Investment Pitches

Pitch Summary:
JOE owns approximately 169,000 acres in the Florida Panhandle. It has been widely known that JOE traded for a tiny fraction of its liquidation value for years, but without a catalyst, it was always perceived to be "dead money." Over the past few years, the population of the Panhandle has hit a critical mass where the Panhandle now has a center of gravity that is attracting people who want to live in one of the prettiest places in the country, with zero state income taxes and few of the problems of large cities. The oddity of the current disdain for so-called "value investments" is that many of them are growing quite fast. I believe that JOE will grow revenue at 30% to 50% each year for the foreseeable future, with earnings growing at a much faster clip. Meanwhile, I believe the shares trade at an attractive multiple on Adjusted Funds from Operations (AFFO), while substantial asset value is tossed in for free. Besides the valuation, growth, and high Return on Invested Capital (ROIC) of the business, why else do I like JOE? For starters, land tends to appreciate rapidly during periods of high inflation—particularly an inflationary period where interest rates are likely to remain suppressed by the Federal Reserve. More importantly, I believe we are about to witness a massive population migration as people with means choose to flee big cities for somewhere peaceful. I suspect that every convulsion of urban chaos and/or tax-the-rich scheming will launch JOE shares higher, and it will ultimately be seen as the way to "play" the stream of very wealthy refugees fleeing for somewhere better.

BSD Analysis:
Kupperman identifies St. Joe as a classic value-to-growth transformation story, owning 169,000 acres in Florida's Panhandle that historically traded below liquidation value. The manager recognizes a demographic inflection point where the region has achieved critical mass, attracting residents seeking attractive living conditions with zero state income taxes and minimal urban problems. The thesis centers on explosive growth expectations of 30-50% annual revenue growth with even faster earnings expansion, while trading at attractive AFFO multiples with substantial embedded asset value. Kupperman views the position as a hedge against inflation, noting land's historical appreciation during inflationary periods, particularly with suppressed interest rates. The investment thesis extends beyond fundamentals to capture a broader demographic migration trend of wealthy individuals fleeing urban centers. The manager expects urban disruptions and tax policies to serve as catalysts, positioning JOE as the primary beneficiary of this wealthy migration to peaceful, tax-advantaged locations.

Pitch Summary:
It may take some time still, but I believe that society will eventually settle on nuclear power as a compromise solution for baseload power generation. This will come at a time when there is a deficit of uranium production, compared with growing demand. As aboveground stocks are consumed, uranium prices should appreciate towards the marginal cost of production. Additionally, there is currently an entity named Sprott Physical Uranium Trust (U-U – Canada) that is issuing shares through an At-The-Market offering, or ATM, in order to purchase uranium (we are long this entity). Originally, I believed that these uranium purchases would accelerate the price realization function by sequestering much of the available above-ground stockpile at a time when utilities have run down their inventories and need substantial purchases to re-stock. I still believe that to be the case but have concluded that the deficit problem is so severe and immediate that this investment demand is simply the icing on the cake and that the next leg higher will be driven largely by utilities and fuel buyers who are starting to see the writing on the wall. The combination of these factors ought to lead to a dramatic increase in the price of uranium as it will take multiple years for sufficient incremental supply to come online—even if the re-start decision were made today.

BSD Analysis:
Kupperman presents a compelling uranium thesis centered on nuclear power's inevitable role as a baseload solution amid growing energy demands. The manager identifies a critical supply-demand imbalance, with uranium production deficits coinciding with depleted utility inventories requiring substantial restocking. Sprott Physical Uranium Trust serves as both an investment vehicle and catalyst, sequestering above-ground uranium supplies through its ATM offering program. The thesis emphasizes structural supply constraints, noting that even immediate restart decisions would require multiple years for meaningful production increases. Kupperman views current investment demand as supplementary to the primary driver: utilities and fuel buyers recognizing supply scarcity. The manager expects uranium prices to appreciate toward marginal production costs as above-ground stockpiles are consumed. This represents a classic inflection opportunity where fundamental supply-demand dynamics should drive sustained price appreciation regardless of broader market conditions.

