cost producer of acetic acid and a leading producer of engineered polymers used in applications ranging from auto parts to medical devices. Although the company operates in highly cyclical markets, its unmatched cost position allows it to remain profitable even during severe industry downturns. Recently, the market reacted negatively to Celanese's acquisition of Dupont's Mobility & Materials segment because the deal added financial leverage to the balance sheet during a cyclical downturn. Despite challenging industry conditions today, we believe the company will generate significant cash flow to reduce its debt burden rapidly. We also believe the integration of the acquired business will yield cost synergies and strengthen Celanese's engineered materials franchise over the long term. The stock price dislocation presented an opportunity to purchase Celanese shares at a single-digit multiple of our estimate of normalized earnings power.

BSD Analysis:
Oakmark views Celanese as a best-in-class chemicals company with unmatched cost advantages in acetic acid production and strong positions in engineered polymers. The fund emphasizes the company's ability to remain profitable even during severe cyclical downturns due to its superior cost structure. Recent market concerns over the DuPont acquisition adding leverage during a downturn have created an attractive entry point. Oakmark believes the company's strong cash generation will enable rapid debt reduction while the acquired business will deliver meaningful cost synergies and strengthen the engineered materials platform. The cyclical nature of the business is viewed as temporary, with normalized earnings power significantly higher than current levels. At a single-digit multiple of normalized earnings, the fund sees exceptional value in a market-leading franchise with defensive characteristics and long-term growth potential.

Pitch Summary:
Carlisle is the largest manufacturer of commercial roofing materials in the U.S. Over the past few years, the company has been divesting cyclical and low-return businesses and narrowing its focus to construction materials. Labor shortages, supply chain delays and raw material cost inflation have allowed all industry participants, including Carlisle, to increase prices on their products. As these headwinds normalize, investors fear that most of the price increases will reverse. However, we believe that Carlisle will retain the price increases due to its stellar reputation, cost and technology leadership and the beneficial structural characteristics of the industry. Carlisle should continue generating attractive returns against the backdrop of persistent demand for reroofing. At 12x our estimate of next year's EPS, we think Carlisle is trading well below intrinsic value.

BSD Analysis:
Oakmark sees Carlisle as a high-quality building materials company with sustainable competitive advantages in commercial roofing. The fund appreciates management's strategic focus on divesting cyclical, low-return businesses to concentrate on higher-quality construction materials. Current industry dynamics including labor shortages and supply chain constraints have enabled widespread price increases across the sector. While investors worry about price reversals as conditions normalize, Oakmark believes Carlisle's market leadership, cost advantages, and technology superiority will allow it to retain pricing power. The structural characteristics of the roofing industry and persistent reroofing demand provide a favorable backdrop for sustained returns. At 12x forward earnings, the fund views the valuation as compelling relative to the company's competitive position and cash generation potential.

Pitch Summary:
Baxter is a provider of medical devices and health care supplies used in patient care. The company's competitive advantages include leading scale, a large installed base and long-term customer relationships. Demand for Baxter's products tends to be stable and predictable. We had invested in Baxter a few years ago when Joe Almeida joined the company as CEO, and we believe that he and his management team are focused on growing per share value. Recently, we got another chance to buy shares after the price fell significantly due to margin pressure from inflation, semiconductor shortages and ripple effects related to Covid-19. We see these issues as short term in nature and think that management will restore higher margins in the years ahead. As a result, we believe the stock is cheap at less than 10x our estimate of normalized earnings.

BSD Analysis:
Oakmark views Baxter as an attractively valued healthcare equipment play trading at a significant discount due to temporary headwinds. The fund emphasizes Baxter's durable competitive moats including leading scale, large installed base, and long-term customer relationships that drive stable demand. Management under CEO Joe Almeida is viewed favorably for their focus on per-share value creation. Current margin pressures from inflation, semiconductor shortages, and COVID-19 effects are seen as transitory issues that should normalize. The fund believes management can restore historical margin levels over time. At less than 10x normalized earnings, Oakmark sees compelling value in a business with predictable cash flows and defensive characteristics. The combination of temporary margin compression and quality management creates an attractive entry point for long-term investors.

