Investment Pitches

Pitch Summary:
American International Group (AIG), a U.S.-based multinational finance and insurance corporation, was a top detractor for the period. AIG's share price declined during the quarter as a result of broader concerns stemming from the banking crisis. We have found that during times of financial stress, AIG tends to trade like a life insurer, even though we attribute only around 20% of its value to Corebridge. We do not agree with the market's perceived assumption that life insurers' risk profiles have increased meaningfully and will suffer asset impairments as they did during the global financial crisis. In our view, this panic is quite different from the global financial crisis. Most of today's problems are the result of an asset and liability mismatch rather than a credit crisis. We believe that AIG's core general insurance business drives most of the company's value, and, in our view, underwriting has seen tremendous improvement since CEO Peter Zaffino joined the company. Since 2016, underwriting profits have improved by $7 billion, and $2 billion of that improvement occurred in 2022. The combined ratio in 2022 was in the low 90% range, and Zaffino believes that this can be below 90% in a few years. The company has accomplished this while lowering insurance limits by roughly half, which dramatically narrows the range of underwriting outcomes. In addition, AIG has been going through a major cost-savings plan for the last several years in preparation for the separation. Part of this plan is to simplify and collapse the reporting structure for the general insurance operations, and we believe the lower general operating costs will have a positive effect on the combined ratio. Ultimately, we believe the company remains an attractive investment given its discount to our perception of its intrinsic value.

BSD Analysis:
The managers maintain a bullish stance on AIG despite recent underperformance, arguing the market is misunderstanding the company's risk profile. They contend AIG is being unfairly penalized as investors conflate it with life insurers during financial stress, when only 20% of value comes from Corebridge. The core thesis centers on dramatic underwriting improvements under CEO Peter Zaffino, with underwriting profits improving $7 billion since 2016 and $2 billion in 2022 alone. The combined ratio reached the low 90% range in 2022, with management targeting sub-90% levels. Risk management has improved through halving insurance limits, narrowing outcome variability. Ongoing cost-saving initiatives and operational simplification should further enhance the combined ratio. The managers view current pricing as an attractive discount to intrinsic value, presenting a compelling opportunity in a misunderstood financial services company with improving fundamentals.

Pitch Summary:
Alphabet, a global communication services provider based in the U.S., was a top contributor to the Fund's performance for the quarter. Fourth-quarter earnings for Alphabet came in around consensus expectations in most of its key business areas, and much of management's discussion on the earnings call revolved around the recent AI developments and costs. CEO Sundar Pichai said Alphabet is an "AI-first company" that is "extremely well-positioned as AI reaches an inflection point." He expressed excitement about the AI-driven developments the company plans to unveil in search and other areas. Chief Business Officer Philipp Schindler suggested that, just as mobile computing helped drive higher revenue and profits in search, AI should also have a positive impact on financial performance. Notably, CFO Ruth Porat pushed back on the idea that higher computing costs related to AI-driven services would incrementally pressure profitability. Pichai also said the company is "on an important journey to re-engineer our cost structure in a durable way." Porat did not provide detail in terms of quantifying savings. However, she noted that the company is slowing the pace of operating expenditures growth, including a meaningful slowing in the pace of hiring in 2023, with most of the impact expected to become more visible in the financials in 2024. She implied that margins are expected to go up over the next couple of years, mentioning that "revenues will grow faster than expenses." Total capital expenditures in 2023 are expected to be in line with the 2022 level. In aggregate, management expressed confidence in the business prospects across search, YouTube, cloud and various other key businesses, but Porat observed that "the challenging macroeconomic climate is ongoing." Overall, we believe the company is positioned well to reap the benefits of the scale of its search business and years of investment into AI capabilities. We also appreciate that the company is transforming its views on cost discipline and efficiency. Our research indicates that Alphabet is trading around its lowest relative price-to-earnings ratio on forward consensus earnings since its initial public offering 20 years ago. When we adjust our valuation for losses in its "Other Bets" segment and include an asset value for its cloud segment, we believe the stock trades at an even lower multiple. To us, this is too cheap of a valuation for a company with businesses, like search, YouTube and Android, which have durable competitive advantages and attractive secular growth outlooks.