Pitch Summary:
We added a Core Long position in FIGS this month around $5.80/share. I've followed FIGS for several years and believe the current setup, growth initiatives, and return profile provide a compelling entry point. As usual with these letters, I'll keep the company and industry background brief (email or call me to discuss further) and focus on the key points of our thesis. Figs is a DTC scrub provider known for reinventing the category with modern fabric and silhouettes. The company competes against traditional strip mall medical store vendors, legacy uniform companies such as Dickey's and Cherokee, and copycat upstarts like Mandala and Jaanuu. We've liked the strong cohort economics (including repeat purchase rate) and brand leadership in a large healthcare worker market (~10mn in the US). Our long thesis is three pronged and centered on several top line initiatives: FIGS' TAM penetration of healthcare workers is lower in the US than bears argue, and thus growth duration will surprise to the upside over the medium term. Figs has lower awareness outside of major healthcare centers in the US; flyover state markets remain a major opportunity to increase customer awareness to drive new customer acquisition and reactivate old buyers. International growth is nascent with Canada the largest market; ample expansion opportunities in early markets in Europe (the company added 10 new markets in 23). Team business will drive US growth going forward. We think there is low hanging fruit with higher propensity to spend employers/organizations such as concierge clinics, private practices, university medical schools, etc. Figs' opportunity in group ordering is simplifying the color and patchwork required by larger organizations. Fig's is the branded, category creator for the modern scrub market; organizations can offer Figs scrubs as a low cost benefit to their employees. MSD% of revenue for the company vs 15% for the industry in the US. All inbound demand today; investment into outbound can close this gap. Natural brand halo effects (word of mouth/other healthcare practitioners seeing Figs uniforms) increase customer awareness of Figs. Continued success in non-scrubwear categories. Higher ASPs, increased attach rates among loyal customers. Risks include penetration among the US healthcare market (currently over 2mn members; there are TAM debates around the number of US healthcare workers that would wear Figs scrubs), elevated inventory of non-core styles, normalizing order frequency below COVID years, and trade down given 66% of their customers make under $100k/year. Amongst near term risks are two major factors we're watching for. First, in our conversations with the company, the tone and messaging around trade down to lower priced competitors amongst Figs' customers has increased vs prior quarters. Second, we believe 1H24 Selling cost estimates are too low on account of the fulfillment initiatives the company has guided to and thus street EBITDA is overinflated. The math behind our 22% IRR at $5.80 is as follows: 320k net customer adds annually. Supported by growth in international, aforementioned brand marketing/awareness outside of major health care cities. Stable AOVs in the low 110s. Normalized order frequency of 2/year per active customer. GM stabilization in the low 70s. No leverage in Selling Costs or Sales and Marketing as a % of revenue. Selling Costs is largely variable with revenue. Marketing costs should increase on a $ basis due to investments in brand awareness and typical ROAS diseconomies of scale for DTC companies. Marginal YoY $ adds for G&A. LT FCF margins in the LDD via more typical FCF conversion on normalized inventory growth and lower SBC.

BSD Analysis:
Sandbrook Capital initiated a Core Long position in FIGS at $5.80, targeting a 22% IRR based on a comprehensive three-pronged growth thesis. The manager believes FIGS has significant untapped market penetration opportunities, particularly in flyover state markets where brand awareness remains low outside major healthcare centers. The team business segment represents a key growth driver, with the company currently capturing only mid-single-digit percentage of revenue versus 15% industry average, presenting substantial upside through outbound sales initiatives targeting high-propensity employers like concierge clinics and private practices. International expansion remains nascent with meaningful runway, having added 10 new European markets in 2023 while Canada remains the largest international market. The investment case assumes 320k annual net customer additions, stable average order values around $110, normalized order frequency of 2x per year, and gross margin stabilization in the low 70s. Key risks include potential trade-down pressure among customers (66% earn under $100k annually), elevated non-core inventory, and management's guidance suggesting higher fulfillment costs that may pressure near-term EBITDA estimates. The manager's financial model projects long-term free cash flow margins in the low double digits through normalized inventory growth and reduced stock-based compensation.

Pitch Summary:
Sandridge is SCC's largest energy holding and was down 6% during 2023, including $2.30/share in dividends received. The long thesis here remains that the secular decline in O&G drilling, combined with the revival of inflation generally, will support carbon-based energy prices going forward (in other words, if you own O&G assets, then ESG is your friend). With legendary investor Carl Icahn as its largest shareholder (he owns 13%) and Icahn's former lieutenant Jonathan Frates as its board chairman, Sandridge did an admirable job steering the company away from the abyss of bankruptcy in April 2020 (when, recall, the price of oil dropped to NEGATIVE $40/bbl). The company has cut unnecessary expenses to the bone ("high-grading" SD's well inventory in fact, not just as a management talking point), thereby maximizing free cash flow conversion. SD has also done a great job recompleting and reactivating dormant wells. SD's annual PDP decline is expected (by the company) to average approximately 8% over the next 10 years. In Q2 2023, SD announced a special dividend of $2/share and the institution of a regular $0.10/quarter dividend, representing a laudable return of the company's excess capital to its true owners, the shareholders.

BSD Analysis:
Seven Corners Capital's thesis on SandRidge Energy centers on a contrarian bet that secular underinvestment in oil and gas drilling, combined with inflationary pressures, will support higher energy prices over time. The manager argues that ESG-driven capital constraints actually benefit existing asset owners by limiting new supply. Carl Icahn's 13% ownership stake and his former lieutenant Jonathan Frates serving as board chairman provide strong governance oversight and turnaround expertise. Management's successful navigation through the April 2020 oil price collapse demonstrates operational resilience and cost discipline. The company has optimized its asset base through high-grading well inventory and reactivating dormant wells, maximizing free cash flow conversion. With an 8% annual PDP decline rate expected over the next decade, the asset base provides predictable cash generation. The $2 special dividend and new $0.40 annual regular dividend demonstrate management's commitment to returning excess capital to shareholders. Despite a 6% stock decline in 2023, the $2.30 per share dividend provided positive total returns while building a sustainable income stream.

