Investment Pitches

Pitch Summary:
With our initial investment in the company in June 2015, EZCORP has been one of the longest held investments in our portfolio. We initially saw the company as deeply undervalued due to temporary factors such as an accounting restatement and we were bullish that new management could turn things around. In 2017, we believed that the point-of-sale lending software that they had announced would also help to improve margins. While margins have improved, the change has been less than I expected. EZCORP has served as a portfolio diversifier as we expect their business is counter-cyclical and will perform better in a recession than in a strong economy. Overall, management has not yet achieved the turnaround in the business that we expected, but EZCORP is still an undervalued business compared to their better-operated peers, such as FCFS. We initially purchased EZPW shares at $7.48 in June 2015 and the share price ended 2023 at $8.74 (an increase of 16.8%). By contrast, the Blue Tower Global Value more than tripled in the 8.5 years between the ends of Q2 2015 and Q4 2023 with a net cumulative gain of 208.6% over that period. Despite the company not performing very well over our holding period, our investment in this stock has been very successful due to EZPW's price volatility and our trading around our position. We sold a significant number of shares at prices as high as $11.85 and bought many shares at as low as $3.15.

BSD Analysis:
Blue Tower's EZCORP investment illustrates a mixed turnaround story where the original thesis has only partially materialized. The manager initially identified value in the company's temporary distress from accounting issues and believed new management could drive operational improvements. While point-of-sale lending software and margin improvements provided some progress, the transformation has been slower than anticipated. The investment's success came primarily through tactical trading around the volatile stock price rather than fundamental business improvement. EZCORP's counter-cyclical characteristics provide portfolio diversification benefits, as pawn lending typically performs better during economic downturns. The company remains undervalued relative to better-operated peers like First Cash Financial Services, suggesting potential upside if management execution improves. However, the 16.8% total return over 8.5 years significantly underperformed the broader portfolio, highlighting the challenges of turnaround investments. This position demonstrates how skilled trading can salvage mediocre fundamental performance in volatile securities.

Pitch Summary:
Georgia Capital is a conglomerate trading at a deep discount to net asset value with skilled, aligned management positioned to take advantage of opportunities in the frontier market of the Republic of Georgia. Our Q1 2021 letter details our investment thesis. When we first invested, Georgia Capital's portfolio included healthcare, retail, insurance, renewable energy, education, and water utility businesses. They have since sold the water utility at a premium to the book value and to their estimated value for NAV. Management has been cognizant of the cheap valuation of the company's shares and have been aggressively buying back shares and retiring debt. Due to the buybacks, retiring debt, and organic growth of some of their businesses, the NAV per share has grown significantly in a relatively short period. Even though the share price has increased so much in the last three years, the relative discount to NAV is roughly where it was when we first invested in the company.

BSD Analysis:
Blue Tower's Georgia Capital investment represents a classic sum-of-the-parts value play in a frontier market setting. The manager identified a diversified conglomerate trading at a substantial discount to net asset value, with skilled and aligned management capable of capitalizing on opportunities in Georgia's developing economy. The portfolio's diversification across healthcare, retail, insurance, renewable energy, and education provides broad exposure to the country's economic growth. Management's value-oriented approach is evidenced by strategic asset sales above book value, aggressive share buybacks, and debt reduction initiatives. These capital allocation decisions have driven significant NAV per share growth despite the company's stock price appreciation. The persistent discount to NAV suggests continued upside potential as management executes on their value realization strategy. This investment demonstrates the opportunities available in overlooked frontier markets where skilled local management can create substantial value through active portfolio management and disciplined capital allocation.

Pitch Summary:
In 2014, we invested in Sberbank of Russia due to its extremely cheap valuation, high returns on equity, and dominant position within Russia and the former Soviet Union. Over the years, we remained bullish on the company as it grew revenues, increased dividends, and expanded into new technology-focused lines of business, including some non-financial businesses. Through their businesses and borrowers, Sberbank gives a general exposure to the Russian economy. I detailed our 2022 trades around the stock in our Q1 and Q2 2022 letters. It is still too early to tell if Sberbank will be a net detractor to Blue Tower's performance or the best investment we have made so far. As long as the disastrous war in Ukraine and the mutual sanctions between the West and Russia continues, the possibility exists of our investment being expropriated in the future. However, all wars end eventually. If the peace that does come involves a normalization of relations between Russia and Ukraine and the West, I expect Sberbank will trade back to their pre-war multiples.

