Investment Pitches

Pitch Summary:
Millicom - Latin American wireless and cable company Millicom was the top contributor in the quarter after being a top detractor in 2021/2022. Millicom returned almost 50% in the quarter amid news of two interested third parties. In January, rumors broke (and were later substantiated) that Apollo Global Management and former SoftBank executive Marcelo Claure were exploring a potential acquisition. Separately, French billionaire Xavier Niel, founder of French broadband Internet provider Iliad, built a 21% ownership stake over the last several months via his investment vehicle Atlas Investissement. As a long-term, large, potentially anchor holder, he took a seat on the Nomination Committee, where Southeastern also has a seat. The Nomination Committee's primary responsibilities are to identify potential board members, propose the compensation for all directors and present proposals on the election and compensation of the statutory auditor. Niel is asking for multiple board seats as well, highlighting his active interest in the business. Millicom sells for an incredibly low multiple of discretionary cash flow before cable and fiber growth capital expenditure. We believe Millicom offers significant potential upside from today's still overly discounted price.

BSD Analysis:
Southeastern maintains a bullish stance on Millicom, a Latin American wireless and cable operator that delivered exceptional 50% returns in Q1 2023 after being a significant detractor in prior years. The investment thesis centers on potential M&A activity with two credible suitors emerging: Apollo Global Management with former SoftBank executive Marcelo Claure exploring acquisition, and French billionaire Xavier Niel building a substantial 21% stake through Atlas Investissement. Niel's active involvement, including securing a board seat and seeking additional representation, signals serious strategic interest beyond passive investment. The company trades at attractive valuation metrics, specifically at low multiples of discretionary cash flow before growth capex. Management engagement through board representation provides Southeastern with governance influence alongside Niel. The convergence of M&A interest, activist involvement, and compelling valuation creates multiple paths to value realization. Despite recent strong performance, management believes the stock remains meaningfully undervalued relative to intrinsic worth.

Pitch Summary:
Global fiber company Lumen was the top detractor in the quarter on the back of disappointing guidance. Revenues remained weak, and the company surprised negatively by cutting guidance by an additional $500 million in the quarter. New CEO Kate Johnson reiterated the potential for strong enterprise sales improvement, but this will require further selling, general, and administrative (SG&A) investment. Additionally, the company is spending to accelerate the automation of its middle market business, while also running off its declining legacy business. We still believe the key to unlocking the price-to-value gap is a strategic sale or separation of the consumer business, but the current financial pressure likely extends that timeline. To the positive, Lumen retired over $600 million debt in an exchange of new senior debt to retire existing unsecured debt. We reduced our Lumen position in the quarter and remain actively engaged with management and the board.

BSD Analysis:
Longleaf Partners expresses a bearish near-term outlook on Lumen Technologies following significant operational disappointments and guidance cuts. The company reduced revenue guidance by an additional $500 million during the quarter, highlighting persistent weakness in core business segments. While new CEO Kate Johnson articulates potential for enterprise sales improvement, execution requires substantial SG&A investment with uncertain returns. The company faces the dual challenge of investing in middle market automation while managing declining legacy business cash flows. Financial pressure has likely delayed the strategic separation of the consumer business, which Longleaf views as critical to unlocking intrinsic value. Despite positive debt reduction of over $600 million through refinancing, the operational headwinds and extended timeline for strategic alternatives prompted position reduction. The fund remains engaged with management but acknowledges the challenging path to value realization given current financial constraints and competitive pressures.

Pitch Summary:
Global hotel franchisor and owner Hyatt was also a top performer in the quarter, continuing its positive performance from 2022. While we are likely in the later stages of the hotel cycle that may be facing more economic worries from here, Hyatt uniquely skews towards group properties that still have room to rebound further post-COVID. It is also much less skewed to more volatile owned property cash flow than its previous years as a public company. Hyatt benefited in the quarter from leaked news that the company is likely to sell more assets and to use proceeds to buy back shares and build balance sheet strength.

