Investment Pitches

Pitch Summary:
Perimeter is the leading provider of fire retardants and firefighting foam used to combat wildfires. While positive news for residents, acres burned in Perimeter's markets (particularly California) were significantly below average for the second year in a row, diminishing cash flow and obscuring the company's earnings power compared to a more typical year.

BSD Analysis:
The fund maintains conviction in Perimeter Solutions despite two consecutive years of below-average wildfire activity that has pressured near-term financial performance. The manager positions Perimeter as the market leader in fire retardants and firefighting foam, suggesting strong competitive positioning and market share. The fund views the current earnings weakness as cyclical rather than structural, with reduced wildfire activity in key markets like California creating temporary headwinds. The manager's framing of low fire activity as "positive news for residents" demonstrates awareness of the social dynamics while maintaining focus on the investment thesis. The fund appears to believe that current market conditions are obscuring Perimeter's true earnings power during more typical fire seasons. This suggests the managers are taking a contrarian stance, betting on mean reversion in wildfire activity and the company's ability to generate strong cash flows during normal operating conditions. The position reflects patience with cyclical volatility in exchange for exposure to a market-leading franchise.

Pitch Summary:
CoreCard processes payments for Goldman Sachs Group, Inc.'s (GS) consumer credit card businesses, including its Apple Card partnership. Well-reported strains in the Goldman-Apple partnership (unrelated to CoreCard's performance) have led to speculation that their relationship may soon be terminated. If so, moving the Apple Card to a new partner will take quite some time, giving CoreCard's entrepreneurial management team the opportunity to plan for what comes next.

BSD Analysis:
The fund maintains a constructive view on CoreCard despite near-term headwinds from the Goldman-Apple partnership uncertainty. The manager emphasizes that CoreCard's performance issues are unrelated to the company's operational capabilities, instead stemming from external partnership dynamics between Goldman Sachs and Apple. The fund views the potential termination of the Goldman-Apple relationship as creating a transition period that could benefit CoreCard's management team. This extended timeline would provide CoreCard's entrepreneurial leadership with strategic planning opportunities to diversify their business or secure new partnerships. The manager appears confident in management's ability to navigate this transition successfully. The position reflects a contrarian bet on CoreCard's operational resilience and management quality during a period of external uncertainty. The fund's patience with this detractor suggests conviction in the company's underlying business model and long-term prospects.

Pitch Summary:
NNN REIT (NNN): NNN is a triple-net lease REIT that maintains a high-quality portfolio, producing consistent results and high occupancy rates throughout all economic cycles. Strong lease renewal rates with very little capex combined with long-term net leases adds stability to operating results. The balance sheet is conservative, with ample capital to make accretive acquisitions. Their strong track record of dividend increases is a testament to the strategy and ability of the long tenured management team.

BSD Analysis:
Bernzott initiated a new position in NNN REIT, attracted by the company's high-quality triple-net lease business model that provides exceptional stability and predictability. The manager highlights NNN's ability to maintain consistent results and high occupancy rates across economic cycles, demonstrating the defensive characteristics of the portfolio. The triple-net lease structure minimizes capital expenditure requirements while long-term lease terms provide revenue visibility and inflation protection through built-in rent escalations. NNN's conservative balance sheet provides financial flexibility to pursue accretive acquisitions in a fragmented market, enabling growth through strategic property additions. The company's strong track record of dividend increases reflects both the stability of the underlying cash flows and management's commitment to shareholder returns. Bernzott's emphasis on the long-tenured management team suggests confidence in execution and capital allocation decisions. This investment aligns with the firm's preference for high-quality businesses with predictable cash flows and shareholder-friendly management, offering both income generation and potential for modest growth through acquisitions.

Pitch Summary:
Halozyme Therapeutics (HALO): Despite an inline quarter and solid outlook, the stock underperformed. We believe there are several potential licensing agreement catalysts heading into 2024 that should add to their highly predictable and cash flow generating royalty revenue streams.

