Investment Pitches

Pitch Summary:
After adding Gilead in the third quarter, we bought AstraZeneca in the fourth quarter. Each of these stocks present distinct investment cases, but both are reasonably valued and have limited patent expiry or pipeline risk. Gilead's strength comes from its dominant franchise in HIV. It offers lower growth, but it yields nearly 4% and trades at 11x earnings.

BSD Analysis:
The managers initiated a position in Gilead as part of their strategy to find value in overlooked healthcare names. They view Gilead as attractively valued at 11x earnings with a compelling 4% dividend yield, representing a defensive healthcare play with reasonable valuation metrics. The investment thesis centers on Gilead's dominant HIV franchise, which provides stable cash flows and limited patent cliff risk. While acknowledging lower growth prospects, the managers appreciate the combination of attractive valuation, meaningful dividend yield, and defensive characteristics. This position reflects their broader strategy of adding defensive healthcare exposure at below-market multiples. The managers see Gilead as offering a favorable risk-adjusted return profile with income generation and limited downside risk from patent expirations.

Pitch Summary:
Euronet Worldwide is an industry leader in providing secure electronic financial transaction solutions. They operate one of the largest independent ATM networks in Europe, are the world's largest payment network for prepaid mobile top-ups, and the second-largest global money transfer company. The stock's recent weakness was in response to a lowered outlook in the EFT segment, which accounts for ~50% of profits. This segment was impacted by economic pressures on consumer spending in Europe. While we believe this will be a headwind, Euronet Worldwide's overall revenue and profit growth is still impressive relative to the broader universe. The stock's decline appears to be an overreaction. We believe the company has a robust business model and long-term growth drivers. Euronet Worldwide also benefits from a long-tenured management team with a proven track record of navigating challenging periods.

BSD Analysis:
Polen Capital views Euronet Worldwide's recent stock decline as an overreaction to near-term headwinds in the European EFT segment. The company maintains leading market positions across multiple payment verticals, including the largest independent ATM network in Europe, the world's largest prepaid mobile top-up network, and the second-largest global money transfer business. Despite economic pressures affecting European consumer spending, Polen emphasizes that overall revenue and profit growth remains impressive relative to peers. The diversified business model across ATMs, money transfers, and prepaid services provides multiple growth drivers and geographic diversification. Management's long tenure and proven track record of navigating challenging periods adds confidence in the company's ability to weather current headwinds. Polen sees the current valuation as attractive given the company's market-leading positions and long-term growth potential in electronic financial transactions.

Pitch Summary:
Apple is the largest company in the world and produces terrific products that engage users for hours each day. Despite the company's size, ubiquity and relevance, however, Apple's growth has slowed dramatically. Its fiscal 2023 earnings were flat with those of 2022. Apple trades at 30x earnings; sustaining that multiple will require a meaningful acceleration in revenues. While such an improvement is possible, we do not see any obvious catalysts for adding tens of billions of dollars to Apple's topline. Consequently, the risk-reward skews negatively.

BSD Analysis:
The managers express a bearish view on Apple despite acknowledging its market leadership and product quality. Their concern centers on the disconnect between Apple's premium 30x earnings multiple and its stagnant growth profile, with fiscal 2023 earnings flat versus 2022. They argue that sustaining such a high valuation requires significant revenue acceleration, which they don't see materializing given the lack of obvious catalysts. The managers reduced their Apple exposure in 2023 as part of their broader strategy of exiting high-multiple, low-growth stocks in a higher interest rate environment. This reflects their disciplined approach to valuation and growth sustainability. The position represents their view that Apple's risk-reward profile has deteriorated as growth has decelerated while the valuation multiple remains elevated.

Pitch Summary:
Yeti, an outdoor and lifestyle brand known for its coolers and drinkware, was also a significant contributor. Yeti delivered better-than-expected quarterly results after navigating a voluntary product recall that negatively impacted earnings. The company continues to navigate a challenging period, but we believe this is temporary. Our long-term outlook for the business is unchanged.

