Investment Pitches

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.

Pitch Summary:
MercadoLibre is the leading e-commerce network/platform in Latin America, connecting merchants and consumers through its industry-leading brands and technology. In addition to its e-commerce prowess, MercadoLibre also owns the dominant regional digital payments platform, MercadoPago. MercadoPago has recently made huge strides in processing payments for off-platform transactions in addition to its longstanding stronghold processing payments for marketplace transactions. MercadoLibre continues to benefit from a flywheel effect, as each business under the company's umbrella helps bring more users into its ecosystem, leading to more merchants offering more products, which in turn attracts more users. In the quarter MercadoLibre's underperformance was likely due to overall weakness in the Financial Services sector, and more specifically weakness in the fintech subsector.

BSD Analysis:
The manager presents a balanced view of MercadoLibre, recognizing the company's strong competitive position while acknowledging recent sector-driven headwinds. MercadoLibre's dominant position in Latin American e-commerce, combined with its expanding MercadoPago digital payments platform, creates a powerful ecosystem with significant network effects. The flywheel dynamic between e-commerce and payments drives user acquisition and merchant adoption, strengthening the company's competitive moats. MercadoPago's expansion into off-platform payment processing represents a significant growth opportunity beyond the core marketplace business. However, the manager attributes the quarter's underperformance to broader fintech sector weakness rather than company-specific issues, suggesting the fundamentals remain intact. The neutral stance reflects the tension between strong long-term positioning and near-term sector headwinds. MercadoLibre's regional leadership and integrated platform approach position it well for Latin America's continued digital transformation, though macro and sector factors may continue to pressure near-term performance. The company's diversified revenue streams across e-commerce and payments provide some insulation from single-market volatility.

Pitch Summary:
Insulet is a medical device company focused on the design, development and commercialization of insulin pump systems for people with type 1 diabetes. Diabetes is a chronic, life-threatening disease for which there is no known cure. Insulet's insulin pump system is superior to traditional multiple daily injections because it provides its users with a more accurate and pain free way to administer insulin when compared to injecting it via syringe multiple times per day. Insulet's stock was under pressure following news that Medtronic purchased EOFlow, the manufacturer of the EOPatch, a tubeless, wearable and fully disposable insulin delivery device. While the EOPatch is not yet launched in the US, it is widely believed it will be available by the end of 2024, increasing competitive pressure on Insulet.

BSD Analysis:
The manager expresses concern about Insulet's competitive position despite acknowledging the company's superior insulin delivery technology. While Insulet's pump system offers clear advantages over traditional injection methods through improved accuracy and reduced pain, the investment thesis faces significant headwinds from intensifying competition. The acquisition of EOFlow by Medtronic represents a major competitive threat, as the EOPatch's tubeless, wearable, and fully disposable design could challenge Insulet's market position. The expected US launch by end of 2024 creates a near-term catalyst for increased competitive pressure and potential market share erosion. Medtronic's established healthcare relationships and distribution capabilities could accelerate EOPatch adoption once launched. The manager's bearish stance reflects concerns that Insulet may struggle to maintain its premium positioning and pricing power in an increasingly competitive insulin delivery market. The stock's underperformance following the Medtronic acquisition announcement suggests the market shares these competitive concerns and is pricing in potential market share losses and margin pressure.

Pitch Summary:
Microsoft builds best-in-class platforms and provides services that help drive small business productivity, large business competitiveness, and public-sector efficiency. Microsoft's products include operating systems, cross-device productivity applications, server applications, software development tools, video games, and business-solution applications. The company also designs, manufactures, and sells devices, including PCs, tablets, and gaming/entertainment consoles that all integrate with Azure, its cloud computing service. In the quarter Microsoft's stock appreciated on the back of excitement surrounding the company's positioning in the generative AI market and its ability to monetize the coming wave of corporate investment in supercomputing and AI.

BSD Analysis:
The manager presents a strong bull case for Microsoft based on its comprehensive platform strategy and strategic positioning in the generative AI revolution. Microsoft's diversified product portfolio spanning operating systems, productivity applications, cloud services, and gaming creates multiple revenue streams and deep customer relationships across enterprise and consumer markets. The integration of these products with Azure cloud services demonstrates the company's ecosystem approach, which drives customer stickiness and cross-selling opportunities. The manager's enthusiasm is particularly focused on Microsoft's AI positioning, recognizing the company's ability to monetize the massive corporate investment wave in supercomputing and artificial intelligence. Microsoft's early partnership with OpenAI and integration of AI capabilities across its product suite positions the company to capture significant value from the AI transformation. The stock's quarterly appreciation reflects market recognition of Microsoft's AI strategy and its potential to drive accelerated growth across the platform. The company's established enterprise relationships and cloud infrastructure provide a strong foundation for AI service delivery and monetization.

