Investment Pitches

Pitch Summary:
Oil prices rose by 32% in the third quarter as global oil demand continues to run 1-2 million barrels per day ahead of supply. In fact, in July oil demand reached a new record high of 103 million barrels per day. Years of underinvestment outside of the US shale patch has resulted in steady decline in non-US oil production. Prolonged production cuts by Saudi Arabia and OPEC, combined with lower-than-average oil inventories has been a recipe for higher prices. Given the multi-year time frames needed to bring on new supplies, combined with environmental policies designed to constrain new oil investment, we believe oil prices could continue to rise for the foreseeable future. Diamondback Energy (FANG), an oil producer with significant acreage in the Permian Basin, saw its shares increase 19% in the quarter.

BSD Analysis:
The manager's bullish thesis on Diamondback Energy is driven by favorable oil market fundamentals including demand running 1-2 million barrels per day ahead of supply and record demand of 103 million barrels per day. Years of underinvestment outside US shale, combined with OPEC production cuts and below-average inventories, create a supportive price environment. Environmental policies constraining new investment and multi-year lead times for new supply suggest sustained higher oil prices. Diamondback's significant Permian Basin acreage positions the company to benefit from this commodity cycle. The 19% quarterly gain reflects market recognition of improving fundamentals. The manager believes structural supply constraints and policy headwinds for new oil investment create a multi-year tailwind for well-positioned producers like Diamondback with low-cost, high-quality Permian assets.

Pitch Summary:
Verizon's (VZ) share price continues to struggle, and the company once again found itself on the portfolio's list of biggest detractors. The company's fundamentals remain strong as it continues to throw off significant free cash flow as it nears completion of the buildout of its 5G infrastructure. We continue to expect normal earnings power of $4.50-$5.00 per share for the next several years. The current share price of $32 is a conundrum to us. This represents a valuation multiple of just 6.8x earnings. We believe this low multiple would only make sense if investors were expecting the business and profitability to collapse. We think this is very unlikely to happen, and consensus estimates are similar to our views and predict growing earnings in the next 4 years. It is very hard to imagine a scenario where profits could materially shrink as the wireless industry is a three-player oligopoly with moderate pricing power, providing a critical service to customers. Given interest rates, and the durability of Verizon's cash flow, we believe a 10-14x multiple is more appropriate. We are happy to collect an 8% dividend yield while we wait for shares to close the gap from their current multiple.

BSD Analysis:
The manager views Verizon as deeply undervalued at 6.8x earnings despite strong fundamentals and significant free cash flow generation. With 5G infrastructure buildout nearing completion, the company should see reduced capex and improved cash flow conversion. The manager expects $4.50-$5.00 in normalized earnings power, supported by the oligopolistic structure of the wireless industry with only three major players and moderate pricing power. The 8% dividend yield provides attractive income while waiting for multiple expansion to a more reasonable 10-14x range. Consensus estimates support growing earnings over the next four years, making the current valuation appear disconnected from fundamentals. The manager believes the market is irrationally pricing in business deterioration that seems unlikely given the essential nature of wireless services and industry structure.

Pitch Summary:
Argan Inc. (AGX) operates in the industrial construction industry building natural gas powerplants. The retirement of coal-fired power plants is driving a multi-year cycle of new natural gas fired power plant construction. Tightening environmental regulation, favorable economics and the rise of artificial intelligence (AI) have propelled Argan stock to all-time highs. Argan builds these powerplants for utility companies like Vistra and Duke Energy. There are shortages of power across the country where companies like Microsoft and Meta are building new AI data centers. These data centers consume extreme amounts of power which the current grid capacity is not suited for. We estimate the company is on a path to reach $1 billion in revenue and $100 million in EBITDA as this buildout happens. The company has a current project backlog of $800 million with visibility of growth to $2 billion. Argan holds $430 million in cash, no debt and is highly profitable. Additionally, they recently increased their quarterly dividend to $0.375 for an annual dividend yield of 1.5%. We continue to hold Argan in investor portfolios.

BSD Analysis:
The manager presents Argan as a compelling play on the intersection of energy transition and AI infrastructure demand. The investment thesis is built on multiple converging trends: coal plant retirements creating natural gas construction opportunities, AI data center proliferation driving unprecedented power demand, and favorable regulatory/economic dynamics. The company's strong financial position with $430 million cash, zero debt, and high profitability provides a solid foundation for growth. The manager's revenue projection of $1 billion and $100 million EBITDA suggests significant upside from current levels. The $800 million backlog with visibility to $2 billion demonstrates strong demand visibility and growth potential. The recent dividend increase to 1.5% yield adds an income component to the growth story. Argan's positioning as an indirect AI beneficiary through power infrastructure appears well-timed given the massive capital requirements for data center expansion.