BSD Analysis:
The managers present a compelling bull case for Alphabet centered on AI positioning and valuation attractiveness. They highlight management's confidence in AI capabilities driving future growth, particularly CEO Pichai's assertion that Alphabet is "extremely well-positioned as AI reaches an inflection point." The thesis emphasizes operational efficiency improvements, with management committing to cost restructuring and slower hiring growth expected to boost margins in 2024. The valuation argument is particularly strong, noting Alphabet trades at its lowest relative P/E ratio since its IPO 20 years ago. When adjusting for Other Bets losses and cloud segment value, the multiple appears even more attractive. The managers appreciate the durable competitive advantages in search, YouTube, and Android, combined with attractive secular growth prospects. This creates a compelling risk-reward profile for a dominant technology platform trading at historically cheap valuations.

Pitch Summary:
Additionally, we initiated a position in Intercontinental Exchange (U.S.) during the quarter. Intercontinental Exchange is one of the largest and most successful financial exchange operators. The company was created through a series of shrewd acquisitions under founder and CEO Jeff Sprecher. We believe Sprecher is an excellent CEO with a history of astute capital allocation and an ability to adapt to opportunities and competitive threats. Today, Intercontinental Exchange competes in three primary segments: exchanges, fixed income/data services and mortgage technology. We believe each of these businesses exhibits attractive economic characteristics and will grow earnings faster than GDP over time. Investors today are concerned about Intercontinental Exchange's mortgage segment as rising interest rates have depressed origination volumes. We agree that this segment will be pressured in the near term. However, only 7% of trailing 12-month revenues are sensitive to mortgage volumes, and we believe they will eventually revert to historical norms. Today, however, Intercontinental Exchange sells for what we believe is an underserved discount to its exchange peers and private market valuations.

BSD Analysis:
The managers initiated a new position in Intercontinental Exchange, highlighting CEO Jeff Sprecher's exceptional track record of shrewd acquisitions and capital allocation. The investment thesis rests on three attractive business segments: exchanges, fixed income/data services, and mortgage technology, each expected to grow earnings faster than GDP over time. While acknowledging near-term pressure on the mortgage segment due to rising interest rates, the managers emphasize this represents only 7% of trailing revenues and should normalize over time. The valuation opportunity appears compelling, with ICE trading at an "underserved discount" to exchange peers and private market valuations. The combination of strong leadership, diversified revenue streams with attractive economics, and temporary valuation discount creates an appealing risk-reward profile. The managers appear confident in the cyclical nature of mortgage headwinds while focusing on the durable competitive advantages of the core exchange and data businesses.

Pitch Summary:
American International Group (AIG), a U.S.-based multinational finance and insurance corporation, was a top detractor for the period. AIG's share price declined during the quarter as a result of broader concerns stemming from the banking crisis. We have found that during times of financial stress, AIG tends to trade like a life insurer, even though we attribute only around 20% of its value to Corebridge. We do not agree with the market's perceived assumption that life insurers' risk profiles have increased meaningfully and will suffer asset impairments as they did during the global financial crisis. In our view, this panic is quite different from the global financial crisis. Most of today's problems are the result of an asset and liability mismatch rather than a credit crisis. We believe that AIG's core general insurance business drives most of the company's value, and, in our view, underwriting has seen tremendous improvement since CEO Peter Zaffino joined the company. Since 2016, underwriting profits have improved by $7 billion, and $2 billion of that improvement occurred in 2022. The combined ratio in 2022 was in the low 90% range, and Zaffino believes that this can be below 90% in a few years. The company has accomplished this while lowering insurance limits by roughly half, which dramatically narrows the range of underwriting outcomes. In addition, AIG has been going through a major cost-savings plan for the last several years in preparation for the separation. Part of this plan is to simplify and collapse the reporting structure for the general insurance operations, and we believe the lower general operating costs will have a positive effect on the combined ratio. Ultimately, we believe the company remains an attractive investment given its discount to our perception of its intrinsic value.

BSD Analysis:
The managers maintain a bullish stance on AIG despite recent underperformance, arguing the market is misunderstanding the company's risk profile. They contend AIG is being unfairly penalized as investors conflate it with life insurers during financial stress, when only 20% of value comes from Corebridge. The core thesis centers on dramatic underwriting improvements under CEO Peter Zaffino, with underwriting profits improving $7 billion since 2016 and $2 billion in 2022 alone. The combined ratio reached the low 90% range in 2022, with management targeting sub-90% levels. Risk management has improved through halving insurance limits, narrowing outcome variability. Ongoing cost-saving initiatives and operational simplification should further enhance the combined ratio. The managers view current pricing as an attractive discount to intrinsic value, presenting a compelling opportunity in a misunderstood financial services company with improving fundamentals.