Pitch Summary:
Founded in 1994, Amazon has evolved from its early roots as an online bookstore to become one of the world's largest eCommerce retailers. At the end of 2022 Amazon stood poised to capture ~40% of all US e-commerce sales, representing five times more share than the next closest competitor. In addition to eCommerce, Amazon Web Services ("AWS") has become the market leader in outsourced cloud infrastructure. Further, Amazon Advertising is garnering significant share in digital advertising, particularly product placement ads, thanks to consumers beginning their product searches on Amazon's site. Despite providing tepid forward guidance on its 1Q23 earnings call, Amazon's stock appreciated on the back of increased confidence the company would be able to contain expenses and push operating margins above prior peaks in the near-to-medium term.

BSD Analysis:
The manager maintains a bullish stance on Amazon based on its dominant market position across multiple high-growth segments. Amazon's commanding 40% share of US e-commerce sales, representing five times the market share of its nearest competitor, demonstrates exceptional competitive moats and scale advantages. The diversification across three major profit centers - e-commerce, AWS cloud services, and advertising - provides multiple growth drivers and reduces single-business risk. AWS's leadership position in cloud infrastructure positions Amazon to benefit from continued digital transformation trends, while the advertising business leverages Amazon's unique position as the starting point for product searches. The manager's confidence appears justified by management's ability to control expenses and expand operating margins despite providing conservative forward guidance. The stock's appreciation following earnings suggests the market recognizes Amazon's operational leverage potential and margin expansion opportunities. This multi-faceted platform approach creates powerful network effects and cross-selling opportunities that should drive sustained long-term growth and profitability improvements.

Pitch Summary:
NVIDIA is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA's products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artificial intelligence (AI), machine learning, and autonomous driving. The reason for the stock's appreciation in the quarter was twofold: First, the stock benefited from tremendous excitement surrounding the further development of generative AI and the likelihood this would necessitate the purchase of a large number of Nvidia's products far into the future; Second, Nvidia posted a beat-and-raise quarter for the history books, where the company upped its F2Q24 revenue guidance above Street estimates by an astounding 50%, causing the stock to gap up ~25% on the announcement.

BSD Analysis:
The manager presents a compelling bull case for NVIDIA centered on its dominant position in the GPU market and strategic positioning for the AI revolution. The company's leadership across four key growth markets - Gaming, Professional Visualization, Data Center, and Automotive - provides diversified exposure to high-growth computing trends. The investment thesis is particularly strong given NVIDIA's critical role in the generative AI infrastructure buildout, where the company's GPUs are essential for training and running large language models. The recent quarter's exceptional performance, with management raising revenue guidance by 50% above Street estimates, demonstrates the company's ability to capitalize on surging AI demand. This guidance beat triggered a 25% stock price surge, validating the market's recognition of NVIDIA's AI opportunity. The manager's conviction appears well-founded given the massive capital requirements for AI infrastructure and NVIDIA's technological moat in high-performance computing. The positioning across data center acceleration, machine learning, and autonomous driving provides multiple avenues for sustained growth as these technologies mature and scale globally.

Pitch Summary:
Liberty Broadband's operating entity, Charter Communications, has faced negative headlines, too, but there are important differences. Importantly, connectivity at home and on the go has become a non-discretionary expense for most households, underpinning the durability of Charter's cash flows in a way that selling used cars does not. Charter's mobile service continues to win in the market, creating a converged bundled product that competes well for the limited number of customers available. And while Charter still has work to do on its network upgrade program, 2025 is expected to mark the peak year of spending. As this investment moderates, free cash flow should improve, supporting continued share repurchases at today's depressed prices. With the benefit of hindsight, the early phase of this investment cycle was painful, but we believe the setup is improving and chose to maintain our position.

BSD Analysis:
The managers maintain conviction in Liberty Broadband despite near-term headwinds, viewing connectivity as a non-discretionary household expense that provides durable cash flow visibility. Charter's mobile service expansion is gaining market traction, creating valuable bundled offerings in a competitive landscape. The key catalyst is the expected peak in network upgrade capital expenditures during 2025, which should drive meaningful free cash flow improvement thereafter. Management's aggressive share repurchase program at depressed valuations provides additional value creation potential. The investment thesis centers on the defensive nature of broadband services and the operational leverage that will emerge as capex moderates. This contrarian position reflects confidence in the long-term fundamentals despite current market pessimism. The managers view current weakness as a temporary investment cycle rather than structural deterioration.

Pitch Summary:
For example, CarMax faces a challenging operating environment. Availability and affordability of late model used vehicles (CarMax's strongest category) remain constrained, while online competitor Carvana has taken share. At the same time, CarMax's own investments in its omni-channel capabilities have yet to deliver improvements, prompting strategic changes and the CEO's ousting. While we continue to respect CarMax's brand and scale advantages, the near-term path to improved fundamentals became less visible, leading us to step aside and monitor developments from the sidelines.