Pitch Summary:
Generac (GNRC) is one of the newer names in the portfolio, with our first purchase in January. The company is still overcoming its elevated inventory of standby generators that hurt profitability in 2022. Investors were disappointed that the company was still correcting this issue, and shares dropped by 24% after releasing quarterly earnings. This decline reversed the large gain in share prices over the prior quarter. On a subsequent analyst day meeting, the company reported that inventories are now normalized, and the company will return to growth and higher profitability in 2024. Our investment case in Generac remains unchanged. We believe the end market for home standby generators should grow faster than GDP over the next decade as black-outs and power grid reliability continues to deteriorate. Generac has built a commanding market position in generators with a strong brand name and an unmatched dealer network of salesmen and installers. We believe the company can grow earnings at a 10-15% rate as revenues increase and operating profit margins return to historical levels near 20%. We think Generac's management team has a credible plan to meet these targets.

BSD Analysis:
The manager maintains conviction in Generac despite a 24% post-earnings decline, viewing the inventory normalization as a temporary headwind rather than a structural issue. The investment thesis centers on secular growth drivers including deteriorating power grid reliability and increasing blackout frequency, which should drive demand for home standby generators above GDP growth rates. Generac's competitive moat includes a strong brand and unmatched dealer network that provides installation and service capabilities. The manager projects 10-15% earnings growth as revenues expand and operating margins recover to historical 20% levels from current depressed levels. With inventory issues now resolved according to management, the company is positioned for a return to growth and margin expansion in 2024. The long-term demographic and infrastructure trends support sustained demand growth in the residential backup power market.

Pitch Summary:
Zeta Global Holdings Corp. (ZETA) which we identified in early 2022, has been a top performer up over 255% year to date. We trimmed the Zeta position earlier this year as it reached an overly larger portion of investor portfolios. We continue to hold Zeta as a large weighting as we believe they can continue to take market share in the advertising industry. Zeta is a marketing technology software company which benefits from multiple market tailwinds in the advertising industry. Zeta's software platform combined with artificial intelligence helps companies' market more efficiently by targeting ads based on specific demographics. The Zeta marketing platform helps customers deliver advertisements through all channels such as email, social media, web, chat, connected TV and video. Zeta is unique in that their platform doesn't use cookies. This reduces risk from a regulatory and customer standpoint as they are not impacted by these issues. Consequently, they can take market share from competitors like Adobe, Salesforce, and Oracle who have all made legacy acquisitions to enter the space (valuations of 8-20x EV/Revenues). Oracle announced they would be exiting the advertising business on their Q4 2024 earnings call, creating an incremental revenue opportunity for Zeta. Despite broader softness in software spending, Zeta remains unaffected, citing a healthy demand environment. The company was founded by former Apple CEO, John Scully, and the management team has a strong track record of performance (the company has beat their revenue guidance for 11 consecutive quarters since their IPO in 2021). As marketing budgets tighten, Zeta is well positioned to take share and potentially benefit from the weakening macro environment. In early September, the company increased their third quarter 2024 guidance to at least $255 million in revenue, representing year over year growth of at least 35%. This accelerated from Q2 growth of 33% and Q1 growth of 24%. We went into detail on the factors influencing their growth in our previous two quarterly letters, and since then the thesis has begun to play out. Since then, the valuation gap between Zeta and their competitors is beginning to close. Zeta competes with Braze Inc. (5x EV/Revenues) and Klaviyo Inc. (9.6x EV/Revenues) who both have similar revenue growth rates yet are far less profitable than Zeta (7.1x EV/Revenues). We believe Zeta can ultimately trade at a premium valuation to both peers.

BSD Analysis:
The manager presents a compelling bull case for Zeta Global, emphasizing the company's strong execution and competitive positioning in the marketing technology space. The investment thesis centers on Zeta's cookie-free advertising platform, which provides a regulatory advantage over legacy competitors like Adobe, Salesforce, and Oracle. The manager highlights accelerating revenue growth from 24% in Q1 to 35% in Q3 2024, demonstrating strong momentum despite broader software spending weakness. Oracle's exit from the advertising business creates additional market share opportunities for Zeta. The company's valuation at 7.1x EV/Revenue appears attractive compared to less profitable peers Braze (5x) and Klaviyo (9.6x). Management's consistent track record of beating guidance for 11 consecutive quarters since IPO adds credibility to future projections. The AI-powered targeting capabilities position Zeta well for continued market share gains as marketing budgets face pressure.

Pitch Summary:
The primary factor driving the portfolio's positive results in Q3 was the buyout offer made by Tapestry (TPR) for Capri Holdings (CPRI). Under the terms of the merger agreement, Tapestry is paying shareholders $57.00 per share in cash. Prior to the announcement of the offer, shares of CPRI were trading for $35. The stock price jumped 56% to $53 on the day of the announcement. Fortunately, we believed that CPRI was significantly undervalued, and we happened to add to our holdings in the company only days before the merger offer, making it the portfolio's largest position.

