Investment Pitches

Pitch Summary:
Hallador Energy is a legacy coal mining company in Indiana that is transitioning to a vertically integrated independent power producer (IPP). During the ESG craze a few years ago, Hallador acquired the grid interconnection rights from its customer Hoosier Energy to build a solar plant on the location of Hoosier's soon-to-be-closed coal plant. The idea was that coal was dead, and Hallador would reimagine itself as a more ESG-friendly solar company. However, when the power market tightened in 2022, the grid operator requested the plant remain in operation. Hoosier was forced to sell the plant at a discount to the only logical buyer – Hallador – who owned the grid interconnection rights. The plant is 40 years old and will be fully depreciated over the next 10 years, but management believes it can operate for at least another 15 years. Today, the power generation segment accounts for only about 45% of Hallador's revenue yet nearly all of its profit. Hallador's power plant sits in the MISO region which, according to the North American Electric Reliability Corporation's 2023 Long-Term Reliability Assessment, is one of the two regions designated as high risk for power shortages in the coming years. MISO has many old coal plants like Hallador's that are slated to be retired, and the replacement capacity is solely coming from intermittent power generation like wind and solar. Even with this backdrop, hyperscalers such as Amazon and Google continue to announce new data center projects in the area, in part drawn by the region's lower power prices compared to neighboring regions like PJM. While generation prices have yet to rise, the capacity market is already responding, as seen by the growth in Hallador's capacity revenue, which is expected to be approximately $65mm this year vs $10mm last year and $1.5mm just a few years ago. Hallador currently has an RFP out to data center operators and management and has said that it is in discussions over a 10-year PPA to contract for the majority of its capacity. It expects an announcement later this year or early next. While time will tell what the pricing from the data center PPA will be, simply using MISO forward pricing as a proxy, we believe that Hallador could generate over $2.50 in FCF per share in 2026. This would price Hallador shares at less than 4x P/FCF, compared to IPP peers that are all trading above 10x. As seen by Talen's Amazon deal, there is a good chance that the data center PPA will likely be priced significantly above forward prices.

BSD Analysis:
The manager identifies Hallador Energy as an opportunistic play on the coal-to-data center power transition, benefiting from unique circumstances that created an undervalued asset. The company's acquisition of grid interconnection rights during the ESG movement positioned it perfectly when power market dynamics shifted, allowing Hallador to purchase the coal plant at a discount when reliability concerns emerged. The MISO region's designation as high-risk for power shortages creates a favorable supply-demand imbalance, with coal plant retirements being replaced only by intermittent renewables while hyperscalers continue building data centers attracted by lower regional power costs. Capacity revenue growth from $1.5mm to an expected $65mm demonstrates the market's recognition of scarcity value. At less than 4x projected 2026 free cash flow versus 10x+ for IPP peers, Hallador offers compelling relative value with significant re-rating potential upon securing a data center power purchase agreement. The fully depreciated 40-year-old plant provides a low-cost baseload generation asset with 15+ years of remaining operational life. Management's active pursuit of a 10-year PPA with data center operators could unlock substantial value given the premium pricing precedent set by similar deals.