Pitch Summary:
Alphabet, a global communication services provider based in the U.S., was a top contributor to the Fund's performance for the quarter. Fourth-quarter earnings for Alphabet came in around consensus expectations in most of its key business areas, and much of management's discussion on the earnings call revolved around the recent AI developments and costs. CEO Sundar Pichai said Alphabet is an "AI-first company" that is "extremely well-positioned as AI reaches an inflection point." He expressed excitement about the AI-driven developments the company plans to unveil in search and other areas. Chief Business Officer Philipp Schindler suggested that, just as mobile computing helped drive higher revenue and profits in search, AI should also have a positive impact on financial performance. Notably, CFO Ruth Porat pushed back on the idea that higher computing costs related to AI-driven services would incrementally pressure profitability. Pichai also said the company is "on an important journey to re-engineer our cost structure in a durable way." Porat did not provide detail in terms of quantifying savings. However, she noted that the company is slowing the pace of operating expenditures growth, including a meaningful slowing in the pace of hiring in 2023, with most of the impact expected to become more visible in the financials in 2024. She implied that margins are expected to go up over the next couple of years, mentioning that "revenues will grow faster than expenses." Total capital expenditures in 2023 are expected to be in line with the 2022 level. In aggregate, management expressed confidence in the business prospects across search, YouTube, cloud and various other key businesses, but Porat observed that "the challenging macroeconomic climate is ongoing." Overall, we believe the company is positioned well to reap the benefits of the scale of its search business and years of investment into AI capabilities. We also appreciate that the company is transforming its views on cost discipline and efficiency. Our research indicates that Alphabet is trading around its lowest relative price-to-earnings ratio on forward consensus earnings since its initial public offering 20 years ago. When we adjust our valuation for losses in its "Other Bets" segment and include an asset value for its cloud segment, we believe the stock trades at an even lower multiple. To us, this is too cheap of a valuation for a company with businesses, like search, YouTube and Android, which have durable competitive advantages and attractive secular growth outlooks.

BSD Analysis:
The managers present a compelling bull case for Alphabet centered on AI positioning and valuation attractiveness. They highlight management's confidence in AI capabilities driving future growth, particularly CEO Pichai's assertion that Alphabet is "extremely well-positioned as AI reaches an inflection point." The thesis emphasizes operational efficiency improvements, with management committing to cost restructuring and slower hiring growth expected to boost margins in 2024. The valuation argument is particularly strong, noting Alphabet trades at its lowest relative P/E ratio since its IPO 20 years ago. When adjusting for Other Bets losses and cloud segment value, the multiple appears even more attractive. The managers appreciate the durable competitive advantages in search, YouTube, and Android, combined with attractive secular growth prospects. This creates a compelling risk-reward profile for a dominant technology platform trading at historically cheap valuations.

Pitch Summary:
In addition to this rotation into stocks with higher potential, we have added Norma Group AG to the fund's portfolio, a company in which we invested in 2016 and which now offers a new investment opportunity. Norma manufactures clamps and pipe connection systems for automotive, water transport and general use. In some niches it holds market shares of 90% and has good growth opportunities. In recent years margins have been squeezed by overcapacity problems, exacerbated by the automotive crisis. Last year, margins suffered even more from the increase in production costs (stainless steel, energy, etc.) and although they have managed to raise prices to compensate for this increase in costs, the delay in their implementation has reduced gross margins by an additional 2%. The share price has continued to fall and is now 70% below the highs of 5 years ago. We believe that this weak situation represents a good opportunity. From a business point of view, already in 2022 the company has managed to increase selling prices by 9% and sales have grown by 14% (partly due to the dollar currency effect). In the United States, where the company has almost half of the business, sales have grown by 26%, and although in Europe and Asia growth has been lower, due to the impact of the war in Ukraine and China's "zero-covid" policy, it is also positive. In addition to price increases, the company has completed an operational restructuring to move production from Frankfurt to a modern factory in the Czech Republic, which will reduce unit costs. In this way, the company has started the process of margin recovery, which we expect in the coming years to return to the level of 12% - 14% from 8% in 2022. The margin prior to the automotive crisis and the inflation period was around 18%. From a financial&valuation point of view, Norma has a reasonable debt level of 2.2x EBITDA at current EBITDA levels. Valuing the company at 11x EBIT and assuming the margin recovery mentioned in the previous paragraph, Norma has a revaluation potential of between 70% and 100%.