BSD Analysis:
The manager demonstrated excellent timing and conviction in Capri Holdings, adding to the position just days before Tapestry's $57 per share buyout offer was announced. The thesis was based on the belief that CPRI was significantly undervalued at $35 per share, representing a 63% discount to the eventual offer price. The 56% single-day gain following the announcement validated the manager's fundamental analysis. This merger arbitrage opportunity became the portfolio's largest position and the primary driver of Q3 outperformance. The successful investment highlights the manager's ability to identify undervalued luxury goods companies trading below intrinsic value. The quick realization of value through M&A activity demonstrates how concentrated value investing can generate substantial alpha when thesis validation occurs rapidly.

Pitch Summary:
A clear, engaging view of the auto industry's "inevitable" and accelerating electric transition. Our own research continues to suggest that EV penetration will rise meaningfully over the next cycle, and we continue to see firms like Rivian (NSQQ: RIVN), a relatively recent addition to our portfolio, as well positioned to capitalize on that shift.

BSD Analysis:
The manager presents a bullish thesis on Rivian based on the inevitable transition to electric vehicles and accelerating EV adoption. The fund views EV penetration as set to rise meaningfully over the next investment cycle, positioning Rivian as well-suited to capitalize on this structural shift. The manager references supporting research from Mike Colias's book "InEVitable" which reinforces their conviction in the electric vehicle transition. Rivian represents a relatively recent portfolio addition, suggesting the manager sees compelling value at current levels. The thesis appears grounded in secular growth trends rather than company-specific fundamentals. The manager's confidence in EV penetration growth provides a favorable backdrop for Rivian's business model. This positioning reflects a thematic investment approach targeting the automotive industry's electrification transformation.

Pitch Summary:
Alimentation Couche-Tard, the intriguingly named French for "Food for night owls," found its roots in the 1980s in Quebec, Canada. Today, they stand as the largest operator of convenience stores in Canada and claim the second-largest position in the United States. In the US, they hold a substantial 5% market share within the convenience store market, a name familiar to anyone who has travelled its roads, thanks to the ubiquitous Circle K brand. This brand typically combines a convenience store with an accompanying fuel station. Traditionally, fuel has been a potent lure, enticing customers to make purchases while waiting for their vehicles to refuel. However, a looming challenge for all convenience stores paired with fuel stations is the advent of electric vehicles (EVs), which poses a potential threat to foot traffic in these stores. Estimates suggest that 15% of trips to convenience stores are solely for store purchases, whereas 65% encompass both fueling and store visits. EV owners may opt to charge their vehicles at home, thus reducing the need for refuelling pit stops at convenience stores. Looking ahead, Morningstar predicts a substantial 40% adoption rate of EVs by 2030. Consequently, convenience stores must enhance their offerings to draw more customers inside. However, a compelling counterargument emerges for the adoption of fast chargers by fuel stations – it takes an average of 20 minutes to charge an EV to approximately 80%, potentially leading to extended store visits and increased foot traffic, ultimately boosting sales. This might mean that the convenience store offering must adapt. We will have to wait patiently to see how this trend unravels for convenience stores and the impact that EVs will have on their traffic. Alimentation Couche-Tard has taken proactive steps in response to the EV wave, already deploying EV charging stations at their convenience stores in Scandinavia. Furthermore, they have ambitious plans to roll out 200 sites across North America by 2024, demonstrating their commitment to adapting to the changing landscape of transportation. The feedback from the management team has been positive in their pilot fast charge stations. The observed trends reveal that, according to data from the 2023 Norwegian EV Association, an impressive 92% of electric vehicle (EV) drivers opt for fast charging stations. This discerning statistic underscores the strategic advantage of integrating fast-charging facilities into convenience stores. Notably, within our sample of stations, Alimentation has experienced a remarkable 8% surge in foot traffic to their stores following the installation of EV chargers on their premises. This represents a fascinating evolution within a dynamic landscape. Convenience stores and fuel stations are facing the imperative to adapt, ensuring their alignment with contemporary consumer trends. Alimentation Couche-Tard appears to be notably well-positioned to navigate this transformation in consumer behaviour.

BSD Analysis:
The analyst presents a compelling bull case for Alimentation Couche-Tard based on the company's market-leading position and strategic adaptation to the electric vehicle transition. With dominant market share as Canada's largest convenience store operator and second-largest in the US (5% market share), the company has established a strong competitive moat through its ubiquitous Circle K brand. The key investment thesis centers on management's proactive response to the EV threat, which could disrupt traditional fuel-driven foot traffic. Rather than viewing EVs as purely negative, the analyst highlights the opportunity for extended customer visits during 20-minute charging sessions versus quick fuel stops. Couche-Tard's early deployment of EV charging stations in Scandinavia and plans for 200 North American sites by 2024 demonstrate strategic foresight. The 8% increase in foot traffic at pilot charging locations and 92% preference for fast charging among Norwegian EV drivers validate the strategy's effectiveness. The company appears well-positioned to transform a potential disruption into a competitive advantage through infrastructure investment and operational adaptation.

