Investment Pitches

Pitch Summary:
Finally, early in the quarter we reduced our Alphabet position substantially, by almost half, and added a position in UnitedHealth. Health insurance in the US is a large, defensive growth industry and UnitedHealth is the market leader. Not only the largest, but also a business with incredibly consistent execution and the foresight to invest outside of their core business. From 2000 to 2023 they have grown their earnings at 18% per year. Much like McKesson and Cencora's investments in technology to better service their suppliers and customers, UnitedHealth has used the cash flows generated from their core business to fund a "services" business, called Optum. This side of the business now generates 50% of profits and is growing faster than the underlying health insurance given the value created for customers through partnerships. It's rare to see periods of share price weakness for this sector which has an incredible record of consistent delivery. However, the past year presented one such opportunity and we used this to further increase our allocation to US healthcare. Between these three we expect around 15% EPS and cash flow growth over the next five years. They trade at an average multiple of about 17x PE, cheaper than the market by some distance, and among the most attractive within our defensive growth universe.

BSD Analysis:
The manager presents UnitedHealth as a compelling defensive growth opportunity, highlighting the company's market leadership and exceptional long-term track record of 18% annual earnings growth from 2000-2023. The investment thesis centers on UnitedHealth's successful diversification beyond core health insurance through Optum, which now generates 50% of profits and grows faster than the base business. This services division creates additional value through customer partnerships and demonstrates management's strategic foresight in capital allocation. The manager emphasizes the rarity of weakness in this consistently performing sector, making the recent opportunity particularly attractive. With expected 15% EPS and cash flow growth over five years and a 17x PE multiple below market averages, UnitedHealth offers compelling value within the defensive growth universe. The position represents increased allocation to US healthcare, reflecting confidence in the sector's structural advantages.

Pitch Summary:
McKesson, the drug distribution business, was added into the portfolio in late 2022. This year we cut the position back following a 70% rise in the shares. Subsequently shares have fallen -15% on the back of a more accelerated generic roll out (with lower profit margins) for Humira, one of the drugs which they distribute. We used this weakness to increase our allocation to the drug distributors by adding Cencora, a direct peer of McKesson, which fell similarly on the news. One of the risks we have identified in the distribution model is the concentration of customers. Pharmacies and hospitals in the US are pretty concentrated, meaning customer churn can have an outsized impact on revenues. By reducing our exposure to McKesson and diversifying into Cencora we have marginally increased our allocation to the sector, which we continue to like for all the reasons from our initial note, while meaningfully reducing this concentration risk.

BSD Analysis:
The manager executed a tactical rebalancing within the drug distribution sector, using market weakness as an opportunity to optimize risk exposure. The 15% decline in Cencora shares following accelerated generic rollout for Humira created an attractive entry point for a direct peer to McKesson. This move demonstrates sophisticated portfolio construction by maintaining sector exposure while reducing single-name concentration risk. The manager acknowledges the inherent customer concentration risk in US drug distribution, where consolidated pharmacy and hospital customers can create revenue volatility through churn. By diversifying across two leading distributors rather than concentrating in McKesson alone, the strategy maintains conviction in the sector's fundamentals while mitigating company-specific risks. The approach reflects confidence in the drug distribution business model despite near-term margin pressures from generic competition.

Pitch Summary:
Ryanair is a business we have admired for years. From peak to trough this year the shares fell by -38% on the back of weaker short-term fare guidance. We saw this as an opportunity to add a full position to the portfolio. The business case may be well known to our readers but, in brief, they have by far the lowest cost structure in the incredibly competitive short-haul market in Europe. They have made decisive, counter-cyclical capital investments, buying planes at discounts when others stepped back. This has resulted in them having the lowest cost, fully owned, fleet with lower carbon emissions and longer useful life than competitors. They have achieved this while holding average fares flat for the past ten years, growing revenues through ancillaries such as early boarding or on-board food and drinks. The most important element of "service" for an airline is punctuality, and Ryanair consistently score top of this ranking in Europe. Market share has grown consistently from 5% twenty years ago to 20% today, and passenger numbers are estimated to grow a further 50% from here. Today Ryanair has a net cash balance sheet, while competitors have excessive leverage and impending capital expenditure programs to replace aged fleets. This leaves room for greater capital return over the coming years, which has already begun with a meaningful buy back this year as their 30% return on capital results in significant excess cash flow. Airlines are clearly risky investments which, like banks, have generally generated poor returns for shareholders. However, like banks, there are exceptions, and Ryanair is one of them.

