Investment Pitches

Pitch Summary:
In the second quarter we took a position in Sabine Royalty Trust (NYSE: SBR). Sabine owns royalty interests in over five thousand tracts of land containing over 2 million gross acres (over 200 thousand net acres) of producing and proved undeveloped oil and natural gas properties in Florida, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas which include the Permian, Anadarko, Gulf Coast, East Texas, and Arkoma basins. Over many years and decades, we expect the oil and gas-producing properties owned by the Sabine Royalty Trust to deplete, however we believe that there is a good chance that this investment will earn a reasonable rate of return from the future distributions which are collected from this asset. As such, we emphasize the importance of not reinvesting the trust dividends back into the royalty trust as we expect the trust corpus itself to decline in value over a long time period. Royalty trusts have certain tax-advantages as the IRS permits unit-holders to deduct depletion expenses against the royalty income received. However, as tax filing and compliance costs can be onerous, we made these purchases solely in client accounts which are tax-advantaged (IRA, 401K, and other tax-deferred and tax-free accounts). If you have a taxable account with us and you want to own SBR and are willing the bear the administrative burden of filing multiple state tax returns please let us know.

BSD Analysis:
Atherean presents SBR as a low-cost, low-capex toll-collector on U.S. oil and gas production with diversified acreage and long-lived reserves. The trust structure eliminates operating expenses and passes nearly all royalty income directly to unitholders, creating attractive yield characteristics. The manager highlights that tax-deferred accounts maximize after-tax returns due to state withholding and multi-state filing requirements. SBR fundamentals show stable distributable income tied to commodity prices, no leverage, and declining but diversified reserves, which historically support mid-single-digit long-term returns. While depletion risk is inherent, the trust’s vast acreage increases the probability of additional reserves and ongoing production. The investment is positioned as a yield vehicle with commodity-linked upside and minimal operating risk.

Pitch Summary:
Toyota is referenced as a beneficiary of Japan’s governance reforms, improving capital allocation, and stronger shareholder return policies. The company continues to recover production volumes as semiconductor shortages ease and maintains leadership in hybrid powertrains. Management has demonstrated increasing willingness to improve transparency and engage on cross-shareholdings, which historically depressed valuations. Toyota’s product breadth provides resilience across demand cycles, while balance sheet strength underpins continued investment in electrification and autonomous technologies.

BSD Analysis:
Toyota is emerging as one of the clearest beneficiaries of Japan’s ongoing governance reforms, with management demonstrating greater discipline around capital allocation, transparency, and the unwinding of cross-shareholdings that historically weighed on valuation. As semiconductor constraints ease, the company is steadily restoring production volumes across its global footprint, reinforcing earnings momentum. Toyota’s leadership in hybrid powertrains remains a major competitive advantage, allowing it to meet tightening emissions standards while maintaining profitability in segments where pure EV economics are still challenging. Its exceptionally broad product lineup provides resilience across consumer demand cycles, giving Toyota stability that most automakers cannot match. A pristine balance sheet allows the company to continue investing heavily in electrification, solid-state battery development, and autonomous technologies without stretching capital. These strengths, combined with improving shareholder return policies, position Toyota for a sustained rerating as governance quality continues to improve. Overall, the company offers a compelling blend of cyclical recovery, structural technological leadership, and emerging capital-allocation tailwinds.

Pitch Summary:
TSMC is noted as an attractive AI beneficiary given its unrivaled leadership in advanced process nodes, essential for both training and inference chips. Demand for 3nm and forthcoming 2nm nodes is expected to remain extremely strong, driven by hyperscaler investment in AI. Despite significant capex commitments, TSMC continues to deliver high ROIC and maintain pricing power due to its technological lead. Geopolitical tensions are acknowledged but are incorporated into scenario analysis.