Pitch Summary:
Talen is an independent power producer (IPP) that serves the Pennsylvania-Jersey-Maryland (PJM) market. It owns 10.7 GW of generation capacity, with the Susquehanna nuclear plant accounting for 2.2 GW, while the remaining assets are various natural gas "peaking" plants that operate at 25-65% utilization. The company went public in 2015 as a combination of Pennsylvania Power & Light's unregulated energy business and the power generation portfolio of a PE shop, Riverstone Holdings. Riverstone took the business private in 2016. Overleveraged following the take-private and poor hedges eventually forced Talen to file for bankruptcy in 2022, and it reemerged as a public company in 2023 on the OTC market with a new board, management, and cleaned-up balance sheet. In July, shares were uplisted to the Nasdaq and will likely be added to several indexes over the coming months. The Susquehanna plant is Talen's prize asset. It is the 6th largest nuclear plant in the country, and while it accounts for only 20% of Talen's overall capacity, it is responsible for nearly 50% of Talen's annual power generation. The IRA legislation passed in 2022 made nuclear plants particularly attractive assets by introducing a production tax credit (PTC) mechanism that effectively sets an approximate $40/MWh floor on power prices generated from nuclear. Compare this to Susquehanna's operating costs of about $23/MWh, and you get a floor of around $300mm in operating cash flow to Talen from Susquehanna alone. Talen is already a beneficiary of the ballooning demand from data centers. As previously mentioned, Talen signed a PPA with Amazon in March to deliver power to its new data center campus, which will continue to be built over the next decade. The pricing implied in the PPA is over $70/MWH, a 50% premium to current PJM prices. There is no contribution from this to the financials currently, but it should help drive double-digit EBITDA growth for Talen over the next decade. We also don't believe Talen is done signing data center PPAs, and it has about 1.2GW of uncontracted capacity from Susquehanna that could be made available for a similar deal. Talen's stock doesn't appear cheap on current year multiples, but at the midpoint of its recently announced 2026 targets, it is trading at 8x EV/EBITDA and 12x FCF, and we believe there is upside to these targets. Constellation Energy (CEG), Talen's closest peer by asset mix and growth profile, trades at 22x EV/EBITDA and 30x P/FCF. Given Talen's superior growth runway, it should arguably deserve a premium. On the downside, we believe that the replacement cost of the Susquehanna plant alone supports a floor valuation much higher than the stock price today. Recent estimates suggest that it costs north of $8,000/KW to construct a new nuclear power plant in the U.S., which, if applied to Susquehanna, would support a value 80% higher than the current market. Even still, this might be too conservative. The last nuclear plant built in the U.S. was the twin 1.25 GW units in Vogtle, Georgia. The project took 14 years to complete, cost $34bn, and bankrupted Westinghouse Electric. Management recognizes the valuation gap and has been buying back shares as aggressively as it can. Since October 2023, Talen has repurchased 14% of its shares, with another $1.25bn remaining on its authorization that would account for another 15% of shares at current prices. If Talen completed this authorization tomorrow, it would still be under its leverage target and could repurchase even more shares with the free cash flow it is set to generate.

BSD Analysis:
The manager presents a compelling bull case for Talen Energy, positioning it as a prime beneficiary of surging AI data center power demand. The investment thesis centers on Talen's crown jewel Susquehanna nuclear plant, which provides baseload power with significant regulatory tailwinds from the Inflation Reduction Act's production tax credits that establish a $40/MWh floor versus $23/MWh operating costs. The Amazon power purchase agreement at $70/MWh represents a 50% premium to current PJM prices and validates the premium pricing power for reliable nuclear generation. At 8x EV/EBITDA on 2026 targets, Talen trades at a significant discount to peer Constellation Energy's 22x multiple despite superior growth prospects from additional data center contracts. The replacement value argument is particularly compelling, with new nuclear construction costs exceeding $8,000/KW suggesting 80% upside to current valuations. Management's aggressive 14% share repurchase program with $1.25bn remaining authorization demonstrates capital allocation discipline and confidence in the undervaluation. The combination of structural demand growth, regulatory support, and attractive valuation creates a multi-year compounding opportunity in the energy transition.

Pitch Summary:
In the Half Year Letter, I wrote about Caesars (CZR)'s long-term growth opportunity in digital gaming and near-term opportunity to buy back its own stock at a single-digit multiple of 2025 free cash flow. Although CZR trades just above our cost basis of $41 per share and the investment has been a drag on performance so far this year, there have been several recent bullish developments that led us to add to the position. Beneficiary of lower interest rates. Caesars is an example of a smaller US business primed to be an outsized beneficiary of lower US interest rates. Lower rates reduce the interest expense on Caesars debt and boosts cash flow used for buybacks. Declining interest rates also stimulates consumer demand for travel, hotel, gaming, restaurant. Additionally, the "bazooka" Chinese stimulus package mentioned should help jumpstart pan-Asian travel to Vegas for business and pleasure. Rapidly growing online gaming US market value. The recent Flutter Entertainment investor day presentation (parent company of market leading online sports betting app FanDuel) was bullish for the US online gaming market. Although we do not own Flutter, the presentation is confirmation of the broader opportunity for large players like Caesars. On page 58 of the Flutter presentation the company revised its 2022 estimate of the US online gaming market from $40 billion $70 billion by 2023. What percent of the pie will Caesars get as the largest US land casino footprint and rewards program? My guess is that the market value estimate will continue to go higher with online revenue ultimately surpassing brick-and-mortar as states continue rolling out legalization. In our opinion Caesars's online growth is not taken seriously by investors and is not priced in the stock today despite CEO Tom Reeg reconfirming $400 to $500 million EBITDA run rate from online by 2024 yearend. Surprise early new buyback program. On October 2, 2024 CZR surprised the market with a quiet SEC filing disclosing it had just bought $150 million of stock at $36.38 per share and authorized a new $500 million buyback (5% to 6% of outstanding shares). In the same disclosure the company said it had completed the sale of the World Series of Poker IP rights for $250 million in upfront cash and $250 million in future consideration. As an example of what I like about CEO Tom Reeg is, the ink is barely dry on this transaction, and he is allocating nearly every penny to buy up as much stock as possible at fire sale prices. We still expect a larger buyback once new hotel construction spend winds down late this year and/or larger asset sales are announced.

