Investment Pitches

Pitch Summary:
ALTG reported results for Q2 2022 that significantly surpassed all expectations with strong performance across all its businesses and geographies. The company increased its EBITDA guidance and announced the initiation of a dividend to common stockholders. We have consistently said ALTG's management team is one of the best amongst our portfolio holdings. Q2 2022 was a perfect example of why we feel that way about them. Keep it up, Ryan and Tony!

BSD Analysis:
The manager expresses strong confidence in Alta Equipment Group's management team, specifically praising executives Ryan and Tony for delivering exceptional Q2 results that surpassed all expectations across business lines and geographies. The investment thesis is built on management execution excellence, with the company demonstrating its operational strength through raised EBITDA guidance and the initiation of a dividend to common stockholders. The dividend initiation signals management's confidence in sustainable cash flow generation and represents a shareholder-friendly capital allocation decision. The manager's personal endorsement of the management team as among the best in their portfolio suggests this is a high-conviction position based on management quality rather than just valuation metrics. The 23% quarterly stock appreciation reflects market recognition of the strong operational performance and improved guidance.

Pitch Summary:
Ipsen, a French specialty pharmaceutical company that we have owned since 2018, focuses on the therapeutic areas of oncology, neuroscience and rare disease. We like Ipsen's global sales and distribution through which additional drugs can be sold, either those developed in-house or those purchased or in-licensed from other drugmakers. Ipsen is currently facing several challenges, including weakness in China and shipping issues, particularly for its drug Carbometyx. This has resulted in muted near-term sales results this quarter, up 6.5% on a constant-exchange-rate basis. We expect similar growth for the balance of the year. Further, a foreign-exchange headwind is also dragging down reported revenue. Nevertheless, we remain optimistic about Ipsen's ability to generate growth from its pipeline, which includes 20 drugs in clinical trials currently.

BSD Analysis:
Brown Capital Management maintains a constructive view on Ipsen despite near-term headwinds, having held the French specialty pharmaceutical company since 2018. The fund values Ipsen's global sales and distribution platform, which provides optionality to commercialize both internally developed drugs and in-licensed assets across oncology, neuroscience, and rare disease therapeutic areas. Current challenges include weakness in the Chinese market and shipping disruptions affecting Cabometyx, resulting in modest 6.5% constant-currency revenue growth with similar expectations for the remainder of the year. Foreign exchange headwinds are additionally pressuring reported revenues. However, the manager remains optimistic about the company's growth prospects driven by a robust pipeline of 20 drugs currently in clinical trials. The global distribution infrastructure positions Ipsen to maximize value from both organic R&D efforts and strategic partnerships. Despite quarterly underperformance as a portfolio detractor, the long-term thesis remains intact based on pipeline potential and commercial capabilities.

Pitch Summary:
AREN reported strong top line results for Q2 2022 but did report lower than expected EBITDA due to a shortfall in margin from the annual Sports Illustrated Swimsuit Issue. AREN's digital ad revenues, page views and all other operating metrics for its core digital business continue to grow showing the potential for its platform. If you remember from last quarter, AREN's stock sold off into the last days of last quarter due to confusion around the actual number of shares investors needed to buy following its inclusion in the Russell Index. It seemed investors thought the shares they needed to buy were much higher near the beginning of the announcement of inclusion versus the reality at the end. This confusion caused overbuying early and selling late into Q2 2022. AREN recently stated on its earnings call that it is currently at an inflection point where both inorganic and organic growth can occur without adding any meaningful cost along the way. We currently expect material increases in revenue, EBITDA, and free cash flow over the ensuing years. We believe in AREN's strategy of rolling up digital assets and integrating them across a single platform; and this approach should allow for better traffic across each individual site.

BSD Analysis:
The manager maintains strong conviction in Arena Group's digital media platform strategy despite temporary EBITDA pressure from the Sports Illustrated Swimsuit Issue shortfall. The investment thesis centers on the company's successful rollup strategy of digital assets and their integration across a unified platform, which drives traffic synergies across individual sites. Key operating metrics including digital ad revenues and page views continue growing, validating the platform's potential. The manager views the recent Russell Index inclusion confusion as a temporary technical factor that created artificial selling pressure rather than fundamental concerns. Management's guidance about reaching an inflection point where growth can occur without meaningful incremental costs suggests strong operating leverage ahead. The 46% quarterly recovery demonstrates the stock's responsiveness to improved sentiment, and the manager expects material increases in revenue, EBITDA, and free cash flow as the platform strategy matures.