Pitch Summary:
MACK, which was up 17% during 2023, is a classic uncorrelated "discount to the sum-of-the-parts" play. It can be good to have one or more of these plays interspersed with one's general long holdings, since (theoretically, at least) investors should view them without regard to rises or falls in the overall market. With no debt, MACK has a cash runway which the company claims should last until 2027. In November 2022, Ipsen announced that the Onivyde Phase 3 drug trial for first-line treatment of pancreatic cancer was successful (if the FDA approves Onivyde for this indication, MACK will receive $225 million from Ipsen via a CVR payment, or nearly $17/share on 13.4 million shares outstanding; note that MACK retains significant NOLs that should largely obviate taxes on such a payment). In mid-June, Ipsen announced that submitted an NDA for Onivyde and that it has received a PDUFA date of February 13, 2024 from the FDA. Insiders purchased MACK heavily via the open market in 2022 and 2023 (including as recently as one week ago). Insider buying can often be a good indicator of the future return on a stock, as insiders tend to shy away from putting their own capital to work (as opposed to being gifted options and RSUs) unless they are highly confident in their stock's future price performance.

BSD Analysis:
Seven Corners Capital views Merrimack Pharmaceuticals as an uncorrelated binary catalyst play with significant upside potential tied to FDA approval of Onivyde for pancreatic cancer treatment. The investment thesis centers on a potential $225 million CVR payment from partner Ipsen, representing nearly $17 per share on the current share count. With a PDUFA date of February 13, 2024, the catalyst timing is well-defined and imminent. The company's debt-free balance sheet and cash runway extending to 2027 provide downside protection while awaiting regulatory approval. Significant net operating losses should minimize tax implications on any CVR payment, enhancing the economic benefit to shareholders. Heavy insider buying throughout 2022 and 2023, including recent purchases, signals management confidence in the FDA approval outcome. The 17% performance in 2023 suggests the market is beginning to price in approval probability, though substantial upside remains if the FDA grants approval. This represents a classic risk-reward asymmetry with defined catalysts and limited correlation to broader market movements.

Pitch Summary:
GNW outperformed the overall market by a significant margin during the 2nd half of 2022 (when SCC's position was initiated) and increased by 26% during 2023 (in line with the S&P). GNW trades at a discount to the sum of its parts, principally its 81.6% ownership stake in Enact Holdings (ticker ACT), which is currently valued at $3.75 billion (or 25% greater than GNW's $3.0 billion aggregate market cap). The SCC long thesis on GNW involves the eventual separation of GNW's ACT stake from GNW's generally unprofitable long-term care & life and annuity operations. Longer term could see GNW's Life & Annuity business (L&A) value unlocked via a de-stacking transaction (currently L&A is trapped below the long-term care business in the org chart and the applicable insurance regulators must bless any de-stacking). The company has been actively repurchasing its stock in recent quarters.

BSD Analysis:
Seven Corners Capital's thesis on Genworth Financial centers on a classic sum-of-the-parts arbitrage opportunity with multiple value unlock catalysts. The core inefficiency lies in GNW trading at a 25% discount to just its Enact Holdings stake alone, which represents $3.75 billion in value versus GNW's $3.0 billion market cap. The primary catalyst involves separating the profitable mortgage insurance business (Enact) from the struggling long-term care operations. A secondary catalyst exists in the potential de-stacking of the Life & Annuity business, currently trapped beneath the long-term care segment in the corporate structure. Management's active share repurchase program demonstrates capital allocation discipline and confidence in the value unlock thesis. The regulatory approval requirement for de-stacking adds complexity but also creates barriers to entry for other investors. With GNW's 26% performance in 2023 matching the S&P 500, the market is beginning to recognize the underlying value, though significant upside remains from full sum-of-parts realization.

Pitch Summary:
PSHZF, led by billionaire hedge fund manager Bill Ackman, finished the 2023 up 36%, outpacing a 27% increase in its NAV (thus, PSH's discount to NAV decreased to 29%): The long thesis continues to be two-fold: (1) a bet that Bill Ackman will outperform the overall market with his stock picking and uncanny ability to make huge sums via hedging; and (2) more importantly over the near to intermediate term, the closing of the sizable NAV discount. Simply closing the current discount would result in a ~40% appreciation in the stock, assuming NAV were to remain constant. Ackman hinted last year that PSH could become a Berkshire Hathaway-type vehicle via a US listing: "As PSH grows in market capitalization and its ownership stakes in its portfolio companies increases, one can envision a world in which over time PSH becomes a controlling owner of one of more businesses that comprise the substantial majority of our assets and income. We expect to continually evaluate PSH and its operations, and consider whether in the future it may be able to operate not as an investment company in the U.S., but rather as an operating company that could be listed in the U.S." Interestingly on this front, major PSH holding Howard Hughes Corporation (HHC) underwent a corporate reorganization in Q3 2023 that potentially could set the entity up to be a Berkshire Hathaway-type vehicle for PSH (i.e., a domestic holdco under which Ackman could group all of PSH's investments, including HHC's current operations, in a publicly-traded entity). Alternatively, HHC (the opco) could conceivably combine with another PSH opco under a newco Berkshire-esque holdco structure. Berkshire trades well above book value and, assuming PSH were to go public in the United States via HHC or otherwise, PSHZF holders should eventually see a similar valuation for their stock.