BSD Analysis:
Polen Capital maintains confidence in YETI despite recent operational challenges, viewing the current difficulties as temporary setbacks rather than fundamental business issues. The company successfully navigated a voluntary product recall while still delivering better-than-expected quarterly results, demonstrating operational resilience and strong brand loyalty. YETI's position as a premium outdoor and lifestyle brand with strong recognition in coolers and drinkware provides pricing power and customer loyalty. The fund manager's unchanged long-term outlook suggests confidence in the brand's durability and growth prospects beyond current headwinds. This reflects Polen's focus on high-quality consumer brands that can weather temporary challenges while maintaining their competitive positioning. The company's ability to exceed expectations despite recall-related earnings impact indicates strong underlying business fundamentals.

Pitch Summary:
Microsoft is the largest holding in our portfolio. Given its partnership with OpenAI and leading position in the cloud, Microsoft is well-positioned to profit from the boom in AI. However, due to Microsoft's tremendous scale and diversification, the company is not dependent upon AI for its success. Microsoft's diverse portfolio of software and cloud offerings ensures the company will thrive even if the next hot thing, like AI, fizzles out. In this way, Microsoft is emblematic of our broader investing approach. We seek to benefit from powerful trends, but we do so with an eye toward managing risk and limiting downside in case the future turns out to be less rosy than hoped for.

BSD Analysis:
The managers view Microsoft as their largest holding and a core position that exemplifies their risk-managed approach to growth trends. They highlight Microsoft's strategic positioning in AI through its OpenAI partnership and cloud leadership, while emphasizing the company's diversification as a key defensive characteristic. The thesis centers on Microsoft's ability to capitalize on AI trends without being dependent on them for success. The managers appreciate the company's scale and broad software/cloud portfolio as providing downside protection. This represents a balanced growth play that aligns with their dividend strategy while offering exposure to transformative technology trends. The position reflects their preference for companies that can benefit from secular growth while maintaining defensive qualities through diversification.

Pitch Summary:
CCC Intelligent Solutions provides software and tools to the automotive insurance ecosystem. Their customers include insurance companies, repair shops, parts suppliers, medical insurance carriers, and auto manufacturers. Company fundamentals have surpassed our expectations this year, demonstrating the durability of the business and its critical role in the auto claims ecosystem. Acquisition speculation also drove the stock higher at the end of the quarter. We believe CCC remains an attractive long-term investment from a quality, free cash flow growth, and valuation perspective.

BSD Analysis:
Polen Capital expresses strong conviction in CCC Intelligent Solutions, emphasizing the company's critical position within the automotive insurance ecosystem. The software provider serves a diverse customer base including insurance companies, repair shops, parts suppliers, and auto manufacturers, creating multiple revenue streams and reducing customer concentration risk. Company fundamentals have exceeded expectations, demonstrating the resilient and mission-critical nature of their software solutions. The business benefits from its essential role in auto claims processing, which provides defensive characteristics and recurring revenue visibility. Polen views the company as attractively valued despite recent acquisition speculation that drove shares higher. The combination of quality business model, strong free cash flow generation, and reasonable valuation makes this an appealing long-term holding in the software sector.

Pitch Summary:
Goosehead Insurance operates as a personal line insurance brokerage, pioneering a disruptive business model swiftly seizing market share from conventional independent and captive broker models. The company continues to deliver results ahead of expectations, underpinned by compelling pricing, enhanced agent productivity, and improved margins. We are particularly impressed by the company's adept execution and its capacity to achieve substantial cost efficiencies, which we believe are sustainable in the long term.

BSD Analysis:
Polen Capital maintains a bullish stance on Goosehead Insurance, highlighting the company's disruptive business model that is capturing market share from traditional insurance brokers. The fund manager emphasizes strong execution metrics including compelling pricing power, enhanced agent productivity, and margin expansion. The company has consistently delivered results above expectations, demonstrating operational excellence in a competitive insurance brokerage market. Polen particularly values the sustainable cost efficiencies that Goosehead has achieved, which should support long-term profitability. The personal lines insurance brokerage model appears to be gaining traction as it disrupts conventional independent and captive broker approaches. This represents a quality growth story in the financial services sector with clear competitive advantages and execution capabilities.