BSD Analysis:
NORMA Group has successfully pivoted toward its "NewNORMA" strategy in 2026, following the strategic €650 million divestment of its Water Management business unit. This transaction has fundamentally strengthened the balance sheet, allowing the company to reduce debt by €300 million and return up to €260 million to shareholders through aggressive buybacks. The firm is now a specialized industrial powerhouse focused on high-precision connection technology, particularly within the evolving electric vehicle and industrial application sectors. Management is delivering on its efficiency initiatives, which have already yielded millions in structural savings, providing a solid buffer against ongoing market softness in the automotive sector. Analysts maintain a "Buy" rating with a fair value target above €20, reflecting a belief in the company’s improved margin profile and focused capital allocation.

Pitch Summary:
It has been seven years since we have talked about Admiral as one of our stocks in focus. Since that time it has been an ever constant presence in the fund. It is actually one of our ‘originals’, as one of the stocks owned from the day the fund launched in January 2015. It’s worth revisiting the story as both Admiral and the insurance industry don’t have their challenges to seek at the moment. Admiral's results show that even it is not immune to these industry issues. They include, increased claims frequency post Covid, supply chain challenges, adverse weather and high levels of inflation - all of which had a very big impact on the industry. There has also been the impact of the Financial Conduct Authority’s insurance pricing reforms, with which Admiral and its peers have had to compete. Subsequently, Admiral’s pre-tax profits saw a decline from £769m to £469m. The group’s insurance loss ratio (claims paid out/earned insurance premium) rose 14 percentage points to 72% - due to a rise in claims inflation; with the group’s expense ratio (underwriting expenses/earned premium) rising 3 percentage points to 30%. The cumulative 17 points rise led to an underwriting loss for the first time in recent decades, reflected in a Combined ratio of 101.7%. However, this should be seen in the context of the industry, which will likely produce a Combined ratio of 115%. Admiral will also reprice risk to reflect these industry pressures, over the coming months. Given the reduction in profits, Return on Equity has also declined from 52% to 35%. Yet, Admiral still maintains industry leading returns due to their strong capital allocation discipline. The sector has recently produced an average Return on Equity (excluding Admiral) of only 2%! Covid and its after-effects have distorted the marketplace over the last couple of years, but we anticipate Admiral’s Return on Equity getting back to previous levels soon. Admiral maintains this ‘returns’ advantage by taking risk off its balance sheet through its relationships with Reinsurers, such as Munich Re. It has also historically been a very good allocator of capital, which means it doesn’t chase growth in the insurance sector for the sake of it. It often takes a step back from the insurance premium cycle when competitors are going for growth. This has created a lot of value for shareholders over the years. Interestingly more recently, following its investment in technology and the development of its loans business, Admiral appears to be getting better at setting the right insurance premia for the right customers, helping it manage the industry cycle even better. Given the resilience of their business model, we anticipate that Admiral will emerge from recent issues and continue to take market share whilst creating good value for shareholders over the long term. The signs are there already with their strong customer growth in the Household, Loans and Travel businesses, all of which enhance their core car insurance business.

BSD Analysis:
Admiral is a structurally advantaged U.K. personal-lines insurer with industry-leading profitability, even after the recent margin compression. Despite a temporary dip, ROE remains vastly superior to peers, supported by its capital-light model, extensive reinsurance partnerships, disciplined underwriting, and strong cost control. The company’s long-term fundamentals—high customer loyalty, underwriting prudence, and improving pricing sophistication—suggest underwriting margins should normalize as claims inflation stabilizes. Shares trade at a modest earnings multiple relative to the company’s historical quality, offering potential rerating as profitability rebounds. Key catalysts include improved pricing cycles, stabilizing claims inflation, and continued customer growth across product lines.