BSD Analysis:
Longleaf Partners maintains a bullish stance on Hyatt Hotels despite acknowledging late-cycle hospitality market conditions and potential economic headwinds. The investment thesis centers on Hyatt's differentiated exposure to group properties, which retain significant post-COVID recovery potential compared to leisure-focused competitors. The company has strategically shifted its business model away from volatile owned property cash flows toward a more stable franchise-heavy structure, reducing operational risk and improving capital efficiency. Recent asset monetization plans provide multiple value creation levers through share buybacks and balance sheet optimization. Hyatt's group-oriented property mix positions it to benefit from continued corporate travel normalization and events recovery. The combination of defensive business model transformation and cyclical recovery tailwinds creates an attractive risk-adjusted return profile. Management's capital allocation strategy of asset sales and shareholder returns demonstrates disciplined value creation focus.

Pitch Summary:
Health insurance and software platform Oscar Health was the top contributor in the quarter after the stock returned over 150% in the period. While tech businesses and other speculative stocks saw a rally in the first quarter, Oscar's stock price move was a direct result of announcing a new CEO, Mark Bertolini. He has a fantastic track record as the long-time CEO of Aetna, which he shifted to be a more consumer-oriented plan and ultimately sold to CVS for $69 billion. Bertolini has been a strategic advisor to Oscar for the last year and knows the company well. He noted on the call announcing his appointment that he "believes in the mission" and the ability to "create significant shareholder value...as either a health plan or as a service to others." His first priority is getting the health plan segment to positive adjusted EBITDA this year. The company reiterated at the end of the quarter that it is on track to achieve this metric. Not only does Bertolini taking the job provide validation of the business, but his compensation package uniquely aligns him in creating shareholder value. It consists of 10.3 million restricted shares, three-quarters of which only vest at stock price hurdles of $11, $16 and $39. Even after the large increase in the quarter, the stock trades at nearly half of the $11 threshold where Bertolini starts really getting paid.

BSD Analysis:
Longleaf Partners presents a compelling bull case for Oscar Health centered on transformational leadership change and operational inflection. The appointment of Mark Bertolini as CEO represents a significant catalyst, given his proven track record of building Aetna into a consumer-focused health plan and executing a successful $69 billion exit to CVS. His compensation structure creates exceptional alignment with shareholders through equity hurdles at $11, $16, and $39 per share, with three-quarters of his 10.3 million restricted shares tied to these performance milestones. The company is positioned to achieve positive adjusted EBITDA in the health plan segment this year, marking a critical profitability milestone. Bertolini's dual strategic vision of value creation either as a standalone health plan or technology service provider to others provides multiple paths to monetization. The current stock price trades at nearly half the $11 threshold where meaningful CEO compensation begins, suggesting significant upside potential. The 150% quarterly return validates the market's confidence in this leadership transition and strategic direction.

Pitch Summary:
Imperial Oil is an integrated Canadian oil producer and our largest oil position. Even if oil trades at $60 per barrel while Imperial Oil's share price is $47 per share, a free cash flow yield of 13% can still be achieved. At Capicraft, we look for such asymmetric investment outcomes: limited risk but significant price moves to the upside.

BSD Analysis:
The manager presents Imperial Oil as their largest energy position with compelling downside protection and asymmetric upside potential. The investment thesis is built on conservative stress-testing, showing the company can generate a 13% free cash flow yield even at $60 oil prices while trading at $47 per share. This demonstrates strong cash generation capabilities and margin of safety. The manager positions this as an asymmetric bet with limited downside risk but significant upside potential as oil prices recover. Given OPEC production cuts of 1.5 million barrels per day and 17-year low oil inventories, the setup appears favorable for energy producers. The integrated nature of Imperial Oil's operations provides additional stability compared to pure-play exploration companies.