BSD Analysis:
The manager presents a compelling turnaround thesis for Caesars Entertainment, trading near his $41 cost basis but with multiple catalysts emerging. The company benefits significantly from declining interest rates through reduced debt service costs and increased consumer discretionary spending on travel and gaming. Caesars dominates the US land-based casino market with the largest footprint and rewards program, positioning it to capture substantial market share in the rapidly expanding online gaming sector. The US online gaming market has been revised upward from $40 billion to $70 billion, with CEO Tom Reeg targeting $400-500 million EBITDA from online operations by year-end 2024. Recent aggressive capital allocation includes a surprise $500 million buyback program (5-6% of shares) funded by asset sales, demonstrating management's confidence in the stock's undervaluation at single-digit free cash flow multiples.

Pitch Summary:
The most noteworthy development in the last quarter has been the rally in Chinese equities sparked by a major government economic stimulus package to help the country pull out of its financial crisis. We did not invest with the expectation of government stimulus, or any catalyst other than the most important businesses in the Chinese economy were selling for distressed valuations. Until last month the basket had been a drag on our performance. After the recent rally our China basket has become over 15% of assets and is comprised of Tencent, Alibaba and Ping An Insurance. Each company dominates large and important consumer-facing segments of the Chinese economy, is growing key areas at double the rate of Chinese GDP and was purchased for single digit multiples of after-tax earnings. Each also has enormous amounts of cash and liquid investments including stock portfolios worth tens of billions of dollars, and large stock buyback programs. Even after the recent rally, Chinese equities are still down by about 77% compared to the S&P 500 over the last 10 years.

BSD Analysis:
The manager's Ping An Insurance position forms part of a strategic China basket representing over 15% of assets, purchased during distressed market conditions. Ping An dominates consumer-facing financial services segments in China while growing key business areas at double the rate of Chinese GDP, acquired at single-digit earnings multiples. The insurance giant maintains substantial cash reserves and liquid investment portfolios worth tens of billions, supported by active share repurchase programs. Despite recent government stimulus-driven rallies, Chinese equities including Ping An remain 77% below S&P 500 performance over the past decade. The manager views this as a compelling value opportunity with significant recovery potential as China's financial sector benefits from economic stabilization measures.

Pitch Summary:
The most noteworthy development in the last quarter has been the rally in Chinese equities sparked by a major government economic stimulus package to help the country pull out of its financial crisis. We did not invest with the expectation of government stimulus, or any catalyst other than the most important businesses in the Chinese economy were selling for distressed valuations. Until last month the basket had been a drag on our performance. After the recent rally our China basket has become over 15% of assets and is comprised of Tencent, Alibaba and Ping An Insurance. Each company dominates large and important consumer-facing segments of the Chinese economy, is growing key areas at double the rate of Chinese GDP and was purchased for single digit multiples of after-tax earnings. Each also has enormous amounts of cash and liquid investments including stock portfolios worth tens of billions of dollars, and large stock buyback programs. Even after the recent rally, Chinese equities are still down by about 77% compared to the S&P 500 over the last 10 years.

BSD Analysis:
The manager's Alibaba position represents part of a concentrated China recovery play, purchased at distressed valuations without relying on government stimulus expectations. Alibaba dominates critical consumer-facing segments of the Chinese economy while achieving growth rates double that of Chinese GDP, acquired at single-digit earnings multiples. The company maintains massive cash reserves and liquid investment portfolios worth tens of billions, complemented by aggressive share buyback programs. Despite recent government stimulus-driven rallies, Chinese equities including Alibaba remain 77% below S&P 500 performance over the past decade. The manager positions this as a long-term value opportunity with significant upside potential as Chinese markets recover from their extended downturn.