BSD Analysis:
Bernzott maintains conviction in Halozyme despite the stock's underperformance and 35% decline for the year, viewing current weakness as a buying opportunity. The manager emphasizes the company's solid operational performance with an inline quarter and positive outlook, suggesting the stock decline is not fundamentally justified. The investment thesis centers on Halozyme's highly predictable royalty revenue model, which provides stable cash flow generation from licensing agreements. Looking ahead to 2024, Bernzott identifies multiple potential licensing agreement catalysts that could expand these royalty streams and drive stock appreciation. This business model offers attractive characteristics including recurring revenue, high margins, and limited capital requirements once licensing deals are established. The manager's continued holding through significant volatility demonstrates confidence in the underlying business quality and the potential for new licensing agreements to rerate the stock. The focus on predictable cash flows and upcoming catalysts suggests Bernzyme offers both defensive characteristics and growth potential in the biotech sector.

Pitch Summary:
Patterson-UTI Energy (PTEN): Lower energy prices and depressed rig counts caused the underperformance during the quarter. Recently completed merger with NextTier Oilfield Solutions and the acquisition of Ulterra should drive improved cash flow and cost synergy opportunities.

BSD Analysis:
Despite PTEN's 22% quarterly decline, Bernzott maintains a bullish long-term view and actually added to the position during the weakness. The manager acknowledges near-term headwinds from lower oil and gas prices and depressed rig counts but characterizes these conditions as transitory. The investment thesis focuses on the transformative impact of recent M&A activity, specifically the merger with NextTier Oilfield Solutions and acquisition of Ulterra, which should generate meaningful cash flow improvements and cost synergies. These transactions position Patterson-UTI as a more diversified and efficient oilfield services provider with enhanced scale and operational capabilities. Bernzott's decision to increase the position during market weakness demonstrates conviction that current energy market conditions don't reflect the company's improved competitive position post-merger. The focus on cash flow generation and cost synergies suggests the combined entity should deliver superior returns when energy markets recover. This contrarian positioning reflects confidence in management's execution of the integration and the cyclical nature of energy markets.

Pitch Summary:
Granite Construction (GVA): Reported better than expected top and bottom-line results which led to outperformance during the quarter. As legacy contracts roll off the books and backlog of new, more profitable business continues to grow, margins should expand. The pace of new contract awards continues to accelerate as overall funding focused on the improvement in the nation's infrastructure begins to materialize.

BSD Analysis:
Bernzott expresses strong conviction in Granite Construction, maintaining it as a top portfolio position following 34% quarterly gains driven by better-than-expected earnings results. The investment thesis centers on a fundamental business transformation as legacy, lower-margin contracts roll off and are replaced by more profitable new business from infrastructure spending initiatives. The manager highlights accelerating contract award pace as evidence that federal infrastructure funding is beginning to materialize into actual projects. This positions Granite to benefit from the multi-year infrastructure investment cycle while simultaneously improving profitability through contract mix enhancement. The combination of revenue growth from infrastructure spending and margin expansion from higher-quality contracts creates a compelling earnings growth trajectory. Bernzott's decision to maintain GVA as a top holding despite significant appreciation suggests confidence in the sustainability of this margin expansion story. The infrastructure spending tailwind provides multi-year revenue visibility in a typically cyclical industry.

Pitch Summary:
HCI Group (HCI): Strong quarterly results and the assumption of in-force premiums from Citizens Property Insurance Corporation drove stock performance during the quarter. The company is also seeking to unlock value of TypTap, a proprietary technology that identifies profitable insurance customers, via an IPO.

BSD Analysis:
Bernzott maintains a bullish stance on HCI Group following exceptional quarterly performance that drove the stock up over 60% in Q4 and 126% for the full year. The manager highlights two key value drivers: the company's successful assumption of additional in-force premiums from Citizens Property Insurance Corporation, which expands their customer base, and the potential value unlock of TypTap through an IPO. TypTap represents a proprietary technology platform that identifies profitable insurance customers, suggesting HCI has developed valuable intellectual property beyond traditional insurance operations. The strong quarterly results indicate operational execution is meeting expectations. The company's ability to grow through premium assumptions from Citizens demonstrates market share expansion opportunities in property insurance. The potential TypTap IPO could provide significant value realization and capital for further growth initiatives. Bernzott's continued holding suggests confidence in management's execution and the company's strategic positioning in the insurance market.