Pitch Summary:
MercadoLibre is a Uruguay-based company that operates the leading e-commerce shopping platform in Latin America (like Amazon) and provides payment and credit services (like PayPal). We have owned MercadoLibre in the International All Company strategy since 2020. Although Latin America is a large market with a population of 650 million, it still has low e-commerce penetration compared to most developed markets as well as China. Currently, about half MercadoLibre's business is in Brazil and a quarter of it is in Argentina. Long-term investments in the marketplace and its rapid-shipping solutions provide significant barriers to entry. MercadoLibre ships 50% of its orders within 24 hours and 80% within 48 hours to over 50 million buyers. We also like the potential in the company's newer financial businesses, where 49 million unique users use MercadoLibre's payment-processing services, credit cards, loans and savings accounts. In the December quarter, MercadoLibre released a particularly strong third quarter earnings report, with revenue up 37% to $3.76 billion and earnings per share up 180% to $7.16. We think that these results reflect the significant long-term investments that MercadoLibre has made to achieve a superior delivery experience relative to competition.

BSD Analysis:
Brown Capital Management maintains a bullish stance on MercadoLibre, viewing it as the dominant e-commerce platform in Latin America with significant growth runway. The fund has held the position since 2020, capitalizing on the region's low e-commerce penetration relative to developed markets and China across a 650 million population base. The company's competitive moat stems from substantial investments in logistics infrastructure, enabling 50% of orders to ship within 24 hours and 80% within 48 hours to over 50 million buyers. The financial services segment represents a compelling growth vector with 49 million unique users utilizing payment processing, credit cards, loans, and savings accounts. Recent Q3 results demonstrated exceptional momentum with 37% revenue growth to $3.76 billion and 180% EPS growth to $7.16. The manager attributes this performance to long-term investments in superior delivery capabilities versus competitors. Geographic diversification across Brazil (50% of business) and Argentina (25%) provides multiple growth markets within the Latin American ecosystem.

Pitch Summary:
D-Wave Systems completed its public listing in August 2022 through a merger with DPCM Capital, Inc., (XPOA), a special purpose acquisition company. The newly listed company is called D-Wave Quantum, Inc., and trades under the symbol QBTS. 180 holds approximately 900,000 shares of QBTS. While this is clearly an important milestone for D-Wave and our efforts to monetize our legacy private portfolio, it is important to note that 180 cannot trade its shares of QBTS immediately. The shares of QBTS owned by 180 are subject to restrictions from trading until a registration statement is filed and deemed effective by the SEC; as well as an expiration of a lockup period that will last four-to-six months from the date of the business combination. Following the completion of its business combination and public listing, QBTS hosted its first earnings call where it noted that headwinds including delays in signing large deals and in moving between phases of its launch program from trials to deployment will result in slower than expected revenue growth. QBTS then lowered its revenue guidance to $7-9 million for 2022, versus the initially anticipated and marketed revenue of $11 million. Not a great way to start life as a public company.

BSD Analysis:
The manager takes a measured view of D-Wave Quantum following its SPAC transaction, acknowledging both the milestone achievement of going public and the immediate challenges facing the company. The position represents a legacy private investment that has achieved liquidity, though 180 Degree Capital faces trading restrictions and lockup periods limiting immediate monetization. The manager expresses concern about the company's rocky public debut, particularly the significant revenue guidance reduction from $11 million to $7-9 million for 2022 on their first earnings call. The delays in large deal signings and slower progression from trials to deployment suggest execution challenges in the quantum computing market. While the public listing provides transparency and eventual liquidity, the early performance indicates the quantum computing commercialization timeline may be longer than initially anticipated. The neutral stance reflects both the strategic value of the public listing and disappointment with early operational results.

Pitch Summary:
CHR Hansen Holdings is a Denmark-based maker of natural food ingredients, which we have held since 2017. The company's two main segments are Food, Cultures & Enzymes (ingredients used for the production of dairy products), and Health & Nutrition (primarily probiotics used in a variety of foods). We think CHR Hansen is an EGC because it generates high margins by providing small but mission-critical ingredients that save time, money and headaches for its large number of dairy and food-industry customers. We also like the company's market position and growth prospects. Over the past three years, the company has faced a variety of macro headwinds such as weakness in China related to COVID-19 shutdowns and lower sales due to the Russian war on Ukraine. In the fourth quarter 2022, Novozymes, another Danish firm and the world's largest producer of industrial enzymes, announced a $12.3 billion merger with CHR Hansen in a stock-for-stock transaction. On Dec. 12, the E.U. approved the transaction. The company announced that it will be named Novonesis once the transaction closes. We are evaluating whether the combined company has sufficient growth for our portfolio.

BSD Analysis:
Brown Capital Management views CHR Hansen as an Exceptional Growth Company due to its high-margin business model providing mission-critical ingredients to dairy and food industry customers. The fund has held the position since 2017, appreciating the company's strong market position and growth prospects despite recent macro headwinds including COVID-related weakness in China and impacts from the Russia-Ukraine conflict. The pending $12.3 billion merger with Novozymes, approved by the EU in December, creates uncertainty about the combined entity's growth profile. The merged company will operate under the name Novonesis, and Brown Capital is currently evaluating whether it meets their growth criteria for continued inclusion in the portfolio. This represents a significant consolidation in the industrial enzymes and food ingredients space. The manager's neutral stance reflects the transitional nature of the investment thesis pending merger completion. The position contributed positively to quarterly performance despite the ongoing strategic review.