Pitch Summary:
The most noteworthy development in the last quarter has been the rally in Chinese equities sparked by a major government economic stimulus package to help the country pull out of its financial crisis. We did not invest with the expectation of government stimulus, or any catalyst other than the most important businesses in the Chinese economy were selling for distressed valuations. Until last month the basket had been a drag on our performance. After the recent rally our China basket has become over 15% of assets and is comprised of Tencent, Alibaba and Ping An Insurance. Each company dominates large and important consumer-facing segments of the Chinese economy, is growing key areas at double the rate of Chinese GDP and was purchased for single digit multiples of after-tax earnings. Each also has enormous amounts of cash and liquid investments including stock portfolios worth tens of billions of dollars, and large stock buyback programs. Even after the recent rally, Chinese equities are still down by about 77% compared to the S&P 500 over the last 10 years.

BSD Analysis:
The manager presents a compelling value thesis for Tencent as part of a concentrated China basket representing over 15% of assets. The investment was initiated based on distressed valuations rather than anticipating government stimulus, demonstrating disciplined contrarian investing. Tencent dominates consumer-facing segments of the Chinese economy while growing key areas at double the GDP rate, purchased at single-digit earnings multiples. The company maintains substantial cash reserves and liquid investments worth tens of billions, plus active share buyback programs. Despite recent rallies, Chinese equities remain 77% below S&P 500 performance over the past decade, suggesting significant upside potential. The manager views this as a long-term recovery play with outsized impact potential on portfolio performance.

Pitch Summary:
By a wide margin, the most impactful item to discuss is the transaction announced on October 9th. CC Capital, a private equity firm in New York run by one of Blackstone's most senior retired dealmakers, will invest $250 million USD into Westaim. This will provide a ~40% stake and a path to control the Board over time, subject to certain stock and business milestones. Longtime supporters will recall that we have owned shares in this company since the inception of our firm (and even before establishing Langdon). We have always had deep respect for the quality of its assets and the capabilities of its leadership team. This transaction, along with the highly successful IPO of Skyward Specialty Insurance, serves as third-party validation that our initial assertions appear to be correct. For a refresher, Westaim is a holding in both our Global and Canadian Portfolios. They are an investment holding company, specializing in acquiring and developing or restructuring businesses operating primarily within the global services financial industry. While we have been fortunate at Langdon to enjoy strong returns from our investment in Westaim it has very much been an "overnight success" a decade in the making. Since Langdon's first purchase in August 2022, we've earned 2x Multiple of Capital (MoC). Since 2014, Westaim's management team has worked tirelessly to build a private credit manager (Arena Investors) from scratch and to turn around a U.S. specialty insurance company (Skyward). In 2024, they successfully exited their investment in Skyward, which has nearly tripled since its IPO in Q1 2023. Skyward, also held in our portfolio, has contributed meaningfully to returns. The exit delivered approximately 2.5-3x MoC, translating to roughly a 13% gross annualized return (IRR) in USD—or closer to 15% in CAD. As shown below, their only other exit was a shorter hold, generating a 2x MoC and a 33% gross IRR in CAD. You must be asking: "How could this company still be trading below net cash on its balance sheet?" That is the very question we've been asking for most of the past decade—and it remains valid today! The successful monetization of Skyward above where Westaim had it marked on its balance sheet at the end of 2022 attracted more investor interest in the material dislocation between price and value. It also brought in a highly experienced and successful investment firm (CC Capital), which will become Westaim's largest owner once the deal closes in Q1 2025. We were wall crossed on this transaction and voted in support of it. We believe it positions Westaim and Arena well to transition from a NAV-based valuation model to one that will eventually trade on earnings. Regarding alignment between CC Capital and Westaim, there are conditions to be met before a full take private could be executed. CC Capital is not allowed to make a bid for the remainder of the company for 3 years post transaction close. In addition, CC Capital cannot elect a 6th board member, of the 11-person board, until the stock price goes above $48.00 CAD ($8.00 pre-share consolidation). These terms create a multi-year runway for the public market to sensibly value this company. Beyond injecting capital into Westaim above market price, CC Capital is also contributing talent and an insurance platform. This platform will serve as the foundation for an insurance-led asset management firm, a model that has become a valuable driver of asset growth among alternative asset managers. Examples include Apollo/Athene, Ares/Aspida, Blackstone/F&G Annuities, and Brookfield/BIS. Westaim has already redomiciled to Delaware from Alberta, making it no longer a Canadian company (a reality we have argued for years). We expect several analysts to begin covering this company in its new incarnation in 2025. There is much more to this transaction than we can cover in this letter. However, after several meetings with the incoming management team, we feel very optimistic about the company's future prospects. We also see low downside risk, with the stock still trading below cash value.