BSD Analysis:
Seven Corners Capital maintains a bullish stance on Pershing Square Holdings, viewing it as a dual-catalyst opportunity. The primary thesis centers on NAV discount compression, which alone could drive 40% upside if the current 29% discount closes while NAV remains constant. The secondary catalyst involves Bill Ackman's proven track record of market outperformance through concentrated stock picking and strategic hedging. The manager highlights Ackman's vision to transform PSH into a Berkshire Hathaway-style operating company through a potential US listing, which could command premium valuations. The Howard Hughes Corporation reorganization in Q3 2023 provides a potential structural pathway for this transformation. With PSH's 2023 performance of 36% stock appreciation versus 27% NAV growth, the discount compression thesis is already showing early validation. The investment represents a leveraged bet on both Ackman's investment acumen and corporate structure optimization.

Pitch Summary:
Lululemon is a specialty technical athletic apparel, accessories and footwear brand that has a global reach that focuses on the premium athleisure segment. They did over US$8bn of revenues in FY22 with $1.2bn of Net Income (adjusted for one-off Mirror acquisition impairment). Lululemon designs and sources all their own materials through suppliers, and subsequent does all the manufacturing via contract manufacturers, with marketing and sells it, similar to the other sporting brands like Nike, Adidas, Under Armour, Puma, etc. Where Lululemon differs from the rest, instead of being largely selling through B2B distributors, having more scale, lower margins, heavy discounting, huge working capital requirements, it sells through largely their two main own B2C channels (~91%) to its own customers, which are roughly split 50-50, amongst their own 655 physical stores worldwide (mostly in US, Canada, China) (~45%) and via DTC / e-commerce (~46%). Lululemon's largely B2C distribution strategy allows it to capture higher profit margins of > 1000bps more versus its competitors. In gross profit margins, Lululemon has 56% GPM vs 43-46% for competitors), and EBIT margins of 22% vs Nike 11% and much lower for others. In addition Lululemon also has better working capital terms, it has significantly lower days receivables cycle (<5 days) vs competitors (30-45 days), as customers pay upfront immediately, versus extending credit payment terms to its B2B distributors. Lululemon's inventory days is also comparable to best-in-class Nike and has been rising due to its DTC strategy. DTC has been growing faster than physical store revenues, growing share of revenues from 20% in 2015 to 46%, as the dominant model is to drive customers to order via DTC/online instead. DTC is also a much more profitable business with higher EBIT margins (42%) vs that of the physical store business (27%). The faster DTC grows, the more profitable Lululemon becomes. Lululemon does have a smaller wholesale B2B channel (~9%) that is sold largely through yoga studios, high-end fitness studios, and through department stores occasionally, but done largely for brand awareness, but that is not the dominant customer distribution strategy. Lululemon is currently majority women's apparel (~65%), and men's apparel (~24%), the reverse of the others which is largely men's. Men's is a very large segment, and Lululemon's unaided brand awareness still remains very low with lots of room to grow from here (US 25% ROW low single digits) as more customers come to know the brand. It is focused on growing Men's (shoes to come in 2024), International namely China, Accessories (Bags), and higher profit margin DTC which is overall profit margin accretive. Geographically wise, it is majority 84% North America (70% US, 14% Canada) with only about 16% of the business being outside the US. The international business has been growing much faster than the North American business. Lululemon is focused on growing China and expects to double existing 100 stores to 200, in comparison Nike has 1,000+ stores. There are other optionalities for Lululemon to to expand to various sport segments, hiking, golf, tennis, men's, etc, and its still low unaided brand awareness shows great strength in what potentially Lululemon can become. Its Power of Three x 2 focuses on 15% net revenue CAGR growth, with Men's +20% CAGR, Women's LDD CAGR, Accessories Low Teens CAGR, Ecomm and Stores +15% CAGR, and International 30%+ CAGR vs North America with LDD CAGR. Lululemon is about its strong customer brand loyalty (fanatic customers, speak to Tai Tais), the subtle logo placement (not big ostentatious logos), its versatility allowing the repeated wearing of their clothing and apparel across multiple occasions. It is also their lesser focus on fashion and their strong focus on technical fabric, production innovation, and on the premium segment. Overall Lululemon is structurally advantaged versus other sports apparel brands with higher profit margins with its largely premium full-priced B2C business and DTC, rather than the traditional B2B business that its competitors focus on. Resulting in higher profit margins and better working capital dynamics, and having full control of future products for sale and the avoidance of discounting by B2B distributors. Lululemon is also marketing advantaged with its strong focus on community based marketing and influencers that have strong influences than sponsoring big name athletes that require large budgets that their competitors Nike and Adidas regularly do, and spends 4% on marketing versus 6-18%+ across its competitors. Though current CEO Calvin McDonald has low insider ownership (0.2% $100m shares), he is an athlete and has the rare support of Founder Chip Wilson. Calvin has also proven to be a strong CEO since he joined in 2018 from Sephora leading it to strong growth and execution. He has 4.3 Stars from Glassdoor, with a solid 88% CEO Approval Rating and 84% Recommend to Friend. Valuations - At FY22 Revenue of $8.1b growing 18% CAGR based on their Power of Three x 2 plan, and if Lululemon can continue to grow and improve profit margins further, and assuming 7% capex margins to get to the following FCF margins, and assuming 30-50x EV/FCF multiples, at current fair valuations, one should be able to get above 20%+ returns if valuation multiples stay the same, or higher if LULU executes well.