Pitch Summary:
CVGI reported Q2 results in line with expectations and called for improvements for operating performance in the second half following the start of renegotiating pricing of contracts from a significant number of its customers. CVGI also continues to win significant new business in the emerging electric truck market that is expected to drive further growth in future years. Similar to our other holdings; even though the stock was already trading at depressed values to start the quarter, it still declined 23% amidst recession fears and decreased our NAV by $0.06 per share.

BSD Analysis:
The manager maintains a constructive view on Commercial Vehicle Group despite the stock's 23% quarterly decline driven by broader recession fears rather than company-specific issues. The investment thesis is supported by management's ability to renegotiate customer contracts for better pricing, which should improve operating performance in the second half. The company's positioning in the emerging electric truck market represents a significant growth catalyst, with CVGI continuing to win new business in this expanding segment. The manager emphasizes that the stock was already trading at depressed valuations before the additional decline, suggesting the current price presents an attractive entry point. The combination of near-term margin improvement through contract renegotiation and long-term growth exposure to electric vehicle trends provides both defensive characteristics and upside potential.

Pitch Summary:
We are hard pressed to find a company that has been completely ineffective and inept in managing itself through the global supply chain woes worse than QMCO. It has been severely punished for its inability to source parts needed for its tape products sold to Hyperscalers, which is a significant part of its business, and the part that is growing the fastest. Earlier in the year, the company conducted a rights offering to shore up its balance sheet and ensure it had staying power to weather the current environment. This quarter, the company reported revenue that was above guidance and analyst estimates, but margins continued to be pressured by supply chain problems and led to lower than expected EBITDA. While management stated that it believed the quarter's margins would be the low point, they did not provide clarity on how quickly the margins can return to historical levels. The truth is investors have completely lost confidence in this management team and will never give the company the benefit of the doubt until QMCO reports results that show improved execution on a consistent basis. QMCO is a classic case of a management team overpromising and underdelivering. We have and will continue to hold QMCO's Board and management team accountable for restoring value and will ramp up our activism, which may include a proxy contest if we don't believe the company is being run for its shareholders.

BSD Analysis:
The manager expresses deep frustration with Quantum Corporation's management execution, particularly regarding supply chain management during a critical growth period for their hyperscaler tape storage business. Despite revenue beating guidance and estimates, the company's inability to source necessary components has severely compressed margins and damaged investor confidence. The manager criticizes management's pattern of overpromising and underdelivering, noting that even after conducting a rights offering to strengthen the balance sheet, operational execution remains poor. While management claims margins have bottomed, their lack of clarity on recovery timing further erodes credibility. The manager's activist stance is evident through their threat of potential proxy contests, indicating they view this as a management problem rather than a fundamental business issue. The investment appears to be a bet on either management improvement or potential activist-driven change.

Pitch Summary:
The company reported improving financial results for Q2 2022 and announced the appointment of Jon Carpeneter as CEO and Nana Banjeree, an affiliate of Cerberus, as Chairman of the Board. SCOR began the process of overhauling the management team and focusing the company on delivering profitable growth and improved EBITDA margins. Cerberus bought $1 million of stock at $2.14 per share and there was additional insider buying from the management and Board during the quarter. Without looking at the screen, you might have thought these actions would have been received positively by investors and the market. Instead, SCOR was down 20% in the quarter and decreased our NAV by $0.11 per share. We believe SCOR is grossly undervalued, in part because it trades at 20% of the value Nielsen received in its takeover led by Elliott Investment Management and Brookfield Business Partners.

BSD Analysis:
The manager presents a compelling value case for Comscore despite the stock's counterintuitive 20% decline following positive developments. The investment thesis is anchored by improving financial results, new leadership under CEO Jon Carpenter, and strategic oversight from Cerberus through Chairman Nana Banjeree. The manager highlights significant insider buying, including Cerberus's $1 million purchase at $2.14 per share, as validation of the turnaround strategy focused on profitable growth and margin improvement. The valuation argument is particularly striking, with SCOR trading at only 20% of the enterprise value/revenue multiple that Nielsen commanded in its recent acquisition by Elliott and Brookfield. The manager views the market's negative reaction to these positive catalysts as irrational, creating an attractive entry point for a company undergoing operational transformation with strong insider support.