BSD Analysis:
Blue Tower's Sberbank investment was initially driven by compelling valuation metrics including extremely cheap multiples and high returns on equity, combined with the bank's dominant market position across Russia and former Soviet territories. The manager maintained conviction as the company demonstrated strong operational performance through revenue growth, dividend increases, and strategic expansion into technology and non-financial businesses. The investment provided broad exposure to the Russian economy through the bank's extensive lending portfolio and business relationships. However, the 2022 Ukraine conflict and resulting Western sanctions have created significant uncertainty around the investment's ultimate outcome. While current sanctions freeze the position, the manager maintains a long-term view that eventual peace and sanctions normalization could restore pre-war valuations. This represents a high-risk, high-reward geopolitical bet where the investment's success depends entirely on future diplomatic developments. The binary nature of this outcome makes it either a potential total loss or exceptional return scenario.

Pitch Summary:
We first invested in Cornerstone Building Brands (when it was still called NCI Building Systems) in 2019 as we believed its stock was undervalued due to one-time expenses and high debt levels from a series of mergers which deterred some investors. We built up the position over a few months paying an average of $5.42 for shares purchased in that calendar year. We also held the view that the US construction sector was poised to outperform. Cornerstone made a significant investment in automation which would help them increase production per worker, making them well-positioned to weather labor shortages. Cornerstone's centralized pricing decisions were also expected to help them stay abreast of production input prices and increase prices ahead of inflation. As Cornerstone realized acquisition synergies, benefited from the housing boom, and paid down debt, their value became more apparent to investors and the share price rose. Despite the share price increases, the management still believed it to be highly undervalued and the company was taken private through an LBO in 2022. Clayton, Dubilier & Rice, which owned about 49% of the company, purchased the remainder of the shares for $24.65 per share, making the deal, including the debt, worth $5.8 billion.

BSD Analysis:
Blue Tower identified Cornerstone Building Brands as undervalued in 2019 due to temporary factors including one-time merger expenses and elevated debt levels that deterred other investors. The manager's thesis centered on the company's strategic automation investments that would enhance productivity per worker, positioning it well for labor shortages. Additionally, centralized pricing mechanisms were expected to help the company stay ahead of input cost inflation. The investment proved highly successful as the company realized acquisition synergies, benefited from the housing boom, and reduced debt levels. Management's aggressive share buybacks and eventual LBO exit at $24.65 per share (versus the $5.42 average purchase price) validated the undervaluation thesis. The 355% return demonstrates the effectiveness of identifying temporary distress situations in cyclical industries. This represents a classic value investment where patient capital was rewarded through operational improvements and multiple expansion.

Pitch Summary:
COLL is an abuse-deterrent opioid company. Since entering its commercialization phase in 2019, the company has benefitted by offering a competitive product to OxyContin. COLL's lead drug (Xtampza) does not have a black box warning from the F.D.A. for pain management, which illustrates its lower abuse potential in this critical patient segment. COLL is a company we have been following for years since it announced the acquisition of its #2 competitor, BioDelivery Sciences in 2021. During that time, we have built conviction on the durability and continued growth of COLL's future cash flows. COLL's valuation has remained depressed, along with the broader healthcare sector. This presented a compelling entry point now that COLL has secured significantly higher margin, multi-year payer contracts because of its responsible pain management (as payers move away from Oxycontin). These contract renewals should help COLL build scale and margins and provide a well-defined path to improve its balance sheet. The Fund initiated the investment when COLL was trading for a mere 3.2x free cash flow, or 5.25x trailing enterprise value to trailing EBITDA. In addition to a low absolute valuation, this investment appears to be misunderstood by investors focused purely on earnings who have not taken the time to sift through one-time items (such as settlement agreements and costs related to the extinguishment of debt) that understate the strength of its operating performance. The company has now completed a majority of its multi-year payer contracts at significantly higher margins to COLL. To underscore this development and what the market is missing, if COLL were to run its business as-is and retire its debt, we estimate it could have a $1 billion net cash position by 2027. Furthermore, if their largest potential competitor (Teva Pharmaceuticals) stays out of the market, it could produce another $1 billion of free cash flow over the next three years. The current market capitalization is roughly $1 billion. Our assessment of management is favorable as well. First, the company is disciplined about costs and maintains a patient capital allocation strategy, which includes two highly successful asset acquisitions under the current CEO. Management has been thoughtful about how it adapts its business over the long-term. COLL has resisted the temptation of short-term price gouging to preserve customer relationships. COLL has now renegotiated 84% of its prescription volume and has maintained 92% of that customer business after the negotiations. This is a testament to the value they bring to the medical community, while not taking advantage of the current OxyContin fallout. Finally, we will wait for validation and are optimistic that management will follow through on its stated willingness to add a capital component (i.e., ROIC) to future compensation programs.