BSD Analysis:
Vision Capital initiated a new position in Lululemon in 2023, viewing it as a structurally advantaged athletic apparel company in the premium athleisure segment. The investment thesis centers on Lululemon's differentiated direct-to-consumer business model, which generates superior margins (56% gross margins vs. 43-46% for competitors) and better working capital dynamics compared to traditional wholesale-focused competitors. The company's 91% B2C distribution split between owned stores and e-commerce provides pricing control and eliminates distributor discounting pressures. Key growth drivers include men's apparel expansion (currently only 24% of sales), international expansion particularly in China, and the higher-margin DTC channel growing from 20% to 46% of revenues since 2015. The manager appreciates Lululemon's community-based marketing approach and technical fabric focus over fashion trends, creating strong customer loyalty. With CEO Calvin McDonald's proven execution track record and the company's 'Power of Three x 2' plan targeting 15% revenue CAGR, the manager sees potential for 20%+ returns if execution continues.

Pitch Summary:
NVIDIA is the portfolio's current largest position at 11.4% and contributor to overall returns in 2023. NVIDIA was first purchased back in 2017, and is currently a near 10-bagger on that investment with a large price rally in 2023. We are still overall comfortable with our position. NVIDIA is at the pivot of the longer term structural tailwind shift from general purpose computing to accelerated computing and generative AI with significantly stronger use cases than the previous Crypto/De-Fi/NFT hype. There is a strong visibility of multi-year long-term broad-based CAPEX demand that reflects the start of a potential longer-term shift. NVIDIA should continue to dominate with its strong architecture moat of CUDA, InfiniBand, Mellanox have built and strategically acquired over the years. That said, we are watching competition as AMD enters with their MI300X GPUs, and other emerging start-up competitors as well.

BSD Analysis:
Vision Capital maintains a bullish stance on NVIDIA as their largest position at 11.4%, representing a near 10-bagger return since their 2017 initial purchase. The manager's thesis centers on NVIDIA's strategic positioning at the intersection of the structural shift from general-purpose to accelerated computing, particularly benefiting from the generative AI boom. Unlike previous hype cycles around crypto and NFTs, the current AI demand appears to have more substantial and durable use cases. The investment case is anchored by NVIDIA's technological moat through its CUDA ecosystem, InfiniBand networking, and Mellanox acquisition, creating a comprehensive platform that's difficult for competitors to replicate. The manager acknowledges emerging competition from AMD's MI300X GPUs and startup challengers but remains confident in NVIDIA's dominant market position. Multi-year CAPEX visibility from hyperscale customers provides revenue predictability and supports the long-term growth trajectory.

Pitch Summary:
In December, a shareholder sent a letter to the Board urging for a strategic review, focused on the potential sale of the education division, and to accelerate share repurchases. We continue to believe Franklin Covey trades at a significant discount to fair value and the sale of its less attractive education business could provide a catalyst to close the valuation gap.

BSD Analysis:
The manager maintains a bullish view on Franklin Covey based on significant undervaluation and potential activist catalyst. The investment thesis centers on the company trading at a substantial discount to intrinsic value, with a clear path to value realization through strategic actions. The December shareholder letter advocating for strategic review represents an activist catalyst that could unlock value through asset optimization. The proposed sale of the education division would allow management to focus on higher-quality business segments while potentially commanding attractive valuations. Accelerated share repurchases would provide additional shareholder returns and demonstrate management's confidence in the business. This appears to be a classic activist situation where external pressure could drive management to take value-enhancing actions. The combination of fundamental undervaluation and activist pressure creates a compelling risk-adjusted opportunity with multiple paths to value realization.

Pitch Summary:
During the fourth quarter, the fund initiated a significant position in Roivant, a biotech company specializing in consolidating promising drug patents, known as 'vants'. Our thesis is based on the following framework: 1. Cash value: - ROIV's strategic acquisition of Televant (85% ownership) from Pfizer for $45 million in December 2022, followed by the sale of this asset to Roche for $5.2 billion in Q4 2024, showcases management's ability for value creation - Adjusting for the sale proceeds, Roivant has a net cash position of ~$8 per share 2. Immunovant (IMVT) Stake: ROIV's ~50% stake in Immunovant (IMVT) represents ~$4 per share 3. Cash Burn: We forecast Roivant burns ~$2 per share over the next two years ($1 per share annual burn rate) 4. Upside Potential from Other Assets and Litigation: - Dermavant, which holds the commercialized drug Vtama, we estimate may be worth ~$3 per share - We estimate the value of additional vants in the pipeline at least $1 per share - Ongoing litigation related to potential patent infringement from COVID vaccines could lead to a settlement worth over $5 per share Roivant's management is well aligned and takes small asymmetric bets. Adjusting the cash value for two years of burn, along with factoring in the Immunovant stake, these assets are valued at $13 per share, providing a margin of safety to the current share price. We believe Roivant's pipeline and litigation claims offer additional upside to ~$20 per share, with limited downside.