Pitch Summary:
We own JPMorgan and Bank of America shares (and Goldman Sachs, for which the recent events are far less impactful given its business mix). Bank balance sheet assets are cash, loans, and investments, with funding liabilities in the form of deposits and debt / bonds. Banks are allowed to designate their investment assets in two ways: Available for Sale (AFS) or Held to Maturity (HTM). AFS securities are held at fair value, with any moves between reporting dates reflected in mark-to-market changes, meaning their value fluctuates with interest rate and credit risk changes. HTM assets are held at cost as they are not intended to be sold. The expectation from regulators is that assets designated HTM won’t be reclassified, however, they do acknowledge circumstances can change. Should this happen, a mark-to-market revaluation is triggered, impacting their book value and regulatory capital. Reclassification of HTM assets to AFS therefore only really happens if banks are in such a tight liquidity position (due to deposit flight) that they cannot cover these outflows from their cash on hand, or even by selling their AFS assets, forcing them to eat into their nest egg of HTM securities. In SVB’s case, deposit flight occurred incredibly fast with 25% of depositors withdrawing their cash in a single day.5 This is a feature of digital banking that clearly causes greater fragility in the event of a loss of confidence. Clearly, this issue is not a risk for JPMorgan although, at first glance, it appears concerning for Bank of America. The questions one needs to ask is what needs to happen to necessitate breaking into the HTM portfolio piggy bank, and what else is happening within the bank to offset these risks. Please ask if you would like to see more detail on this working but, in summary, Bank of America would need to suffer c.50% deposit outflows to force a mark to market on their HTM assets. There are several reasons we think this is unlikely. The first is size. With $1.9 trillion of deposits (vs. SVBs c$200bn) Bank of America is a systemic part of the depositary base in the US, and system deposits would need to meaningfully contract for them to be impacted. The second is diversity. Bank of America is a broad-based bank with an array of depositors (not narrowly focused on the tech companies in Silicon Valley as SVB was). The third is support from the Fed. The new “BTFP” facility allows banks to borrow up to 100% of the par value of their HTM assets, removing the need for an outright sale.6 As of December 2022, the rise in interest rates has generated an unrealised $100bn loss on Bank of America’s HTM assets. The most likely outcome is that these bonds mature at par and no loss is suffered, although an opportunity to earn a higher return in today’s interest rate environment is of course forgone. If these bonds were bought above par, then some portion of this loss may have to be realised from 2033 onwards as this is the earliest maturity within the portfolio. The flip side is that the recent move in interest rates has also driven an $8bn realised annual increase in profits today7. In both banks, solid management decisions have avoided the duration risk trap which others have fallen into. Why Own a Stock Today? This is an evergreen question that we ask ourselves about all our portfolio holdings. With banks, as with all cyclicals, our thought process goes as follows: 1. Do we believe in structural growth? 2. Is the business less cyclical than prior cycles? 3. Could the company emerge stronger when it passes through the eye of an inevitable downcycle? We believe in the structural returns from our holdings. They have generated an average 15% return on capital in a very tricky decade, and the next cycle should present further consolidation opportunities (c.f. Credit Suisse finally retiring their investment bank). Both banks have around a third of the leverage they had prior to the 2008 crisis, and three times the liquidity. Capital-light fee-based businesses are a larger contributor to their bottom lines, and credit risk within trading has been vastly reduced due to proprietary trading regulation. Asset quality is significantly higher, with mortgages at lower loan-to-value ratios made to homeowners with higher average FICO scores. All told, the cyclicality in the businesses through asset exposure, credit risk, and balance sheet leverage are lower than any point in the recent past, and revenues are more diverse. Finally, to the inevitable down cycle. We will see in a few days the impact of the recent malaise as they report Q1 earnings, and we expect solid deposit figures following depositor flight to safety from regional banks in the US. Given the tightening of financial conditions within the regional banks, we also expect loans to migrate to the money centre banks, creating long-term customer relationships with high franchise value. Trading at 9x normalised earnings the stocks are cheap and, while we don’t have a particular view on when they might re-rate, the strength shown through this difficult period (which is likely not over) will shine through in above-average intrinsic value growth, as well as potentially higher valuations, as we move through the next five years.

BSD Analysis:
Latitude’s thesis on Bank of America is that the market is overstating its interest-rate and liquidity risk: they estimate it would take roughly a 50% deposit outflow to force sales of HTM securities, a scenario they view as unlikely given its size, diversified deposit base and access to the Fed’s BTFP facility. They emphasize that unrealised losses on HTM bonds are largely a timing issue and that rising rates have simultaneously boosted current profits, while the bank has lower leverage, higher liquidity and better asset quality than pre-crisis. At about 14x trailing and low-teens forward earnings—only modestly above its 10-year average P/E—BAC offers a reasonable valuation for a scaled franchise with improving returns and operating leverage. Earnings growth should be driven by deposit repricing normalisation, fee income and potential share buybacks as capital builds, though a deeper recession could pressure credit costs and delay capital return. Relative to regional banks, BAC also stands to gain share in both deposits and lending as customers migrate toward perceived safety, reinforcing the medium-term compounding story.