BSD Analysis:
Third Avenue initiated a position in Collegium Pharmaceutical at an attractive valuation of 3.2x free cash flow and 5.25x EV/EBITDA, viewing it as a misunderstood opportunity in the abuse-deterrent opioid space. The manager's thesis centers on COLL's competitive positioning against OxyContin through its Xtampza product, which lacks FDA black box warnings and offers lower abuse potential. The company has successfully renegotiated 84% of its prescription volume at significantly higher margins while maintaining 92% customer retention, demonstrating strong market positioning as payers shift away from traditional opioids. Third Avenue projects that COLL could generate $1 billion in net cash by 2027 if it maintains current operations and retires debt, with potential for an additional $1 billion in free cash flow over three years if competitor Teva stays out of the market. Management receives favorable assessment for disciplined cost management, patient capital allocation, and strategic acquisitions under the current CEO. The investment appears undervalued due to investor focus on earnings rather than underlying cash generation, with one-time items masking operational strength. Third Avenue views this as a compelling entry point in a depressed healthcare sector with clear catalysts for margin expansion and balance sheet improvement.

Pitch Summary:
As such, during the quarter, the Fund initiated a position in large-cap real estate operating company Sun Hung Kai Properties Ltd ("Sun Hung Kai"). Sun Hung Kai owns and develops premium commercial and residential property portfolios in Hong Kong (80% of property revenue) and, to a lesser extent, mainland China (20%). The company's portfolio includes 126 million square feet of high-quality retail, office, hotel, and data center assets and developments. With an 'A+ S&P' rated balance sheet, Sun Hung Kai is well known for owning some of the best investment properties in Hong Kong and consistently developing some of the best residential condo products since the company was founded in the 1970s. Sun Hung Kai shares trade at a 63% discount to net asset value, which is a distressed level not even seen in over 30 years, including the Global Financial Crisis (2008/2009) and the Asian financial crisis (1997/98), as shown in the following chart. The implied valuation also represents 9 times trailing earnings or 6 times peak earnings, which is also around cyclical lows only seen previously at crisis points. Rarely do such high-quality companies trade at such wide discounts; with the share price factoring in overly pessimistic assumptions on real estate fundamentals and geopolitical risk, Sun Hung Kai offers a compelling long-term investment opportunity, in our view.

BSD Analysis:
The manager initiates a position in Sun Hung Kai Properties, viewing it as an exceptional value opportunity in Hong Kong's premier property developer. The company trades at a historic 63% discount to NAV, the widest discount in over 30 years including during the Global Financial Crisis and Asian Financial Crisis. At 9x trailing earnings and 6x peak earnings, valuations reflect crisis-level pessimism despite the company's A+ credit rating and 126 million square feet of premium Hong Kong assets. The manager believes current pricing incorporates overly negative assumptions about Hong Kong real estate fundamentals and geopolitical risks. Sun Hung Kai's track record of developing Hong Kong's best residential products since the 1970s, combined with its dominant market position and fortress balance sheet, creates a compelling contrarian opportunity. The extreme valuation discount suggests significant upside potential as markets normalize and the company's high-quality asset base commands appropriate valuations.

