Investment Pitches

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 investment is positioned as a play on the structural shift toward electrification in the automotive industry. The manager indicates this is a relatively recent portfolio addition, suggesting conviction in the timing of the EV transition. The thesis relies on Rivian's positioning to capitalize on rising EV penetration over the next cycle. However, the pitch lacks specific fundamental analysis such as valuation metrics, competitive positioning details, or financial performance indicators. The investment appears to be a thematic play on the broader EV trend rather than company-specific fundamentals. The manager's confidence is supported by their own research suggesting meaningful EV penetration growth ahead.

Pitch Summary:
A good example of the former is Qatar Gas Transport, the sole distributor of Qatari liquified natural gas exports, whose vessels are chartered on long-term fixed-rate contracts, with growth optionality from Qatar's North Field expansion project.

BSD Analysis:
The manager views Qatar Gas Transport as an attractive defensive investment with compelling growth optionality tied to Qatar's North Field expansion. The company's monopolistic position as the sole distributor of Qatari LNG exports provides significant competitive moats and pricing power. The long-term fixed-rate charter contracts offer predictable cash flows and downside protection, making this an ideal defensive holding during uncertain market conditions. The North Field expansion project represents substantial growth potential, as Qatar aims to increase LNG production capacity significantly over the coming years. This combination of defensive characteristics with growth optionality aligns well with the fund's strategy of buying quality businesses with earnings upside potential. The LNG shipping sector benefits from structural supply-demand imbalances and Qatar's dominant position in global LNG markets. The investment thesis balances capital preservation with participation in the global energy transition toward cleaner fossil fuels.

Pitch Summary:
This is a painful but necessary decision, as it often means parting ways with companies (and management teams) we admire, but which we can no longer justify owning at current valuations. A good example here is National Company for Learning and Education, a K-12 owner/operator with a market capitalisation of $1.2 billion based on an operating income of less than $30 million.

BSD Analysis:
The manager has taken a disciplined approach to exit National Company for Learning and Education despite admiring the company and management team, citing valuation concerns as the primary driver. With a market capitalization of $1.2 billion against operating income of less than $30 million, the company trades at over 40x operating income, which the fund deems unsustainable. This represents a classic value discipline decision where fundamental metrics no longer support the investment case despite qualitative strengths. The manager's willingness to exit reflects adherence to valuation discipline over emotional attachment to quality businesses. The K-12 education sector may have benefited from Vision 2030 themes, but the valuation has reached levels that assume near-perfect execution of blue-sky scenarios. This exit demonstrates the fund's commitment to risk management and capital preservation when valuations become disconnected from fundamentals.

Pitch Summary:
The best example of this is Abdullah Al Othaim Markets, the discount grocery retailer that is capturing significant share of its ~$40 billion market by doubling down on its value-for-money proposition to take advantage of weakening competition, a shift in shopping behavior to more value-for-money options, and the general growth in population in the central region, to which Al Othaim is over-indexed.

BSD Analysis:
The manager presents a compelling bull case for Abdullah Al Othaim Markets based on market share capture dynamics in Saudi Arabia's $40 billion grocery market. The investment thesis centers on the company's strategic positioning to benefit from multiple tailwinds: weakening competitive landscape, consumer behavioral shifts toward value-oriented shopping, and demographic growth in their core geographic market. The fund views this as a high-conviction position despite elevated near-term multiples, believing the company will grow into its valuation over time. The manager's willingness to maintain exposure reflects confidence in the structural growth opportunity and the company's execution capabilities. This represents a classic growth-at-a-reasonable-price strategy where current valuation concerns are offset by strong fundamental drivers. The demographic and competitive positioning provides a multi-year runway for market share gains and earnings growth.