Pitch Summary:
We own JPMorgan and Bank of America shares (and Goldman Sachs, for which the recent events are far less impactful given its business mix). Bank balance sheet assets are cash, loans, and investments, with funding liabilities in the form of deposits and debt / bonds. Banks are allowed to designate their investment assets in two ways: Available for Sale (AFS) or Held to Maturity (HTM). AFS securities are held at fair value, with any moves between reporting dates reflected in mark-to-market changes, meaning their value fluctuates with interest rate and credit risk changes. HTM assets are held at cost as they are not intended to be sold. The expectation from regulators is that assets designated HTM won’t be reclassified, however, they do acknowledge circumstances can change. Should this happen, a mark-to-market revaluation is triggered, impacting their book value and regulatory capital. Reclassification of HTM assets to AFS therefore only really happens if banks are in such a tight liquidity position (due to deposit flight) that they cannot cover these outflows from their cash on hand, or even by selling their AFS assets, forcing them to eat into their nest egg of HTM securities. In SVB’s case, deposit flight occurred incredibly fast with 25% of depositors withdrawing their cash in a single day.5 This is a feature of digital banking that clearly causes greater fragility in the event of a loss of confidence. Clearly, this issue is not a risk for JPMorgan although, at first glance, it appears concerning for Bank of America. The questions one needs to ask is what needs to happen to necessitate breaking into the HTM portfolio piggy bank, and what else is happening within the bank to offset these risks. Please ask if you would like to see more detail on this working but, in summary, Bank of America would need to suffer c.50% deposit outflows to force a mark to market on their HTM assets. There are several reasons we think this is unlikely. The first is size. With $1.9 trillion of deposits (vs. SVBs c$200bn) Bank of America is a systemic part of the depositary base in the US, and system deposits would need to meaningfully contract for them to be impacted. The second is diversity. Bank of America is a broad-based bank with an array of depositors (not narrowly focused on the tech companies in Silicon Valley as SVB was). The third is support from the Fed. The new “BTFP” facility allows banks to borrow up to 100% of the par value of their HTM assets, removing the need for an outright sale.6 As of December 2022, the rise in interest rates has generated an unrealised $100bn loss on Bank of America’s HTM assets. The most likely outcome is that these bonds mature at par and no loss is suffered, although an opportunity to earn a higher return in today’s interest rate environment is of course forgone. If these bonds were bought above par, then some portion of this loss may have to be realised from 2033 onwards as this is the earliest maturity within the portfolio. The flip side is that the recent move in interest rates has also driven an $8bn realised annual increase in profits today7. In both banks, solid management decisions have avoided the duration risk trap which others have fallen into. Why Own a Stock Today? This is an evergreen question that we ask ourselves about all our portfolio holdings. With banks, as with all cyclicals, our thought process goes as follows: 1. Do we believe in structural growth? 2. Is the business less cyclical than prior cycles? 3. Could the company emerge stronger when it passes through the eye of an inevitable downcycle? We believe in the structural returns from our holdings. They have generated an average 15% return on capital in a very tricky decade, and the next cycle should present further consolidation opportunities (c.f. Credit Suisse finally retiring their investment bank). Both banks have around a third of the leverage they had prior to the 2008 crisis, and three times the liquidity. Capital-light fee-based businesses are a larger contributor to their bottom lines, and credit risk within trading has been vastly reduced due to proprietary trading regulation. Asset quality is significantly higher, with mortgages at lower loan-to-value ratios made to homeowners with higher average FICO scores. All told, the cyclicality in the businesses through asset exposure, credit risk, and balance sheet leverage are lower than any point in the recent past, and revenues are more diverse. Finally, to the inevitable down cycle. We will see in a few days the impact of the recent malaise as they report Q1 earnings, and we expect solid deposit figures following depositor flight to safety from regional banks in the US. Given the tightening of financial conditions within the regional banks, we also expect loans to migrate to the money centre banks, creating long-term customer relationships with high franchise value. Trading at 9x normalised earnings the stocks are cheap and, while we don’t have a particular view on when they might re-rate, the strength shown through this difficult period (which is likely not over) will shine through in above-average intrinsic value growth, as well as potentially higher valuations, as we move through the next five years.

BSD Analysis:
Latitude frames JPMorgan as a structurally advantaged money-centre bank that has avoided the duration-risk mistakes seen at regional peers and is positioned to capture deposit inflows and loan migration as smaller banks retrench. They highlight strong capital and liquidity, improved asset quality and diversified fee income, arguing that cyclicality is materially lower than pre-2008 while returns on equity have averaged around the mid-teens through a difficult decade. At roughly 15x trailing earnings and a mid-teens ROE, JPM trades at only a modest premium to its long-run P/E yet still offers an attractive risk-adjusted earnings yield for a franchise of this quality.:contentReference[oaicite:1]{index=1} Rising rates have expanded net interest income and should continue to support earnings as long as credit costs remain contained. The key upside catalyst is continued market-share gain in deposits and corporate lending as weaker competitors retrench, while risks include a sharper credit cycle or regulatory tightening that crimps returns.