BSD Analysis:
TSMC is the dominant enabler of global AI compute, holding an unchallenged lead in advanced process nodes that are essential for both training chips and inference accelerators. Demand for its 3nm platforms and the upcoming 2nm generation remains exceptionally strong, driven by hyperscalers racing to expand AI capacity and shift workloads onto the most energy-efficient silicon available. This technological edge gives TSMC meaningful pricing power, allowing it to sustain high returns on invested capital even while executing one of the largest capex programs in corporate history. The firm’s scale advantage is self-reinforcing: no other foundry can match its yield learning, manufacturing precision, or cadence of node advancement. While geopolitical tensions are a real consideration, they are already incorporated into valuation frameworks, and the company continues to diversify manufacturing with new capacity in the US, Japan, and Europe. TSMC’s balance sheet strength and deep customer partnerships further enhance visibility and reduce volume risk. For investors seeking long-term AI exposure, TSMC remains the most critical and hardest-to-replicate link in the semiconductor supply chain.

Pitch Summary:
Mondrian highlights Samsung as an emerging-market AI beneficiary due to improving memory-market dynamics, with supply discipline and rising AI-server demand driving DRAM and HBM pricing inflection. The fund views Samsung as cyclically depressed but structurally advantaged, with operating leverage to a memory super-cycle supported by AI adoption. The company’s large net-cash balance sheet provides resilience and optionality for shareholder returns.

BSD Analysis:
Samsung is one of the clearest emerging-market beneficiaries of the AI boom, with its memory business positioned at the center of accelerating demand for DRAM and high-bandwidth memory used in AI servers. After a deep cyclical downturn, supply discipline across the industry and surging AI-server orders are driving a powerful pricing inflection that directly benefits Samsung’s scale-advantaged manufacturing base. The company remains structurally advantaged as one of only a few players capable of producing leading-edge memory at competitive yields, giving it strong operating leverage as the cycle turns. Rising HBM penetration in AI workloads provides a multi-year tailwind, and Samsung’s roadmap positions it well to capture share as customers diversify sourcing beyond a single supplier. Despite near-term earnings pressure from the trough, the business retains a massive net-cash balance sheet, which provides resilience and optionality for future buybacks, capex, or strategic investment. With fundamentals improving and the AI-driven memory super-cycle still early, Samsung offers an attractive mix of cyclical recovery and long-term structural upside.

Pitch Summary:
Sony is highlighted as a Japanese beneficiary of AI-related demand, particularly in image sensors for smartphones and emerging applications like autonomous systems and robotics. The company continues to strengthen its content ecosystem through gaming and streaming, supporting recurring revenue streams. Sony’s capital allocation strategy has shifted toward shareholder returns, including buybacks, enabled by robust free cash flow and strong balance sheet health. Exposure to multiple structurally growing end markets gives Sony resilience despite cyclical consumer-electronics softness.

BSD Analysis:
Sony is well positioned as a key Japanese beneficiary of AI-driven demand, particularly through its world-leading image sensor business, which is central to smartphones, autonomous systems, and emerging robotics applications. As these markets scale, Sony’s technological lead in high-resolution, low-power CMOS sensors gives it a durable competitive edge and strong pricing power. Beyond semiconductors, the company continues to deepen its content ecosystem across gaming, music, and streaming, adding more recurring and subscription-based revenue to what was once a cyclical portfolio. PlayStation remains one of the strongest global gaming platforms, and ongoing investments in first-party content further lock in user engagement. Sony’s balance sheet strength and robust free cash flow have enabled a shift toward more shareholder-friendly capital allocation, including consistent buybacks. With exposure to multiple structurally growing end markets, Sony is far more resilient than a traditional consumer electronics manufacturer. The combination of AI-linked sensor demand, content-driven recurring revenue, and increasing shareholder returns creates a compelling long-term setup.