BSD Analysis:
The manager presents a compelling bull case for Ryanair based on its structural competitive advantages and opportunistic entry timing. The 38% share price decline created an attractive entry point for a business with the lowest cost structure in European short-haul aviation. Ryanair's counter-cyclical fleet investments have resulted in a modern, fuel-efficient fleet with lower emissions and longer useful life than competitors. The company has demonstrated pricing discipline by keeping fares flat for a decade while growing revenues through ancillary services. Market share expansion from 5% to 20% over twenty years, combined with an estimated 50% passenger growth runway, supports the long-term growth thesis. The net cash balance sheet contrasts favorably with leveraged competitors facing costly fleet replacement cycles. With a 30% return on capital generating significant excess cash flow, the company has initiated meaningful capital returns through share buybacks.

Pitch Summary:
Portfolio holding Toyota Industries still has more than 100% of its market capitalization in cross-shareholdings but has recently made significant improvements in disclosure on capital allocation and in shareholder return policy, including a commitment to significantly reduce policy-held shares and its largest ever share buyback. We have long felt that the possible unwind of these substantial cross-shareholdings supported the skew of outcomes for the stock and have engaged with management on this topic for several years.

BSD Analysis:
Mondrian's investment in Toyota Industries represents a compelling value unlock opportunity driven by the unwinding of Japan's cross-shareholding system. The company holds cross-shareholdings worth more than 100% of its market capitalization, creating a unique asymmetric return profile as these holdings are monetized. Management has recently demonstrated commitment to shareholder value creation through improved capital allocation disclosure and the largest share buyback program in company history. The manager's multi-year engagement with management on cross-shareholding reduction appears to be yielding results, with the company now committed to significantly reducing policy-held shares. This structural change should improve return on equity and increase management accountability to shareholders. The investment thesis hinges on the substantial value that can be unlocked as Toyota Industries transitions from a cross-shareholding structure to a more shareholder-focused model. Mondrian views the recent policy changes as validation of their long-term engagement strategy and expects continued progress in value realization.

Pitch Summary:
Portfolio holding Mitsubishi Electric, for example, has taken all these steps and is moving closer to global governance best practices which should allow the industrial conglomerate to realize more of the value in its strong and growing core businesses and net cash balance sheet. It was encouraging to see the company proactively announce an additional mid-quarter share buyback in response to recent market volatility.

BSD Analysis:
Mondrian views Mitsubishi Electric as a beneficiary of Japan's ongoing corporate governance reforms, highlighting the company's proactive adoption of shareholder-friendly practices. The manager emphasizes that Mitsubishi Electric has implemented comprehensive governance improvements including large share buybacks, dividend increases, addition of independent directors, better management compensation alignment, and divestiture of non-core assets. The company's strong net cash position provides financial flexibility during market downturns while supporting continued shareholder returns. The recent mid-quarter share buyback announcement demonstrates management's responsiveness to market conditions and commitment to capital allocation discipline. Mondrian believes these governance enhancements will help unlock value in the company's core industrial businesses. The investment thesis centers on the structural transformation of Japanese corporate practices creating a favorable environment for value realization. The manager's confidence appears reinforced by the company's balance sheet strength and operational focus on higher-return core segments.

Pitch Summary:
Loblaw, a subsidiary of George Weston Limited is Canada's largest grocery retailer and a national leader among the traditional supermarket industry. The company operates over 2400 stores across Canada under store banners: Loblaws, Shoppers Drug Mark/Pharmaprix, No Frills, Real Canadian Superstore, Fortinos, Zehrs Markets, Provigo, Maxi and T&T Supermarket. The company's integrated approach combines food retail, pharmacy services, and digital commerce. They've successfully developed a multi-format value architecture with discount, conventional and premium stores under different banners. Loblaws' leading loyalty program PC Optimum allows for personalized offerings in combination with PC Financial. We believe the company can continue to execute its strategy through various economic cycles, delivering attractive returns and dividend growth.

BSD Analysis:
Bristol Gate initiated a position in Loblaw, recognizing it as Canada's dominant grocery retailer with over 2,400 stores operating under multiple banners across various price points. The company's multi-format strategy spanning discount (No Frills), conventional (Loblaws), and premium (Real Canadian Superstore) segments provides comprehensive market coverage and defensive characteristics. Loblaw's integrated approach combining food retail, pharmacy services through Shoppers Drug Mart, and digital commerce creates multiple revenue streams and customer touchpoints. The PC Optimum loyalty program, combined with PC Financial services, generates valuable customer data and enhances customer retention through personalized offerings. This ecosystem approach provides competitive advantages and pricing power in the Canadian retail landscape. The company's diversified format strategy and strong market position should enable consistent execution across economic cycles. Bristol Gate expects Loblaw to deliver attractive returns and dividend growth given its market leadership, operational scale, and integrated business model in the essential consumer staples sector.