Pitch Summary:
In IT services, uncertain macroeconomic conditions in the US and Europe are causing corporate customers to delay new projects. We expect this slowdown to be short-lived, so when shares of Argentina-based Globant fell to attractive levels, we took the opportunity to initiate a new position. Over the past few years, with extra incentive provided by the pandemic, businesses have embarked on major digital-transformation initiatives to facilitate better interactions with their customers, trade partners, and employees. Globant, through its highly skilled yet competitively priced global talent pool based primarily in Latin America and Asia, is helping customers improve their digital interactions. One such customer is Disney, whose popular Disney+ streaming-TV service Globant played a key role in developing and launching. There are several IT services companies that provide similar offerings, but Globant differentiates itself in how it delivers these services. Unlike most of its peers, the company's teams are organized according to their area of technical expertise rather than the industries of the customers they serve. Its business units, which it calls 'digital studios,' span data and artificial intelligence, the metaverse, cybersecurity, and cloud operations, as opposed to, say, health care or hospitality. This structure allows Globant's studios to transfer their deep technical knowledge across different client industries. We expect strong earnings growth over the next decade, due to both rising corporate demand for digital solutions and Globant's ability to win market share. The company's strong balance sheet—it maintains a net-cash position—also enables it to invest in new tech capabilities and geographic markets.

BSD Analysis:
The fund manager presents a compelling bull case for Globant as a differentiated IT services provider positioned to capitalize on long-term digital transformation trends. The manager views current macroeconomic headwinds as temporary, creating an attractive entry point for a high-quality business with secular growth drivers. Globant's unique organizational structure around technical expertise rather than industry verticals creates competitive advantages through knowledge transfer across client sectors. The company's 'digital studios' spanning AI, metaverse, cybersecurity, and cloud operations position it at the forefront of emerging technologies. High-profile client relationships like Disney's streaming service development validate Globant's capabilities and market positioning. The company's cost-competitive global talent pool in Latin America and Asia provides margin advantages while maintaining technical excellence. Management's net-cash balance sheet position enables strategic investments in new capabilities and geographic expansion without financial constraints. The manager expects strong earnings growth over the next decade driven by both rising corporate digital demand and Globant's market share gains. This combination of differentiated positioning, financial strength, and secular growth trends supports the bullish investment thesis.

Pitch Summary:
We opted to buy Kaspi.kz, a high-quality business in Kazakhstan on the forefront of this fintech revolution. Kaspi delivered cash flow return on equity in excess of 60% in each of the past three years. Its digital ecosystem encompasses payments solutions, an e-commerce marketplace, and retail lending, all of which reside on its 'super-app.' It is not only Kazakhstan's largest digital-payments provider (with a 67% market share) but also the largest e-commerce company and largest unsecured retail lender. On the payments side, Kaspi offers low-priced end-to-end functionality that doesn't rely on Visa or Mastercard. The company has also implemented strong risk-management systems. For example, as consumers send payments or transact on its e-commerce marketplace, Kaspi collects data that it pairs with traditional credit-bureau information to assess a prospective borrower's creditworthiness. Its average consumer-loan maturity period is also relatively low at seven months, which helps the company react quickly to risk signals. Over the past five years, profits increased at a compounded rate of 33% (in US dollars), and we expect rapid growth to continue alongside rising penetration of digital payments and e-commerce in Kazakhstan. To further monetize its user base and boost growth, the company has been adding new services such as travel bookings and online grocery shopping.

BSD Analysis:
The fund manager presents an exceptionally strong bull case for Kaspi.kz as a dominant fintech platform capitalizing on Kazakhstan's digital transformation. The company's extraordinary financial performance, with cash flow return on equity exceeding 60% for three consecutive years, demonstrates exceptional capital efficiency and profitability. Kaspi's comprehensive super-app ecosystem creates powerful network effects, combining payments (67% market share), e-commerce leadership, and retail lending dominance in a single platform. The company's independence from traditional payment networks like Visa and Mastercard provides competitive advantages and higher margins. Management has implemented sophisticated risk management systems that leverage transaction data for credit assessment, while maintaining conservative loan maturities of seven months for rapid risk adjustment. The impressive 33% compound annual profit growth over five years validates the business model's scalability and market opportunity. Kaspi's expansion into adjacent services like travel and grocery demonstrates platform monetization potential as digital adoption accelerates across Kazakhstan. This positions the company as a prime beneficiary of the ongoing fintech revolution in emerging markets.