BSD Analysis:
The manager presents a detailed sum-of-the-parts valuation for Roivant Sciences, demonstrating strong analytical rigor in this complex biotech holding company. The investment thesis is anchored by management's proven value creation track record, exemplified by the Televant transaction generating over 100x returns ($45M to $5.2B). The valuation framework provides substantial margin of safety with $8 per share in net cash and $4 per share from the Immunovant stake, totaling $13 per share after accounting for two years of cash burn. The manager identifies multiple value drivers including Dermavant's commercialized Vtama drug, pipeline assets, and significant litigation upside from COVID vaccine patent claims potentially worth $5+ per share. The asymmetric risk-reward profile is attractive with limited downside given the cash position and meaningful upside to $20 per share from pipeline and litigation catalysts. This represents a sophisticated biotech investment combining proven management execution with multiple value creation pathways.

Pitch Summary:
During Q1, we acquired a position in Latch recognizing the value of Latch's technology that far exceeded its share price. Despite outstanding financials, our acquisition took place when shares were trading well below the $1.50 per share indicated on Latch's balance sheet. Our research unveiled a significant reduction in expenses and cash burn. In May, Latch made a notable move by announcing its acquisition of Honest Day's Work for $22 million in stock. This acquisition brought Honest Day's Work founder, Jamie Siminoff, founder of Ring (acquired by Amazon), on as CEO. On June 21st, we published an overview of our thesis on our website, tourlitecapital.com, and Twitter. As of August 10th, Latch was delisted from the Nasdaq due to the Company's inability to file restated financials. As a result, Latch's shares fell over 50% and gave back a significant amount of our prior gains. While not impactful to the underlying business, this is expected to significantly reduce liquidity. Based on our conversations with management, we believe the company remains committed to restating its financial statements and eventually uplisting back to a major exchange.

BSD Analysis:
The manager's investment in Latch represents a deep value technology play that encountered significant execution challenges. The initial thesis was compelling, with shares trading below tangible book value ($1.50 per share) while the technology platform held substantial intrinsic value. Operational improvements including expense reduction and lower cash burn supported the turnaround narrative. The acquisition of Honest Day's Work and appointment of Jamie Siminoff (Ring founder) as CEO represented a major catalyst, bringing proven smart home expertise and Amazon connections. However, the investment was derailed by accounting issues leading to Nasdaq delisting and a 50%+ share price decline. While the manager maintains the underlying business remains intact, the delisting creates significant liquidity constraints and regulatory overhang. This case illustrates the risks inherent in distressed technology investments where operational improvements can be overshadowed by corporate governance issues.

Pitch Summary:
Despite making strong progress in its post spin-off initiatives and receiving multiple sell-side upgrades, we believe Kyndryl remains undervalued. Current gross margins are significantly below normalized levels, and a significant portion of their new high-margin signings are still in backlog. Over the next two years, we anticipate high-margin signings to comprise over 60% of revenue, leading to incremental gross margins of approximately 4%. While operating in a capital-intensive industry, Kyndryl exhibits characteristics of a resilient business: predictable revenue from long-term contracts (>5 years), customer stickiness, and the ability to pass on inflationary costs. There remains ongoing work to address a sizable unprofitable account.

BSD Analysis:
The manager identifies Kyndryl as an undervalued post-spinoff opportunity with significant margin expansion potential. The thesis is built on the company's successful transition from IBM, evidenced by strong operational progress and multiple sell-side upgrades. Current gross margins are depressed below normalized levels, creating a margin recovery story as high-margin contract signings in backlog convert to revenue. The manager projects high-margin business will comprise over 60% of revenue within two years, driving approximately 400 basis points of gross margin improvement. The business model exhibits attractive characteristics including long-term contract visibility (>5 years), high customer switching costs, and pricing power to offset inflation. While acknowledging the capital-intensive nature and a problematic unprofitable account, the manager sees compelling value in this IT services transformation story with clear operational leverage.

Pitch Summary:
FIP remains an attractive and overlooked opportunity. The priority this year will be to redeem the preferred stock, followed by the refinancing of the 10.5% holding company debt. With Jefferson Terminal steadily increasing throughput volumes from signed contracts, we anticipate the potential sale of Jefferson Terminal this year. The tax-free proceeds from this sale would go towards redeeming the preferred, marking the initial step in unlocking the value embedded in the Transtar asset, which we believe exceeds the current market cap of FIP.

BSD Analysis:
The manager presents a compelling value unlocking thesis for FTAI Infrastructure centered on asset monetization and capital structure optimization. The investment strategy focuses on multiple catalysts: preferred stock redemption, refinancing of expensive 10.5% holding company debt, and the potential sale of Jefferson Terminal. The Jefferson Terminal asset appears to be performing well with increasing throughput volumes from contracted business, providing visibility into cash flows. The manager's valuation work suggests significant embedded value in the Transtar asset alone, which exceeds the entire market capitalization. The tax-efficient structure of the potential Jefferson Terminal sale creates additional value through preferred redemption. This represents a classic sum-of-the-parts opportunity where asset sales and capital structure improvements should unlock substantial shareholder value in an overlooked infrastructure play.