Pitch Summary:
Dell is identified as a beneficiary of surging AI-related infrastructure demand, particularly in high-performance servers and GPU-dense architectures. The firm has gained share in selected enterprise segments due to its supply-chain capabilities and strong relationships with hyperscalers. Recent earnings surprised positively, with AI-server backlog building meaningfully. Mondrian views Dell as an attractively valued beneficiary of early-stage AI hardware deployment, even if mainstream AI monetization remains uncertain.

BSD Analysis:
Dell is emerging as a meaningful beneficiary of the first wave of AI infrastructure build-out, with demand surging for its high-performance servers and GPU-dense architectures. Its supply-chain strengths and long-standing enterprise relationships have helped it gain share in key segments where reliability and rapid delivery are critical. Recent earnings confirmed this momentum, with AI-server backlog expanding sharply as hyperscalers and large enterprises ramp capacity. While the broader monetization of AI remains early and uneven, Dell is already capturing the hardware spend that must occur before any downstream value is realized. The company’s integrated design, manufacturing, and logistics model gives it an edge in navigating component constraints and meeting short lead-time requirements for complex AI systems. Valuation remains attractive relative to the scale of the infrastructure cycle underway, with the market still discounting AI demand as potentially transient. As deployments expand and backlog converts into revenue, Dell stands to be one of the clearer early-stage winners in AI hardware.

Pitch Summary:
Mondrian highlights Meta as a beneficiary of AI investments that materially enhance engagement, content personalization, and advertiser ROI. The company has driven a significant recovery in profitability following cost discipline initiatives and a focus on improving the efficiency of its data-center and model-training infrastructure. Meta’s scale advantages in AI-driven recommendation systems underpin accelerating time-spent metrics across Facebook and Instagram. With a strong balance sheet and improving free cash flow, Meta remains well positioned to compound earnings as AI application monetization broadens across ad formats and messaging.

BSD Analysis:
Meta is becoming one of the clearest AI winners in the consumer internet space, using large-scale model investments to materially improve engagement, content ranking, and advertiser ROI across its platforms. Advances in recommendation systems are driving meaningful gains in time spent on Facebook and Instagram, reinforcing Meta’s unmatched scale advantage in data and model training. After several years of elevated spending, the company has executed a sharp profitability recovery through disciplined cost management and more efficient data-center buildouts. These improvements have restored operating leverage at a time when AI-enhanced ad formats are gaining traction and lifting monetization. Meta’s balance sheet remains exceptionally strong, and rising free cash flow gives the company ample capacity for continued buybacks and long-term AI investment. As AI applications broaden into messaging, business tools, and more immersive ad experiences, Meta has multiple avenues to compound earnings. The company’s combination of scale, model sophistication, and financial strength keeps it positioned as a durable long-term compounder in the AI-enabled ad ecosystem.