Pitch Summary:
Clearwater Analytics is a leading provider of investment portfolio reporting and analytics solutions. It uses advanced data and analytics to serve as the book of record across many asset classes for investment managers, corporations, insurers, and pension funds. The company analyzes and reports on over $6.4 trillion in daily assets across numerous accounts. Their software simplifies operations and ensures accuracy, speed, and scalability, adding significant customer value while reducing complexity. We believe the company is poised to sustain its robust growth trajectory, achieving annual top-line growth of 20% with meaningful margin expansion over our 5-year investment horizon. Clearwater is a great example of a Flywheel company with a unique and sticky product, high net recurring revenue, a significant runway for growth, and a business model and competitive advantage that strengthens with scale.

BSD Analysis:
Polen Capital initiated a new position in Clearwater Analytics, viewing it as an exemplary 'Flywheel' company with compelling long-term growth prospects. The manager highlights the company's leadership position in investment portfolio reporting and analytics, serving as the book of record for over $6.4 trillion in daily assets across diverse institutional clients. Polen's investment thesis centers on Clearwater's unique and sticky software solution that simplifies operations while ensuring accuracy, speed, and scalability for customers. The manager projects sustained robust growth with 20% annual top-line growth and meaningful margin expansion over their 5-year investment horizon. Polen particularly values the company's high net recurring revenue model and significant growth runway. The characterization as a 'Flywheel' company reflects Polen's belief that Clearwater's competitive advantages and business model strengthen with scale, creating sustainable barriers to entry and long-term value creation.

Pitch Summary:
Unlike LAAC, which is ramping production and selling lithium, even if it is still just technical grade, LAC is developing an asset that the management team hopes to turn on towards the end of 2026, with initial construction starting last year. Although we are confident that management will be successful in the fullness of time, a sentiment shared by management at GM, who is footing the bill for a big chunk of the construction cost and has 100% of the offtake from the mine for the first ten years, we favor allocating additional available capital to other opportunities. If we don't intend to add to the position in the short term and believe there are better opportunities, why continue holding? At 1%, our de minimis position is a toehold that has to be added to in the future but need not be added to in a rush. On the surface, LAC has many strengths: strong management, strong backing, a first-of-a-kind flow sheet that appears likely to deliver a cash cost per ton of LCE at roughly $7,000 vs. current US spot prices of $17,000, and an opportunity to be the largest producing lithium mine in North America. These are all critical variables, but the assets' real strength lies below ground in the deposit's geology. Although, in geological analysis terms, we are still in the early days of understanding the nature of claystone lithium deposits, a recent journal article published in Science Advances by a trio of volcanologists suggests that the McDermitt Caldera, which houses the Thacker Pass deposit, could be among the largest lithium deposits in the world. Only time will tell if the geological model the team (which included a LAC geologist) can be used to explain other examples of hydrothermally enriched lithium deposits and thus justify the claim that the deposit is one of the world's largest, but it is promising.

BSD Analysis:
Massif Capital maintains a small toehold position in Lithium Americas as a long-term option on what could become North America's largest lithium operation. The manager's confidence is bolstered by GM's strategic partnership, which includes funding construction and securing 100% offtake for the first decade. The projected $7,000 per ton cash cost versus $17,000 spot prices suggests exceptional economics once operational in 2026. The geological thesis is particularly compelling, with recent scientific research indicating the Thacker Pass deposit within the McDermitt Caldera could rank among the world's largest lithium resources. While the manager prefers near-term opportunities over this development-stage asset, the 1% position represents strategic optionality on a potentially tier-one asset with strong backing and superior economics.

Pitch Summary:
Paycom, a leading provider of cloud-based human capital management software for small and mid-sized businesses, was another detractor in the period. Despite reporting positive results, the investors seemed concerned about the company's performance in the year's second half. As a result, the stock fell by almost 20% on the day of the report. However, the company is committed to investing in its BETI platform to onboard more customers, which may have a short-term negative impact on revenues. But, in the long run, it can benefit the company's margins. Our positive long-term outlook remains unchanged. We still believe the company has an attractive growth potential in a large addressable market.

BSD Analysis:
Polen Capital maintains an unchanged bullish long-term outlook on Paycom despite recent stock volatility and investor concerns. The manager acknowledges that while the company reported positive results, market concerns about second-half performance led to a significant 20% single-day decline. Polen views the company's investment in its BETI platform as a strategic priority that may create near-term revenue headwinds but should drive long-term margin expansion. The investment thesis centers on Paycom's leadership position in cloud-based human capital management software for SMBs and the large addressable market opportunity. Polen's conviction in the company's growth potential remains intact, suggesting they view current market concerns as temporary rather than fundamental. This position reflects the manager's confidence in Paycom's competitive positioning and their willingness to look through short-term execution concerns to focus on long-term value creation.