Pitch Summary:
In early August Premium Brands released earnings which provided clarity to investors regarding second half volume growth. Coming from a significant capital expenditure cycle that increased capacity in many of its production lines in the US, the company can now capitalize on increasing US demand and new product launches. It also proceeded with a sale and leaseback of a real estate asset making progress on its debt deleveraging. The company beat on EPS and revenue compared to FactSet estimates. The company also reiterated its FY25 guidance, highlighting strong expected performance for the second half of the year. Management kept the dividend constant and indicated a focus on buybacks when leverage targets are met.

BSD Analysis:
Bristol Gate maintains a positive outlook on Premium Brands following strong Q2 earnings that beat consensus estimates on both EPS and revenue. The company has completed a significant capital expenditure cycle that expanded production capacity across multiple US facilities, positioning it to capitalize on growing US market demand and new product launches. The sale-leaseback transaction demonstrates management's commitment to debt deleveraging while maintaining operational flexibility. Premium Brands' reiteration of FY25 guidance with emphasis on strong second-half performance indicates confidence in the business trajectory. Management's disciplined approach to capital allocation, maintaining the dividend while prioritizing debt reduction, reflects prudent financial stewardship. The focus on share buybacks once leverage targets are achieved suggests future shareholder returns. The company's expanded US production capacity and new product pipeline position it well to capture market share in the growing specialty foods segment.

Pitch Summary:
Toromont Industries released strong Q2 earnings on July 29, that beat analyst consensus estimates on earnings per share and revenue. Toromont seems well positioned to capitalize on the AI fuelled Data Center construction fervor, providing power generation and cooling on sight solutions. Its recent acquisition AVL, while still a small contributor at just 8% of the Equipment Group sales, it claims now over 25% of its backlog. Toromont, equipped with a pristine balance sheet has now another growth lever and investing in increasing capacity in the US to cater specifically the Data Center power solutions demand.

BSD Analysis:
Bristol Gate views Toromont Industries favorably following strong Q2 earnings that exceeded consensus estimates on both EPS and revenue. The company is strategically positioned to benefit from the AI-driven data center construction boom through its power generation and cooling solutions. The AVL acquisition, while currently representing only 8% of Equipment Group sales, has already captured over 25% of the company's backlog, indicating strong market demand for data center infrastructure solutions. Toromont's pristine balance sheet provides financial flexibility to invest in US capacity expansion specifically targeting data center power solutions. This positions the company as a key beneficiary of the ongoing AI infrastructure buildout. The combination of strong operational execution, strategic positioning in high-growth markets, and robust financial health makes Toromont an attractive investment. The company's ability to leverage its Caterpillar relationship and expand into specialized data center solutions represents a compelling growth opportunity in the current technology infrastructure cycle.

Pitch Summary:
Open Text reported earnings in early August that helped contribute to positive investor sentiment. The main driver of returns was the announcement of a management change. The board's Executive Chair T. Jenkins shared the company's focus on its core Content segment and possible dispositions of lower growth segments that was well received by the market. On the results, OpenText reported a 32% increase in cloud bookings for the quarter driven by demand for their new AI-driven Titanium X platform. The company also announced a 5% increase in its quarterly dividend and a $300 million share repurchase program. The company also provided an optimistic Fiscal Year 2026 outlook, projecting a return to total revenue and accelerated cloud revenue growth.

BSD Analysis:
Bristol Gate maintains a bullish stance on OpenText following strong Q3 results and strategic repositioning. The company's 32% increase in cloud bookings demonstrates robust demand for their AI-driven Titanium X platform, positioning them well in the enterprise software transformation. Management's focus on the core Content segment and potential divestiture of lower-growth divisions should improve operational efficiency and margins. The 5% dividend increase and $300 million share repurchase program reflects strong cash generation and management's confidence in the business. The optimistic FY2026 outlook projecting accelerated cloud revenue growth suggests the company is successfully transitioning to higher-margin recurring revenue streams. OpenText's strategic pivot toward AI-enhanced solutions and cloud-first approach aligns with enterprise digital transformation trends. The management change and portfolio optimization strategy should unlock shareholder value through improved focus and capital allocation.