BSD Analysis:
Langdon presents Westaim as a classic value realization story, highlighting the transformative $250 million investment from CC Capital that validates their long-held thesis. The fund has generated a 2x return since 2022, demonstrating patience in a decade-long value creation process. Westaim's successful exit from Skyward Specialty Insurance at 2.5-3x returns and 15% CAD IRR showcases management's capital allocation capabilities. The company trades below net cash despite owning Arena Investors, a private credit manager built from scratch, creating a significant valuation disconnect. CC Capital's involvement brings institutional credibility and an insurance platform that positions Westaim to adopt the successful insurance-led asset management model used by Apollo, Ares, and Blackstone. The structured deal terms provide downside protection while allowing time for public market revaluation. Redomiciliation to Delaware and expected analyst coverage should improve liquidity and institutional accessibility. The combination of trading below cash value with transformational strategic partnership creates an asymmetric risk-reward profile.

Pitch Summary:
A&W, which many will know for its iconic Burger Family, traces its roots back to 1923 in California. The Canadian arm of the business opened its first location in Winnipeg in 1956. Soon after, A&W Canada pursued independence from the U.S. business, and by 1972, the business was acquired by Unilever. However, operational challenges prompted management to launch a buyout, creating the A&W we know today. Since 1991, A&W Canada has had only three CEOs, with the current CEO joining in 1992. Remarkably, the founders still own ~35% of the business 35 years later. This long-term ownership reflects a culture that not only attracts and retains talent but also fosters a shared commitment to sustainable, long-term success. A&W's culture permeates every aspect of its decision-making. For instance, a decade ago, the company undertook what we believe to be a thoughtful, five-year rebranding effort—the first in its history—to appeal to a new generation. This strategic focus on high-quality, sustainable ingredients rejuvenated the brand and positioned it as a leader in ethical sourcing. It was also a key factor in A&W winning the license to bring the UK-based Pret-A-Manger brand to Canada. Our conviction in A&W's potential was solidified through firsthand experiences. During our 2024 Tour du Canada, we added A&W to our watchlist and began engaging with management to understand Torquest's vision for the business. This culminated in a visit to A&W's Vancouver headquarters, where we spent three hours with the senior strategy team. Their depth of talent, cultural alignment, and hunger for growth left a lasting impression. Today, A&W is Canada's second-largest burger chain and has merged its operating business with its publicly listed royalty company, creating a pure-play multi-brand Quick Service Restaurant (QSR). The company boasts a strong track record of profitable growth, reinvesting in new restaurants at attractive returns and generating substantial cash flow. The recent Pret-A-Manger rollout and a valuation disconnect relative to North American QSR peers position A&W for significant value creation in the years ahead. A&W's culture and long-term focus are reflected in the tenure of its senior leadership. On average, members of the senior management team have been with the company for over 20 years (as seen in the graphic below), with several starting as cooks in A&W restaurants. This depth of experience and alignment is a testament to a culture that prioritizes growth, sustainability, and long-term success. Culture attracts talent, which we can see with the depth within the organization – there are multiple layers of high caliber talent at A&W. This culture also permeates decision making and strategy at A&W, leading to a focus on strategy that delivers long-term sustainable success for the business. Heightened conviction in our variant perception came from experiencing this culture first-hand and spending time with the team on their home turf.