Pitch Summary:
Maruti Suzuki, which makes nearly half of India's cars, is another holding that's similarly committed to its financial strength. Even though Maruti is investing steadily for growth in a market that is still in the early stages of car adoption, management has built a balance-sheet fortress full of cash. Hypothetically, the company would be able to keep its offices and plants open and survive for almost a decade without selling a single car. This financial strength is enabled by a lean expense structure and a capital-expenditure strategy that has generated positive free cash flow in all but two of the past 20 years, even through several industry downturns. Maruti's managers are prudent spenders, preferring to enter into contracts with Japan's Suzuki and Toyota to produce certain new car models (including electric vehicles) rather than taking on the cost of those plants itself. This allows Maruti to instead focus on marketing and selling the vehicles, all the while gaining manufacturing experience through its partners, so that it may be in a better position to make EV investments on its own once the technologies mature and demand picks up.

BSD Analysis:
The fund manager presents a strong bull case for Maruti Suzuki centered on exceptional financial strength and strategic capital allocation in India's emerging automotive market. The company's dominant market position, producing nearly half of India's cars, provides significant scale advantages in a market still in early adoption stages. Management has built an impressive cash fortress that could theoretically sustain operations for nearly a decade without revenue, demonstrating extraordinary financial discipline. The company's track record of generating positive free cash flow in 18 of the past 20 years, including through multiple industry downturns, validates management's operational excellence. The strategic partnership approach with Suzuki and Toyota for new model development, particularly electric vehicles, allows Maruti to gain manufacturing expertise while minimizing capital risk. This asset-light strategy positions the company to capitalize on EV opportunities once technologies mature and demand accelerates. The combination of market leadership, financial strength, and prudent capital allocation creates a compelling investment thesis in India's growing automotive sector.

Pitch Summary:
Localiza, Brazil's leader in the capital-intensive rental-car industry and a holding since early 2019, exemplifies the type of disciplined financial management we seek. In addition to benefiting from substantial scale in a market with few competitors, the company is focused on sustaining attractive returns on invested capital. Localiza has demonstrated it recognizes that managing a growth business sometimes means taking the foot off the gas pedal if returns on certain investments look unattractive. During the pandemic, used car prices rose significantly, driven by supply shortages and lower borrowing costs in markets such as Brazil, where the benchmark interest rate bottomed out at 2%. Like its peers, Localiza enjoyed a sudden windfall from selling its used cars during that time. But rather than deploying those supernormal profits to expand its fleet at inflated prices, Localiza's management waited for the car market to cool off. As a result of its discipline, the company should be able to increase earnings by nearly 50% this year and expand its fleet at much better prices.

BSD Analysis:
The fund manager presents a compelling bull case for Localiza based on disciplined capital allocation during volatile market conditions. The company demonstrated exceptional financial prudence during the pandemic by resisting the temptation to expand its fleet at inflated car prices, instead waiting for market normalization. This contrarian approach positions Localiza to capitalize on current market conditions with a projected 50% earnings increase. The manager emphasizes the company's substantial scale advantages in a concentrated Brazilian market with few competitors, combined with management's focus on maintaining attractive returns on invested capital. Localiza's ability to recognize when to pause growth investments demonstrates sophisticated capital discipline that should drive sustainable long-term returns. The company's market leadership position and proven management track record since 2019 support the bullish thesis. This disciplined approach contrasts favorably with competitors who expanded aggressively during the pandemic at poor economics.

BSD Analysis:
The manager initiated a new position in McKesson, attracted by the company's leading position in pharmaceutical distribution to retail drugstores, physician offices, and hospitals across the United States. McKesson operates the largest specialty drug and oncology distribution business in the US, which represents the fastest-growing and highest-margin segment of drug distribution. The company benefits from operating in a stable oligopoly structure with only two other major competitors, providing pricing stability and market share protection. Beyond core distribution, McKesson offers diversified revenue streams including technology and transaction processing services to drugstores, commercialization services to pharmaceutical manufacturers, and basic supply services to physician offices. The manager expects at least low double-digit earnings growth driven by a combination of organic operating earnings growth, accretive acquisitions, and ongoing share repurchase programs. The stable, cash-flow generative business model provides defensive characteristics while the specialty drug exposure offers growth upside in an aging demographic environment.