Pitch Summary:
In the case of LAAC, we view the business as a compelling value play, with a de-risked producing asset (Cauchari-Olaroz) and the potential to reinvest capital at high rates of return via the development of its Pastos Grandes assets. The company trades at a discount to its fundamental value, a gap that could close in the near term as the company continues to ramp up production. With 40 ktpa in Lithium Carbonate Equivalent (LCE) production that is 90% contracted under a market price offtake agreement, the firm appears well-positioned to have a successful 2024. Our fundamental value is based on a net present value of the Cauchari asset, with no upside associated with the potential development of Pastos Grandes. We have slightly adjusted the 2020 Definitive Feasibility Study (DFS) production levels and significant adjustments to our expected operating costs. Then, we valued the asset at various lithium carbonate price levels. We run our valuation at lithium carbonate prices of $15k per ton, $22.5k, and $30k vs. the current reported South American Lithium Carbonate FOB Swap price of $16.0k per ton, which is down 43% or so in the last three months. We expect the gap between the current market price and our fundamental value to close soon as the firm ramps up production this year. Total production capacity is anticipated to be achieved by mid-2024, as is a battery-grade lithium carbonate product. At the current spot price for South American Carbonate, we believe LAAC will produce an attributable average annual EBITDA of roughly $350 million per year for the first ten years of the firm's operations. The peer group above has a mean EV/EBITDA of 6.1x, implying an EV of $2.1 billion, suggesting a Market Capitalization of $2.0 billion, a per-share value of roughly $13 a share. Currently, we have a 5% position in the company and are adding when it trades down. While unsure of our final target allocation weight, we are theoretically comfortable allocating as much as 7% of the portfolio to LAAC.

BSD Analysis:
Massif Capital presents a compelling value thesis for Lithium Argentina, emphasizing the company's transition from development to production phase with the Cauchari-Olaroz asset. The manager's valuation methodology appears conservative, focusing solely on the producing asset without attributing value to the prospective Pastos Grandes project. The 90% contracted production at market prices provides revenue visibility, while the expected ramp to full capacity by mid-2024 should drive meaningful cash flow generation. At current lithium carbonate prices of $16k/ton, the projected $350 million annual EBITDA supports the manager's $13 price target based on peer multiples. The position sizing strategy of gradually building to 7% allocation demonstrates conviction while managing risk during the production ramp phase.

Pitch Summary:
Doximity is a productivity and professional network app for doctors that generates revenue primarily from biopharmaceutical advertising. The stock was negatively impacted by a weaker growth outlook and the acknowledgment that the company needs to invest to shift towards a self-service model to meet customers' needs better. We believe the advertising return on investment remains best-in-class, and physician engagement remains convincing, but we are closely monitoring the position.

BSD Analysis:
Polen Capital maintains a cautious but not entirely negative stance on Doximity, acknowledging both strengths and emerging challenges. The manager recognizes the company's best-in-class advertising return on investment and strong physician engagement metrics as key competitive advantages. However, they express concern about the weaker growth outlook and the company's need to invest in transitioning to a self-service model to better serve customers. This strategic shift represents both an opportunity and a risk, as it requires significant investment that may pressure near-term profitability while potentially improving long-term scalability. Polen's decision to closely monitor the position suggests they are evaluating whether management can successfully navigate this transition. The balanced assessment reflects the manager's recognition of Doximity's strong fundamentals in physician engagement while acknowledging execution risks around the business model evolution.

Pitch Summary:
Farfetch is a leading back-office services and software provider for luxury brands seeking to globalize their businesses online and an extensive online marketplace for luxury apparel and accessories. During the quarter, the company reported weaker-than-expected revenue and gross merchandise value ("GMV") while also lowering GMV and operating margin projections for the entire year. The stock traded down more than 40% on this news. We ultimately exited the position during the quarter. Farfetch is a leading digital software and services provider and online marketplace for global luxury brands. While we believe in the company's long-term potential, profitability has trended in the wrong direction, and a turnaround is taking longer than expected. While Farfetch may still prove successful over time, and the stock is arguably inexpensive, we can no longer count on management's execution, and we believe there are better risk-adjusted return opportunities in higher quality businesses.