Pitch Summary:
Altius is a new addition to the portfolio. Altius explores and develops mineral properties through a unique setup. While they spend a small amount of upfront capital to explore and identify prospects, they utilize 3rd party partners for the capital-intensive drilling/mining in exchange for a royalty on the production. Their assets are diversified across potash, copper, lithium, and iron ore among others. Some of you may recall one of our more successful royalty investments in TPL (Texas Pacific Land). The beauty of a royalty structure is several fold. On the one hand, if there is increased volume of production, they get their share without any increase in their operating costs. The company doing the work pays for the labor/machinery etc. If the commodity price goes up it is pure "extra" profit to the royalty holder. Additionally on the way down there are very few fixed costs for the royalty owner as they can maintain a small number of headcount at HQ. The management team is aligned (they own a good amount of stock), think like shareholders and has done an excellent job. We own the Company at 50% of the underlying value of the assets. An argument can be made thar we own it close to 30% of the underlying value of the assets.

BSD Analysis:
Black Bear introduces Altius Minerals as a new portfolio addition, emphasizing the attractive economics of the royalty business model. The company's asset-light approach involves minimal upfront capital for exploration while partnering with third parties for capital-intensive development in exchange for production royalties. The diversified commodity exposure across potash, copper, lithium, and iron ore provides broad-based exposure to critical materials. The royalty structure offers significant operating leverage with pure profit flow-through from volume increases and commodity price appreciation, while maintaining minimal fixed costs during downturns. At 11% of AUM, this represents a meaningful allocation with management alignment through significant stock ownership. The valuation appears compelling at 30-50% of underlying asset value, suggesting substantial upside potential in a proven business model.

Pitch Summary:
Paramount is an ENP (exploration and production) in the energy space. It has no debt and ~$580MM in cash/securities (16% of the mkt cap). Management is fully aligned with us as they own 46% of the Company. Over the next 2 years the company should generate ~10+% in annual free-cash flow presuming bearish energy prices.

BSD Analysis:
Black Bear highlights Paramount Resources as a financially robust Canadian E&P company with exceptional balance sheet strength and management alignment. The debt-free structure with $580 million in cash (16% of market cap) provides significant financial flexibility and downside protection. Management's 46% ownership stake ensures strong alignment with shareholder interests, a key factor in the investment thesis. At 10% of AUM, this represents a meaningful energy allocation with projected free cash flow yields exceeding 10% annually even under bearish commodity price assumptions. The conservative financial profile and aligned management make this an attractive energy exposure with limited downside risk. The company's ability to generate substantial cash flows in a challenging price environment demonstrates operational efficiency and cost discipline.

Pitch Summary:
CONSOL Energy is an American energy company focused on the coal sector. The business has undergone a shift from being a majority producer of coal for domestic energy purposes to an export-driven producer of coal for non-power generation purposes. While there is a negative stigma associated with coal (and some deserved) there are parts of the world that have limited energy alternatives and will require coal supply over the coming years. I expect the company to commit a large amount of the free-cash-flow to buying in cheap stock and the per share intrinsic value to grow substantially over the next 3 years. Rough valuation thoughts on CONSOL…. Over the coming 2 years CEIX should generate $20-$40 in per share FCF. They own a marine terminal which is conservatively worth $15-$30 in per share value. Over the long-term the business should generate $300MM+ of annual FCF. At reasonable multiples this comes out to $60-$100 per share. Add these related pieces up and you will arrive at a price of $95-$170 vs. a $100 year-end stock price. Clearly in the short term, volumes and prices could be worse but over the medium-long term our downside seems limited given the lack of financial leverage.

BSD Analysis:
Black Bear presents a contrarian bull case for CONSOL Energy, focusing on the company's strategic pivot from domestic thermal coal to export-oriented metallurgical coal markets. The manager acknowledges coal's negative perception but emphasizes global demand from regions with limited energy alternatives. The investment thesis centers on exceptional free cash flow generation ($20-$40 per share over two years) and aggressive share buybacks driving per-share value creation. The marine terminal asset provides additional value ($15-$30 per share) and strategic positioning for export markets. At 14% of AUM, this represents a significant energy allocation with sum-of-the-parts valuation suggesting 95-170% upside potential. The conservative balance sheet with minimal leverage provides downside protection in a volatile commodity environment.