Pitch Summary:
PBPB reported strong Q2 2022 results and provided a healthy outlook for the second half of 2022. The company announced two franchise deals in late September, although it has not yet completed any re-franchising deals. Large franchise and re-franchise deals are critical milestones in ensuring the company is on a less-capital-intensive growth trajectory that should support a much higher share price. We are more than satisfied with the operational turnaround we have seen from this new management team. The pace of franchise deals has been slower than we would like, but in reality, given the backdrop of rising interest rates, global inflation, and a bear market in financial assets, we shouldn't be all that surprised with the pace of activity. Nothing we are currently seeing justifies a share price trading at one-third of the value it had when it was a completely broken business model just five years ago. We have a 13D on file and we will continue to engage with the management and Board to ensure the company takes the steps required to create significant shareholder value going forward.

BSD Analysis:
The manager maintains a strong bullish stance on Potbelly despite the stock's 20% quarterly decline. The investment thesis centers on an operational turnaround executed by new management, with the company reporting strong Q2 results and positive guidance. The manager emphasizes that franchise deals are critical for transitioning to a less capital-intensive growth model that should drive higher valuations. While acknowledging that the pace of re-franchising has been slower than desired, they attribute this to broader market conditions rather than company-specific issues. The manager finds the current valuation particularly compelling, noting the stock trades at one-third of its price from five years ago when the business was fundamentally broken. Their activist approach is evident through their 13D filing and ongoing engagement with management and the board to drive shareholder value creation.

Pitch Summary:
Norfolk Southern (NSC) –NSC underperformed during Q3 as the East Palestine, Ohio derailment has been a disruption for the company in terms of time and money. That said, the rail improved service levels during the quarter and has some tailwinds behind it, including industrial on-shoring pricing relative to truck, disruption in the freight market from Yellow and UPS, and continued service level improvement.

BSD Analysis:
The London Company acknowledges Norfolk Southern's near-term challenges from the East Palestine derailment while highlighting emerging operational improvements. The company has demonstrated progress in service level recovery, suggesting management's focus on operational excellence. Several structural tailwinds support the investment thesis, including industrial reshoring trends that favor rail transport economics. Disruption from Yellow's bankruptcy and UPS labor issues creates market share opportunities for NSC. The pricing advantage of rail versus trucking becomes more pronounced during periods of freight market stress. Continued service improvements should enhance customer relationships and pricing power. This pitch reflects confidence in NSC's ability to overcome current challenges and benefit from favorable industry dynamics.

Pitch Summary:
Martin Marietta (MLM) –MLM underperformed during Q3 after a strong start to the year. Quarterly results revealed lower than expected aggregate shipments, which have been negatively impacted by a softer residential market and adverse weather. Despite shipment declines and ongoing input cost headwinds, MLM's robust pricing strategy has led to material gross profit increases this year. MLM maintains a leadership position within aggregates and its exposure to key markets continue to give us confidence that it will benefit from growth in construction and infrastructure spending for many years.

BSD Analysis:
The London Company maintains long-term conviction in Martin Marietta despite near-term volume challenges. The company's pricing power has offset shipment declines and input cost pressures, demonstrating operational discipline. MLM's leadership position in aggregates provides competitive advantages through scale and geographic footprint. The manager views current residential market softness and weather impacts as temporary headwinds. Infrastructure spending trends and construction market recovery should drive long-term volume growth. The company's strategic market exposure positions it well for multi-year construction and infrastructure investment cycles. This pitch reflects confidence in MLM's ability to navigate cyclical downturns while maintaining pricing discipline and market leadership.