Pitch Summary:
Sapiens International (Israel) is a global leader in core software solutions in the insurance industry. Because insurance core software is the most mission-critical function in an insurance company and replacing a system is both expensive and disruptive, Sapiens's customer base is extremely sticky. Given that half of all insurers still use mainframes and will need to modernize to stay competitive, we believe that Sapiens also has significant growth potential. Even after a company selects Sapiens, there are further long-tailed opportunities for growth. Finally, the company has multiple opportunities for margin expansion, including offshoring service talent, re-leveraging its North America business investments and transitioning to the cloud.

BSD Analysis:
The manager initiated a position in Sapiens based on the company's dominant position in mission-critical insurance software with extremely sticky customer relationships. The investment thesis relies on the high switching costs and disruptive nature of replacing core insurance systems, creating a defensive moat around existing customers. A significant growth opportunity exists as half of all insurers still operate on legacy mainframe systems and must modernize to remain competitive. The manager identifies multiple expansion opportunities beyond initial software sales, including long-tailed growth from existing customers and several margin improvement initiatives. These margin catalysts include offshoring service talent, re-leveraging North American business investments, and cloud migration benefits. The combination of defensive customer stickiness, secular modernization tailwinds, and multiple operational leverage opportunities creates an attractive risk-adjusted return profile in the specialized insurance software vertical.

Pitch Summary:
Euronext (France) is a pan-European stock exchange and market infrastructure provider. Across geographies and markets, exchanges can be good defensive businesses that provide reasonable growth, high incremental margins and strong free cash flow conversion. They also have strong track records of value creation through M&A. Over the past decade, Euronext's strong management team has created significant value by continually improving business quality and diversifying geographic mix through M&A. These efforts culminated in the company's transformative EUR 4.3B acquisition of Borsa Italiana in 2021, which, among its many benefits, completed the company's decade-long journey to becoming a fully vertically integrated market infrastructure company. With the build-out of the company's footprint and operational capabilities now largely complete, we expect the focus to turn to accelerating organic growth and driving margin improvement over the next few years. Trading near record low multiples, Euronext's share price does not reflect our estimate of the company's strength, improvements in asset quality or its future prospects.

BSD Analysis:
The manager views Euronext as an attractive defensive business trading at record low multiples despite significant operational improvements and strategic positioning. The investment thesis centers on the exchange operator's successful transformation into a fully vertically integrated market infrastructure company, culminating with the transformative EUR 4.3B Borsa Italiana acquisition in 2021. Management has demonstrated strong value creation through M&A while improving business quality and geographic diversification over the past decade. With the build-out phase largely complete, the manager expects focus to shift toward accelerating organic growth and margin expansion. The defensive characteristics of exchange businesses - reasonable growth, high incremental margins, and strong free cash flow conversion - provide downside protection. The manager believes current valuation fails to reflect the company's enhanced asset quality, operational capabilities, and future growth prospects.

Pitch Summary:
Adecco (Switzerland) is the second-largest generalist staffer globally, supplying temporary help and permanent placement services for a range of occupations. Adecco's performance in recent years has trailed its publicly traded peers Randstad and Manpower by a wide margin. We believe the company's new management, led by CEO Denis Machuel, has a credible strategy to correct many of the self-inflicted wounds that troubled the company in the past. Despite its cyclicality, a staffing business can provide strong returns on capital, cash conversion and growth over time. As its past under-performance is corrected, we believe Adecco has a credible path to high-single-digit earnings growth, which, combined with an undemanding valuation, creates attractive upside potential.