Pitch Summary:
We have owned BLDR and been discussing the name since it was in the 50's (and owned lower). While it's up dramatically (trading around $166 at year-end) it was still trading ~10% yield with modest leverage and encouraging prospects. As a reminder, BLDR is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 40%+ of the topline. The company has modest leverage and has been using their abundant free-cash-flow to buy in over 39% of the stock in the last 2 years. While mortgage rates are higher, they are not unusual versus history. The low rates of the last 5-10 years are the outlier. We have a structural shortage of housing in the USA. With existing homeowners locked into low-rate mortgages, the aspiring homeowner may increasingly need to find a home from a homebuilder. Normalized free-cash-flow per share looks to be in the range of $15-$17 per year. Margins are structurally higher given their increased shift into value-add products. At year end pricing of ~$166 that implies a free-cash-flow yield of 9-10%. The pricing still does not reflect the long-term wind at its back or the pricing power inherent in value-add products.

BSD Analysis:
Black Bear maintains a long-term bull thesis on Builders FirstSource, having held the position since the $50s and riding significant appreciation to $166. The transformation from a cyclical commodity business to a value-added products company (40%+ of revenue) represents a structural improvement in margins and pricing power. The housing shortage thesis provides secular tailwinds, particularly as existing homeowners remain locked into low mortgage rates, driving demand toward new construction. Aggressive capital allocation through share buybacks (39% reduction in two years) demonstrates management's confidence and shareholder-friendly approach. At 14% of AUM, this represents a core holding with attractive free cash flow yields of 9-10% despite the stock's appreciation. The manager believes the market undervalues the company's structural improvements and long-term positioning in a supply-constrained housing market.

Pitch Summary:
Asbury Group operates auto dealerships across the United States. The strength of the model comes from the back of the house in parts and services where more than 50% of the profits come from. We are exiting a period of high margins on new and used car sales. As inventories normalize and interest rates rise, I fully expect the dealers to make less profit (called the GPU) when selling a car. Less discussed is while profits per car are at all-time highs, the volumes sold have mirrored prior recessions. My expectation is that dealers will likely make less per car but will mitigate some of that pressure by selling more cars, especially used vehicles, as prices drop. When an auto dealer sells a car to a consumer, they capture both the trade-in (inventory to sell) and the relationship for parts and services. It is a razor-razorblade model in a highly fragmented industry (many dealerships are owned privately by families). The large dealer groups have transitioned to an omni-channel model where much of the selling/pre-buy activity can be done online, reducing the need for headcount and making the transaction smoother for their customers. The lower operating costs of the business are not appreciated by the market. They are appreciated by us and the management teams as most dealers, including ABG, have been buying in lots of stock with their free-cash flow. ABG should be able to earn $30-$40 in free-cash flow per share in a "normal" year. At year-end pricing that implies a 13-18% annual yield. I hope management continues to buy back a lot of stock at these levels!

BSD Analysis:
Black Bear presents a compelling bull case for Asbury Group, emphasizing the defensive nature of the auto dealership model with over 50% of profits derived from higher-margin parts and services. The manager acknowledges near-term headwinds from normalizing inventories and rising rates but expects volume recovery to offset margin compression. The razor-razorblade business model creates recurring revenue streams through service relationships, while the omni-channel transition reduces operating costs in a fragmented industry. At 22% of AUM, this represents the fund's largest position, reflecting high conviction in the thesis. The valuation appears attractive with projected free cash flow yields of 13-18% annually, supported by aggressive share buybacks. Management's capital allocation strategy aligns with shareholder interests through consistent stock repurchases using abundant free cash flow.