BSD Analysis:
Polen Capital exited their Farfetch position during the quarter, citing deteriorating fundamentals and execution concerns. The manager highlights the company's disappointing financial performance, including weaker-than-expected revenue and gross merchandise value, along with reduced full-year guidance for both GMV and operating margins. The 40% stock decline following earnings reflects the severity of the operational challenges. While Polen acknowledges Farfetch's long-term potential in the luxury e-commerce space and notes the stock's attractive valuation, they express lost confidence in management's ability to execute a timely turnaround. The decision to exit reflects Polen's disciplined approach to capital allocation, prioritizing higher-quality businesses with better risk-adjusted return profiles. This position change demonstrates the manager's willingness to cut losses when fundamental deterioration undermines their investment thesis, despite potential long-term value.

Pitch Summary:
Yeti, an outdoor and lifestyle brand known for its coolers and drinkware, was also a significant contributor. Yeti delivered better-than-expected quarterly results after navigating a voluntary product recall that negatively impacted earnings. The company continues to navigate a challenging period, but we believe this is temporary. Our long-term outlook for the business is unchanged.

BSD Analysis:
Polen Capital maintains an unchanged bullish long-term outlook on YETI despite recent operational challenges. The manager views the company's better-than-expected quarterly results as evidence of underlying business strength, particularly given the headwinds from a voluntary product recall that impacted earnings. Polen characterizes the current challenging period as temporary, suggesting confidence in management's ability to navigate through operational issues. The investment thesis appears to center on YETI's strong brand positioning in the outdoor and lifestyle market, with the manager viewing recent difficulties as transient rather than structural. This position reflects Polen's conviction in YETI's long-term growth trajectory and brand durability. The manager's willingness to look through near-term volatility demonstrates their focus on the company's fundamental competitive advantages in the premium outdoor products market.

Pitch Summary:
Globant, an IT consulting firm focused on helping companies embrace digital transformation, was a top contributor. The company has reported compelling results this year despite increased pessimism about the IT services space and some competitors reducing their outlook. While we do not believe Globant will be immune to a more significant downturn in IT services spending, we believe the long-term outlook for Globant continues to be very attractive.

BSD Analysis:
Polen Capital maintains a constructive view on Globant despite broader IT services sector headwinds. The manager acknowledges the company's strong execution and compelling financial results, which have outperformed in a challenging environment where competitors are reducing guidance. Polen recognizes that Globant faces potential cyclical pressures from reduced IT services spending but emphasizes their confidence in the company's long-term positioning. The investment thesis appears centered on Globant's digital transformation capabilities and its ability to differentiate from competitors during market downturns. The manager's balanced perspective acknowledges near-term risks while maintaining conviction in the company's structural growth opportunities. This position reflects Polen's belief that high-quality IT services providers with strong execution can outperform through economic cycles.

Pitch Summary:
Goosehead Insurance operates as a personal line insurance brokerage, pioneering a disruptive business model and swiftly seizing market share from conventional independent and captive broker models. The company continues to deliver results ahead of expectations, underpinned by compelling pricing, enhanced agent productivity, and improved margins. We are particularly impressed by the company's adept execution and its capacity to achieve substantial cost efficiencies, which we believe are sustainable in the long term.

BSD Analysis:
Polen Capital maintains a bullish stance on Goosehead Insurance, highlighting the company's disruptive business model in personal lines insurance brokerage. The manager emphasizes Goosehead's ability to capture market share from traditional independent and captive broker models through superior execution and operational efficiency. The investment thesis centers on the company's consistent outperformance of expectations, driven by compelling pricing strategies and enhanced agent productivity. Polen particularly values the company's demonstrated ability to achieve substantial cost efficiencies, which they view as sustainable competitive advantages. The manager's confidence in Goosehead's long-term margin expansion potential and market share gains reflects their belief in the company's structural advantages over legacy competitors. This position represents Polen's conviction in technology-enabled disruption within the traditional insurance distribution landscape.