BSD Analysis:
The fund managers exited CarMax due to deteriorating fundamentals and competitive pressures. The company faces supply constraints in its core late-model used vehicle segment while losing market share to online competitor Carvana. Management's investments in omni-channel capabilities have failed to deliver expected improvements, resulting in strategic changes and CEO turnover. Despite acknowledging CarMax's brand strength and scale advantages, the managers determined that the path to improved fundamentals had become unclear. The exit reflects a disciplined approach to cutting losses when investment thesis deteriorates. This represents a classic value trap scenario where cheap valuations couldn't overcome operational headwinds. The decision demonstrates prudent risk management in a challenging retail automotive environment.

Pitch Summary:
Tencent Holdings is one of China's largest technology companies with leading positions in gaming, social media and payments. The Portfolio last exited Tencent in 2022 amid a weak Chinese macro-economy and a political initiative to suppress and subjugate the Technology sector. Some of these pressures have since eased, while the economic headwinds remain (though may be easing). Despite these headwinds, Tencent has remained a consistent growth business, compounding revenues at an 11% CAGR over the past 3 years and Earnings Per Share (EPS) at 36% CAGR. While gaming represents the largest contributor to profits and remains a good business, the real growth driver in the years ahead should be the WeiXin (WeChat) app which has ~ 1.4B users who spend on average 90 minutes per day in the app. This strong position allows Tencent to offer services like e-commerce, payments and entertainment while also serving up high value advertisements. AI should also benefit other units of Tencent including its public cloud, its large language model, its gaming business, and its business productivity software. All together we believe Tencent can grow revenues sustainably at a low-double digit rate and EPS at a mid-teens rate.

BSD Analysis:
Polen Capital re-initiated a position in Tencent Holdings after exiting in 2022 due to Chinese regulatory pressures and macro headwinds, viewing the current environment as more favorable for the technology giant. The manager acknowledges that while some regulatory pressures have eased, economic challenges persist but may be improving. Despite these headwinds, Polen highlights Tencent's impressive resilience with 11% revenue CAGR and 36% EPS CAGR over the past three years. The investment thesis centers on WeChat's dominant position with 1.4 billion users spending 90 minutes daily on the platform, creating a powerful ecosystem for e-commerce, payments, entertainment, and high-value advertising. Polen sees artificial intelligence as a significant catalyst across Tencent's business units including cloud services, large language models, gaming, and productivity software. The fund projects sustainable low double-digit revenue growth and mid-teens EPS growth, indicating confidence in Tencent's ability to monetize its massive user base and leverage AI capabilities across its diversified technology platform.

Pitch Summary:
Netherlands-based ASM International is a leading provider of essential semi-cap equipment for "front-end" technology processes used to build chips. ASM dominates the market for Atomic Layer Deposition, a technology increasingly needed for building logic gates on the smallest, "leading edge" chips. The AI boom is fueling ongoing advances in semiconductors, leading to smaller and more powerful chips. As this occurs, more of ASM's ALD and other technologies get used in logic and memory fabs. Making chips gets harder every year. Semi-cap companies collaborate with fab operators to develop essential technology that propels civilization's progress. We believe ASM's business can grow earnings at a high-teens rate for the next five years.

BSD Analysis:
Polen Capital initiated a position in ASM International, recognizing the Dutch company's dominant market position in Atomic Layer Deposition (ALD) technology, which is increasingly critical for manufacturing leading-edge semiconductors. The manager emphasizes that ASM's ALD technology is essential for building logic gates on the smallest, most advanced chips that power AI applications. Polen views the AI boom as a structural driver that will continue fueling semiconductor advances, requiring smaller and more powerful chips that rely heavily on ASM's specialized technologies. The fund projects high-teens earnings growth over the next five years, reflecting confidence in ASM's technology leadership and market position. Polen appears to view semiconductor manufacturing complexity as a competitive moat, with ASM's collaboration with fab operators positioning the company as an essential technology partner. The investment thesis centers on ASM's specialized technology becoming increasingly indispensable as chip manufacturing becomes more challenging and AI-driven demand continues to grow.

Pitch Summary:
Disco Corp is a Japanese leader in essential semi-cap equipment for back-end chip manufacturing. The company specializes in dicing, grinding, and polishing silicon wafers, with equipment used throughout the semiconductor process—from initial cutting to final packaging. Back-end technology is increasingly important for AI, as advanced chip packages require extensive processing by Disco machines. We believe Disco can compound total returns at a high teens rate over the next five years.

BSD Analysis:
Polen Capital initiated a new position in Disco Corporation, viewing the Japanese company as a specialized leader in critical back-end semiconductor manufacturing equipment. The manager emphasizes Disco's expertise in dicing, grinding, and polishing silicon wafers, processes that are essential throughout the semiconductor manufacturing cycle from initial cutting to final packaging. Polen highlights the increasing importance of back-end technology for AI applications, as advanced chip packages require extensive processing using Disco's specialized equipment. The fund projects that Disco can deliver high-teens total return compounding over the next five years, indicating strong conviction in the company's growth prospects. This investment thesis appears driven by the structural growth in AI-related semiconductor demand and Disco's specialized market position. Polen views the company as well-positioned to benefit from the ongoing advancement in chip packaging technology required for next-generation AI applications.