Pitch Summary:
Also, our second largest position, Burford Capital, finally started hitting runs for us. Burford is the world's largest litigation financier, earning an average of 30% in its litigation book. Due to Covid, many court cases were postponed, Burford's debt had to be refinanced urgently, and prominent analysts questioned Burford's business model. But everything changed on 31 March 2023. A long-awaited court ruling was decided in Burford's favour. In terms of this ruling, Argentina owes billions of dollars to (among others) Burford—these amounts may be multiples of Burford's current share price. On 31 March 2023, Burford's share price rose by 54%. Other concerns have also been addressed and Burford can now finally be valued for what it is: a business that can earn high capital returns without much correlation to the wider financial markets. In April 2023, Burford's share price rose further, but our valuation is still multiples of the current share price.

BSD Analysis:
The manager presents a compelling turnaround thesis for Burford Capital, the world's largest litigation financier. The investment case centers on a major catalyst - a favorable court ruling against Argentina that could result in recoveries worth multiples of the current share price. The manager highlights Burford's attractive business model characteristics, including high returns (30% average on litigation book) and low correlation to broader financial markets. Previous headwinds from COVID-related court delays and debt refinancing concerns have been resolved. The 54% single-day gain in March 2023 validates the thesis, yet the manager believes significant upside remains with their valuation still multiples above current levels. This represents a classic special situations investment with asymmetric risk-reward profile.

Pitch Summary:
We bought shares in Charles Schwab Corporation as they declined meaningfully in March. Schwab is the premier asset-gathering franchise in the brokerage industry, with particular strength in the advisory market. As one of the top two players in the retail side of the market, it has the scale economies to be a low-cost provider and compete with newcomers intent on industry disruption. In the advisory segment, where it serves independent advisors, it delivers the gold standard in service and product breadth. We believe its moat is wide, and it should grow at a healthy pace for the foreseeable future. As part of its brokerage model, Schwab operates a meaningfully sized bank, where its brokerage clients maintain deposits as part of their cash management. With over $300 billion in deposits and $500 billion in assets, if it were an independent bank, it would be one of the largest in the country. As interest rates have risen, many clients have been moving cash from low-yield bank accounts to higher-yielding alternatives, such as money-market funds. The industry calls this process cash "sorting." For Schwab, cash sorting began about 18 months ago, and a large part of its recent stock price drop can be attributed to investor concerns that this process may accelerate. The difference for Schwab, compared to all other banks, is that when depositors pull money out, they are mostly just moving it over to other parts of Schwab! Thus, unlike traditional banks, Schwab doesn't lose assets in the sorting dynamic. In fact, like U.S. Bancorp, Schwab appears to be a net beneficiary from the recent mini-panic in that new asset inflows have picked up as individuals flee to safety. This dynamic does cause some disruption at the bank entity, though, as client cash remains within Schwab's total but is no longer available as deposits to fund the bank's securities portfolio. We think Schwab has more than sufficient liquidity to deal with this. The realistic worst-case outcome is that total earnings are moderately suppressed for a period as funding costs go up, and Schwab earns less profit for every dollar invested in deposit alternatives, as compared to what it earns per dollar deposited in the bank. Despite this headwind, we believe that as long as Schwab can grow total investment assets under its umbrella over time, its earning power should also grow.

BSD Analysis:
Madison initiated a position in Charles Schwab during March 2023 market weakness, viewing the decline as an opportunity to acquire a premier asset-gathering franchise at attractive valuations. The investment thesis centers on Schwab's dominant market position in brokerage and wealth management, with particular competitive advantages in serving independent advisors through superior service and product breadth. Madison emphasizes Schwab's unique business model advantage during cash sorting cycles - unlike traditional banks that lose deposits permanently, Schwab retains client assets as they move between deposit accounts and money market funds within the platform. The managers acknowledge near-term earnings pressure from higher funding costs but view this as temporary, expecting long-term earnings growth to resume as total assets under management expand. The thesis reflects confidence in Schwab's wide economic moat, scale advantages, and ability to benefit from industry flight-to-quality dynamics during periods of financial stress.