BSD Analysis:
The manager added to the Becton Dickinson position during the healthcare sector selloff, viewing the weakness as an attractive entry opportunity. The investment thesis is built on BD's strong competitive position with hospital customers, where the company commands pricing power due to its differentiated consumable offerings and high regulatory barriers that make replacement difficult. While the company has faced headwinds from COVID-related supply chain disruptions that impacted component procurement, the manager expects these constraints to ease and drive revenue growth in coming quarters. The operational improvement story includes margin expansion opportunities through better integration of previous acquisitions, operational efficiency gains, and SKU rationalization efforts. BD's defensive healthcare exposure and essential medical device offerings provide stability during economic uncertainty. The combination of pricing power, improving supply chain dynamics, operational leverage opportunities, and defensive end markets makes this an attractive value opportunity in the healthcare sector.

BSD Analysis:
The manager initiated a position in Meta during Q4 2022 and remains bullish following the stock's strong Q1 2023 performance. The investment thesis centers on Meta's substantial scale advantages in driving user engagement across its platform ecosystem. The company's ability to continuously invest in monetization tools while maintaining cost discipline represents a key competitive advantage. Meta's strong balance sheet provides financial flexibility during uncertain economic conditions. Despite the significant rally, the manager maintains conviction that the original investment drivers remain intact and continue to support the bull case. The position represents a successful contrarian investment, as the manager bought during a period of significant pessimism around Meta's metaverse investments and regulatory challenges. The sustained user engagement and monetization capabilities across Facebook, Instagram, and WhatsApp continue to generate substantial cash flows and support the long-term investment thesis.

Pitch Summary:
Progressive, which has minimal interest rate mismatch exposure. Progressive continues to demonstrate superior underwriting practices with consistent share gains in the personal auto insurance market while maintaining strong profitability. The company pioneered the use of in-vehicle telematics, providing it with a substantial amount of differentiated user data that it uses to reward better drivers while also reducing its risk of losses. These data-driven insights enabled Progressive to lead the industry in raising prices to offset higher losses. Subsequently, as competitors have been forced to sharply raise prices in order to restore profitability, customers have shopped for better rates and Progressive has been able to accelerate its market share gains. The company has a conservative investment portfolio, which we believe is likely to prove defensive in a softer macro environment.

BSD Analysis:
The manager presents a strong bull case for Progressive, highlighting multiple competitive advantages and defensive characteristics. The company's minimal interest rate exposure provides protection during the current volatile rate environment. Progressive's superior underwriting capabilities are evidenced by consistent market share gains while maintaining strong profitability metrics. The company's pioneering use of telematics technology creates a significant data moat, allowing for better risk assessment and pricing power. This technological advantage enabled Progressive to lead industry price increases ahead of competitors, and as rivals were forced to catch up with sharp price hikes, Progressive gained market share from customers seeking better rates. The conservative investment portfolio adds another layer of defensive positioning for potential economic weakness. The combination of technological differentiation, pricing leadership, market share gains, and defensive balance sheet positioning makes Progressive an attractive holding in an uncertain macro environment.

Pitch Summary:
Our concerns over financials with asset/liability mismatches and those making very long-duration bets led us to reduce our bank exposure in 2022 for example, with trims to Charles Schwab. We trimmed Schwab further in the quarter due to the potential for more regulatory scrutiny and heightened risk of "cash sorting" as customers shift low-yielding deposits into higher-yielding options such as money market funds and U.S. Treasurys. While this impacts the company's earnings in the near term, roughly 80% of its deposits are FDIC insured and we believe the vast majority of the deposits are likely to stay inside of the Schwab ecosystem where the company can still collect fee and spread income over time.

BSD Analysis:
The manager maintains a cautious stance on Charles Schwab, having reduced exposure in 2022 and trimming further in Q1 2023. The primary concerns center on asset/liability mismatches and duration risk in the company's portfolio. The manager is particularly worried about "cash sorting" behavior where customers move deposits to higher-yielding alternatives like money market funds and Treasuries, which directly impacts Schwab's net interest income. Additionally, increased regulatory scrutiny following the banking sector turmoil adds another layer of risk. However, the manager acknowledges some defensive characteristics, noting that 80% of deposits are FDIC insured and expects most deposits to remain within the Schwab ecosystem, allowing the company to continue generating fee and spread income over time. The position appears to be a tactical reduction rather than a complete exit, suggesting the manager sees long-term value but is managing near-term risks.