Pitch Summary:
Staying on yet more resource conversions, it was also positive to see luxury hotel owner and manager Mandarin Oriental ("Mandarin") sign an option to sell its Paris Hotel for US$225mn while retaining a long-term property management contract. Part of the proceeds will be used toward leveraging the company's luxury hotel management platform into 27 new hotels under various stages of construction. These properties will not be owned but managed, ensuring high returns on invested capital. The Paris Hotel sale represents US$1,700,000 per room, highlighting the significant disconnect between public and private market value in Asian listed property companies; Mandarin shares currently trade at an implied value of less than US$200,000 per room. This market disconnect in Asian property companies is not only apparent in small market-cap companies like Mandarin.

BSD Analysis:
The manager identifies Mandarin Oriental as another compelling resource conversion opportunity, highlighting the company's strategic shift from asset ownership to fee-based management. The Paris Hotel sale at $1.7 million per room demonstrates strong private market valuations, while Mandarin's public market valuation implies less than $200,000 per room, representing a massive 88% discount. This transaction exemplifies the manager's thesis on Asian property company mispricings. The proceeds will fund expansion into 27 new managed hotels, transitioning to a capital-light, high-return model that should generate superior returns on invested capital. The asset-light strategy reduces capital intensity while maintaining revenue streams through long-term management contracts. This transformation from owner-operator to pure management company should command higher valuation multiples while reducing balance sheet risk, making it an attractive resource conversion play in the Asian hospitality sector.

Pitch Summary:
Concerning other resource conversion opportunities, it was positive to see the Fund's investment in Swire Pacific ("Swire"), a Hong Kong/China diversified company with about 80% of its assets in a high-quality retail and office portfolio in Hong Kong and China, announce another meaningful wealth creating transaction. The Fund's investment position in Swire has benefitted from many transactions over the past few years, including divesting non-core beverages assets, selling non-core office assets, divesting its legacy marine services business, and buying back shares at deep discounts. Combined, these actions helped Swire generate a total shareholder return of 22% in 2023 despite the broad Hong Kong market (Hang Seng Index) being in a protracted bear market. In November, Swire's property subsidiary announced the sale of 12 floors of its premium office asset, One Island East (on Hong Kong Island), to the tenant occupying the space. This US$700m transaction was reportedly conducted at a low 3.3% cap rate, reflecting a high value for the office given the current office market weakness. Shortly thereafter, Swire announced another large-scale share buyback, representing about 9% of the company (by equity value) which is currently underway. Importantly, this buyback will again be conducted at extraordinary discounts to book value, with shares traded at just 25% of book value at the time of announcement. Hence, the buyback should provide meaningful value accretion to remaining shareholders. When combining this share buyback with the previous repurchase activity announced in 2022, special dividend in 2023, and ordinary dividends, Swire will have returned about 40% to shareholders over the last year and a half with little change to book value per share. Fund Management has been very pleased with management's capital allocation decisions of late and is happy to retain an investment in an increasingly simplified real estate entity that owns, operates, and develops some of the best real estate in Asia.

BSD Analysis:
The manager highlights Swire Pacific as a successful resource conversion story, demonstrating exceptional capital allocation despite challenging Hong Kong market conditions. The company generated 22% total returns in 2023 while the Hang Seng Index remained in a bear market, driven by strategic asset sales and aggressive share buybacks. Recent transactions include a $700 million office sale at a 3.3% cap rate and a 9% share buyback at 25% of book value, showcasing management's ability to monetize assets at attractive valuations. Over 18 months, Swire has returned approximately 40% to shareholders through buybacks, special dividends, and regular distributions while maintaining stable book value per share. The manager views this as validation of their resource conversion thesis, with Swire evolving into a simplified, high-quality Asian real estate platform. The combination of premium Hong Kong/China assets and disciplined capital allocation creates a compelling investment despite regional headwinds.