Pitch Summary:
U.S. Bancorp shares are ensnared in the bank-run panic that began late in the quarter. Two large banks failed in early March as depositors rushed to withdraw money on concerns that the banks would suffer from liquidity problems. That's a self-fulfilling prophecy, of course, but in the case of the two banks, it was prompted by the revelations of utter mismanagement of their securities portfolio. Bank models are, essentially, to borrow short and lend long. This sounds dangerous of course, and it would be if not for the deposit guarantee provided by the FDIC. The history of the U.S. banking system can be divided into two eras – pre-FDIC, when bank runs were fairly common, and post-FDIC, when bank runs have been close to non-existent. However, FDIC protection has its limits, and it remains incumbent on management to properly manage its assets and liabilities. The two banks in question didn't do that. By taking down the share prices of all banks, we think investors are shooting first and asking questions later; they are not distinguishing between the strong and the weak. U.S. Bancorp, as one of the largest and best-managed banks in the country, appears to be a net beneficiary so far of the panic among some depositors, with a pick-up in net deposit inflows in recent weeks. We don't dismiss the probability of industry contagion – in a true nationwide panic, the big banks will suffer along with the small banks, and the well-managed ones will suffer along with the badly-managed ones. But we think the odds of that are quite small, and recent steps by federal regulators confirm that they will do everything in their power to prevent such a scenario, given the calamitous impact that it would have on our economy. We tightly manage this risk by limiting our exposure to the banking sector.

BSD Analysis:
Madison presents a contrarian bull case for U.S. Bancorp amid the March 2023 banking crisis, arguing that market indiscriminate selling has created an opportunity in a high-quality institution. The managers emphasize USB's superior management quality and scale advantages as one of the largest U.S. banks, distinguishing it from the failed regional banks that suffered from securities portfolio mismanagement. They note that USB is actually benefiting from deposit flight, experiencing net inflows as customers seek safety. The thesis relies on the low probability of systemic contagion and regulatory backstops, while acknowledging they manage concentration risk through limited sector exposure. Madison views the current panic as creating a temporary dislocation in a fundamentally sound franchise. The investment reflects confidence in management's asset-liability management capabilities and the bank's competitive positioning during industry stress.

Pitch Summary:
During the quarter, we established a new position in Oracle as the company's growth profile has improved from a low single digit revenue growth company to high single digits. The key drivers of improved growth come from the company's Software-as-a-Service applications and the Oracle Cloud Infrastructure (OCI). Oracle's software applications power the Enterprise Resource Planning and Human Capital Management functions of large and small-to-medium sized businesses and are growing in the mid-teens. OCI is a differentiated cloud infrastructure provider that is gaining share due to its strong value proposition in speed, performance, and security. In addition, we believe that the company's operating margins will improve from scale benefits in OCI and cost efficiencies from its recent acquisition of Cerner.

BSD Analysis:
The manager initiated a new position in Oracle based on the company's transformation from low single-digit to high single-digit revenue growth, driven by successful cloud transition. The growth acceleration is powered by two key drivers: SaaS applications growing in the mid-teens and Oracle Cloud Infrastructure gaining market share. Oracle's enterprise software applications in ERP and HCM serve both large enterprises and SMBs, providing diversified revenue streams and sticky customer relationships. OCI's differentiated value proposition in speed, performance, and security enables share gains in the competitive cloud infrastructure market. The manager expects margin expansion from OCI scale benefits and cost synergies from the Cerner acquisition, which should drive earnings growth acceleration. Oracle's cloud transformation story, combined with improving fundamentals and margin expansion potential, supports the bullish investment thesis and new position establishment.

Pitch Summary:
Healthcare insurance stocks have been weak due to a ruling by CMS (Center for Medicare & Medicaid Services) in late January where claw back payments totaling $4.7 billion were due from insurers that overcharged Medicare. The claw back payment period goes back to 2011. We remain confident that UnitedHealth Group can deliver long term double digit earning per share growth from its value-based care offerings for both its government and private sector customers.