Pitch Summary:
In this past quarter we have made one portfolio trade, swapping Equinor for Shell which, on our estimates, enhances the portfolio’s long-term earnings power significantly. We currently have two stocks in the energy sector and, as explained in previous notes, our investment thesis is one rooted in the capital cycle. We continue to track the reinvestment rates of global energy companies which, having fallen to a multi-decade low, are clearly not rising as they have in previous cycles. Oil prices are set by the intersection of supply and demand and have been shown to have a very tight correlation to global commercial inventories. This chart shows that logical effect in action (note inventories are shown inverted on the y-axis – lower inventories driving higher prices). On this basis, the current $80 oil price is to be expected given the levels of inventories in the system. Predicting the oil price is notoriously difficult, although the above framework provides a sense of asymmetry to our oil price expectations. With this macro context in mind, the portfolio trade this quarter was not a result of a bearish view on oil prices per se, but primarily a result of us not having a strong view on European gas prices returning to their 2022 highs (which drive Equinor’s earnings significantly). As a reminder, Equinor is a high-quality European gas producer generating 90% of its operating income from the Norwegian continental shelf (a high quality, geopolitically important energy source), with 50% of its production being gas. It has an incredible asset in Johan Sverdrup, and in May this year it was announced that production could increase to 755,000 b/d, which is about 7% of the total daily European oil consumption.6 We do not doubt its asset quality. European gas prices reached unprecedented levels in 2022 because of Putin’s invasion. This was a result of a confluence of factors. Namely, the Nord Stream (Russian) gas pipeline being shut off, a lack of a reliable energy source to replace Russian gas (there has been a scramble to build LNG terminals) and low gas storage before what could have been a cold European winter. Equinor has profited handsomely from this, generating 40% of its market cap in free cashflow since 2022.7 On a prospective basis, European gas prices have less visible upside than oil prices, and no clear asymmetry. Shell has been on our shelf of ideas for some time and is a large integrated European energy company with a greater liquids business than Equinor. Like BP, it remains diversified with an oil & gas, chemicals, and marketing business, and is also building out a renewables business, but at a pace which reflects the economic returns available across its assets. Similarly to BP, Shell trades at almost a 50% discount to the US integrated oil companies due to its UK primary listing, despite their similar structures and exposures. Growth rates look comparable over the next five years, and we would rather a starting earnings yield of 15% to one of 9%, giving us a meaningful margin of safety as well as incrementally more upside should the shares rerate in line with global peers.

BSD Analysis:
Latitude’s Shell thesis is a classic capital-cycle trade: they see a disciplined integrated major with a greater liquids mix than Equinor, benefiting from structurally constrained upstream investment and an oil price supported by tight inventories. They highlight Shell’s diversified portfolio across upstream, LNG, chemicals, marketing and measured renewables, arguing that management is allocating capital based on economic returns rather than chasing volume or politics. At the same time, Shell trades at a large discount to U.S. supermajors, with a mid-single-digit dividend yield, high-single-digit earnings yield and EV/EBITDA around the mid-single digits, leaving ample scope for both cash returns and re-rating. Strong free cash flow supports a mix of dividends and buybacks, and if management maintains capex discipline while continuing to simplify the portfolio, the stock can compound at double-digit total returns even on flat oil prices. Main risks are a sharp cyclical downturn in energy demand, political pressure on fossil fuels and execution missteps in its transition and chemicals businesses.

Pitch Summary:
In this past quarter we have made one portfolio trade, swapping Equinor for Shell which, on our estimates, enhances the portfolio’s long-term earnings power significantly. We currently have two stocks in the energy sector and, as explained in previous notes, our investment thesis is one rooted in the capital cycle. We continue to track the reinvestment rates of global energy companies which, having fallen to a multi-decade low, are clearly not rising as they have in previous cycles. Oil prices are set by the intersection of supply and demand and have been shown to have a very tight correlation to global commercial inventories. This chart shows that logical effect in action (note inventories are shown inverted on the y-axis – lower inventories driving higher prices). On this basis, the current $80 oil price is to be expected given the levels of inventories in the system. Predicting the oil price is notoriously difficult, although the above framework provides a sense of asymmetry to our oil price expectations. With this macro context in mind, the portfolio trade this quarter was not a result of a bearish view on oil prices per se, but primarily a result of us not having a strong view on European gas prices returning to their 2022 highs (which drive Equinor’s earnings significantly). As a reminder, Equinor is a high-quality European gas producer generating 90% of its operating income from the Norwegian continental shelf (a high quality, geopolitically important energy source), with 50% of its production being gas. It has an incredible asset in Johan Sverdrup, and in May this year it was announced that production could increase to 755,000 b/d, which is about 7% of the total daily European oil consumption.6 We do not doubt its asset quality. European gas prices reached unprecedented levels in 2022 because of Putin’s invasion. This was a result of a confluence of factors. Namely, the Nord Stream (Russian) gas pipeline being shut off, a lack of a reliable energy source to replace Russian gas (there has been a scramble to build LNG terminals) and low gas storage before what could have been a cold European winter. Equinor has profited handsomely from this, generating 40% of its market cap in free cashflow since 2022.7 On a prospective basis, European gas prices have less visible upside than oil prices, and no clear asymmetry. Shell has been on our shelf of ideas for some time and is a large integrated European energy company with a greater liquids business than Equinor. Like BP, it remains diversified with an oil & gas, chemicals, and marketing business, and is also building out a renewables business, but at a pace which reflects the economic returns available across its assets. Similarly to BP, Shell trades at almost a 50% discount to the US integrated oil companies due to its UK primary listing, despite their similar structures and exposures. Growth rates look comparable over the next five years, and we would rather a starting earnings yield of 15% to one of 9%, giving us a meaningful margin of safety as well as incrementally more upside should the shares rerate in line with global peers.