Pitch Summary:
In the fourth quarter, we promoted Trane Technologies to resilience. Trane is a leading participant in the HVAC and Transport Refrigeration industries globally. Roughly, 60% of Trane's business is commercial HVAC, 20% is North American residential HVAC, and 20% is transportation refrigeration units. A hallmark of resilient companies is the ability to adapt and sustain themselves in changing business conditions. A decentralized approach helps nimbleness. Trane has a robust operating system that is executed day-to-day at a local level. It allows management to maintain a long-term orientation and to focus on capital allocation and cultivate a culture centered on innovation to drive decarbonization. Another hallmark of resilient companies is broad predictions. For Trane, we are invested in the broad and comfortable prediction that the world continues on the path of decarbonization. Globally 15% of greenhouse gas emissions come from heating and cooling buildings. Reducing the energy intensity of buildings is quite likely to remain a key lever in the world's decarbonization efforts. For years, growth in the HVAC and transport refrigeration industries has benefited from efforts to decarbonize, driven by increased regulatory standards. The trend remains strong, with additional regulation and incentives and with corporate commitments to cleaner and more efficient buildings. Demand for HVAC would also benefit from Another boon is additional manufacturing infrastructure investment, such as new semiconductor fabs and electric vehicle battery plants. The industry is not without cycles, but the company is well suited to endure them and even emerge in a better competitive position. Through innovation, Trane is also creating high-NZS, or win-win, outcomes for customers. For example, the energy efficiency of Trane's HVAC equipment has greatly improved over the years, enabling the company to offer its large customer base attractive returns on replacement projects. New equipment also helps these customers meet their carbon reduction commitments. Utilizing digital connectivity has allowed Trane to remotely monitor the installed base of equipment, creating a better outcome for customers while also winning market share from independent service providers. Trane is a high-NZS business, creating win-win outcomes for all constituents, without a myopic focus on profitability at the expense of customers or society. Finally, the stock's valuation is a component of the stock's place in our resiliency sleeve. We do not need a series of successful predictions to earn our required return; rather, we can rely on our broad predictions and our confidence in the innovation and adaptability of the business.

BSD Analysis:
NZS Capital promoted Trane Technologies to their 'resilience' sleeve, indicating high conviction in the company's long-term prospects. The manager's thesis centers on Trane's leadership position in HVAC and transport refrigeration, with exposure to the secular decarbonization trend. The fund highlights that 15% of global greenhouse gas emissions come from heating and cooling buildings, positioning Trane as a beneficiary of regulatory standards and corporate commitments to cleaner buildings. The company's decentralized operating model and focus on innovation are viewed as competitive advantages that enable adaptation through industry cycles. Trane's ability to create 'win-win' outcomes through energy-efficient equipment that provides attractive ROI for customers while meeting carbon reduction goals is seen as a sustainable moat. The digital connectivity capabilities for remote monitoring further differentiate Trane from independent service providers. The manager believes the valuation provides adequate returns based on broad secular trends rather than requiring specific predictions, reflecting their confidence in the business model's resilience.

Pitch Summary:
In September, publishers named Dollar General the Worst Retail Job in America. The headlines exposed "rat infestations, blocked fire exits, expired kids' food, machete-wielding and watermelon-throwing shoppers and other nightmares" and Dollar General was going to spend a mere $150 million to fix it. The market speculated: "If DG cannot handle its current store base, will it need to slow store growth?" and "Is $150 million really going to be enough?" The wrong answer to either question would be dire. Rather than join the cause to panic sell first and ask questions later, we re-underwrote the position and stress-tested our thesis. When the pandemic forced us into our homes, many living in urban areas decided to try out the countryside, reversing a decade-long trend of urbanization. According to the US Census from 2021 to 2022, the largest US cities saw the greatest concentrations of residents moving out. For Dollar General, this means that there are now more rural areas to build new stores. So long as there are growing pockets of rural development, we do not see a need for Dollar General to slow store growth. But execution remains a crucial ingredient to DG's success. In a back-of-the-envelope calculation, the $150 million labor investment equates to about $14 a day per store assuming the investment is split evenly between stores. This shorthand calculation was commonly cited alongside criticisms of DG's store conditions, but it fails to appreciate that not every single store needs a facelift. In June, management began piloting a new strategy called Smart Teams where district managers choose 2-4 of their district's best inventory stockers to clean up the worst stores in the district. After a successful pilot, the strategy was deployed across the store base over the last quarter. We expect the investment to reduce inventory shrink and improve same-store sales, metrics that have plagued the stock this year.