BSD Analysis:
The manager maintains a bullish long-term view on UnitedHealth Group despite sector weakness from CMS claw back payments totaling $4.7 billion for Medicare overcharges dating back to 2011. This regulatory headwind is viewed as a one-time event rather than a structural challenge to the business model. The investment thesis centers on UnitedHealth's value-based care offerings, which represent a differentiated approach to healthcare delivery and payment. The company's ability to deliver double-digit EPS growth is supported by its diversified business model spanning insurance, pharmacy benefits, and healthcare services. Value-based care arrangements with both government and private sector customers provide sustainable competitive advantages and margin expansion opportunities. UnitedHealth's scale, data analytics capabilities, and integrated care model position it well to capitalize on healthcare industry transformation trends despite near-term regulatory pressures.

Pitch Summary:
Danaher has been trading lower since it reported fourth quarter earnings in January. The company lowered Covid-19 related sales for 2023 from $500 million to $150 million as pharmaceutical companies are switching their focus away from pandemic vaccines and therapeutics to the research and development of new drugs. Danaher's pharmaceutical customers will be working through existing inventory before starting to order new products. We remain confident in Danaher's strong competitive position providing innovative products to Life Science companies.

BSD Analysis:
The manager maintains conviction in Danaher despite stock weakness following Q4 earnings and significant reduction in COVID-19 related sales guidance from $500 million to $150 million for 2023. The headwinds are viewed as temporary as pharmaceutical companies shift focus from pandemic-related products back to traditional drug R&D, which should benefit Danaher's core life sciences business. The current inventory digestion by pharmaceutical customers represents a cyclical rather than structural challenge. The manager emphasizes Danaher's strong competitive positioning and innovative product portfolio serving life sciences companies, which provides durable competitive advantages. The company's exposure to secular growth trends in biotechnology, pharmaceutical R&D, and life sciences research supports long-term growth prospects. Danaher's operational excellence and acquisition strategy have historically driven consistent outperformance, supporting the manager's continued confidence despite near-term COVID normalization headwinds.

Pitch Summary:
Eli Lilly was down during the first quarter after a strong 2022. Fourth quarter earnings were slightly better than expected but both Trulicity and Mounjaro, key growth drivers, missed expectations. The earnings per share beat was driven by higher gross margins and a lower tax rate. Mounjaro has additional obesity data reading out in mid-2023 along with the expected obesity approval in the second half of the year. Lilly is also working on next generation treatments for diabetes and obesity, with a new GGG and oral GLP-1 in the clinic which will report phase II data in mid-2023. Finally, donanemab for Alzheimer's has an important trial reading out in 2Q 2023 which should be supportive of full FDA approval in early 2024.

BSD Analysis:
The manager maintains a bullish stance on Eli Lilly despite Q1 weakness and mixed Q4 results where key diabetes drugs Trulicity and Mounjaro missed expectations. The earnings beat was driven by operational improvements including higher gross margins and lower tax rates, demonstrating management execution. The investment thesis centers on multiple upcoming catalysts, particularly Mounjaro's obesity data and expected approval in H2 2023, which could significantly expand the addressable market. Lilly's robust pipeline includes next-generation diabetes and obesity treatments with a new GGG and oral GLP-1 reporting Phase II data mid-2023. The Alzheimer's drug donanemab represents another major catalyst with trial results expected in Q2 2023 and potential FDA approval in early 2024. This pipeline depth across high-value therapeutic areas supports the manager's conviction despite near-term headwinds in existing products.

Pitch Summary:
US Bancorp stock suffered amidst the bank crisis in March. We continue to have a positive view on US Bancorp. First of all, we like the Union Bank acquisition and see strong accretion from this acquisition over the next two years and beyond. More importantly, US Bancorp has an A+ rated balance sheet by Standard & Poor's, very strong liquidity coverage ratio (122%), ample access to additional funding sources and has a culture of conservative lending. We have added to our US Bancorp position.