Pitch Summary:
During the quarter, the Fund took advantage of share price weakness to invest in small-cap UK office company Helical plc ("Helical"). Helical is structured as a Real Estate Investment Trust ("REIT") and specializes in the re/development, refurbishment, and management of high-quality 'sustainable' London office properties. With a history of recycling capital, the current Helical portfolio consists of eight properties totaling just under 900k square feet and three development site joint ventures with Transport for London ("TfL") located in prime positions at central London tube (subway) stations. Since the beginning of COVID, Fund Management has been cautious about investing in office real estate given the uncertain outlook surrounding a structural shift to work from home or hybrid working. At the advent of COVID restrictions, Fund Management reduced the Fund's exposure to office real estate from 26% of assets down to 10%, with the remaining exposure mostly in Asia through diversified real estate companies. Along those lines, it is important to note that Helical is a niche operator focused on a London office market where fundamentals are better than most office markets globally. The investment in Helical is in fact premised on five key drivers: (i) London office fundamentals in smaller, high-quality, environmentally rated buildings are favorable, with CBRE predicting 5.1% rent growth per year over the next five years, (ii) the City of London's regulatory requirements on green buildings means developers like Helical are in an advantageous position to create value as assets are upgraded, (iii) Helical shares are deeply discounted, trading at a 46% discount to net asset value (book value) and an implied 10% real estate cap rate, (iv) Helical is in the process of leasing up a recently completed new property with leasing deals a potential catalyst, together with value creation from the TfL joint ventures, and, (v) Helical is a resource conversion candidate through a possible merger or privatization. As part of Third Avenue's investment approach, one of the four general ways corporations can create wealth is by surfacing the private-market value of their enterprises through resource conversions such as mergers and acquisitions ("M&A"), from which the Fund has a track record of benefitting. This is especially the case in the UK, where numerous M&A deals in the listed real estate sector have occurred over recent years. UK Investment bank, Peel Hunt, outlines 18 M&A deals since 2019 at an average 31% premium to the prior day's share price close, at a marginal discount to net asset value (or "NAV"). If shares continue to trade at significant discounts, Helical's board, owners, and managers should be incentivized to surface value given that the founder controls 8.5% of the company and is no longer involved in the "day-to-day" per se, and senior management and an employee profit plan owns about 5.4%.

BSD Analysis:
The manager presents a compelling contrarian investment in Helical, a London office REIT, despite the sector's post-COVID challenges. The thesis centers on five key value drivers: favorable London office fundamentals with CBRE forecasting 5.1% annual rent growth, regulatory advantages from green building requirements, deeply discounted valuation at 46% discount to NAV with 10% implied cap rate, near-term catalysts from property leasing and TfL joint ventures, and potential for resource conversion through M&A. The manager emphasizes Helical's niche focus on high-quality, sustainable properties in a London market with better fundamentals than global peers. Historical UK real estate M&A activity supports the conversion thesis, with 18 deals since 2019 averaging 31% premiums. Strong insider ownership (13.9% combined) provides alignment for value realization through potential privatization or merger activity.

Pitch Summary:
We also initiated a position in Best Buy, a leading electronics retailer with more than 1,000 stores nationwide. We've been impressed with management's ability to navigate a difficult retail landscape, gaining share amongst its offline competitors. The consumer electronics market is suffering from a spending hangover after the Pandemic, but we are starting to see green shoots of a recovery; in the meantime, Best Buy offers a 5% dividend.

BSD Analysis:
The fund initiated a position in Best Buy, recognizing management's strong execution in a challenging retail environment. The investment thesis highlights Best Buy's ability to gain market share among brick-and-mortar competitors despite broader retail headwinds. The managers acknowledge the consumer electronics sector is experiencing a post-pandemic spending normalization, but they identify early signs of recovery emerging. The 5% dividend yield provides attractive income while waiting for the cyclical recovery to materialize. Best Buy's nationwide footprint of over 1,000 stores represents significant physical retail infrastructure that may be difficult for competitors to replicate. The managers appear to be making a contrarian bet on the resilience of specialized electronics retail and Best Buy's competitive moat in an increasingly digital world. The combination of market share gains, early recovery signals, and attractive dividend yield suggests the managers view current valuations as compelling relative to the company's long-term prospects.

Pitch Summary:
We added two smaller positions to the portfolio in the fourth quarter as well—Piper Sandler (PIPR) and Best Buy (BBY)--both of which are Minnesota-based. Piper Sandler, founded in 1895, is a leading investment bank based right in our backyard in Minneapolis. Piper's management has done an excellent job of expanding its merger and acquisitions (M&A) expertise and growing its share of M&A deals. Due to higher interest rates, the M&A environment has slowed considerably but should re-accelerate as companies adjust to the new interest rate regime.