BSD Analysis:
Langdon presents a compelling cultural thesis for A&W, emphasizing the company's exceptional management stability and founder ownership retention. The fund's investment rationale centers on A&W's transformation into a pure-play multi-brand QSR following the merger of its operating business with the royalty company. Management's 20+ year average tenure and the fact that several executives started as restaurant cooks demonstrates deep operational knowledge and cultural alignment. The successful rebranding effort and ethical sourcing positioning has differentiated A&W in the competitive Canadian QSR market. The Pret-A-Manger licensing deal represents a significant growth catalyst and validates management's strategic capabilities. Langdon's conviction was strengthened through direct management engagement and on-site visits, suggesting strong due diligence. The valuation disconnect relative to North American QSR peers implies potential multiple expansion opportunity as the company executes its multi-brand strategy.

Pitch Summary:
Among the top five detractors for the fourth quarter were two holdings from the Consumer sector: Royal Unibrew and FeverTree. Royal Unibrew, a leading European beverage producer, declined 8%, returning to our historical cost basis. FeverTree, a premium mixer company known for its tonic waters, experienced an 18% drop, ending 2024 approximately 20% below our average cost for the investment. These performance levels are far from what we would consider impairments. Both companies operate within the everyday purchase category, which we believe is less economically sensitive than large-ticket discretionary spending. Importantly, we believe FeverTree and Royal Unibrew maintain strong balance sheets and have significant potential to restore margins to historical levels. This gives us confidence that, with patience, the investments we have in these companies will yield meaningful rewards over the long term. As evidenced above, both companies are currently trading at their lowest earnings multiples in a decade, based on both 2024 and projected 2025 earnings. This is despite delivering impressive revenue growth over the same period—20% annualized for FeverTree and 10% for Royal Unibrew. From our assessment, the primary driver of this valuation compression has been margin pressures, which remain a critical determinant of their future value creation. This dynamic was evident at the time of our initial investment and continues to hold true today. With margins improving by 30% at FeverTree and remaining stable for Royal Unibrew, both companies have performed in line with our expectations. We believe it is only a matter of time before their stock prices reflect their strong underlying fundamentals.

BSD Analysis:
Langdon presents a patient bull case for Royal Unibrew, viewing the 8% Q4 decline as a temporary return to cost basis rather than fundamental deterioration. The manager emphasizes the company's position as a leading European beverage producer operating in the defensive everyday purchase category. The investment thesis is anchored on attractive valuation metrics, with Royal Unibrew trading at decade-low earnings multiples despite consistent 10% annualized revenue growth. Langdon highlights the company's strong balance sheet and stable margin profile as key strengths during the current challenging environment. The manager's conviction stems from their belief that margin pressures are temporary and that the market has overreacted to near-term headwinds. Their patient approach reflects confidence in Royal Unibrew's ability to restore historical margin levels and deliver meaningful long-term returns. The combination of defensive business characteristics, solid fundamentals, and compelling valuation supports Langdon's optimistic outlook for the European beverage producer.

Pitch Summary:
Among the top five detractors for the fourth quarter were two holdings from the Consumer sector: Royal Unibrew and FeverTree. Royal Unibrew, a leading European beverage producer, declined 8%, returning to our historical cost basis. FeverTree, a premium mixer company known for its tonic waters, experienced an 18% drop, ending 2024 approximately 20% below our average cost for the investment. These performance levels are far from what we would consider impairments. Both companies operate within the everyday purchase category, which we believe is less economically sensitive than large-ticket discretionary spending. Importantly, we believe FeverTree and Royal Unibrew maintain strong balance sheets and have significant potential to restore margins to historical levels. This gives us confidence that, with patience, the investments we have in these companies will yield meaningful rewards over the long term. As evidenced above, both companies are currently trading at their lowest earnings multiples in a decade, based on both 2024 and projected 2025 earnings. This is despite delivering impressive revenue growth over the same period—20% annualized for FeverTree and 10% for Royal Unibrew. From our assessment, the primary driver of this valuation compression has been margin pressures, which remain a critical determinant of their future value creation. This dynamic was evident at the time of our initial investment and continues to hold true today. With margins improving by 30% at FeverTree and remaining stable for Royal Unibrew, both companies have performed in line with our expectations. We believe it is only a matter of time before their stock prices reflect their strong underlying fundamentals.