Pitch Summary:
Digi International, Inc. (DGII): DGII has been a pioneer in wireless communication technology and has over 35,000 customers worldwide and owns more than 160 different patents. The company operates two primary segments: Products & Services and Solutions. The Products & Services division primarily sells hardware to enterprise clients to provide business continuity. The Solutions division offers a full suite of solutions for asset monitoring. The Solutions division revenues are recurring as customers typically sign three to five-year subscription contracts and they have been installing its sensors and control hubs in 3000-4,000 new sites per quarter for customers such as CVS, Olive Garden and Tim Hortons. We initially purchased DGII for our Micro Cap portfolio in 1Q20 and have now added it to the Small Cap portfolio in 1Q23.

BSD Analysis:
Conestoga presents a compelling bull case for Digi International based on its established market position and recurring revenue model. The manager highlights DGII's pioneer status in wireless communication technology, supported by a substantial patent portfolio of 160+ patents and a broad customer base of 35,000 clients. The investment thesis centers on the company's dual-segment approach, with the Products & Services division providing hardware for business continuity and the Solutions division generating recurring revenues through 3-5 year subscription contracts. The Solutions segment's growth trajectory is particularly attractive, with consistent quarterly installations of 3,000-4,000 new sites for major enterprise customers including CVS, Olive Garden, and Tim Hortons. This recurring revenue model provides predictable cash flows and demonstrates strong customer retention. The manager's confidence is evidenced by their decision to graduate the position from their Micro Cap to Small Cap portfolio, suggesting successful execution and growth in market capitalization since their initial 2020 purchase.

Pitch Summary:
In March 2023, the U.S. banking system experienced a brief crisis when three banks failed in quick succession. The prices of large regional banks fell precipitously as investors indiscriminately sold shares, allowing us to significantly increase our exposure at fire-sale prices. Current market sentiment does not distinguish between Held To Maturity ("HTM") vs. Available For Sale ("AFS") securities unrealized losses, presenting us with a unique opportunity. While other market participants view the AFS unrealized losses as an undesirable risk, we view them as a juicy source of future upside as the losses naturally reverse with time. We estimate that the combination of AFS unrealized loss reversals, profitable earnings yields, and valuation multiple expansion will generate 2.0X to 3.5X+ our cost in the next 5 years. To qualify for inclusion, the large regional banks had to satisfy the following selection criteria: High % of floating rate loans. This helps offset the effects of rising interest rates. Having to pay more for deposits has less impact on profits if a bank can offset it by charging more for loans. Stable, diversified, and low-cost deposit base. Banks serving businesses with treasury management tools for operating accounts, supplying working capital (Commercial & Industrial) loans, and those targeting households with primary checking accounts will naturally have stickier and lower-cost deposit bases. Low/prudent exposure to Commercial Real Estate loans. Earnings yield of 10-15%+ and generous dividend yields. Minimal Held to Maturity ("HTM") securities exposure. HTM securities are held at cost on the balance sheet, and HTM unrealized losses have not been charged to equity book value. High % of Available For Sale ("AFS") unrealized losses relative to market cap. AFS securities are held at fair market value on the balance sheet, and AFS unrealized losses have been charged to equity book value (via Accumulated Other Comprehensive Income "AOCI"). AFS losses will reverse over the next ~5 years (due to natural payoff at maturity, or sooner if interest rates decline), boosting equity book values, and the upside return potential of our regional bank investments. We estimate our basket of large regional banks will return 2.0X to 3.5X+ in the next 5 years. One day, we will look back upon this opportunity with disbelief, especially considering the high quality, durable, and profitable nature of these regional banks.