Pitch Summary:
In March 2021 Reckitt Benckiser or 'RB', as it was then known, rebranded to become 'Reckitt'. Originally, it was the product of a merger in 1999 between the British Reckitt & Colman company and the Dutch business Benckiser. It operates in the consumer health and hygiene industry, selling a wide range of products such as disinfectants, cleaning agents, infant formula and over-the-counter medicines. Reckitt's business model is focused on innovation and brand-building, all delivered in a sustainable way. The company invests heavily in research and development to create new products and improve existing ones. It has a strong portfolio of leading brands that offer attractive growth prospects and sustainable competitive advantages, given many of them have market leading positions. Reckitt's globally recognised brands help consumers lower their search costs and provide products that they can trust. This is particularly important as over half the company's operating profits come from its consumer health and infant nutrition divisions. Reckitt has a good economic moat based on intangible assets, reflecting both the strength of its brands and its entrenchment in retailers' supply chains. Reckitt has amassed leadership in an array of categories spanning household products (hygiene segment), consumer health and infant nutrition. Its competitive strength comes from its focus on niche categories such as auto dishwashing (34% global share), surface and disinfection (33% global share with Lysol and Dettol), intimate wellbeing (36% market share in condoms and lubricants) and sore throat (29% global share with products such as Strepsils). Overall, the company owns the number-one or number-two brands in around 15 narrowly defined categories at a global level. We believe that this makes it a key supplier for retailers in those categories. As with our Fund valuation graph, Reckitt's graph tells a similar story of a de-rating over several years. This is in part a reflection of the acquisition that they made of the infant formula maker, Mead Johnson, in 2017 for c$17bn. They overpaid for it and it is fair to say that it has been a drag on returns on capital for the following years, due largely to a multi-billion pound impairment charge that the business took. The sale of the 'Chinese Infant Formula Child Nutrition' part to Primavera Capital helped to recover some capital and is allowing the business to focus on areas of strength in other markets. This issue largely explains the derating of the shares, over the last few years. However, more recently incremental returns have been heading in the right direction. Their superior gross and operating profit margin profiles, in relation to their competitors, shows that the business continues to be run well operationally. We continue to monitor the capital allocation of the business, to ensure that any growth that is acquired, creates long term value for shareholders. So in conclusion, the investment case centres on an operationally well run business, growing through innovation and brand strength, all of which we believe is currently being undervalued by the market.

BSD Analysis:
Castlebay presents a compelling value opportunity in Reckitt, emphasizing the company's dominant market positions across multiple consumer health and hygiene categories. The manager highlights Reckitt's strong economic moat built on brand strength and retailer relationships, with the company holding #1 or #2 positions in 15 narrowly defined global categories including 34% share in auto dishwashing and 33% in surface disinfection. The investment thesis centers on operational excellence despite recent headwinds from the poorly executed Mead Johnson acquisition in 2017, which created a temporary drag on returns through impairment charges. The partial divestiture of Chinese infant formula operations to Primavera Capital demonstrates improved capital allocation discipline. Castlebay views the current valuation as attractive given the company's superior gross and operating margins relative to competitors, strong innovation pipeline, and market-leading brand portfolio. The manager believes the operational improvements and focus on core strengths position Reckitt for a re-rating as the market recognizes the underlying business quality.

Pitch Summary:
Adriatic Metals is developing a polymetallic deposit in Europe that will produce two primary products: a zinc concentrate and a concentrate of lead and silver. In addition to those metals, it will generate revenue from contained copper, gold and antimony. The silver is of particular interest to us. Often thought of as the poor man's gold, silver mainly sees interest from precious metals investors. Less discussed is the large and growing demand for silver from the industrial sector, especially in advanced technologies, where it is critical to a wide range of applications. The deposit's unique characteristics lend it to being one of the lowest cost silver projects in the world. The mine is located in Bosnia, and while the country may not be the first to come to mind when people think of mining, it actually has a long history of it going all the way back to the Bronze Age. The project is in an old mining town that had only recently been revisited with modern exploration techniques. Development will greatly benefit the surrounding community, revitalizing the area with new jobs and infrastructure. It is estimated that the project will add 2% to the entire country's GDP. A friendly permitting environment has also contributed to an extremely fast development timeline, with the company going from discovery to production in only six years. The company is led by founder Paul Cronin, a successful natural resource investor who took an interest in the project with an eye toward Europeans needing to rebuild domestic supplies of metals. Europe may seem like an unlikely place to develop a new mine, but the continent is making a push to become less dependent on foreign countries for access to raw materials. The EU has deeply committed to a green transition and achieving climate neutrality by 2050, and earlier this year released a critical raw materials act recognizing the importance of mining in achieving those goals. The valuation of the company is among the lowest in our resource portfolio. At current commodity prices we estimate the mine can generate over $200 million in annual free cash flow versus a market cap of only $600 million. The combination of small footprint, high grade, and low capex lead to extraordinary economics with the company projecting an IRR above 100% for the project. This investment shares similarities to others in our portfolio in that the fundamentals are strong, but investor awareness is lacking. As an example, the company released an update earlier this year that nearly doubled the estimated mineral resource and there was hardly any reaction from the market. With the company only weeks away from starting up the mine, we believe the onset of cash flow will finally get the attention of investors.