Pitch Summary:
Auto Trader is the dominant UK automotive classified advertising business accounting for three quarters of consumer time spent online searching for cars in the UK. We bought it for the second time since the fund was launched during the UK "Truss panic" in autumn 2022. The share price fell by more than 25% in a few weeks on the political and economic concerns, much more than broader UK indices, which declined c. 7-11% over the same period. The stock and the business have both performed well since, with a rally after a strong half year results announcement in November bringing the share price to new all-time highs. The stock contributed 0.9% to the fund in 2023. We believe the investment opportunity remains attractive. Whilst Auto Trader's competitive threats have receded in recent years and its growth prospects have improved, the valuation is at the lower end of its history as a public company. Auto Trader came to the market via IPO in 2015. It was founded in 1977 as "Thames Valley Trader", which became a weekly print publication with thirteen regional editions across the UK. It apparently was so popular in the print heyday that it periodically broke the presses having crammed in too many pages of ads. The company navigated the online transition early and pretty cleanly: the business launched its first website in 1996, digital revenue exceeded print in 2007, and the last print publication was in 2013. In its IPO prospectus, Auto Trader cited PWC research which claimed it was responsible for about 75% of consumer enquiries received from websites by car dealers. The business has faced substantial threats since: first, CarGurus Inc. disrupted the US market and then launched in the UK in late 2015 with new features such as an assessment of whether the cars listed were attractively priced. It talked up aggressive plans to topple Auto Trader as the market leader. CarGurus scaled back its international ambitions in early 2020, exiting some markets and seeking to cut its UK losses. CarGurus UK remains small today, eight years since its launch, even after acquiring Pistonheads in an effort to scale up. The international operations have progressively been de-emphasised in group reporting, disappearing as a separate segment in Q1 2022. UK subsidiary accounts show the operation has not added any employees since 2019 and whilst UK revenue is not disclosed, we estimate it is less than £25m, or roughly a twentieth of Auto Trader's scale. Second, Carvana Co.'s enthusiastic reception in US markets triggered a flood of copycats. The most prominent brands in the UK were Cazoo, Cinch and Heycar. To give a flavour of the performance of these businesses, Cazoo Group Ltd's share price has declined by 99.97% since its peak shortly after listing via SPAC. It is frankly an embarrassment that we were never short. Anyhow, the relevance for Auto Trader is that the online transition of car buying and selling is unlikely to be nearly as disruptive as many analysts worried a couple of years ago. Cazoo and Cinch have suffered almost 50% declines in their web traffic, and neither currently lists more than 10,000 vehicles, against Auto Trader's total listings of over 450,000 vehicles. Broader data suggests Auto Trader's competitive position has become more entrenched after the combination of this disruptive phase of competition and Covid. In 2023 Auto Trader's share of minutes spent online relative to its closest peers has increased to c. 79% from around 75% in 2021-22, according to Similarweb. Meanwhile the company has been evolving its product to become more embedded in its customers' business operations. It has released increasingly advanced data and intelligence tools and increased penetration of these tools from around 40% of customers to over 70% in recent years. In addition, a new suite of operations management products ("Connect") which integrate into more than 70 external software suppliers position Auto Trader as a platform as well as a marketing channel. Car dealers in the UK struggle to do business without Auto Trader. We can see this in various ways. For instance, Similarweb allows us to analyse "unique traffic" on combinations of websites – about 75% of users of autotrader.co.uk use none of the other significant car portals, whilst for most competitors that proportion is under 30% of their much smaller audience. In summary, most of the car-buying audience is only searching for cars on Auto Trader. Management highlighted this in 2018, and it remains true today: Data like this provides a comprehensive perspective, but sometimes there is no substitute for anecdote. Whilst scrolling through the many (mostly unenlightening!) discussions of Auto Trader on car dealer forums a few years ago we found a nugget of gold. A dealer who owned two dealership locations announced his plan to conduct a physical A-B test of his marketing activities across the two. He had been listing his vehicles on motors.co.uk and autotrader.co.uk and lacked sufficiently precise attribution of leads to understand clearly the return on investment of the two platforms. He withdrew his vehicles from autotrader.co.uk at one dealership and from motors.co.uk at the other. He planned to run the experiment for three months and then update the forum on his findings. Six weeks later, reminiscent of how medical trials are sometimes curtailed early because it would be unethical to continue withholding the experimental treatment from patients, the dealer stopped the experiment because the impact of cutting Auto Trader was too expensive. In his words: "…we are 6 weeks into the challenge and can't continue with it any longer. The site that cancelled Motors and stayed with Autotrader has continued with the normal volume of sales, even looking like it will increase a little this month, so that site won't be going back on Motors. The other site that stayed with Motors and came off Autotrader… sales down 10 units last month and going the same way this month, if not worse. So there you have it. AT seems to be worth 10 units per month, about a third of our sales on each site. Will be going back to Autotrader and reviewing Motors" As we noted before, we also expect the company to grow faster in the next few years than it has since IPO. Auto Trader grew revenue at a compound organic rate of almost 8% p.a. between FY2015 (year end March) and FY2023, and per share revenue at around 9% whilst margins ticked up gradually from low 60s to c. 70% in the run-up to Covid. Price and mix (what the company calls "Product") have driven most of that increase, which is natural given that the site has listed the vast majority of available inventory for many years and the UK used car market is mature. Organic revenue growth picked up to 9.3% in FY23, and 12.2% on a per share basis. The company can grow at a decent rate with barely any capital investment; return on capital employed is a ludicrously high number as a result. Auto Trader retains strong pricing power in its core product, will enjoy a boost from volume recovery as increased new car sales flow into the used market after Covid supply constraints, and has a lot of opportunity to increase penetration of the more recently launched products in its suite. However, the opportunity for incremental growth comes from two main sources: digital retailing, and new cars – both via advertising and recovery / expansion of new car listings. Innovations are enabling the digitization of all kinds of retailing. However, the future for car retail seems likely to be hybrid. A car is a large purchase and used cars are self-evidently highly variable in condition and quality. Most consumers still like to view and test drive a car before purchasing it. Although their business models were unsustainable, the rapid initial growth and consumer response to Cazoo and Cinch's proposition has changed expectations and is forcing more traditional operators to get their online act together. "Deal Builder" is Auto Trader's product aimed at allowing traditional dealers to match the digital retail experience of Cazoo and Cinch. It was soft-launched (without charge) in 2023, but over 35,000 cars are already available to purchase on the site under this model. Autotrader.co.uk users can now reserve a vehicle, arrange finance and part-exchange all on the site. Early testing shows a significant improvement in conversion rate from consumer clicks to vehicle purchase, and consumer feedback is strong. Importantly, there is no doubt about the source of a lead when consumers buy a car this way. This will be an expensive product when fully launched in 2024 and could drive a step change in the revenue Auto Trader generates per vehicle listed on the site as adoption grows. In addition, Auto Trader obtains a great deal more consumer data than it has had in the past, which it will find ways to monetise in future. In the new car space, original equipment manufacturer ("OEM") advertising has been suppressed since Covid as new car supply was so constrained that getting rid of the cars was not the problem! The market has loosened significantly in the last few months and that is likely to trigger increased competition for consumer attention. More significantly though, Tesla's direct selling model has prompted other OEMs to make similar moves. This is the first time OEMs have been responsible for shifting vehicles and is likely to prompt spending on performance marketing which, given the UK market structure, Auto Trader should enjoy a large share of. Continued improvement in new car supply should also help the established new car listings product for franchise dealers. Overall, we anticipate Auto Trader delivering double digit revenue growth allied to some margin improvement at group level as the losses from the Autorama leasing business which was acquired in 2022 are reduced. The main risk we foresee is the potential for a significant worsening of the environment for Auto Trader's customers. Constrained vehicle supply and healthy consumer balance sheets since Covid have made for a strong environment for car dealers: the overall used car gross profit pool expanded materially as used car prices jumped. If used car prices reverse these gains, dealers would suffer, which may in turn constrain Auto Trader's ability to extract more revenue per dealer. The capital allocation record of the group is good, albeit with some blemishes. The vast majority of cash generated since IPO has been returned to shareholders, split roughly 60% through buybacks and 40% dividends. Management has executed its strategic plan with clarity and conviction. It has eschewed the temptation to go hunting overseas. It has invested in its offices and its teams with the result that it is one of the UK's most popular workplaces according to Glassdoor. The black marks are twofold: first, management issued a slug of equity in the early stages of Covid to ensure it maintained the flexibility to heavily discount its subscription fees to support car dealers whilst activity was heavily suppressed. This is perhaps nitpicking; but company policy is to run a net cash balance sheet and Auto Trader entered Covid with almost GBP 300m of net debt, without which this dilution may not have been deemed necessary. Second, and more significantly, Auto Trader clearly overpaid for the acquisition of Autorama in 2022. Perhaps the team got caught up in the manic market environment of the times. Thankfully it was relatively modest in the scale of the group – well under a year's cash flow. Other acquisitions have been small: product or technology bolt-ons. The team, unusually, acknowledges the Autorama deal to be an error. We are therefore optimistic that it won't happen again. With a dividend yield of almost 1.5% and the share count likely to reduce by around 2.5% per year (depending on the share price) the company offers a total return in the mid to high teens region assuming an unchanged valuation. With an almost debt-free balance sheet, and the company trading at a forward FCF yield of a little under 5%, we think this is a reasonable assumption.