BSD Analysis:
The fund initiated a new position in Piper Sandler, a Minneapolis-based investment bank with a 128-year operating history. The managers are impressed with management's execution in expanding the firm's M&A capabilities and growing market share in the M&A advisory business. The investment thesis acknowledges current headwinds from higher interest rates that have significantly slowed M&A activity industry-wide. However, the managers anticipate a cyclical recovery as companies adapt to the new interest rate environment and M&A activity re-accelerates. The geographic proximity to the fund's Minneapolis headquarters likely provides the managers with enhanced due diligence capabilities and management access. This appears to be a contrarian investment in a cyclically depressed sector, betting on Piper Sandler's competitive positioning for the eventual M&A market recovery. The timing suggests the managers believe current valuations reflect overly pessimistic assumptions about the duration of the M&A slowdown.

Pitch Summary:
The Fund's relative performance was negatively impacted by what we didn't own as well. In particular, not holding Apple for most of the year cost the Fund more than 300bps (basis points) of performance. Apple may be the best-known company in the world and its seemingly ubiquitous iPhone holds a dominant share of the global cell phone market. Apple is even more dominant among Millennials and Gen Zers, which should lead to even greater market share as these cohorts age. This loyal user base should pay huge dividends for shareholders as Apple continues to monetize this ecosystem, especially as the company delves deeper into services, payments, and AI. We initiated a position in Apple during the fourth quarter and await a more attractive entry point to add to our position.

BSD Analysis:
The fund managers initiated a position in Apple during Q4 2023 after missing out on significant performance by not holding the stock earlier in the year. Their thesis centers on Apple's dominant market position, particularly the iPhone's commanding share of the global smartphone market. The managers highlight Apple's especially strong position among younger demographics (Millennials and Gen Z), which they believe will drive expanding market share as these cohorts age and maintain brand loyalty. The investment case emphasizes Apple's ability to monetize its ecosystem through services, payments, and artificial intelligence initiatives. The managers view the current position as a foundation, indicating they are waiting for more attractive entry points to increase their allocation. This suggests they see Apple as undervalued relative to its long-term growth potential despite its strong 2023 performance.

Pitch Summary:
Ingevity (NGVT)–NGVT underperformed in Q3 after lowering full-year guidance reflecting unexpectedly persistent raw material cost inflation and soft demand in the company's industrial specialties segment (part of the performance chemicals division). We believe the business is improving, as NGVT is investing in alternative fatty acid production capacity, which will enable the business to enter new markets, support a cost advantage, and enable feedstock selection. We believe this should provide better products for customers and enable the business to mitigate CTO (NGVT's current key raw material) cost inflation. We believe NGVT's current valuation is attractive (roughly 6.5x EV/EBITDA), and the company's diverse product mix, growing pavement technology business, and monopoly position in activated carbon for automobiles provide ample downside protection.

BSD Analysis:
The London Company maintains a bullish stance on Ingevity despite recent guidance reduction and Q3 underperformance, viewing current challenges as temporary headwinds rather than structural issues. The manager acknowledges near-term pressures from raw material cost inflation and soft industrial demand but emphasizes the company's strategic investments in alternative fatty acid production capacity. This capacity expansion should enable NGVT to enter new markets, achieve cost advantages, and reduce dependence on CTO, its current key raw material. The investment thesis centers on the company's attractive valuation at roughly 6.5x EV/EBITDA, which appears compelling given the business quality and market position. NGVT's diverse product mix provides revenue stability, while the growing pavement technology business offers additional growth opportunities. The company's monopoly position in activated carbon for automobiles creates a significant competitive moat and provides downside protection. The manager believes these strategic initiatives and market positions should enable NGVT to mitigate current cost pressures and deliver improved performance as market conditions normalize.

Pitch Summary:
Lancaster Colony (LANC)–LANC underperformed during Q3 reflecting expectations for slower growth in the future. Higher pricing has aided revenue growth in recent quarters, but those benefits are expected to moderate. Fortunately, the fundamentals at LANC remain strong. The company should realize tailwinds to margins and free cash flow over the next 12 months with capacity expansions complete, and mix continuing to shift towards margin-accretive volumes. LANC has attractive opportunities for growth, and a strong balance sheet (net cash) is available to support investment.