BSD Analysis:
Broyhill maintained conviction in Dollar General despite negative headlines about store conditions and operational challenges, demonstrating contrarian value investing discipline. The fund recognized that pandemic-driven urban-to-rural migration created new growth opportunities for DG's rural-focused store format, countering market concerns about slowing expansion. Their analysis of the $150 million labor investment was more nuanced than street commentary, noting that targeted improvements through the Smart Teams strategy would be more effective than blanket spending across all locations. The fund correctly identified that operational improvements would drive margin expansion through reduced shrink and improved same-store sales. Despite being early on the timing, their fundamental thesis around rural demographic trends and operational leverage remains intact. The position reflects Broyhill's willingness to lean into quality businesses during temporary operational headwinds. Their stress-testing approach and re-underwriting process exemplifies disciplined risk management during periods of negative sentiment.

Pitch Summary:
If you were not following the saga that was the acquisition of Activision Blizzard by Microsoft, we invite you to breeze through our play-by-play write-up of the merger here: ATVI: Anti-Trust Gone Wild. At the time of this write-up, the Federal Trade Commission (FTC) had just been denied its request for a preliminary injunction, or a request that Microsoft's acquisition of Activision be delayed until the FTC could finish its suit to block the deal. After the FTC's denial, the UK's Competition and Markets Authority (CMA), which previously vetoed the acquisition, announced its willingness to reconsider remedies offered by Microsoft. We will pick up there. Following the loss, the FTC trudged on. It appealed Judge Corley's denial of the preliminary injunction and lost, then took the case back in-house to its administrative law judge. Why they would do this – we aren't sure. The FTC's administrative proceeding will eventually end up back in the district court where it was previously shot down. It's a losing game. A month after the CMA showed willingness to reconsider the deal, Microsoft submitted a revised deal for review which included the transfer of cloud gaming rights to Ubisoft. The CMA accepted the revised deal and the deal closed at the originally agreed-upon price of $95 on October 13th.

BSD Analysis:
Broyhill successfully navigated the complex regulatory landscape surrounding Microsoft's acquisition of Activision Blizzard, demonstrating sophisticated merger arbitrage expertise. The fund correctly anticipated that regulatory challenges from both the FTC and UK's CMA would ultimately fail, despite initial setbacks and prolonged uncertainty. Their analysis proved prescient as the deal closed at the original $95 price after Microsoft addressed cloud gaming concerns by transferring those rights to Ubisoft. The position generated significant alpha as a top contributor to quarterly performance, validating Broyhill's contrarian stance during peak regulatory uncertainty. This merger arbitrage play showcased the fund's ability to assess regulatory risk and maintain conviction when others were selling on headline risk. The successful outcome reinforced their disciplined approach to special situations investing. The trade exemplified how thorough fundamental analysis and regulatory expertise can generate outsized returns in complex corporate transactions.

Pitch Summary:
The potential for technological innovation to create shareholder value goes far beyond the effects of AI, of course. For example, Vertex Pharmaceuticals is building a significant competitive advantage through its unique approach to drug discovery. Unlike most drug developers, which focus on mitigating symptoms of an illness, Vertex seeks to understand and address the causal biology of a disease more fully. This approach has helped the company establish a wide lead in treating cystic fibrosis (CF), a rare disease that causes mucus buildup in organs such as the lungs. Vertex's research and treatments have targeted the root cause of CF, which is that a particular protein becomes misfolded and unable to move chloride out of a cell, resulting in an imbalance between salt and water. Its scientists have been able to do this by working with the lung cells of real CF patients, an advantage over using engineered animal cells to simulate the disease-causing mechanism to determine which drug candidate is most promising for humans. Vertex's latest therapy, approved in 2019, is Trikafta, a combination of three medicines that targets a mutation found in 90% of CF patients. Vertex is now using the same approach to address other illnesses. In 2023, Casgevy, its treatment for sickle cell disease, became the first CRISPR-based gene-editing therapy to receive regulatory approval. (CRISPR, a technology honored by the Nobel Prize in 2020, allows scientists to make precise changes to parts of the genome, the set of DNA instructions found in a cell.) By correcting the faulty gene that causes sickle cell disease, Casgevy could offer a one-time therapy to cure approximately 16,000 patients who have the red blood cell disorder—a significant improvement over the usual course of treatment, which is merely to manage symptoms through blood transfusions and pain medicines. As Vertex turns toward treating Type 1 diabetes and non-opioid pain management next, the company's CEO is forecasting a "milestone-rich period." Meanwhile, the commercial rollout of Trikafta has been so successful that management increased company revenue projections twice in 2023. Each CF treatment introduced by Vertex has not only made substantial improvements over earlier generations but also arrived long before the patents expired on the previous therapy. By quickly and repeatedly raising the standard of care, Vertex was able to ward off competition from a potential new market entrant. The rival found it too difficult to catch up and ultimately abandoned its efforts.