BSD Analysis:
Langdon maintains a bullish stance on FeverTree despite recent underperformance, viewing the 18% Q4 decline as a temporary setback rather than fundamental impairment. The manager emphasizes FeverTree's position in the everyday purchase category, which provides defensive characteristics during economic uncertainty. The investment thesis centers on a compelling valuation opportunity, with the stock trading at decade-low earnings multiples despite impressive 20% annualized revenue growth. Langdon highlights margin recovery as the key value driver, noting 30% margin improvement that aligns with their original investment expectations. The manager's confidence stems from FeverTree's strong balance sheet and the belief that current margin pressures are temporary rather than structural. Their patient approach reflects conviction that the market will eventually recognize the company's strong fundamentals and margin restoration potential. The defensive nature of the premium mixer business, combined with attractive valuation metrics, supports Langdon's long-term optimism for meaningful returns.

Pitch Summary:
By a wide margin, the most impactful item to discuss is the transaction announced on October 9th. CC Capital, a private equity firm in New York run by one of Blackstone's most senior retired dealmakers, will invest $250 million USD into Westaim. This will provide a ~40% stake and a path to control the Board over time, subject to certain stock and business milestones. Longtime supporters will recall that we have owned shares in this company since the inception of our firm (and even before establishing Langdon). We have always had deep respect for the quality of its assets and the capabilities of its leadership team. This transaction, along with the highly successful IPO of Skyward Specialty Insurance, serves as third-party validation that our initial assertions appeared to be correct. For a refresher, Westaim is an investment holding company, specializing in acquiring and developing or restructuring businesses operating primarily within the global services financial industry. While we have been fortunate at Langdon to enjoy extremely strong returns from our investment in Westaim it has very much been an "overnight success" a decade in the making. Since Langdon's first purchase in August 2022, we've earned 2x Multiple of Capital (MoC). Since 2014, Westaim's management team has worked tirelessly to build a private credit manager (Arena Investors) from scratch and to turn around a U.S. specialty insurance company (Skyward). In 2024, they successfully exited their investment in Skyward, which has nearly tripled since its IPO in Q1 2023. Skyward, also held in our portfolio, has contributed meaningfully to returns. The exit delivered an approximate 2.5-3x MoC, translating to roughly a 13% gross annualized return (IRR) in USD—or closer to 15% in CAD. You must be asking: "How could this company still be trading below net cash on its balance sheet?" That is the very question we've been asking for most of the past decade—and it remains valid today! The successful monetization of Skyward above where Westaim had it marked on its balance sheet at the end of 2022 attracted more investor interest in the material dislocation between price and value. It also brought in a highly experienced and successful investment firm (CC Capital), which will become Westaim's largest owner once the deal closes in Q1 2025. We were wall crossed on this transaction and voted in support of it. We believe it positions Westaim and Arena well to transition from a NAV-based valuation model to one that will eventually trade on earnings. Regarding alignment between CC Capital and Westaim, there are conditions to be met before a full take private could be executed. CC Capital is not allowed to make a bid for the remainder of the company for 3 years post transaction close. In addition, CC Capital cannot elect a 6th board member, of the 11-person board, until the stock price goes above $48.00 CAD ($8.00 pre-share consolidation). These terms create a multi-year runway for the public market to sensibly value this company. Beyond injecting capital into Westaim above market price, CC Capital is also contributing talent and an insurance platform. This platform will serve as the foundation for an insurance-led asset management firm, a model that has become a valuable driver of asset growth among alternative asset managers. Examples include Apollo/Athene, Ares/Aspida, Blackstone/F&G Annuities, and Brookfield/BIS. Westaim has already redomiciled to Delaware from Alberta, making it no longer a Canadian company (a reality we have argued for years). We expect several analysts to begin covering this company in its new incarnation in 2025. There is much more to this transaction than we can cover in this letter. However, after several meetings with the incoming management team, we feel very optimistic about the company's future prospects. We also see low downside risk, with the stock still trading below cash value.

BSD Analysis:
Langdon presents a compelling bull case for Westaim, highlighting a transformational $250 million investment from CC Capital that validates their long-held thesis. The manager emphasizes Westaim's successful track record, including a 2.5-3x return on their Skyward exit and 2x returns since Langdon's 2022 investment. The pitch centers on a significant valuation disconnect, with the stock trading below net cash despite strong asset quality and management capabilities. CC Capital's involvement brings institutional validation, additional capital, and an insurance platform that positions Westaim to transition from NAV-based to earnings-based valuation. The structured deal terms provide downside protection while creating a multi-year runway for market revaluation. Langdon views the redomiciliation to Delaware and expected analyst coverage as additional catalysts for value recognition. The manager's decade-long conviction and intimate knowledge of the business, combined with the recent third-party validation, supports their optimistic outlook for the company's transformation into an insurance-led asset management firm.