BSD Analysis:
The London Company maintains a constructive view on Lancaster Colony despite recent underperformance, attributing the weakness to growth deceleration concerns rather than fundamental deterioration. The manager acknowledges that pricing benefits that drove recent revenue growth are expected to moderate, creating near-term headwinds. However, the investment thesis focuses on improving operational fundamentals, with completed capacity expansions positioned to drive margin expansion over the next 12 months. The company's product mix shift toward higher-margin volumes should provide additional tailwinds to profitability and free cash flow generation. LANC's strong balance sheet with net cash provides significant financial flexibility to pursue growth investments and strategic opportunities. The manager identifies attractive growth opportunities ahead, suggesting the current valuation doesn't reflect the company's improving operational profile. The combination of margin expansion catalysts, strong financial position, and growth optionality creates a compelling risk-adjusted investment opportunity. Management's track record of capital allocation and operational excellence supports confidence in execution.

Pitch Summary:
Enovis (ENOV)–ENOV declined in Q3 after outperforming to start the year. ENOV's orthopedic implant portfolio continues to generate healthy growth and gain market share, while demand for its industry leading bracing products has proven resilient. More recently, concerns that weight-loss drugs might affect the number of orthopedic procedures longer-term have weighed on sentiment, but we believe that any impact is manageable and fails to consider offsetting positive factors. We have conviction that ENOV's attractive and diversified portfolio of orthopedic offerings will help support a long runway for continued earnings growth.

BSD Analysis:
The London Company maintains conviction in Enovis despite recent stock weakness, viewing the decline as a temporary setback rather than a fundamental deterioration. The manager highlights ENOV's strong operational performance, with the orthopedic implant portfolio generating healthy growth and gaining market share in a competitive landscape. The company's industry-leading bracing products demonstrate resilient demand, providing diversification and stability to the business model. While acknowledging market concerns about weight-loss drugs potentially reducing orthopedic procedures, the manager believes these fears are overblown and fail to account for offsetting positive factors. The investment thesis centers on ENOV's diversified portfolio of orthopedic offerings, which should support a long runway for earnings growth. The manager's conviction suggests they view current valuation as attractive following the Q3 decline. The combination of market share gains, product diversification, and long-term demographic trends supports the bullish outlook despite near-term headwinds.

Pitch Summary:
Qualys(QLYS)–QLYS reported solid 2Q23 earnings, including double-digit sales growth and an acceleration in bookings despite the challenging macroeconomic environment. QLYS continues to execute on their new go-to-market strategy, following the addition of a new Chief Revenue Officer. We have a strong conviction in QLYS's ability to maintain its industry-leading profitability driven by a variety of cybersecurity products for small and medium sized businesses.

BSD Analysis:
The London Company expresses strong conviction in Qualys, emphasizing the company's resilient performance amid macroeconomic headwinds. The manager highlights QLYS's solid Q2 2023 results, featuring double-digit sales growth and accelerating bookings, which demonstrate the company's ability to execute effectively in challenging conditions. The investment thesis centers on the company's new go-to-market strategy and leadership changes, including the addition of a new Chief Revenue Officer, which should drive improved sales execution. QLYS's focus on cybersecurity solutions for small and medium-sized businesses positions the company well in a growing market segment. The manager emphasizes the company's industry-leading profitability, which provides competitive advantages and financial flexibility. The diverse portfolio of cybersecurity products creates multiple revenue streams and reduces concentration risk. Strong conviction suggests the manager views current valuation as attractive relative to the company's growth prospects and market position.

Pitch Summary:
Tempur Sealy (TPX)–TPX continued to outperform as quarterly results demonstrated solid execution in a challenging market environment. Industry volumes remain weak, but there are signs of sequential improvement. Strategic investments will allow for continued share gains as TPX launches new products, captures incremental wholesale opportunities, and spends more on advertising to support its premium brands. Valuation remains compelling and robust free cash flow generation, strong brand equity, and solid management execution support our investment thesis.