BSD Analysis:
Marram presents a compelling contrarian thesis on regional banks following the March 2023 banking crisis, specifically highlighting Fifth Third Bancorp as a prime example. The manager argues that indiscriminate selling created fire-sale opportunities in high-quality regional banks with strong fundamentals. The investment thesis centers on the reversal of Available For Sale (AFS) unrealized losses, which have already been charged to equity book value but will naturally reverse over 5 years as securities mature or interest rates decline. FITB trades at attractive metrics with a 13.6% earnings yield, 5.3% dividend yield, and AFS unrealized losses representing 35.3% of market cap. The manager's detailed financial modeling projects 2.0x to 3.7x total returns over 5 years through three drivers: AFS loss reversals, continued profitability from floating rate loan exposure, and valuation multiple expansion from the current depressed 1.12x book value back to historical 1.5-2.0x+ levels. The selection criteria emphasize banks with floating rate loan portfolios, stable deposit bases, and minimal commercial real estate exposure, positioning them to benefit from rising rates while avoiding the pitfalls that caused the March bank failures.

Pitch Summary:
Let me tell you something about this new addition to our portfolio: Ain Holdings. Ain Holdings is the largest dispensing pharmacy chain in Japan, with 1,210 pharmacies and 76 cosmetic and drug stores. It was founded in 1969 and has a market share of around 4 percent in a highly-fragmented but consolidating industry. In Japan, the top five pharmacy chains account for only 14 percent of the market, compared to 43 percent in the UK and 64 percent in the US. The Japanese government is encouraging the use of generic drugs and home-based healthcare, and is leaning on pharmacies in their new role as primary healthcare service providers. These policies are driving the consolidation of pharmacies into bigger chains. Ain is well positioned to benefit from this trend, with its strong track record of execution, healthy balance sheet, and culture of innovation. The added responsibilities have added considerable complexity to the business, making it harder for smaller pharmacies to compete. Cost pressures are also giving bigger chains an edge because of the in-house procurement capabilities and their stronger position to negotiate lower prices with vendors. Ain's size gives it the resources to lead sector consolidation. The company has been acquiring smaller competitors at EV/EBITDA multiples of around 4.5x, which compares favorably to Ain's own 5-year average multiple of around 8.8x. After it integrates the acquired pharmacies, Aim is also able to capture additional synergies such as decreased procurement costs, increased efficiency, elimination of costly temporary staff, and promoting upskilling opportunities. Additionally, the company has preserved its optionality to carry out larger M&A transactions by taking on less leverage than its peers, enabling it to respond to new regulations such as the recent changes allowing it to enter long-term partnerships with hospitals to run pharmacies on hospital grounds. Ain's culture of decentralization and shared learning is reflected in its "Pharmacy-led" project, which uses feedback provided by its staff to improve efficiency though better management of inventory and labor hours while increasing customer satisfaction through shorter wait times. Overall, we believe that Ain is well positioned to benefit from the ongoing consolidation in the Japanese pharmacy market. The company has a strong track record of execution, a healthy balance sheet, and a culture of innovation.

BSD Analysis:
Mayar Capital initiated a new position in Ain Holdings, Japan's largest dispensing pharmacy chain with 1,210 locations and approximately 4% market share in a highly fragmented industry. The investment thesis centers on industry consolidation driven by Japanese government policies promoting generic drugs and home-based healthcare, which are increasing operational complexity and favoring larger chains. Ain's competitive advantages include strong execution capabilities, a healthy balance sheet with low leverage, and superior procurement power that enables better vendor negotiations. The company is actively consolidating the market through acquisitions at attractive 4.5x EV/EBITDA multiples, well below its own 8.8x historical average, while capturing synergies through cost reduction and operational improvements. Ain has preserved financial flexibility for larger M&A opportunities and benefits from regulatory changes allowing hospital partnerships. The company's decentralized culture and "Pharmacy-led" feedback system drive operational efficiency improvements and customer satisfaction. With Japan's pharmacy market significantly less consolidated than developed peers (14% vs 43% in UK and 64% in US), Ain appears well-positioned to benefit from structural industry tailwinds.