Pitch Summary:
Our thesis was driven by a catalyst tied to a significant litigation payout expected in Q1 2024. As the year ended, Esperion's stock saw substantial appreciation. The $125 million settlement received in January, while falling short of the initial $300 million expectation, extended the business's cash runway. Due to the stock selling off on the litigation announcement, it resulted in a small detraction from performance in January. As our thesis has played out, we exited our position in January.

BSD Analysis:
The manager executed a catalyst-driven investment in Esperion Therapeutics based on anticipated litigation proceeds. The thesis was event-driven, focusing on a significant legal settlement expected in Q1 2024 rather than fundamental business operations. While the $125 million settlement materialized, it fell short of the initial $300 million expectation, demonstrating the inherent risk in catalyst-based investments. The settlement did provide meaningful value by extending the company's cash runway, which was likely critical for this biotech company's operations. The manager's disciplined approach is evident in the timely exit following thesis completion, despite the settlement being below expectations. This represents a successful special situation investment where the manager captured gains from the catalyst while managing downside risk through position sizing and exit timing.

Pitch Summary:
APG continues to be an attractive business with a well-aligned management team. Despite operational improvements, its FCF yield is still twice that of its peers, even with a higher proportion of recurring revenue. The ongoing integration of Chubb and the emphasis on expanding their recurring, higher-margin services revenue provides room for further margin expansion. We believe the further integration of Chubb continues to present a meaningful catalyst for share appreciation this year.

BSD Analysis:
The manager maintains a bullish stance on APi Group, emphasizing the company's attractive valuation despite operational improvements. The investment thesis is anchored on superior free cash flow generation, with FCF yield double that of peers while maintaining higher recurring revenue quality. The ongoing Chubb integration represents both a near-term catalyst and long-term value driver through margin expansion opportunities. Management's focus on expanding recurring, higher-margin services revenue should drive sustainable profitability improvements. The combination of strong cash generation, quality revenue mix, and integration synergies creates a compelling value proposition. The manager views the Chubb integration as a key catalyst for share price appreciation, suggesting the market has not fully recognized the value creation potential from this strategic combination.

Pitch Summary:
FTAI has been a significant positive contributor to the fund in 2023. Our initial position was based on the belief that FTAI was undervalued for a couple of reasons. Firstly, its structure as a partnership limited ownership by funds and indexes, and FTAI has since simplified its structure as a C-Corp. Secondly, the spin-off of its infrastructure business simplified FTAI as a pureplay aviation business. Over the past year, the aviation segment saw a meaningful inflection in business fundamentals and FTAI's modular factory continued to prove as a time-efficient and low-cost solution. With repeated customers and plans for growth, along with the introduction of PMA parts, FTAI's aerospace segment is expected to witness significant cash flow growth.

BSD Analysis:
The manager presents a compelling bull case for FTAI Aviation based on structural improvements and operational momentum. The thesis centers on two key catalysts: corporate structure simplification from partnership to C-Corp, which removes ownership restrictions for institutional investors, and the strategic spin-off of infrastructure assets creating a pure-play aviation business. The manager highlights strong operational execution with the modular factory proving to be a competitive advantage through time and cost efficiency. Customer retention and growth plans, combined with the introduction of PMA (Parts Manufacturer Approval) parts, position the company for significant cash flow expansion. The investment appears well-timed, capturing both structural value unlocking and fundamental business improvement in the recovering aviation sector.