BSD Analysis:
Latitude describes Equinor as a high-quality Norwegian, gas-weighted producer with world-class assets like Johan Sverdrup that has already monetised the extraordinary 2022 gas price spike, generating roughly 40% of its market cap in free cash flow. They nonetheless view the forward risk-reward as less compelling because European gas prices lack the clear asymmetric upside they see in oil, and because much of Equinor’s windfall has been realised. On fundamentals, Equinor still screens inexpensive at roughly 10x 2025 earnings with a mid-single-digit dividend yield and EV/EBITDA around the low single digits, reflecting both cyclicality and European policy risk. The manager’s decision to rotate capital suggests they prefer to lock in gains and redeploy into more liquids-exposed, higher-earnings-yield integrated majors where the perceived margin of safety is greater. Key watchpoints for Equinor from here are commodity prices, Norway’s tax regime and capital allocation between dividends, buybacks and energy-transition investments.

Pitch Summary:
WMT exposed itself to significant business risk by rewarding $12 bil contract to SYM; lack of proper due diligence and conflict of interest for this contract; the company will have to invest more capex; projected FCF is lower;

BSD Analysis:
Walmart faces margin pressure from inflation, labor costs, and e-commerce competition. Shorts argue the scale advantage is offset by slowing comps, international drag, and potential multiple compression if growth moderates.

Pitch Summary:
The shitco that is most overhyped coming into the Russell index (1,500% since its reverse merger; the company is underfunded; promotion of an old technology; no signs of economic validity; 95% downside; Update 7/12 - Follow-up report: More delays and the short thesis stays the same.

BSD Analysis:
374Water develops wastewater treatment solutions. Shorts highlight speculative valuation, reliance on government contracts, and slow commercialization. Revenue is minimal relative to market cap, creating a disconnect between fundamentals and expectations.

Pitch Summary:
The technology is not cutting-edge with no innovation and competitiveness; implemented only four systems since 2007; low retention ratio in the management team; inexperienced to fulfill WMT's contract obligations; Update 8/23 - NINGI tweeted that insiders sold $1.4bil of shares.

BSD Analysis:
Symbotic builds warehouse automation systems, with Walmart as both customer and investor. Shorts focus on customer concentration, high valuation, and execution risk. Walmart dominates backlog, making revenues dependent on a single client. Robotics execution is complex, with delays likely. Competition from Ocado and logistics majors looms. Valuation assumes perfect execution and diversification that is not yet proven.

Pitch Summary:
The company has only 8-months of cash even after its recent cash infusion; its Jet is capable of flying for only a few minutes; the claimed battery technology is unable to be verified; unrealistic project pipelines; Update 10/24/24 - The company announced that it is facing a near-term insolvency. After nine years, its jet is unable to fly for more than a few minutes; misrepresented battery specifications;

BSD Analysis:
Liberty Latin America operates broadband, wireless, and cable across LatAm. Bears cite FX volatility, weak ARPU, and capex intensity. Competition erodes pricing power, macro instability compresses cash flow, and debt levels are high. Catalysts: churn, FX impact, regulation, leverage trajectory. Counterpoints: mobile data growth is secular, but profitability capped by low-income markets.