Pitch Summary:
Within Materials, our investments in Gold (Equinox and an undisclosed junior) and our Nickel investment in Centaurus Metals are proving particularly painful and account for the vast majority of not only our 2023 losses but our struggles over the last seven quarters. Centaurus alone represents a nearly 5% loss for the portfolio at the current time. This is a particularly painful stock to own as the company continues to make decent progress on developing the Jaguar deposit, including securing complete control of the mines offtake from Vale. Nevertheless, the distinctive company-level catalysts are not proving sufficient. The stock has traded chiefly with nickel, which has done nothing but fall since our investment. We would be mistaken for not acknowledging some missteps in building the position, specifically an overly aggressive entry, which occurred in two ways: First, we took a full 6% position all at once, rather than legging into it. We do not have any notes on why we chose to do that, but it is not our standard approach to building a position. Second, we took an aggressive position at the same time dramatic events were occurring in the Nickel space. Furthermore, we expect continued fragmentation of the market, similar to what is seen in the oil market based on sulfur content and weight (API Gravity) but in this case based on CO2 intensity. Some of this depends on how seriously car manufacturers take efforts to green supply chains, but the signals are good, especially when one is talking about higher-end EVs selling into Western markets. Simplistically, we see all metals ultimately being sold on a Free on Board carbon-neutral basis, meaning a premium/discount would be applied based on the carbon intensity of production. In this context, Class 1 Nickel and Nickel Sulfate produced from sulfide deposits will earn a premium due to the inherently lower carbon intensity of the production process. As the chart of the GHG intensity of producing Nickel across the industry shows, the Jaguar deposit has a lower life of mine CO2 footprint than 97% of global nickel production. Centaurus should release a Definitive Feasibility Study on the Jaguar deposit during the fourth quarter, clearing the path for a final investment decision sometime next year. This will likely remain a painful investment for some time, but we have confidence that the asset's qualities and the market context will eventually yield a good return.

BSD Analysis:
Massif Capital maintains conviction in Centaurus Metals despite significant losses, with the position representing nearly 5% of portfolio drawdown. The manager acknowledges tactical errors including taking a full 6% position aggressively during nickel market volatility rather than building gradually. However, the investment thesis centers on the Jaguar deposit's superior environmental profile, with 97% lower CO2 intensity than global nickel production. The fund expects market fragmentation based on carbon intensity, similar to oil markets, creating premiums for low-carbon nickel sulfate. Centaurus secured complete offtake control from Vale and will produce battery-grade nickel sulfate directly rather than selling concentrate. The EU's Carbon Border Adjustment Mechanism should provide competitive advantages over high-carbon Indonesian production. A Definitive Feasibility Study due in Q4 2023 will enable final investment decisions, positioning Centaurus to benefit from EV supply chain decarbonization trends despite near-term commodity headwinds.

Pitch Summary:
A portfolio holding to highlight this quarter is Atmus Filtration Technologies Inc. (ATMU). Atmus is a leading manufacturer of premium filtration products for highway and off-highway commercial vehicles. Atmus is a spin-off from Cummins and is currently trading at a discount to direct filtration peers, providing an attractive entry point. As an independent entity, the company is well-positioned to accelerate its growth though expansion in new market and distribution channels. It has strong brand recognition (protected by over 1,300 patents worldwide) and deep expertise in filtration equipment made for first-fit or aftermarket for Original Equipment Manufacturers (OEMs). The company's products are primarily sold in the aftermarket, as it comprises 84% of revenues, which reduces its truck market cyclicality exposure. The replacement and repair opportunities for Atmus are rising as global emissions standards become more stringent and phase-ins require lower emissions per vehicle, which can be addressed through newer filters and more filter components per vehicle. Atmus continues to innovate, and the company has started to offer zero-emission vehicle (ZEV) filters to adapt to the higher number of electric vehicles on the market.