BSD Analysis:
Ennismore presents a compelling bull case for Auto Trader Group, emphasizing the company's dominant market position with 75% share of UK automotive search time and strengthened competitive moat following the failure of disruptors like Cazoo and Cinch. The manager highlights Auto Trader's successful navigation from print to digital, maintaining pricing power while expanding into higher-value products like data analytics and the new "Deal Builder" digital retailing platform. Key growth drivers include accelerating revenue growth (12.2% per share in FY23), margin expansion opportunities, and new monetization avenues from OEM advertising as Tesla's direct-sales model prompts industry changes. The investment thesis centers on a market-leading platform with exceptional returns on capital, trading at attractive valuations despite improving fundamentals. Management's disciplined capital allocation through buybacks and dividends, combined with a debt-free balance sheet, supports the mid-to-high teens total return expectation. The primary risk identified is potential deterioration in dealer profitability if used car prices decline significantly.

Pitch Summary:
Albemarle (ALB) –ALB underperformed due to declining lithium spot prices in the quarter. We remain attracted to ALB, reflecting its low cost position in two consolidated industries (lithium & bromine). However, we recognize quarterly results can be volatile, driven by short-term supply-demand dynamics for the underlying commodities. It is important to note that ALB's favorable position on the cost curve means the company can likely maintain healthy profitability even at trough prices.

BSD Analysis:
Despite near-term headwinds from declining lithium prices, The London Company maintains conviction in Albemarle's structural advantages. The company's low-cost position in both lithium and bromine markets provides defensive characteristics during commodity downturns. ALB operates in consolidated industries with high barriers to entry, supporting long-term pricing power. The manager acknowledges short-term volatility but emphasizes the company's ability to maintain profitability even at trough commodity prices. This cost curve advantage is crucial for weathering cyclical downturns in specialty chemicals. The dual exposure to lithium (electric vehicle growth) and bromine (flame retardants) provides diversification. The pitch reflects confidence in ALB's operational excellence and market positioning despite current commodity headwinds.