Pitch Summary:
We've added a short position: Sunrun Inc. Sunrun is one of the most cash-destructive businesses we've ever come across, with the solar installation firm burning more than $1b every year since 2019 to put panels on roofs. The company claims that GAAP accounting – which tallies negative retained earnings of around $70m since the birth of the company — cannot quite comprehend the economic value the company generates. Instead, management stresses mark-to-model accounting that reminds us of Enron. Unsurprisingly, Jim Chanos, one of the most vocal Enron short sellers, is all over Sunrun as well. As he and Carson Block of Muddy Waters point out, the only way for the company to show positive unit economics is to make very favorable assumptions about contract renewals and maintenance costs. Muddy Waters estimates that the true economic value of the company's contracts is up to 90% lower than described by management. We would also add that higher interest rates are not likely to help the economics of solar installations, and should lead to much lower net subscriber values. Our average price for the short position was $23.14.

BSD Analysis:
Bireme Capital presents a scathing bear case against Sunrun, characterizing it as one of the most cash-destructive businesses they've encountered. The fund's short thesis rests on fundamental skepticism of the company's accounting practices, noting over $1 billion in annual cash burn since 2019 and negative retained earnings since inception. The manager draws explicit parallels to Enron, criticizing management's reliance on mark-to-model accounting over GAAP metrics to justify economic value creation. The fund aligns with prominent short sellers Jim Chanos and Carson Block, who argue that positive unit economics require unrealistic assumptions about contract renewals and maintenance costs, with Muddy Waters estimating true contract values are 90% lower than management claims. The bear case is further strengthened by rising interest rates, which should pressure the economics of solar installations and reduce net subscriber values, making this an opportunistic short in a challenging rate environment.

Pitch Summary:
In April we made a significant new investment in the company Airtel Africa. Airtel is a leading mobile wireless operator in Sub-Saharan Africa, with operations in 14 countries and #1 or #2 market share in nearly all of them. Their business has exhibited consistent revenue growth as subscribers and pay-per-gigabyte data usage grow exponentially. Operating income has doubled since FY 2019. Airtel also operates a leading peer-to-peer payments network which did over $300m in EBITDA last year. This business has been growing at double-digit rates for years as unbanked Africans switch from cash to digital payments, typically provided by their mobile operator. Airtel is likely to facilitate more than $100b in transfers this year. Despite this secular growth story, the stock trades at 8.5x earnings and an even lower multiple of maintenance free cash flow. We think that the stock is suffering from familiarity bias, the tendency for investors to focus on stories they know and understand well. Airtel's operations are across 14 African countries, but it trades in London, reports in US dollars, and is majority owned by an Indian telecom operator. This makes a natural investor base hard to find. Contrast this with Airtel's peer MTN, which is one of the premier firms listed locally on the Johannesburg Stock Exchange and has historically traded at a substantially higher multiple. Given that Airtel has tripled EBIT since 2018, in contrast to MTN's mere 50% growth in USD, we are happy to own Airtel as long as the discount persists and the business continues thriving. Our average price is around 115 GBp per share.

BSD Analysis:
Bireme Capital identifies Airtel Africa as a compelling secular growth story trading at deep value multiples due to structural investor neglect. The fund's thesis centers on Airtel's dominant market positions (#1 or #2 in nearly all 14 African markets) and exposure to two powerful secular trends: exponential mobile data growth and the digitization of payments across unbanked African populations. The manager highlights impressive fundamental performance, with operating income doubling since 2019 and the mobile money business generating over $300m in EBITDA while facilitating $100b+ in annual transfers. Despite this growth trajectory, the stock trades at just 8.5x earnings due to what the fund identifies as familiarity bias - the company's complex structure (African operations, London listing, USD reporting, Indian ownership) creates an orphaned security without a natural investor base. The fund contrasts this with peer MTN's premium valuation despite inferior growth metrics, suggesting significant multiple expansion potential as the discount closes.