BSD Analysis:
The manager articulates a strong bull thesis for Vertex based on its differentiated drug discovery approach targeting causal biology rather than symptom management. The company has established dominant market position in cystic fibrosis with Trikafta addressing 90% of CF patients, demonstrating superior scientific capabilities. The 2023 approval of Casgevy as the first CRISPR gene-editing therapy validates Vertex's platform approach and expands addressable markets significantly. Management's twice-raised revenue projections for 2023 reflect strong commercial execution of Trikafta. The company's ability to consistently introduce superior therapies before patent expiration creates sustainable competitive advantages, evidenced by a competitor abandoning efforts to compete. The pipeline expansion into Type 1 diabetes and non-opioid pain management, described as a "milestone-rich period," suggests multiple value creation catalysts ahead.

Pitch Summary:
Information technology is a crucial part of almost every business. As generative AI infiltrates more and more businesses, their leaders are increasingly recognizing the need for an IT platform that can support the evolution of their business model in an ever-evolving world. Generally, that has entailed a more consolidated, cloud-based infrastructure that can help drive cost efficiency as well as productivity. ServiceNow has become a preferred vendor for addressing those needs. ServiceNow has differentiated itself through the fast implementation times made possible by the simplicity of its Now Platform, which features a single code base and data model. This makes it easier to roll out across large organizations such as those in the public sector. For example, it took just six months for ServiceNow to develop a digital governmental-services tool to be used by citizens in one US state, and as of the third quarter, its business with the US federal government had increased 75% year over year. After beating and raising its guidance three quarters in a row, ServiceNow forecast full-year revenue growth of 25% for 2023, far eclipsing the 4.3% growth in global IT spending. ServiceNow is also among the earliest providers of workflow solutions equipped with generative AI, technology that can help IT departments diagnose and address tech issues faster. For example, with AI able to summarize internal or external requests, IT staff can focus on next steps, whether that be issuing a new computer to an employee or granting a user access to certain functions. ServiceNow also can train large language models with a client's own data to ensure the results are relevant and trustworthy. These enhanced capabilities add to ServiceNow's pricing power, with generative-AI-enabled software commanding, on average, roughly 30% higher prices than software without generative AI. ServiceNow's remarkable customer satisfaction, as evidenced by its high customer-retention rates and expanding relationships, is allowing the company to grow rapidly and profitably.

BSD Analysis:
The manager presents a compelling bull case for ServiceNow centered on its strategic positioning in the enterprise IT transformation market. The thesis emphasizes ServiceNow's differentiated Now Platform with its single code base architecture, enabling rapid deployment across large organizations including government clients. The company's 25% revenue growth forecast significantly outpaces the 4.3% global IT spending growth, demonstrating market share gains. The integration of generative AI capabilities provides meaningful pricing power, with AI-enabled software commanding 30% premium pricing. Strong execution is evidenced by three consecutive quarters of beat-and-raise guidance, while the 75% year-over-year growth in federal government business showcases expanding market penetration. High customer retention rates and expanding relationships indicate strong competitive moats and recurring revenue visibility.