BSD Analysis:
The manager initiated a position in Adecco based on a turnaround thesis centered on new management's ability to correct past execution issues. As the world's second-largest generalist staffing company, Adecco has significantly underperformed peers Randstad and Manpower, creating an opportunity for operational improvement under CEO Denis Machuel's leadership. The investment case relies on the inherent attractiveness of the staffing business model, which can generate strong returns on capital, cash conversion, and growth over time despite cyclical headwinds. The manager expects the company to achieve high-single-digit earnings growth as management addresses self-inflicted operational wounds. Combined with what the manager views as an undemanding valuation, this operational improvement story offers attractive upside potential as performance converges toward industry peers.

Pitch Summary:
Viaplay (Sweden), a media and entertainment company, was the top detractor to the Fund's performance for the quarter. The company issued a profit warning in June and replaced its CEO with immediate effect. We believe Viaplay's difficulties are due to a convergence of a tough macro environment and a growth-minded former CEO who was slow to adapt, which prompted its board to opt for a course correction. We still believe that Viaplay is a good business and that quick and commercial action should be able to strengthen the company. Despite the disappointing guidance revisions, we still appreciate its Nordic business which has a 30-year track record of profitability, strong engagement metrics, and position as a leader in local and sports content. We look forward to the new plan and financial targets from CEO Jorgen Lindemann, the former CEO of MTG, which previously housed Viaplay.

BSD Analysis:
Despite Viaplay being the quarter's top detractor following a profit warning and CEO replacement, the manager maintains a bullish stance on the Swedish streaming company. The thesis rests on the underlying strength of the Nordic business, which boasts a 30-year profitability track record, strong engagement metrics, and leadership in local and sports content. The manager attributes recent difficulties to a convergence of macro headwinds and poor execution by the previous growth-focused CEO who was slow to adapt. The appointment of new CEO Jorgen Lindemann, former MTG chief who previously oversaw Viaplay, provides optimism for a strategic turnaround. The manager believes quick commercial action can strengthen the fundamentally sound business model, viewing current challenges as temporary execution issues rather than structural problems.

Pitch Summary:
SoftwareOne, a Swiss value added reseller (VAR), received an unsolicited offer of CHF 18.50 per share from Bain, which the board rejected. We believe Bain's offer materially undervalued SoftwareOne, so we supported the board's rejection of it. We were impressed by the independence displayed by SoftwareOne's board as Bain's offer had support of SoftwareOne's founders (who control just under 30% of the outstanding equity). It's worth noting the founders that supported the offer would have been able to rollover their investment in SoftwareOne—an opportunity not available to other shareholders.

BSD Analysis:
The manager views SoftwareOne as materially undervalued at Bain Capital's CHF 18.50 per share unsolicited offer, supporting the board's rejection of the bid. The investment thesis is strengthened by the board's independence, particularly impressive given that the company's founders (controlling just under 30% of equity) supported Bain's offer. The manager notes a potential conflict of interest where founders could roll over their investment while other shareholders would be cashed out at what the manager considers an inadequate price. This Swiss value-added reseller appears to be another private market validation of the manager's stock selection, though in this case the board's rejection preserves upside potential. The situation demonstrates the manager's confidence in intrinsic value exceeding private market offers.

Pitch Summary:
At Applus, a Spanish testing and inspection company, three private equity firms expressed interest during the quarter, and all were granted diligence rights. Ultimately, Apollo offered EUR 9.50 per share, which we believe undervalues Applus. Currently, Applus shares are trading above Apollo's offer price because one of the other interested firms engaged in diligence could respond with a higher offer. We appreciate the Applus board's willingness to allow a competitive bid process to develop.

BSD Analysis:
The manager believes Applus is undervalued at Apollo's EUR 9.50 per share offer, viewing the testing and inspection company as worth more than the proposed acquisition price. The investment thesis is supported by multiple private equity firms showing interest, with three firms granted due diligence rights during the quarter. The competitive bidding environment has driven shares above Apollo's offer price, suggesting market expectations for a higher bid. The manager appreciates the board's approach of allowing a competitive process to develop, contrasting favorably with Software AG's handling of its takeover situation. This represents an active M&A situation where the manager expects value realization through a potential bidding war among interested private equity buyers.