Pitch Summary:
Talen Energy (TLN) Senior Secured Notes (7.25% due 2027, 6.625% due 2028, 7.625% due 2028) - Talen Energy Corporation, through its subsidiary, TES, is one of the largest competitive power generation and infrastructure companies in North America. TES owns and/or controls approximately 13,000 megawatts of generating capacity in wholesale U.S. power markets, principally in the Mid-Atlantic, Texas and Montana. On May 9, 2022, the company filed Chapter 11 Bankruptcy with holders of 62% of unsecured bondholders backing a restructuring support agreement through which $1.4 bn of debt would be equitized, $3.2 bn of debt would be eliminated and certain bondholders committed to backstop a $1.65 bn equity rights offering. The proposed Plan of Reorganization (POR) provided for payment in full of the secured bonds including all pre-petition accrued interest and 40% of the call premium that would be due as of the POR's effective date. The order approving the debtor-in-possession financing, providing cash to support the company during Chapter 11, also required the company to pay current interest, monthly, to the secured bondholders, subject to certain liquidity tests. Comfortable that the POR would be approved and that the secured bonds would be paid in full in cash by June 30, 2023, we began buying the bonds in October 2022 at yields to the expected exit date in the 8-10% range. The bankruptcy court confirmed the Plan of Reorganization (POR) on December 15, 2022, with the effective date subject to receipt of regulatory approval for the transfer of ownership to the unsecured bondholders. Since our initial purchases, we added to the position, most recently in March when we bought bonds yielding 9-10%. The company received its final regulatory approval on March 31, 2023, and is expected to exit bankruptcy, after completion of its exit financing, by mid-May 2023. Insofar as the time to exit will have been shorter than our expectation, the rate of return on the position is expected to be a bit higher than our initial estimates.

BSD Analysis:
CrossingBridge executed a successful bankruptcy arbitrage strategy in Talen Energy's secured notes, capitalizing on the company's Chapter 11 restructuring process. The manager identified an attractive risk-adjusted opportunity in the secured bonds of this major North American power generator with 13,000 MW of capacity across key wholesale markets. The investment thesis centered on the high probability of full recovery for secured bondholders under the Plan of Reorganization, which provided for complete payment including accrued interest and partial call premiums. CrossingBridge's confidence was bolstered by strong bondholder support (62% backing) and the company's ability to maintain current interest payments during bankruptcy proceedings. The manager systematically built the position from October 2022 through March 2023 at yields of 8-10%, with regulatory approval received ahead of schedule in March 2023. With bankruptcy exit expected by mid-May 2023, the accelerated timeline should enhance returns beyond initial projections, demonstrating effective execution of a time-arbitrage strategy in distressed credit markets.

Pitch Summary:
Infrabuild Australia Pty (INFRAB) 12.00% First Lien Notes due 10/1/24 – Infrabuild is Australia's largest vertically integrated producer of steel "long product" (bars, beams, rebar) produced via electric arc furnaces and its second largest recycler of steel scrap. The company is wholly owned by GFG Alliance, a multinational producer of steel, aluminum, and renewable energy. GFG has been experiencing financial distress as a result of its borrowing relationship with Greensill (UK). However, Infrabuild is the "crown jewel" of GFG and, since it issued its bonds in 2019, has had no relationship with Greensill. Further, we became comfortable that GFG's issues were unlikely to affect the Infrabuild bonds as they are secured by all of Infrabuild' s Australian assets and the bond indenture contains strong covenants, limiting the ability of GFG to take out dividends or issue significant incremental debt that might negatively impact the credit. As a result of very strong performance in 2022, net leverage (net debt divided by EBITDA), based on the last 12 months ended December 31, 2022, is 0.70x. Should the company continue to perform as it has, cash flow from operations should be sufficient to repay the bonds. If cash flow reverts to the levels of 2019 and 2020, net leverage would only deteriorate to less than 2.5x. Infrabuild's strong credit statistics, solid bondholder protections and the parent company's desire to preserve value, led us to begin purchasing the bond in November of 2022 at 94.50 for a yield-to-maturity of 15.40%. Our comfort with the credit has grown through several phone calls with management and an in-person meeting with them in February, leading us to add to the position through numerous purchases, the last in February at 97, for a yield-to-maturity of 14.13%. The company is in the process of acquiring GFG's North American steel operations at, in our opinion, a slightly elevated value. It is being financed with a new asset-based loan facility under terms similar to their prior ABL facility. Our bonds have a first lien on Infrabuild' s fixed assets and a second lien on the company's inventory and receivables. In October 2023, the bonds become current obligations and we believe that the company will look to refinance them prior to maturity.