Pitch Summary:
RVLV is an online-only fashion retailer targeting Millennial and Gen Z customers. Its site offers a curated selection of premium brands across apparel, footwear, accessories and beauty. Brand loyalty is strong, with net sales retention >90%. Customers appreciate the on-trend nature the curated selection, plus RVLV's ability to offer free, 2-day shipping and free returns is a differentiator versus peers. RVLV has increased revenue at +20%/year since its inception. ROIC has been steadily increasing and is roughly 50% today. RVLV is self-funding with a strong balance sheet (net cash of $270M), and has never used debt. In 2023, RVLV announced its first share repurchase program of $100M (-10% of market cap) to take advantage of the low stock price. Founded in 2003, the co-CEOs, hold 45% of the company.

BSD Analysis:
The London Company's investment in Revolve Group reflects confidence in the company's dominant position in the millennial and Gen Z online fashion market. The manager emphasizes RVLV's exceptional customer loyalty metrics with over 90% net sales retention, indicating strong brand affinity and repeat purchasing behavior. The company's curated approach to premium brands, combined with superior logistics capabilities including free 2-day shipping and returns, creates meaningful competitive advantages. The financial profile is particularly compelling with 20% annual revenue growth since inception and an outstanding 50% return on invested capital. The pristine balance sheet with $270M in net cash and zero debt provides significant financial flexibility. Management's decision to initiate a $100M share repurchase program demonstrates capital allocation discipline and confidence in the business model. The concentrated ownership structure with co-CEOs holding 45% aligns management interests with shareholders.

Pitch Summary:
PLUS specializes in providing IT solutions and optimizing organizations' IT and supply chain processes in the U.S. With a focus on the specialized IT sector, including data center infrastructure, networking, security, cloud, and collaboration, PLUS has gained market share in a fragmented reseller market. Prioritizing client tech spending areas has led to double-digit growth and industry-leading gross margins of about 24%, with EBIT margins at 8%. PLUS boasts a robust balance sheet with $20M in net cash, and we see potential for value appreciation, trading below conservative intrinsic value estimates.

BSD Analysis:
The London Company initiated a position in ePlus based on the company's strong competitive positioning in the fragmented IT reseller market. The manager highlights PLUS's specialization in high-demand areas like data center infrastructure, networking, security, cloud, and collaboration solutions. The investment thesis centers on the company's ability to gain market share while maintaining superior profitability metrics, with gross margins of 24% significantly above industry averages. The 8% EBIT margins demonstrate operational efficiency in a competitive sector. The balance sheet strength with $20M in net cash provides financial flexibility and downside protection. The manager sees the stock as undervalued relative to intrinsic value estimates, suggesting potential for meaningful appreciation as the market recognizes the company's quality fundamentals and growth trajectory.

Pitch Summary:
Diageo (DEO) – DEO underperformed during 4Q after it reduced its guidance due to softer demand trends and higher reinvestment needs. In Latin America, there's been unanticipated destocking and a weaker macro environment is driving consumers to trade down to cheaper products. The important U.S. market has been slow to rebound but management is prioritizing marketing investments to support profitable growth. Overall, we believe DEO's leading portfolio of brands across key categories and regions gives the company an entrenched position in the attractive spirits industry.

BSD Analysis:
Despite near-term challenges, The London Company maintains conviction in Diageo based on the company's fundamental competitive advantages in the spirits industry. The manager acknowledges significant headwinds including reduced guidance, softer demand trends, and increased reinvestment requirements. Latin American operations face destocking issues and consumer trade-down behavior due to macro weakness, while the crucial U.S. market recovery remains sluggish. However, management's strategic focus on marketing investments to drive profitable growth demonstrates long-term thinking rather than short-term cost cutting. The firm emphasizes DEO's leading portfolio of premium brands across key categories and geographic regions as a sustainable competitive moat. This brand portfolio provides pricing power and market share protection in the attractive spirits industry, which typically demonstrates resilient demand characteristics. The company's entrenched market position suggests temporary challenges are cyclical rather than structural. The London Company views current weakness as a temporary setback for a fundamentally strong consumer staples franchise with global reach and premium brand positioning.