Pitch Summary:
Cogeco Inc, our Canadian broadband investment, has been a material loser with the stock down 20% YTD. Shares have now lost 10% over the past five years, significantly trailing the broader market. This is despite earnings growing from 6 CAD per share in 2017 to over 9 CAD per share last year. While earnings have grown, investors have become concerned about a decline in near-term free cash flow. This metric has fallen from CAD 487m in FY2021 to CAD 362m on a trailing 12-month basis. Cogeco has explained that this is due to CAD 200m of network expansions, and that otherwise free cash flow would be flat this year. Still, even flat earnings and FCF are concerning due to the growth capex being spent: earnings should be expanding. That being said, any short-term concerns about free cash flow appear overly discounted in the stock, which trades at a PE ratio of around 5x.

BSD Analysis:
Bireme Capital maintains conviction in Cogeco despite significant underperformance, presenting a classic value opportunity in Canadian broadband infrastructure. The manager acknowledges the stock's poor performance (-20% YTD, -10% over five years) while highlighting strong fundamental earnings growth from CAD 6 to over CAD 9 per share since 2017. The investment thesis rests on the market's overreaction to temporary free cash flow compression, which declined from CAD 487m to CAD 362m due to CAD 200m in network expansion investments. While the manager concedes that flat earnings amid growth capex spending is concerning, they argue the 5x P/E ratio more than compensates for these near-term headwinds. This represents a contrarian bet on Canadian telecom infrastructure, where the fund believes market pessimism has created an attractive entry point for a quality broadband operator with improving earnings power.

Pitch Summary:
Our biggest winner through May 2023 has been Meta Platforms. The stock is up 120%, with business results surprising to the upside on both revenue and expenses. On expenses, the company announced two large layoffs since we initiated our position last year: 10,000 in Nov and 11,000 in March. The impact of these layoffs has been dramatic. Our initial estimate of 2023 expenses made back in early 2022 was nearly $100b, but we now forecast 2024 expenses of just $85b. And it is not just near-term expenses that are getting cut: Zuckerberg told employees in April to expect ongoing employee growth of 1-2% per year. This is far below previous levels of 20-30%. Given our estimates of mid-single-digit revenue growth, Meta could exhibit material operating leverage going forward and $20 in core EPS is in sight.

BSD Analysis:
Bireme Capital presents a compelling bull case for Meta Platforms based on dramatic operational efficiency improvements following significant workforce reductions. The fund's thesis centers on the company's successful cost-cutting initiatives, with two major layoffs totaling 21,000 employees driving expenses down from an estimated $100 billion to $85 billion. The manager highlights a fundamental shift in Meta's growth strategy, with employee growth slowing from 20-30% annually to just 1-2%, creating substantial operating leverage potential. With mid-single-digit revenue growth expectations and dramatically reduced expense growth, the fund sees a path to $20 in core earnings per share. The 120% stock appreciation validates their investment thesis, demonstrating how operational discipline can drive significant shareholder value creation. This represents a classic value creation story through margin expansion rather than top-line growth acceleration.

Pitch Summary:
Lastly, MEI Pharma not only suffered from the pronounced under-performance of the biotech segment overall, suffering one of the worst multi-year sell-offs in industry history, but also from the FDA's unwillingness to approve its later stage drug candidate based on previously-agreed upon data that the company achieved. Accordingly, we saw price-agnostic selling in the company as investors used an unfashionable industry with bad news as an excuse to liquidate holdings at less than a quarter of the cash on the balance sheet. We took advantage of this price-agnostic selling subsequent to the quarter and welcome efforts by owners to assert more control over this company. We believe owners manage businesses better than independent agents that are more often appointed to run businesses.