BSD Analysis:
Old West presents a compelling bull case for Adriatic Metals, a polymetallic mining developer in Bosnia with an exceptionally attractive valuation profile. The manager highlights the company's unique position as one of the world's lowest-cost silver projects, benefiting from growing industrial demand for silver in advanced technologies beyond traditional precious metals investment. The investment thesis centers on extraordinary project economics, with management projecting an IRR above 100% and estimated annual free cash flow of $200 million against a modest $600 million market cap. The fund emphasizes the strategic timing advantage, with the mine weeks away from production startup and a favorable European regulatory environment supporting domestic raw materials development. Old West views this as a classic value opportunity where strong fundamentals are masked by limited investor awareness, evidenced by minimal market reaction to a resource doubling announcement. The manager expects the onset of cash flow generation to catalyze investor recognition and drive significant appreciation. The combination of low-cost production, high-grade deposits, minimal capex requirements, and imminent cash flow generation creates a compelling risk-adjusted return profile in the commodities space.

Pitch Summary:
In addition, we initiated a new position in Confluent, a real-time data streaming platform that we believe will play a crucial role in AI. The company offers a cost-effective alternative to a self-managed solution, resulting in a resilient growth profile even through this downturn.

BSD Analysis:
Spear Advisors initiated a new position in Confluent, viewing the real-time data streaming platform as strategically positioned for the AI revolution. The fund believes Confluent will play a crucial role in AI infrastructure by providing essential data streaming capabilities that AI applications require. Management highlights the company's competitive advantage through its cost-effective alternative to self-managed solutions, which drives customer adoption and retention. The resilient growth profile during the current market downturn demonstrates the mission-critical nature of Confluent's platform for enterprise customers. This positioning aligns with Spear's 24.8% allocation to Cloud/Data Infrastructure, where Confluent represents one of their largest holdings alongside Snowflake and Cloudflare. The investment thesis centers on the massive growth in data and compute requirements driven by AI adoption. The fund views data streaming as fundamental infrastructure that will benefit from the AI technology wave.

Pitch Summary:
During the quarter, we sized up our position in SentinelOne (S), a high-quality cybersecurity company that sold off after a forecasting error that was not well understood by investors. SentinelOne is currently the cheapest and highest growth publicly traded cybersecurity company, growing at >90% over the last twelve months and expected to grow over 30% over the next twelve months, and trading at a 5x Enterprise Value to Revenues (below the 6x sector average).

BSD Analysis:
Spear Advisors increased their position in SentinelOne following a market overreaction to a forecasting error that management believes was misunderstood by investors. The fund highlights compelling valuation metrics, with the company trading at 5x EV/Revenue versus the 6x sector average despite being the highest growth publicly traded cybersecurity company. SentinelOne's growth profile is exceptional, with >90% growth over the trailing twelve months and expectations for >30% growth over the next twelve months. The manager views this as an attractive entry point for a high-quality cybersecurity platform. The positioning aligns with Spear's broader thesis on cybersecurity benefiting from enterprise infrastructure changes and evolving threat landscapes. The fund maintains a 24.1% allocation to cybersecurity, viewing SentinelOne as a core holding alongside Zscaler and CrowdStrike. This represents a classic value opportunity in a high-growth technology company experiencing temporary market dislocation.