BSD Analysis:
CrossingBridge presents a compelling credit opportunity in Infrabuild's 12% first lien notes due October 2024, viewing the Australian steel producer as an attractive distressed credit play. The manager emphasizes Infrabuild's position as Australia's largest vertically integrated steel long products producer and second-largest steel scrap recycler, providing defensive market positioning. Despite parent company GFG Alliance's financial distress related to Greensill exposure, CrossingBridge argues Infrabuild operates independently with strong structural protections including asset security and restrictive covenants. The credit metrics are exceptionally strong with 0.70x net leverage as of December 2022, providing substantial downside protection even if performance reverts to historical levels. The manager's conviction has grown through direct management engagement, leading to position additions at yields exceeding 14%. With bonds becoming current in October 2023, CrossingBridge expects refinancing before maturity, offering attractive risk-adjusted returns on what appears to be a fundamentally sound credit trading at distressed levels due to parent company concerns.

Pitch Summary:
CVX is an integrated energy and chemical producer. Its upstream segment explores for, produces, processes and transfers energy products. Its downstream segment refines and markets these products in addition to industrial plastics and fuel and lubricant additives. Among the major oil companies, CVX is the most levered to oil and gas production; it has one of the most successful exploration programs and among the best production profiles. CVX also has less exposure to the downstream business, which provides an above-peer operating margin profile and supports CVX's return on invested capital. CVX has one of the strongest balance sheets in the oil industry with net debt/EBITDA of just 0.1x. The combination of its low cost positioning and strong balance sheet gives us greater confidence in downside protection despite its ties to a volatile commodity. We're attracted to management's rational approach to capital allocation, with consideration for the full cycle. In terms of capital allocation, CVX just announced a $75B share repurchase plan, and it pays a healthy 3.5% dividend. We have owned CVX in the past and it is the only Energy exposure in the Large Cap portfolio.

BSD Analysis:
The London Company initiates a new position in Chevron, highlighting the company's superior operational and financial profile within the integrated oil sector. The investment thesis emphasizes Chevron's upstream-focused business model with best-in-class exploration success and production profiles, providing greater leverage to commodity price upside. The manager values Chevron's limited downstream exposure, which supports above-peer operating margins and strong return on invested capital metrics. The exceptionally strong balance sheet with 0.1x net debt/EBITDA provides significant downside protection in volatile commodity markets. Management's disciplined, full-cycle capital allocation approach resonates with the manager, demonstrated through the substantial $75 billion share repurchase authorization and sustainable 3.5% dividend yield. The low-cost positioning combined with financial strength creates a defensive profile despite energy sector volatility. This represents the portfolio's sole energy exposure, suggesting selective positioning in a high-quality operator with superior competitive advantages and shareholder-friendly capital allocation.

Pitch Summary:
BLK underperformed in Q1, but our conviction in BLK remains high based on the durability of its competitive position, an under-levered balance sheet, persistently strong profitability, and capital return. BLK has experienced some margin pressure on market-driven AUM declines, but has responded with cost control measures. We continue to view BLK as a well-run company that is likely to outperform the industry over the long term.

BSD Analysis:
The London Company expresses unwavering conviction in BlackRock despite Q1 underperformance, emphasizing the durability of the company's competitive positioning in asset management. The investment thesis centers on BlackRock's structural advantages including an under-leveraged balance sheet, consistently strong profitability metrics, and disciplined capital return policies. The manager acknowledges near-term margin pressure from market-driven AUM declines but highlights management's responsive cost control measures, demonstrating operational flexibility. The characterization of BlackRock as "well-run" suggests confidence in management's execution capabilities and strategic decision-making. The manager's long-term outlook positions BlackRock to outperform industry peers, indicating belief in the company's ability to gain market share and maintain pricing power. This conviction stance reflects the manager's view that current weakness represents a temporary cyclical headwind rather than a structural challenge to BlackRock's dominant position in the global asset management industry.