Pitch Summary:
We recently purchased shares of Merchants Bancorp, one of the best run banks you've never heard of. The company has compounded its tangible book value 30% annually for the last five years – compared to 7% for First Horizon, 9% for JP Morgan and only 4.5% for the S&P 500. MBIN consistently earns a 25%+ return on tangible equity, operates with one of the best efficiency ratios in banking yet, at our purchase price of five times earnings, it carried one of the lowest multiples in the entire sector. Over the years, Merchants has carved out a couple of highly profitable niches in its Multifamily Mortgage and Mortgage Warehousing business units. The agency-backed, Multifamily Mortgage business consists primarily of funding low-risk loans that meet the underwriting standards of various government programs, under an "originate to sell" model. Merchants serves as an authorized agency lender for Fannie, Freddie, FHA, and USDA – the list of financial institutions with this designation is surprisingly small. (Of the more than 4,600 banks in the U.S., only a couple dozen are authorized agency lenders.) The attractive return on assets (ROA) generated by this business is significantly enhanced because, as the company almost immediately sells these loans, this segment only ties up approximately $400 million in assets, while earning as much as $40 million annually. Given this agency lending model produces a very short-term loan book (94% of these loans reprice within 30 days), it faces minimal interest rate risk. As evidence that this agency lending business is attractive, one of the largest agency lenders in the U.S. is mortgage broker Berkadia, which not coincidentally happens to be joint venture between Warren Buffett's Berkshire Hathaway and Jefferies Financial (formerly, Leucadia National, hence Berkadia). Depending on the year, Merchants regularly holds a top 3 or 4 position in this industry, along with Berkadia, Citigroup and JPMorgan. More than 40% of MBIN's financings are for affordable housing, making the company the third largest affordable housing lender in the U.S. Like the agency lending business, the company's Mortgage Warehousing business produces a series of very short-term loans, minimizing both credit and interest rate risk. In this segment, the company loans money to non-bank mortgage originators, funding their new mortgage loans over the short period from the date of origination until the non-bank originator can sell the mortgage to investors. These loans typically turn over every 15-to-20 days, significantly reducing interest rate risk. And because the loans are match funded with customers' custodial deposits, there is essentially no credit risk on these loans. As mortgage rates began to increase throughout 2022, both new mortgage originations and refinancings declined – almost 50% according to the Mortgage Bankers Association. Not surprisingly, MBIN's mortgage warehousing business declined from 58% of the company's earnings to 20%, yet the company's total earnings were essentially flat for the year due to similar-sized growth in its agency-backed, multifamily and traditional banking businesses. Merchants is one of the most efficient lenders in the country, with near nonexistent net charge-offs, de minimis interest rate exposure, and an improving net interest margin as the company continues to grow. Company insiders own 45% of the shares and the CEO has been a recent buyer in the open market. Our purchase price of $35 was only 1.3 times the company's tangible book value and five times earnings. The market likely "penalizes" the company's stock price for a couple of reasons, none of which concern us. A portion of the company's earnings are derived from selling assets – an accounting category that superficial stock analysts generally consider as non-dependable. While this is true for a company that earns a huge gain from divesting an entire business line or massive real estate holding, selling assets (very short-term loans) is MBIN's core business. The reason analysts likely don't understand the nature of Merchant's core business is that the company makes little-to-no effort courting institutional investors. The company does not provide earnings guidance and holds no earnings calls. Instead, the company executives (who, remember, own almost half of the company's shares) spend their energy and effort running one of the best and most efficient lenders in the country. We like that allocation of executive resources. We expect future earnings increases should approximate the company's growth in underlying book value, resulting in a business we think is worth at least $60/share today.

BSD Analysis:
Moon Capital presents a compelling value thesis for Merchants Bancorp, highlighting the bank's exceptional operational metrics and specialized business model. The manager emphasizes MBIN's 30% annual tangible book value growth over five years, significantly outpacing major peers like JPMorgan (9%) and the S&P 500 (4.5%). The bank's dual focus on multifamily mortgage origination and mortgage warehousing creates a low-risk, asset-light model with minimal interest rate exposure due to short loan durations. MBIN's position as one of only a few dozen authorized agency lenders among 4,600+ US banks provides a significant competitive moat. The valuation appears attractive at 5x earnings and 1.3x tangible book value, especially given the 25%+ return on tangible equity. Strong insider ownership of 45% and recent CEO purchases signal management confidence. The manager's $60 price target implies 71% upside from the $35 purchase price, based on expected earnings growth tracking book value expansion.

Pitch Summary:
Global Payments is a leading provider of payments acceptance services, including roughly four million merchant locations around the world. The payments landscape has grown crowded in recent years with new entrants promising disruptive change. To be sure, the payments industry is competitive, but we believe Global Payments is more durable than other investors fear. As a result, its shares trade at a compelling valuation.

BSD Analysis:
The fund initiated a new position in Global Payments, viewing the company as an undervalued leader in the payments processing industry. The managers acknowledge the increasingly competitive landscape with new entrants promising disruption, but maintain conviction in Global Payments' competitive durability. The fund's emphasis on the company's scale, serving approximately four million merchant locations globally, suggests they view size and established relationships as key competitive advantages. The managers appear to believe that market fears about disruption are overblown relative to Global Payments' actual competitive positioning and business quality. This contrarian view has created what the fund sees as a compelling valuation opportunity. The timing of this new position initiation during a quarter of broad market strength suggests the managers found Global Payments attractively priced despite overall market exuberance. The fund's confidence in the company's durability implies they expect Global Payments to maintain market share and pricing power despite increased competition. This represents a bet on the value of established payment infrastructure and merchant relationships in an evolving industry.

Pitch Summary:
Liberty Broadband Corp. (LBRDA), a holding company owning 31% of Charter Communications, Inc. (CHTR), joins CoreCard as a top detractor for the quarter. Shares slumped as Charter's CFO commented at a recent conference that competition for new broadband subscribers remains elevated. Although most investors are singularly focused on current subscriber trends, we believe longer-term growth opportunities from the company's footprint expansion and wireless businesses remain intact.

BSD Analysis:
The fund maintains a contrarian bullish stance on Liberty Broadband despite recent share price weakness driven by competitive concerns in the broadband market. The managers acknowledge that Charter's CFO highlighted elevated competition for new subscribers, which has created near-term pressure on the stock. However, the fund differentiates itself from the broader market by focusing on longer-term structural growth drivers rather than current subscriber metrics. The managers specifically cite footprint expansion and wireless business development as key growth catalysts that the market is overlooking. This suggests confidence in Charter's ability to expand its geographic reach and diversify revenue streams beyond traditional cable services. The fund's decision to add to the position opportunistically during the quarter demonstrates conviction in their contrarian thesis. The managers appear to view current market pessimism as creating an attractive entry point for a quality asset with multiple growth vectors. Their patience with near-term subscriber headwinds reflects a long-term investment horizon focused on Charter's strategic positioning.