Pitch Summary:
The company has $200m debt yielding 6%, which is equal to all the profits the company could make in its glory period; equity is overvalued; the company is only riding the AI wave;

BSD Analysis:
BigBear.ai markets AI and analytics to U.S. government clients. Bears cite overpromising, ongoing losses, and reliance on government contracts. Revenue growth has lagged amid execution issues and balance sheet strain. Competition from larger AI players threatens positioning. Equity dilution remains a recurring risk.

Pitch Summary:
The combination of a defensive business model, growing free cashflow and low leverage creates a particularly attractive investment thesis around Austria's largest telecommunications provider. Additionally, the spin-off of its tower assets is expected to unlock value and potentially allow them to re-lever with a special dividend or M&A. Telekom Austria (TKA) is a leading Austrian telecommunication provider with growing business in Central and Eastern Europe. The company splits operations geographically with Austria representing 55% of sales, followed by Bulgaria (13%), Croatia (9%), Belarus (9%), Serbia (7%), Slovenia (4%) and North Macedonia (3%). TKA operates in oligopolistic markets being the incumbent in Austria and number two or three in all other jurisdictions. While telcos are perceived as mature businesses, TKA has managed to grow top line at 2.7% pa over the last five years mainly due to the growth of its international activities, which benefit from price increases, a post-covid recovery, convergence, and rising penetration rates. Moreover, the group is not suffering from changes in consumer behavior or increased churn, and it continues to benefit from strong demand for high-bandwidth products and successful upselling. TKA has more pricing power than most European peers, with inflation-linked tariffs in the two key jurisdictions, Austria and Bulgaria, and price increases in most other markets, protecting profitability in a particularly challenging macro environment. Simultaneously, the ongoing restructuring program combined with the main shareholder's focus on financial performance has already borne fruit with the EBITDA margin increasing from 32.5% in 2016 to 36.7% in 2022 to grow EBITDA at 5.0% per annum over the last five years. Finally, the lowly-levered balance sheet (<1.0x excluding leases) offers ample space for management to execute a 5G and fiber investment program without adding debt risk. It is worth noting that the United Group, the main competitor in Bulgaria, Croatia, Slovenia and Serbia has a similar investment program but it is 5.0x levered. The most interesting part of the story is the announced spin-off of the tower business and its listing on the Vienna stock exchange. While public markets are unlikely to pay recent private market multiples for this business, publicly traded peers are still highly appreciated by the market. Apart from the value recognition of the tower company asset, currently ignored by the market, the spin-off is expected to benefit the thesis in multiple ways. As an independent entity, the tower company could expand its strategy by signing agreements with other telecom operators and tower companies, hence increasing the tenancy ratio, which is the main driver of profitability. Moreover, TKA will transfer approximately 50% of their leases and we estimate 200-250 million of financial debt to the tower company, reducing lease (IFRS 16) and financial debt and their linked lease and interest expense cash outflows. Exposure to Belarus, roughly 10% of the business, weighs negatively on investor sentiment. Thus far they have been able to extract dividends and the currency has been remarkably stable, however this could change at any time. Even in the most pessimistic scenario, the thesis remains attractive. Low liquidity of the share and the required investment in 5G and fiber are probably two other reasons for the discount. We don't see them as a concern since the first has nothing to do with the value of the company and the second is a market-wide trend which probably affects the levered peers more. The major shareholders have already agreed to a capital expenditure plan so the risk that the government forces uneconomic 5G/fiber rollout is limited. Excluding any value realization from the tower business divestment, we estimate that Telekom Austria trades at a 12% free cash flow yield, which for a stable and growing business with improving margins should be considered a bargain. Although the details of the spin-off haven't been released yet, the tower company should add an extra €2.5-3.0 per share value to our thesis. The spin-off is also expected to further reduce leverage, which could give room for a special dividend. Overall, we see this as a classic value play with an interesting upside potential without taking significant risk.

BSD Analysis:
Palm Harbour Capital presents a compelling bull case for Telekom Austria based on its defensive telecommunications business model, strong free cash flow generation, and low leverage profile. The manager highlights TKA's oligopolistic market positions across Austria and Central/Eastern Europe, with the company achieving 2.7% annual revenue growth over five years despite operating in mature telecom markets. Key competitive advantages include inflation-linked pricing power in Austria and Bulgaria, successful margin expansion from 32.5% to 36.7% EBITDA margin, and a conservative balance sheet with less than 1.0x leverage excluding leases. The upcoming tower business spin-off represents a significant value catalyst, potentially adding €2.5-3.0 per share while reducing debt and creating opportunities for special dividends or M&A activity. The manager values the core business at a 12% free cash flow yield, which appears attractive for a stable, growing telecom operator with improving margins. While Belarus exposure creates some geopolitical risk, the overall investment thesis remains compelling given the defensive characteristics and multiple value unlock opportunities.