Pitch Summary:
SHC is the fund's largest holding. As the investment is changing from one driven by legal considerations to a GARP one, albeit a GARP idea where I believe there is room for substantial multiple appreciation towards peers, I believe a brief overview of our thesis and the primary drivers of the businesses is warranted. While legal risks remain and I am closely following them, the highest risk portion of SHC's legal troubles has passed with the settlement of the Illinois litigation. For now, there is little that would trouble me beyond a bad headline, and I would be a buyer in such a case. On my estimates, which are slightly ahead of the Street, SHC is currently trading 13x 2024 EV/EBIT and 15x 2024 P/E. I often compare this to peer STE, which currently trades 19x and 25x respectively, as it implies 40-70% upside. However, it is important that partners understand I am comfortable owning SHC on a long-term basis solely on growth and earnings yield. I believe SHC is a highly probable 10% or better EBIT growth story, which combined with SHC's earnings yield results in a mid-to-high teens IRR with a decade or longer runway. While some of that growth requires capex, slightly lowering the impact of buybacks or M&A, I believe the highly predictable and minimally cyclical nature of SHC's growth is exceptional. SHC is diversified across pharma and medical device manufacturers. SHC works with 9 of the 10 largest pharma manufacturers and 40 of the top 50 med device manufacturers, with a 100% renewal rate across its 10 largest customers and an average customer relationship of 25 years. Critically, beyond STE and a smaller third player in the EU, SHC faces little competition. SHC is >10x the size of the regional players, who simply cannot match SHC's service offering. Combined, this has resulted in SHC has achieving an ~50% EBIT margin. With a diverse healthcare customer base and minimal competition, the primary driver of SHC's growth is overall medical procedures, along with the additional growth from continued innovation in medical devices, further outsourcing, and SHC's consistent 3-5% price increases. Perhaps most importantly, it is difficult to envision a scenario in which SHC does not grow. Without a major competitor launching from scratch or a shift towards insourcing sterilization, neither of which is happening, the only thing that could drive a significant decline in SHC's revenues would be a decline in the number of medical procedures. While there are scenarios I can imagine in which procedures would substantially decline for several years, such as a pandemic that kills a significant percent of the population, enormous natural disasters like asteroid strikes, or World War III, it is difficult to think of an equity investment that would not be impacted by such events. Further, we all have bigger fish to fry than watching our retirement accounts in such scenarios. While I still believe multiple expansion towards peers is probable and I am watching the legal risks closely, this durable, predictable growth is why I am comfortable owning our investment for many years.

BSD Analysis:
McIntyre presents a compelling bull case for Sotera Health Company, positioning it as a transition from a legal-risk play to a growth-at-reasonable-price (GARP) investment. The manager highlights significant valuation upside, with SHC trading at 13x 2024 EV/EBIT versus peer STE at 19x, implying 40-70% appreciation potential. The investment thesis centers on SHC's dominant market position in medical device sterilization, serving 9 of the top 10 pharma companies and 40 of the top 50 medical device manufacturers with exceptional customer retention (100% renewal rate, 25-year average relationships). The company's moat is reinforced by limited competition and scale advantages, with SHC being 10x larger than regional players and achieving ~50% EBIT margins. McIntyre projects highly probable 10%+ EBIT growth driven by medical procedure volume growth, device innovation, outsourcing trends, and consistent 3-5% annual price increases. The manager emphasizes the defensive nature of the business, noting that significant revenue declines would require catastrophic scenarios affecting all equity investments. With the Illinois litigation settlement removing the highest legal risks, McIntyre views SHC as a durable, predictable growth story suitable for long-term ownership with mid-to-high teens IRR potential.

Pitch Summary:
During the second quarter, we added a new position in Pfizer, a leading global pharmaceutical company. Key product areas for Pfizer are cardiovascular, metabolic, migraine, and women's health, a vaccine portfolio across all ages with a pipeline focus on infectious diseases with significant unmet medical needs. Pfizer sales and earnings grew significantly during the pandemic, benefitting from its Covid vaccines and treatment products. The company is in a transition from a Covid to a post-Covid world with revenues and earnings declining in 2023. After this post-Covid reset, Pfizer is expected to grow sales by 3% to 4% per year and earnings by 6%+ per year. The company's stock price stock peaked at more than $61 in December 2021. Now below $40, Pfizer's valuation is attractive at 11 times earnings with a healthy and sustainable 4.4% dividend yield.

BSD Analysis:
Matrix added Pfizer to the Dividend Income portfolio, capitalizing on the post-COVID transition period that has pressured the stock. The pharmaceutical giant operates across multiple therapeutic areas including cardiovascular, metabolic, migraine, and women's health, with a robust vaccine portfolio and infectious disease pipeline. While 2023 represents a reset year with declining revenues and earnings as COVID-related sales normalize, management expects a return to steady growth with 3-4% annual sales growth and 6%+ earnings growth thereafter. The stock has declined significantly from its December 2021 peak above $61 to below $40, creating an attractive entry point at 11x earnings. The 4.4% dividend yield provides income while investors wait for the growth trajectory to resume, making it suitable for the dividend-focused strategy.

Pitch Summary:
During the quarter, we started a new position in United Health Group, a healthcare company with two businesses – UnitedHealthcare, the nation's largest health insurer, and Optum, a provider of medical services including primary care, urgent care, outpatient surgical centers, and pharmacy management. The company is a leader in the healthcare industry, and its strong profit and earnings growth record has often been rewarded in the market with a premium multiple. The stock falls out of favor periodically when investors become concerned about political, regulatory, reimbursement, legal, and healthcare inflation risks. We view the stock's recent underperformance as an opportunity to invest in a very high-quality company at an attractive price.

BSD Analysis:
Matrix initiated a position in UnitedHealth Group, viewing recent weakness as an attractive entry point for a high-quality healthcare leader. The company operates two complementary businesses: UnitedHealthcare (the nation's largest health insurer) and Optum (diversified medical services including primary care and pharmacy management). UNH has historically commanded premium valuations due to its strong profit and earnings growth track record. The manager believes periodic concerns about political, regulatory, and reimbursement risks have created a temporary opportunity to acquire shares at attractive valuations. The dual-platform business model provides diversification within healthcare while maintaining market leadership positions. Matrix's thesis centers on the company's defensive characteristics and long-term growth potential in an expanding healthcare market.