BSD Analysis:
The London Company maintains a bullish stance on Tempur Sealy, highlighting the company's strong execution despite challenging industry conditions. The manager emphasizes TPX's ability to gain market share through strategic investments in new product launches and increased advertising spend for premium brands. The thesis centers on the company's robust free cash flow generation and strong brand equity, which provide competitive advantages in a weak volume environment. The manager views the current valuation as compelling, suggesting the stock trades below intrinsic value. Sequential improvement signs in industry volumes provide additional support for the investment case. The combination of operational excellence, brand strength, and attractive valuation creates a compelling risk-adjusted opportunity. Management's solid execution track record reinforces confidence in the company's ability to navigate market headwinds successfully.

Pitch Summary:
Initiated: Zebra Technologies Corporation (ZBRA)–ZBRA is the largest player in the global automatic identification and data capture (AIDC) market. It sells purpose-built, enterprise-grade devices (i.e. barcode scanners, RFID technology, & mobile computing devices) that require substantial engineering prowess and robust support and servicing for mission critical applications. Sources of moat include scale, a vast, global distribution network, close customer relationships, a reputation for innovation, a comprehensive solution set, and bargaining power. We're attracted it its strong balance sheet, compelling valuation and secular tailwinds. ZBRA's ability to provide automation, data analytics, and supply chain visibility solutions positions it well to capitalize on the growing demand for these services across various industries.

BSD Analysis:
The London Company initiated a position in Zebra Technologies, attracted to the company's dominant position in the automatic identification and data capture market. The fund emphasizes ZBRA's leadership in mission-critical enterprise devices including barcode scanners, RFID technology, and mobile computing solutions that require significant engineering expertise and ongoing support. The investment thesis highlights multiple competitive advantages including scale benefits, a global distribution network, and strong customer relationships built around innovation and comprehensive solutions. The fund sees ZBRA as well-positioned to benefit from secular trends toward automation, data analytics, and supply chain visibility across various industries. The company's strong balance sheet and what the fund views as a compelling valuation provide additional investment appeal. The fund believes ZBRA's ability to provide integrated solutions for automation and supply chain optimization positions it to capitalize on growing enterprise demand for these capabilities.

Pitch Summary:
Closer to home, Chicago-based Littelfuse is the largest circuit protection company in the world. The company is benefiting from the long-term trend towards electrification. However, its short-term results are being negatively impacted by pandemic related inventory de-stocking. We believe the company will resume growing within a year or so. In the meantime, we are happy to own it at a discount to our estimate of fair value.

BSD Analysis:
Vulcan Value Partners views Littelfuse as a compelling long-term play on the global electrification trend, despite near-term headwinds from inventory destocking. As the world's largest circuit protection company, Littelfuse is positioned to benefit from the structural shift toward electric vehicles, renewable energy, and increased electronic content across industries. The fund acknowledges that pandemic-related inventory adjustments are currently pressuring short-term results, but believes this represents a temporary cyclical issue rather than a fundamental business problem. Management expects growth to resume within approximately one year as inventory levels normalize and underlying demand for circuit protection solutions continues to expand. The investment thesis centers on Littelfuse's market-leading position in an essential technology category that should see sustained demand growth from electrification trends, purchased at an attractive valuation during a temporary earnings trough.

Pitch Summary:
Initiated: Waters Corporation (WAT)–WAT designs, manufactures, sells, and services high-performance liquid chromatography (HPLC), mass spectrometry (MS), and thermal analysis technologies. These solutions are invaluable tools in R&D and quality control processes for industries like pharmaceuticals, life sciences, and food & beverage. Sources of moat include its entrenched leadership position, the heavily regulated nature of drug production, high switching costs, & its Empower software—which is the standard in HPLC Quality Assurance/Quality Control settings. We're attracted to its strong balance sheet, predictable cash flows (~60% recurring revenue), and compelling economic moat.

BSD Analysis:
The London Company initiated a position in Waters Corporation, viewing it as a high-quality analytical instruments company with significant competitive advantages. The fund highlights WAT's leadership position in critical laboratory technologies including HPLC, mass spectrometry, and thermal analysis, which are essential for pharmaceutical R&D and quality control processes. The investment thesis centers on multiple sources of competitive moat, including the heavily regulated nature of drug production that creates high switching costs for customers. The company's Empower software platform is particularly valuable as the industry standard for HPLC quality assurance and control, creating additional customer stickiness. The fund is attracted to WAT's financial profile, noting approximately 60% recurring revenue that provides predictable cash flows and a strong balance sheet that supports the business through various market cycles.