Pitch Summary:
The company will fail within 12 months without additional financing; expected to lean into an AI hype to raise cash from unsuspecting retail investors;

BSD Analysis:
Presto’s AI ordering tools face weak adoption, poor unit economics, and scalability concerns. Despite labor-saving claims, conversions to scale have lagged. Cash burn and reliance on financing add dilution risk. Larger players like Toast and NCR pose competitive threats.

Pitch Summary:
The company failed to benefit from the last two uranium bull markets (`06 and `10); none of the estimated resources can be mined profitably at current uranium prices; acquired 5 mines for $350mil, yet none can also be mined;

BSD Analysis:
UEC has accumulated uranium assets but remains promotional, loss-making, and reliant on equity issuance. Few cash-generating projects exist, and production timelines are distant. While uranium sentiment is strong, the gap between investor enthusiasm and UEC’s operating reality remains wide.

Pitch Summary:
Potential Tesla's bid is unlikely as other less-risky options are present; "Green Mining & Green Tech" claims are false; experts think $2-3bil acquisition is possible, half of the current price; another potential bidder - Rio Tinto passed; lost Mitsui as a client; overvalued (87% above the comparable figures);

BSD Analysis:
Sigma Lithium is a Brazil-based producer dependent on a single project. Risks include execution challenges, cost control, and lithium price volatility. Environmental or political disruption could derail output. The single-asset profile amplifies downside if demand falters or competition increases.

Pitch Summary:
Cash burning machine, expected to report losses for the next two years; $2.3bil worth of stock-based compensation; further reduction in earnings as "staking" is prohibited by the SEC; indirect regulatory risks;

BSD Analysis:
Coinbase is exposed to regulatory overhang, declining trading volumes, and reliance on retail fees. Expansion into staking and custody remains small. DEXs and global competitors threaten share. High compliance costs squeeze margins, while valuation remains tied to volatile crypto cycles.

Pitch Summary:
The main customers, which are regional banks, will continue to lose their customers; does not look attractive based on valuation (EV 30x the 2023 EBITDA, which excludes stock-based compensation);

BSD Analysis:
Q2 sells cloud software to regional banks. Short thesis highlights sluggish growth, client concentration, and fintech competition. Regional bank stress increases counterparty risk, while high R&D costs hinder profitability. Despite recurring revenues, valuation looks stretched given limited operating leverage.

Pitch Summary:
The company hid its toxic real estate portfolio using web of real and fake holding companies; $582mil off-balance liabilities is disguised; the company could have been insolvent in case of total portfolio consolidation; major financial ratios are lower than their reported levels

BSD Analysis:
Arbor Realty has faced scrutiny over its mortgage REIT model, which depends heavily on credit markets and multifamily lending. Bears argue that rising rates, deteriorating credit quality, and higher funding costs threaten both earnings and dividend sustainability. The firm’s concentration in bridge loans leaves it vulnerable if refinancing markets freeze. Leverage amplifies risk, and while Arbor highlights strong demand for rental housing, skeptics question whether earnings quality justifies the valuation given increasing defaults and stress in commercial real estate.

Pitch Summary:
Paywalled (The Bear Cave is publishing additional concerns about Coinbase (NASDAQ: COIN — $12.4 billion). The Bear Cave believes Coinbase currently faces a perfect storm of problems including ballooning losses and legal liabilities, the collapse of bank partners, and a volatile stablecoin that all add pressure to its deteriorating core business.)

BSD Analysis:
Coinbase is the leading U.S.-based crypto exchange, but shorts highlight regulatory pressure, fee compression, and overreliance on trading volumes. The SEC’s stance on crypto securities could significantly disrupt operations, while decentralized exchanges and global competitors push pricing lower. Diversification into custody and institutional services is growing but still small. Without sustained crypto bull markets, Coinbase’s high valuation looks vulnerable.

Pitch Summary:
Involved in the corruption of Ghana's politician; Ghana's authorities are unlikely to ratify its mining licenses due to corruption; PLL's Tenessee facility is dead; potential problems with regulators;

BSD Analysis:
Piedmont Lithium’s value hinges on developing its Carolina Lithium project, but delays, permitting risk, and financing needs weigh heavily. Lithium price volatility adds further uncertainty. With no near-term production and significant capex ahead, dilution risk is high. Critics argue valuation reflects excessive optimism amid intense global competition.