Pitch Summary:
An interesting idea we have come across in discussions with other investors is in Sweden (trading on the Nasdaq Nordic exchange within the Nasdaq First North Growth Market). Intellego Technologies (INT.ST) is closer to the beginning of its business life cycle but has an exceptionally interesting product based on photochromic dyes that change color with exposure to ultra-violet light. The company manufactures these dyes into cards and tabs that can be used in a variety of retail and industrial settings. Other manufacturers have also signed contracts with them to use the dyes in custom made applications. The technology has a number of use cases from protection against skin cancer, UV-C disinfection, food processing and semi-conductor manufacture. The business is trading at cheap levels even based on contracts signed to date but has LOIs that could increase future revenues by a significant margin and is signing new contracts every month.

BSD Analysis:
The manager identifies Intellego Technologies as an early-stage opportunity with compelling photochromic dye technology that changes color upon UV light exposure. The investment thesis centers on the versatility of applications spanning healthcare (skin cancer protection), industrial processes (UV-C disinfection, food processing), and semiconductor manufacturing. The company has progressed beyond pure R&D with signed manufacturing contracts and custom application agreements, providing revenue visibility. The valuation appears attractive even based on current contracted revenues, with significant upside potential from letters of intent that could materially increase future revenues. The manager notes consistent monthly contract signings, indicating strong commercial traction. As an early-stage technology company on the Nasdaq First North Growth Market, this represents a higher-risk, higher-reward opportunity with multiple end-market applications for their specialized photochromic technology platform.

Pitch Summary:
Remaining on the theme of technology, we have held a position in Pax Global (0327.HK) for some time, which remains good value. The Point of Sale (POS) technologies that Pax has developed in both hardware and software are market leading, combining their Android SmartPOS terminals with the MAXSTORE platform and apps. They have progressed the POS from a standalone solution to a technology that enables a host of retail solutions, tailored to use cases spanning payment acceptance, stock control, ticket sales, restaurant bookings, loyalty programs, gift cards and employee management. Part of the reason for the cheapness may still be because of past security concerns over the company. This has been shown to be a false concern recently, because the company has been elected to the Board of Advisors for the PCI (Payment Card Industry) Security Standards Council. They now sit alongside other western POS industry leaders such as Ingenico and Verifone. We expect there will be continued growth in Pax's business driven by their market-leading technology. Revenue growth over the last five years to 2022 has been 124.5% and eps growth has been 278.0%. Anecdotally we are seeing more of their best-selling A920 POS machines in different retail settings. For any readers out there, feel free to let us know if you see them on your travels this summer! Given the continued cheapness in this name we will maintain a meaningful weighting in the portfolio that will benefit from the continued business progress and growth.

BSD Analysis:
The manager presents a strong value case for Pax Global, emphasizing the company's market-leading POS technology and comprehensive retail solutions platform. The investment thesis highlights Pax's evolution from simple payment terminals to integrated retail management systems through their Android SmartPOS terminals and MAXSTORE platform. Key validation comes from Pax's recent election to the PCI Security Standards Council Board of Advisors, effectively resolving past security concerns and placing them alongside Western industry leaders like Ingenico and Verifone. The fundamental performance is impressive with 124.5% revenue growth and 278% EPS growth over five years through 2022. The manager notes increasing market penetration of their A920 terminals and maintains conviction in the continued cheapness of the valuation. The combination of strong fundamentals, market validation, and persistent undervaluation supports their meaningful portfolio weighting.

Pitch Summary:
In particular this year, our position in Opera Ltd. (OPRA) has benefitted from the surge of interest in AI. We originally purchased Opera because of their overlooked move towards higher ARPU users in the browser market, cash and investee balances, unique product offerings and ability to quickly develop, enhance and release new software. They demonstrated this by releasing new functionality within their browsers called Aria2 to allow users to access OpenAI's GPT LLMs3. These allow the user to obtain summaries of web pages, ask questions on any topic, get assistance with writing in a variety of forms and obtain recommendations across a range of products and services. The interest in AI has helped drive additional gains in our Opera position. We reduced our holding somewhat but have kept a meaningful position because we believe that there is still a lot of business runway ahead for Opera and a large TAM. Their current share of the browser market is still only estimated to be 3.2%4. This share is growing, and there is still a lot of potential market share left and Opera's unique business model comprising specific types of browsers such as Opera GX is giving them a lot of browser user hours. The value of the real estate of young gamers and other users being in front of the Opera browsers for many hours each day is likely undervalued by the market.