BSD Analysis:
THB Asset Management presents a compelling bull case for Atmus Filtration Technologies, emphasizing the company's attractive valuation following its spin-off from Cummins. The manager highlights ATMU's defensive business model with 84% aftermarket revenues, which provides stability against truck market cyclicality. The investment thesis centers on the company's ability to benefit from increasingly stringent global emissions standards, which drive demand for more sophisticated filtration systems and higher filter content per vehicle. THB views the spin-off structure as creating an undervalued opportunity, with ATMU trading at a discount to direct peers despite strong fundamentals. The company's extensive patent portfolio (1,300+ patents) and established OEM relationships provide competitive moats. Management's strategic pivot toward zero-emission vehicle filtration products demonstrates adaptability to industry trends. The combination of defensive cash flows, regulatory tailwinds, and spin-off dynamics creates an attractive risk-adjusted opportunity in the industrial filtration space.

Pitch Summary:
Airbnb continues to deliver double-digit growth in revenue and nights booked, which is especially impressive given the year-ago growth rates it delivered on these same metrics (+29% and +31, respectively). Despite these attractive results, the stock sold off as investors reacted to fourth quarter guidance that came in slightly below expectations. Coming into the fourth quarter, the stock was up +60% on the back of strong fundamentals. Stepping back, nothing has changed. Private rentals continue to take market share from hotels globally, and Airbnb continues to take market share within private rentals given its relentless focus on improving the guest and host experience. Looking ahead, we expect many years of robust earnings and cash flow growth from here.

BSD Analysis:
Polen Capital maintains strong conviction in Airbnb despite short-term market volatility around guidance expectations. The managers emphasize the company's impressive operational performance, delivering double-digit growth in both revenue and nights booked against challenging year-over-year comparisons of 29% and 31% respectively. Their investment thesis is built on two key secular trends: the ongoing market share shift from traditional hotels to private rentals globally, and Airbnb's continued market share gains within the private rental space. The fund attributes Airbnb's competitive advantage to its relentless focus on enhancing both guest and host experiences, creating a virtuous cycle that strengthens the platform's network effects. They view the stock's sell-off following slightly disappointing Q4 guidance as a temporary reaction that doesn't alter the fundamental investment case. With the stock having appreciated 60% prior to the quarter on strong fundamentals, Polen Capital sees the current environment as validating their long-term thesis while expecting sustained earnings and cash flow growth over multiple years.

Pitch Summary:
Microsoft's business continues to grow well, albeit at slower rates than in the previous few years. That said, it was a relative detractor to the Portfolio because our 7% average weighting for both the quarter and the year were significantly lower than the 12% benchmark weighting in the Russell 1000 Growth. Microsoft shares appreciated a benchmark-beating 19% in 4Q and 58% in 2023. Just like with Amazon's AWS business, we expect to see a re-acceleration in Microsoft's business from generative AI. In addition, we also expect generative AI to help not just Microsoft's Azure cloud service business grow, but also to be an additional growth driver for the company's Productivity Suite (Word, Excel, PowerPoint, etc.) and Power Platform, which helps build internal apps for businesses. Microsoft has created generative AI co-pilots, which are bots that use large language models (LLMs) to make a customer's Microsoft software even more functional. As an example, co-pilot offerings from Microsoft can take text and data from Word and Excel and automatically create a PowerPoint presentation from it. We expect to see generative AI demand from Azure customers becoming a larger contributor to growth of that segment while Microsoft Co-pilot becomes a premium feature of the high-end Microsoft commercial bundles, leading to better pricing. Given the strength of the company's existing businesses and the expected strong product cycle driven by generative AI advancements, we chose to add to our Microsoft position. It is now our second largest position behind Amazon.

BSD Analysis:
Polen Capital significantly increased their Microsoft position, making it their second-largest holding, based on the company's strategic positioning in the generative AI revolution. While acknowledging slower growth rates compared to previous years, the managers see generative AI as a transformative catalyst across Microsoft's entire ecosystem. Their investment thesis centers on AI-driven acceleration across three key segments: Azure cloud services benefiting from increased AI workload demand, Productivity Suite monetization through AI co-pilot features, and Power Platform enhancement for enterprise applications. The fund particularly values Microsoft's AI co-pilot technology, which integrates large language models to enhance software functionality and justify premium pricing in commercial bundles. They view this as a sustainable competitive advantage that will drive both growth acceleration and margin expansion. Despite the stock's strong 58% performance in 2023, Polen Capital's conviction led them to increase their position, reflecting confidence in Microsoft's ability to monetize AI innovations across its diversified software portfolio while maintaining its dominant market position.