BSD Analysis:
The manager maintains strong conviction in US Bancorp despite sector-wide pressure during the March banking crisis, viewing the weakness as a buying opportunity. The Union Bank acquisition provides meaningful earnings accretion over the next two years, enhancing scale and market presence. Most importantly, US Bancorp's financial strength differentiates it from troubled peers, with an A+ credit rating from S&P and robust liquidity coverage ratio of 122% well above regulatory requirements. The company's conservative lending culture and ample funding sources provide defensive characteristics during periods of financial stress. The manager's decision to add to the position demonstrates high conviction in the bank's credit quality and long-term prospects. US Bancorp's strong balance sheet and prudent risk management position it to gain market share and benefit from potential industry consolidation following recent banking sector disruptions.

Pitch Summary:
Target reported a solid fourth quarter, exceeding expectations. Same store sales were positive with better-than-expected margins resulting in earnings for the quarter ahead of expectations. At the same time, Target provided guidance for 2023 that was below expectations, which sets them up to meet or exceed expectations after a difficult 2022. Target expects same store sales for 2023 to range from a low single digit decline to a low single digit increase, with operating margins in the 4.5% to 5% range. We continue to view Target as well positioned for long-term growth with its strong owned brand strategy and omnichannel offerings.

BSD Analysis:
The manager presents a bullish thesis on Target following strong Q4 execution that exceeded expectations on both sales and margins. The conservative 2023 guidance creates a favorable setup for the company to meet or beat expectations after a challenging 2022, potentially driving multiple expansion. Target's same-store sales guidance of low single-digit decline to low single-digit growth reflects realistic expectations in a difficult consumer environment. The projected operating margin range of 4.5-5% demonstrates disciplined cost management and operational efficiency. The manager emphasizes Target's competitive advantages through its owned brand strategy, which drives higher margins and customer loyalty. The omnichannel capabilities provide flexibility and market share gains in an evolving retail landscape. These strategic differentiators position Target well for long-term growth despite near-term macro headwinds.

Pitch Summary:
TE Connectivity has performed well with continued strength in its Auto business (60% of sales) as content per vehicle continues to grow and drive revenues. TE's Communications segment has experienced softness as well as in some parts of the Industrial segment. Over the long-term, we continue to see growth for application-specific connectors and sensors in transportation as the base of EV's grow, as well as in industrial, medical, energy and communications which leaves TE well positioned.

BSD Analysis:
The manager maintains a bullish long-term view on TE Connectivity despite near-term softness in communications and industrial segments. The automotive business, representing 60% of sales, continues to drive growth through increasing content per vehicle, a secular trend supporting the investment thesis. The manager emphasizes TE's specialization in application-specific connectors and sensors, which creates competitive differentiation and pricing power. The electric vehicle transition represents a significant growth catalyst, as EVs require substantially more connectivity content than traditional vehicles. TE's diversified end-market exposure across transportation, industrial, medical, energy, and communications provides multiple growth vectors and reduces cyclical risk. The company's engineering expertise and customer relationships in harsh environment applications create sustainable competitive advantages that support long-term market share gains.

Pitch Summary:
Qualcomm stock was volatile during the quarter but moved higher in March. Qualcomm fundamentals have been hurt over the last several quarters due to excess smartphone inventories. Management messaged in their recent conference call that inventory issues peaked in their first fiscal quarter and should begin to moderate. They are also seeing excess inventory in their IoT (Internet of Things) business, which will take a couple of quarters to work through. By our estimates, Qualcomm fundamentals should trough in the June quarter with a second-half recovery. Qualcomm remains well positioned to diversify away from smartphones with long-term growth in Auto and IoT.

BSD Analysis:
The manager presents a bullish turnaround thesis for Qualcomm, viewing current weakness as cyclical rather than structural. Management's guidance that inventory issues peaked in Q1 and will moderate provides visibility into a fundamental recovery timeline. The manager's analysis suggests fundamentals will trough in the June quarter with second-half improvement, indicating a well-researched bottom-up view. Critically, the investment case centers on Qualcomm's diversification strategy beyond smartphones into automotive and IoT markets, which offer superior long-term growth prospects. The company's wireless technology leadership and intellectual property portfolio provide competitive advantages in these emerging markets. Despite near-term headwinds from inventory corrections, the manager maintains conviction in Qualcomm's strategic positioning for secular growth trends in connected devices and automotive electrification.