BSD Analysis:
GreenWood's MEI Pharma position reflects a contrarian value play in a severely distressed biotech sector experiencing historic multi-year selloffs. The manager views the FDA's rejection of the company's late-stage drug candidate as particularly frustrating since the company had achieved previously agreed-upon data endpoints. This regulatory setback, combined with broader biotech sector weakness, created what GreenWood characterizes as price-agnostic selling pressure. The investment thesis centers on an extreme valuation disconnect, with shares trading at less than 25% of the company's cash balance, suggesting significant downside protection. GreenWood increased their position following the quarter, viewing the selling as irrational and opportunity-driven rather than fundamentally justified. The manager expresses optimism about potential ownership changes and governance improvements, believing owner-operators manage businesses more effectively than independent management teams. This aligns with their broader investment philosophy favoring companies with significant insider ownership and long-term oriented leadership. The position represents a deep value opportunity with substantial upside potential if the company can navigate regulatory challenges or attract more constructive ownership.

Pitch Summary:
As discussed in prior letters, a dramatic over-reaction by investors to a delayed reporting of full year results in S4 Capital caused a significant draw-down in Sir Martin Sorrell's disruptive digital ad and services business earlier in the year. While a delay in the audit caused investors to flee, the audited figures released a couple months later showed immaterial changes from the preliminary unaudited figures. Furthermore, the company's consistent market share gains have continued, and it maintains one of the best growth rates in the industry — which it continues to disrupt. While digital advertising is currently out of favor, as is the cannabis industry, these companies continue to grow and position their businesses for the future. Both companies are managed by substantial owners of the business, and they continue to build their businesses with multi-year time horizons.

BSD Analysis:
GreenWood views S4 Capital's dramatic selloff as a classic market overreaction to temporary reporting delays rather than fundamental business deterioration. The manager emphasizes that the eventual audited results showed immaterial differences from preliminary figures, validating their thesis that the market panic was unjustified. S4 Capital's competitive positioning remains strong, with consistent market share gains and industry-leading growth rates in the disruptive digital advertising space. The company benefits from Sir Martin Sorrell's leadership and substantial ownership stake, aligning management incentives with long-term value creation. GreenWood appreciates the multi-year investment horizon approach, which contrasts with short-term market sentiment. The manager acknowledges that digital advertising is currently out of favor but views this as a temporary fashion shift rather than structural decline. The investment thesis relies on the company's continued execution in gaining market share and disrupting traditional advertising models. GreenWood's conviction stems from the combination of strong fundamentals, owner-operator management, and attractive valuation following the market overreaction.

Pitch Summary:
Investors shunned the cannabis stocks as hope for new banking legislation faded. Even still, Verano is free-cash-flow positive despite onerous double taxation of its operations. It continues to organically expand its footprint in attractive regulated states, while maintaining its industry-leading profitability and free-cash-flow margins. As the Biden administration heads into an election year, we are optimistic about the sectors' potential to come back into fashion as the President looks to de-schedule the substance, and therefore eliminate the onerous double taxation. That will bring Verano's free-cash-flow yield from 5.5% today to over 15%.

BSD Analysis:
GreenWood maintains a bullish stance on Verano despite significant underperformance, viewing the cannabis sector's decline as a temporary fashion shift rather than fundamental deterioration. The manager emphasizes Verano's operational excellence, highlighting its free-cash-flow positive status despite facing onerous double taxation that other industries don't endure. The company's organic expansion strategy in attractive regulated states while maintaining industry-leading profitability margins demonstrates strong execution capabilities. The investment thesis centers on a potential regulatory catalyst, with the manager anticipating cannabis de-scheduling under the Biden administration during the election year. This regulatory change would eliminate double taxation, dramatically improving the company's free-cash-flow yield from 5.5% to over 15%. The manager views current market sentiment as disconnected from the company's fundamental strength and growth trajectory. GreenWood's conviction appears rooted in both the company's operational performance and the significant valuation upside from potential regulatory reform.