BSD Analysis:
The manager presents a compelling bull case for Opera based on AI integration and market share expansion potential. The investment thesis centers on Opera's successful pivot to higher ARPU users and their rapid AI implementation through the Aria feature, which leverages OpenAI's GPT technology for enhanced user functionality. With only 3.2% browser market share, Opera has significant runway for growth, particularly through their gaming-focused Opera GX browser that captures valuable young gamer demographics. The manager emphasizes the undervalued nature of Opera's user engagement, particularly the extended browser hours from gaming users. While the position was partially reduced following AI-driven gains, the fund maintains meaningful exposure based on the large total addressable market and Opera's unique positioning in specialized browser segments. The thesis combines both current AI momentum and long-term market share expansion opportunities.

Pitch Summary:
Brett Kelly founded Kelly Partners in 2006 in Australia as a specialist chartered accounting network. Since its founding, the results have been incredible. Revenues started out at less than a million and will likely be above $100 million in their 2024 fiscal year. In other words—revenues have doubled five times since founding. This is a result of good organic growth and by acquiring many other like-minded accounting firms. Since going public in 2017, 31 accounting firms have joined Kelly Partners, 24 of which have come in just the past three years. Andvari believes there are two main reasons for the recent increase in the pace of acquisitions. First, Kelly Partners has grown its reputation as a great permanent home for the accounting firms built up over the decades by accountants looking to retire. Second, Kelly has developed a repeatable system of best practices and standards that enables them to increase the growth and profitability of acquired accounting firms. For example, Kelly Partners operates with 30%+ EBITDA margins while the average accounting firm in Australia is at 19%. When it comes to the qualitative aspects of the company, there are several we like. First, Kelly Partners is consolidating share in a highly fragmented market. Second, the accounting business itself is solid and predictable. Accounting relationships with private businesses and their families can last several generations. People and businesses will always have taxes to pay. Further, the complexity and quantity of tax rules only seems to increase. The last qualitative aspect to the company is the founder and CEO Brett Kelly. He is by all accounts a great person and leader. His actions mirror his words. He is aligned with shareholders as he still owns 50% of the company. Kelly speaks Andvari's language of accounting, investing, and capital allocation. His investing and business heroes are ones that inspire us as well. Like Berkshire Hathaway, Kelly Partners has an owner's manual that serves as a handbook for current and prospective shareholders to better understand the business. There is no doubt Brett Kelly knows what it takes to enable success for his employees, customers, and shareholders. The opportunity to acquire and improve more accounting firms is still significant. Kelly Partners is just beginning to expand in the United States and the United Kingdom. We expect the company to double revenues another two times over the next decade.

BSD Analysis:
Andvari presents a compelling bull case for Kelly Partners Group, highlighting the company's exceptional growth trajectory with revenues growing from under $1 million to an expected $100+ million by 2024. The fund emphasizes Kelly's successful serial acquisition strategy, having integrated 31 accounting firms since going public in 2017, with accelerating pace in recent years. The investment thesis centers on market consolidation opportunities in a fragmented accounting industry, superior operational efficiency evidenced by 30%+ EBITDA margins versus 19% industry average, and the predictable, recurring nature of accounting services. Management quality appears strong with founder-CEO Brett Kelly maintaining 50% ownership and demonstrating shareholder-aligned capital allocation. The company's expansion into US and UK markets provides additional growth runway. Andvari's expectation of doubling revenues twice more over the next decade suggests confidence in the scalability of Kelly's acquisition and integration model.

Pitch Summary:
PayPal is a leading payment technology platform that enables consumers and businesses to securely send and receive online and mobile payments without disclosing payment card data. As of year-end 2022, the two-sided network had 435mm active customer accounts, 30mm PayPal-accepting merchants, and was active in over 190 markets around the world. In the second quarter all of PayPal's underperformance followed its 1Q23 earnings announcement when the company announced a beat on the top and bottom line, but issued weak forward margin guidance, which provoked investors to hit the sell button, sending shares down ~20%. Given it's unknown how long it will take management to implement its revised growth playbook, the investment team decided to exit the position and deploy the capital elsewhere.

BSD Analysis:
The manager's decision to exit PayPal reflects concerns about the company's execution and margin trajectory despite its strong market position. While PayPal maintains impressive scale with 435 million active accounts and 30 million merchants across 190 markets, the investment thesis has deteriorated due to management's weak forward margin guidance. The 20% stock decline following earnings, despite beating top and bottom line estimates, demonstrates the market's loss of confidence in management's ability to maintain profitability while investing for growth. The manager's bearish stance is driven by uncertainty around the timeline for implementing PayPal's revised growth strategy and concerns about margin pressure in a competitive digital payments landscape. The decision to exit and redeploy capital elsewhere suggests the manager believes better risk-adjusted opportunities exist in the current market. PayPal's challenges likely reflect intensifying competition from newer fintech players and big tech companies, forcing the company to invest heavily in product development and customer acquisition at the expense of near-term margins. The exit decision demonstrates disciplined portfolio management when fundamental concerns outweigh the company's market position.