Pitch Summary:
Alphabet reported a mixed fourth quarter but messaged a renewed focus on its cost structure. Google has already announced a headcount reduction as well as a reduction to its real estate footprint with additional cost savings benefits to be realized next year. Google also discussed its position on Artificial Intelligence (AI). It has been investing in this area for over six years and uses its AI capabilities across search, YouTube, and its ad quality systems. We remain comfortable with Google's position here.

BSD Analysis:
The manager maintains a bullish stance on Alphabet despite mixed quarterly results, emphasizing the company's proactive cost management initiatives including headcount reductions and real estate optimization. The focus on operational efficiency should drive margin expansion and earnings growth in the coming year. Critically, the manager highlights Google's six-year investment in artificial intelligence, positioning the company advantageously in the AI revolution. The integration of AI capabilities across core products like search, YouTube, and advertising systems demonstrates strategic foresight and competitive differentiation. Google's dominant market positions in search and digital advertising provide durable revenue streams while AI investments offer significant upside potential. The combination of cost discipline and AI leadership supports the manager's continued confidence in the investment thesis.

Pitch Summary:
Analog Devices (ADI) performed well with a strong January quarter result (October fiscal year). ADI's core end markets of auto and industrial (75% of revenues) remain strong, up 30% and 25% year over year, respectively. Communications was also solid, up 18% while consumer was down 6% year over year.

BSD Analysis:
The manager highlights Analog Devices' strong quarterly performance driven by robust demand in its core automotive and industrial segments, which comprise 75% of revenues and grew 30% and 25% year-over-year respectively. The diversified end-market exposure provides stability, with communications also showing solid 18% growth offsetting weakness in consumer markets. ADI's positioning in secular growth markets like automotive electrification and industrial automation supports the bullish thesis. The company's analog and mixed-signal expertise creates competitive moats in these application-specific markets. Strong execution across multiple end markets demonstrates operational excellence and market share gains. The manager's confidence appears well-founded given the sustained momentum in ADI's largest revenue drivers.

Pitch Summary:
Founded in 1926 and based in Minneapolis, Graco manufactures equipment that is used to measure, control, and spray fluid and powder materials. Graco particularly specialises in equipment solutions for difficult-to-handle materials such as ones with high viscosities, abrasive or corrosive properties, and materials that require precise ratio control. You'll see Graco's products being used to spray-paint buildings, apply lines on road surfaces, blend fluids in food and beverage manufacturing, and in environmental groundwater remediation. Graco's research and development spending as a percent of sales is twice the average of its peers. It works to improve its products each year in ways that save the customer time, improve energy efficiency, reduce weight and help the customer achieve environmental compliance. Manufacturing at Graco is highly vertically integrated and almost all in America, unusual in its industry, meaning it manufacturers rather than purchases most of the components that go into its pumps and sprayers. This approach allows Graco greater control of quality and product innovation, and importantly, greater control over its costs. Graco looks to reduce the cost per unit by 2–3% every year through manufacturing productivity and automation, which has been particularly valuable during the inflationary period of the last couple of years. Control over manufacturing has also been a significant advantage during the supply chain pressures experienced over the same period. Management believes its vertically integrated model helps Graco generate profit margins more than 1.5x that of its peers. Graco's management takes a very long-term approach to running the business. During the COVID-19 pandemic, as in the GFC, there were no layoffs and no furloughs at Graco, and no cuts to product-development spending. Management took the view that staying the course would see the company far better positioned to benefit from the inevitable recovery than its peers, and so it proved in both cases. Over the last decade, Graco's revenue has grown on an underlying basis at 7% p.a., well ahead of the growth of its end markets, and we believe the company will continue growing its top and bottom line at an attractive rate for many years to come.