Pitch Summary:
Alphabet (GOOG) –GOOG outperformed in Q3, reflecting better than expected Search revenue and sustainable momentum in Cloud. Search ad revenue accelerated sequentially and remains the largest contributor to topline growth. Slower expense growth helped margins as management continued to focus on long-term profitable growth. GOOG's capital allocation priorities have been favorable as the company continues to invest in the business and return capital to shareholders via its buyback program. GOOG has a solid balance sheet, significant market share, and generates strong returns.

BSD Analysis:
The London Company emphasizes Alphabet's fundamental strength across its core business segments. Search revenue acceleration demonstrates the durability of Google's advertising franchise, while Cloud momentum suggests successful diversification efforts. Management's expense discipline and focus on profitable growth indicate operational maturity. The company's balanced capital allocation between growth investments and shareholder returns reflects financial discipline. GOOG's dominant market position in search and growing cloud presence provide sustainable competitive advantages. The solid balance sheet offers financial flexibility during uncertain economic conditions. This pitch highlights quality characteristics that align with the fund's investment philosophy of sustainable high returns and strong market positions.

Pitch Summary:
Old Dominion Freight Line (ODFL) -ODFL delivered significant positive performance during Q3 as a large LTL (less-than-truckload) competitor, Yellow Corp., began losing business ahead of a looming strike of its mostly unionized workforce. Yellow eventually filed for Chapter 11 bankruptcy, and ODFL made a bid for its terminal assets. The stock also responded positively as the lingering freight recession and inventory de-stocking showed some possible signs of coming to an end.

BSD Analysis:
The London Company capitalizes on ODFL's competitive positioning during industry consolidation. Yellow Corp's bankruptcy created a significant market share opportunity for ODFL, with the company strategically bidding for terminal assets to expand its network. This represents a classic example of a quality operator benefiting from weaker competitors' distress. The manager sees early signs of freight market recovery and inventory restocking, suggesting cyclical tailwinds ahead. ODFL's operational excellence and network density provide competitive advantages in the LTL market. The company's ability to gain market share during downturns positions it well for the eventual recovery. This pitch reflects confidence in ODFL's long-term market leadership and operational efficiency.

Pitch Summary:
NewMarket(NEU) -NEU outperformed early in Q3 after a strong earnings report that showed some recovery in pricing and margins after a long period of higher base oil and chemical prices. The stock flattened out later in the quarter as oil prices rose. NEU also used stronger cash flow to repay debt and repurchase company shares.

BSD Analysis:
The London Company highlights NewMarket's operational recovery following a challenging period of elevated input costs. The company demonstrated pricing power and margin expansion in Q3, suggesting management's ability to navigate commodity price volatility. Strong cash flow generation enabled debt reduction and share repurchases, indicating disciplined capital allocation. However, the stock's performance correlation with oil prices presents ongoing volatility risk. The manager appears confident in NEU's ability to maintain profitability despite commodity headwinds. The company's specialty chemicals business model provides some defensive characteristics. Overall, this represents a quality play on chemical industry recovery with attractive shareholder returns.

Pitch Summary:
While Tesla is a $750 billion company, I still think it has plenty of growth in the tank. The company's long-term goal is 20 million cars, which could yield more than $800 billion in revenue (the next gen model will be important to reach this volume). Further, its energy business is hitting an inflection point on profitability and while we're at sort of an in-between point as far as autonomy goes, it's an extremely attractive call option. As Elon has mentioned, the upgrade to actual full self-driving would be the single biggest instant value creation of all time. While Mr. Musk is often given to hyperbole, I'm with him on this one. And looking out even further, which is far more uncertain, the other bets like Optimus and Dojo do seem to indicate the company has a lead in real-world AI. But even if we just take the car business without FSD, $800 billion in 2032 revenue could give us $120 billion in profits. Using a simple 20x earnings, we get a $2.4 trillion company. That's still a 16% CAGR without including all of the other long-term bets that will likely provide some value creation, if the company's past is any indication of the future. Call me crazy but I think there is a real path to Tesla becoming the most valuable company on the planet. There will be bumps as more competition continues to come into the market but Tesla really is playing a different game. The sheer amount of data that the company has already collected and the millions of incremental cars that will be added annually to that treasure trove is an advantage that should not be overlooked. True autonomous driving is still a bit away but I don't think that's completely necessary to the thesis. If it does materialize, this can be a $5 trillion company over the next decade. I'll take those odds as the company continues to innovate, lower prices, and attract some of the world's most ambitious engineers.