Pitch Summary:
Colefax is a tiny, illiquid, founder-led luxury home-furnishings group with a 90-year heritage and one of the strongest design brands in high-end interiors. The company has retired 81% of its shares since 1999 and sits on £3.77/share in cash, giving it an EV/EBIT of only ~3.1x. Its Product division (fabrics + wallpaper) is the real economic engine, with 8–12% EBIT margins, near-100% FCF conversion, outsourced production, and premium pricing power in the US, which now represents over half of sales. Near-term, US tariffs (+10–50%) are a headwind, but Colefax can mitigate them by shifting production out of India, lifting prices, and leaning into its highest-margin US brands (Cowtan & Tout). Buybacks are likely to continue, especially after low tender uptake, and a dividend shift could attract UK yield investors.

BSD Analysis:
Colefax represents a structurally underappreciated luxury design asset trading at deep-value industrial multiples despite brand equity that would command a premium valuation in any strategic process. The company’s long operating history, exceptionally disciplined founder-led stewardship, and ultra-lean, outsourced production model give it a level of earnings durability rarely seen in micro-caps. Its U.S. business—the highest-margin geography and the epicenter of global luxury interiors demand—continues to exhibit resilient order flow even as broader home-furnishings markets soften, demonstrating genuine pricing power and brand stickiness. Tariffs will create noise over the next few quarters, but management has credible levers across price, sourcing, and mix to fully offset the impact over a 12–18 month window. With an extraordinarily clean balance sheet, consistent cash generation, and a decades-long track record of buying back stock at steep discounts, capital allocation remains a core part of the thesis. The combination of low float, high insider alignment, and depressed EV/EBIT multiples sets up a meaningful re-rating if discretionary demand stabilizes or if the company adopts a more explicit capital-return framework. Given the ongoing consolidation in luxury décor and design houses globally, Colefax also carries under-priced optionality as a strategic acquisition target.

Pitch Summary:
American Eagle is a Gen Z-focused retailer with denim strength and a growth engine in Aerie/Offline activewear. After a disastrous Q1 with inventory write-offs, guidance cuts, and sales declines, the stock is down ~50% YoY. Aerie’s stumble stemmed from fashion misses and external factors (tariffs, cold weather), but long-term growth trends remain intact. The July 2025 Sydney Sweeney “Has Great Jeans” campaign went viral, driving all-time high web traffic and sold-out SKUs, setting up strong back-to-school sales. AEO also executed a 10% ASR buyback around lows, improving EPS outlook. With $0.50 dividend, clean balance sheet, and a CEO with large equity ownership, management is aligned. The setup is favorable: high short interest, low expectations, but brand interest peaking. If Aerie regains growth and denim benefits from campaign momentum, EPS could rebound to $1.50 and the stock rerates to 10–12×, offering 40–70% upside.

BSD Analysis:
Q1: sales declines in both AE & Aerie; $75m inventory write-off; ASR completed ($200m, ~10% shares). Dividend $0.50. Supply chain now <5% China by YE25.

Pitch Summary:
Freightos runs a digital freight marketplace (Webcargo, Freightos.com) and a data subscription business (FBX index, pricing). 65% of revenue comes from subscriptions, 35% from marketplace take-rates. With ~80% market share in air freight booking platforms, Freightos enables price discovery, instant booking, and tracking. Despite being left for dead post-SPAC and freight downturn, KPIs (GBV, transactions, revenue) continue to rise. The platform benefits from opacity in freight forwarding and cartel-like commission structures. Strong network effects arise as data + marketplace reinforce each other. Blue-sky potential includes scaling into ocean freight, belly cargo utilization, and higher take-rates. Strategic shareholders (Qatar Airways, FedEx, SGX, Prudential) add credibility.

BSD Analysis:
Run-rate GBV ~$1.3b; take-rate 0.83%; >70% airlines onboard; gross margin >72%; targeting EBITDA breakeven by 2026.

Pitch Summary:
UiPath positions itself as the enterprise orchestration and execution layer of agentic AI. Rather than competing with LLM developers, it provides the secure, governable, and scalable infrastructure to operationalize AI in enterprises. Its platform integrates bots, AI agents, and humans with compliance-ready workflows. The new Anthropic MCP protocol enhances rather than threatens its value. Customer traction with Maestro shows early adoption, and Gartner has again named it RPA leader. Financials show revenue growth, positive FCF, and cash-rich balance sheet. Stock is down 86% from ATH, offering asymmetric upside if growth stabilizes and adoption scales.

BSD Analysis:
Q1 FY26: Rev $357m (+6% YoY); ARR $1.693b (+12%); NRR 108%; GAAP op loss $(16)m vs $(49)m LY; Non-GAAP op inc $70m (20% margin); FCF $117m; Cash $1.59b.