BSD Analysis:
Aoris highlights Graco as a specialized industrial equipment manufacturer with strong competitive advantages in fluid handling solutions for difficult materials. The company's investment in R&D at twice the peer average drives continuous product innovation focused on customer efficiency and environmental compliance. Graco's vertically integrated US manufacturing model provides superior cost control, quality assurance, and supply chain resilience, enabling profit margins 1.5x higher than competitors and annual unit cost reductions of 2-3%. Management's long-term orientation was demonstrated during COVID-19 and the GFC when the company maintained employment and R&D spending while peers cut costs, positioning Graco for stronger recovery performance. The company has achieved 7% annual revenue growth over the past decade, outpacing end market growth, supported by its differentiated market position and operational excellence.

Pitch Summary:
LVMH is the world's largest luxury goods company. It owns 75 leading luxury brands across five areas: Fashion & Leather Goods make up half of the company's revenue, across brands such as Louis Vuitton, Christian Dior and Fendi. Wines & Spirits, where LVMH is the largest producer globally of champagne and cognac. Watches & Jewellery includes the recently acquired jeweller Tiffany, as well as Bulgari and Tag Heuer. Perfumes & Cosmetics, where Dior makes the bestselling men's and women's fragrances in the world. Selective Retailing includes Sephora and the largest global operator of duty-free stores. The company's breadth across its many brands, product areas and its global clientele provides valuable balance to the inevitable ups and downs in any one area. While the LVMH group was formed in 1987 through the merger of Louis Vuitton and Moët Hennessy, most of its brands have very long histories of their own, spanning more than a century in some cases. For instance, Louis Vuitton was founded in 1854 to produce suitcases for the French royal family, in the brand's trademark canvas material. The rich histories of LVMH's luxury brands make them desirable and authentic to their customers. There's a story behind their products; they stand for something. This heritage and desirability only compounds over time, making it difficult for new brands to succeed in the luxury industry. LVMH has also been incredibly successful at straddling the legacy of its brands with new products and vibrant marketing that keep them contemporary and relevant. In 2022, the company invested over €30 billion into creating new products, advertising its brands through engaging campaigns, and refurbishing its stores with constantly evolving displays. LVMH makes most of its products in-house and sells primarily through directly operated stores, which allows it to ensure a high standard for the in-store customer experience, the quality of its products and how they're priced. As is the case with many other companies in the Aoris portfolio, a key ingredient to LVMH's success is in its decentralised structure. LVMH's 75 brands operate with a high degree of autonomy, with their own CEO and creative director who are accountable for their own budgeting, product development, marketing and staffing decisions. This autonomy helps its brands to remain agile and entrepreneurial, which came to the fore during COVID-19 when the brands had to quickly adapt to serving local rather than travelling clientele. It also allows for brands that LVMH acquires to retain their own culture and independence. The company has also benefited from its family ownership. CEO and chairman, Bernard Arnault, who built LVMH into the luxury powerhouse that it is today, is currently the wealthiest person in the world through his family's ownership of a 48% stake in LVMH. The family is aligned with our desire for LVMH to compound in value over the long term. Put together, these attributes have contributed to LVMH's growing desirability with consumers (and corresponding market share gains), its long track record of growth (averaging 9% p.a. over the last 10 years) and enviable profitability (an operating profit margin of 26%). LVMH is an all-weather business that we expect to keep compounding in value for many years to come.

BSD Analysis:
Aoris presents a comprehensive bull case for LVMH as the world's largest luxury goods conglomerate with 75 premium brands across five diversified segments. The manager emphasizes LVMH's competitive moats including century-old brand heritage that creates authentic desirability, vertical integration ensuring quality control, and a decentralized structure allowing brand autonomy and entrepreneurial agility. The company's substantial reinvestment of over €30 billion in 2022 into product development, marketing, and store refurbishment demonstrates management's commitment to maintaining brand relevance and premium positioning. Family ownership through Bernard Arnault's 48% stake aligns long-term value creation with shareholder interests. The pitch highlights LVMH's impressive financial metrics including 9% annual revenue growth over the past decade and a 26% operating margin, positioning it as a consistent compounder in the luxury sector.