BSD Analysis:
The manager presents an exceptionally bullish long-term thesis for Tesla, viewing it as a potential path to becoming the world's most valuable company despite its already massive $750 billion valuation. The core automotive thesis targets 20 million annual vehicle sales generating over $800 billion in revenue, with the next-generation model being crucial for volume scaling. Even excluding full self-driving capabilities, the manager projects $120 billion in profits by 2032, supporting a $2.4 trillion valuation at 20x earnings for a 16% CAGR. The investment case extends beyond automobiles to include the energy business reaching profitability inflection and multiple optionality plays including autonomous driving, Optimus robotics, and Dojo AI infrastructure. The manager particularly emphasizes Tesla's data advantage from millions of vehicles as a sustainable competitive moat that competitors cannot easily replicate. While acknowledging increased competition and execution risks, the thesis suggests Tesla operates in a fundamentally different category with potential for $5 trillion valuation if autonomous driving materializes, making this a high-conviction, high-upside position.

Pitch Summary:
This is the newest addition to the portfolio and it differs slightly from the typical company that we invest in because it's not founder led nor is it a market share leader. However, CEO John Fieldly has overseen nearly all of Celsius's success and the company is rapidly gaining share against incumbents. If you're not familiar with Celsius, it's a fast-growing energy drink that has a positioning advantage as the "healthy" option compared to Monster and Red Bull. The company has grown sales from $50 million to $1.3 billion in just five years. And more recently, Celsius's exclusive distribution relationship with Pepsi has strengthened its competitive advantage. The quick thesis is that Celsius's market is likely wider than the incumbents because it resonates with both men and women while Monster and Red Bull, collectively, do 9x more in sales in the US. However, Celsius is already ahead of Monster and Red Bull in sales on Amazon. If that's a hint at the future, it's possible that Celsius could rival incumbent sales in five or so years. Even at $5 billion in revenue at 30% margins, that gives us $1.5 billion in earnings. At 20x earnings, that's about a 20% CAGR from today's price. While it's not a guarantee that Celsius becomes the leader, it definitely has a counter-positioning advantage and plenty of growth opportunities, as the company has barely scratched the international opportunity. At the same time, we must monitor this investment closely because the barriers to entry are fairly low and there is quite a bit of competition.

BSD Analysis:
The manager presents a compelling but cautious bull case for Celsius, acknowledging it deviates from their typical founder-led, market-dominant investment criteria. The thesis centers on Celsius's "healthy" positioning advantage versus Monster and Red Bull, which has driven explosive growth from $50 million to $1.3 billion in revenue over five years. CEO John Fieldly's track record and the exclusive Pepsi distribution partnership strengthen the competitive position. The manager identifies a broader addressable market opportunity, noting Celsius appeals to both men and women while incumbents collectively generate 9x more US sales. Encouragingly, Celsius already leads Monster and Red Bull in Amazon sales, potentially signaling future market dynamics. Financial projections suggest $5 billion revenue at 30% margins could generate $1.5 billion in earnings, worth $30 billion at 20x earnings for a 20% CAGR. However, the manager appropriately flags risks including low barriers to entry, intense competition, and the need for close monitoring, making this a higher-risk but potentially high-reward position.

Pitch Summary:
This is a Bulgarian home automation company. Random, I know! But the growth and profitability are certainly something that caught my attention. Shelly Group recently changed its name from Allterco to focus on the main business line, Shelly. These are electrical relays that connect to appliances, lights, fixtures, etc. to enable home automation. The ease of use and interoperability have led to the company's growth. It's a seamless, inexpensive way to do home automation. The company forecasts greater than 40% annual growth for the next three years, expanding its EBIT margins to 30%. At that point, I could easily see the company doing $60 million in EBIT. At 15x earnings, that's a 26% CAGR in roughly three and a half years. Meanwhile, the two co-founders each own more than 25% of the business and the products just keep improving. The company has a DTC sales channel through Amazon, Walmart and other retailers but the rest of the business that is sold through installers will likely continue to be a huge tailwind.

BSD Analysis:
The manager presents an intriguing bull case for Shelly Group, a Bulgarian home automation company that has caught attention through exceptional growth and profitability metrics. The company's core product line consists of electrical relays that enable seamless and cost-effective home automation through superior ease of use and interoperability. The investment thesis is built on aggressive growth projections of over 40% annually for three years while expanding EBIT margins to 30%, potentially reaching $60 million in EBIT. At a 15x earnings multiple, this translates to an impressive 26% CAGR over approximately 3.5 years. The company benefits from strong founder ownership with each co-founder holding over 25% of the business, ensuring aligned incentives. The dual distribution strategy through direct-to-consumer channels (Amazon, Walmart) and installer networks provides multiple growth vectors. While the Bulgarian origin may seem unconventional, the compelling growth metrics and margin expansion potential make this a high-conviction small-cap opportunity.