Pitch Summary:
One recent example of maintenance research was a trip to Germany and Italy with ATS Corporation. ATS is a provider of automation solutions to manufacturers around the world. The business is driven by talented engineers who design and assemble automated assembly technology that is installed into manufacturers in the Life Science, Food and Beverage, Transportation, Packaging, and Energy sectors. An example of this would be production of an automated assembly line that manufactures inhalers for asthmatic patients or epi-pens for those who have anaphylaxis. We spent time with local operators at ATS Life Science Tooling, Comecer, and CFT Group. Two of these three businesses were acquired by ATS in the past five years, and we expect all of them to be meaningful drivers of growth and returns on capital in the years ahead. These trips give us the opportunity to observe operational changes post-acquisition, meet with local talent, gain a deeper understanding of growth and margin drivers, and experience first-hand the decentralized culture that management has fostered. The culture at ATS is similar to Langdon's, with both organizations driven by a shared focus on continuous improvement.

BSD Analysis:
Langdon maintains a bullish view on ATS Corporation based on their direct operational due diligence and cultural alignment with management. The manager emphasizes ATS's position as a global provider of automation solutions across diversified end markets including life sciences, food and beverage, transportation, packaging, and energy sectors. The investment thesis is strengthened by the company's successful acquisition strategy, with two of three recent European acquisitions (ATS Life Science Tooling, Comecer, and CFT Group) expected to drive meaningful growth and returns on capital. Langdon's on-site visits to Germany and Italy provided firsthand insight into post-acquisition integration and the company's decentralized culture focused on continuous improvement. The manager highlights ATS's engineering talent and specialized automation capabilities, citing examples like automated assembly lines for medical devices such as inhalers and epi-pens. The cultural similarity between ATS and Langdon, both focused on continuous improvement, suggests strong management alignment. The bullish stance reflects confidence in ATS's ability to execute its acquisition strategy while maintaining operational excellence across its global platform.

Pitch Summary:
Aritzia, founded in 1984, is an everyday luxury fashion house focused on the female consumer. Aritzia and its halo of brands; Wilfred, Babaton, TNA, Super Puff, Sunday Best have been well known to Canadians for years. Revenues at Aritzia increased from $875MM pre-COVID to $2.2B for the fiscal year ending February 2023, driven by growth in eCommerce and the United States. We have spent time with several key leaders at Aritzia to better understand their store real estate and distribution strategies. It is clear that the company invests in talent as thoughtfully as it does in capital. For example, founder Brian Hill spent nearly a decade recruiting their Head of Real Estate before she joined. Similarly, Aritzia waits patiently for its target location to become available—whether in a mall or on a street—before committing to long-term leases. Over the past two years, the business navigated a major catch-up capital expenditure program that was needed after the business saw eCommerce revenues nearly quadruple through the pandemic. While the capital program was sensible, the front-loaded nature and its impact on cash generation surprised us. For us at Langdon—and for Aritzia's management team—this has been a valuable lesson in communication. With these distribution network investments now behind them, we have seen the business deliver on expected margin improvements while continuing to grow. We are excited for what lies ahead as they continue to invest in U.S. growth, which now represents over 55% of revenues, while patiently laying the foundation for international expansion in the years to come.

BSD Analysis:
Langdon presents a bullish case for Aritzia based on the company's successful transformation from a Canadian retailer to a North American growth story. The manager highlights impressive revenue growth from $875MM pre-COVID to $2.2B by February 2023, driven primarily by e-commerce expansion and U.S. market penetration. The investment thesis centers on management's disciplined approach to talent acquisition and real estate strategy, with the founder spending nearly a decade recruiting key executives and waiting patiently for optimal store locations. While the manager acknowledges being surprised by the front-loaded nature of recent capital expenditures and their impact on cash generation, they view the completion of distribution network investments as a positive inflection point. With the U.S. now representing over 55% of revenues and margin improvements materializing, Langdon sees Aritzia well-positioned for continued growth. The international expansion opportunity provides additional upside potential as the company leverages its proven North American playbook globally. The manager's bullish stance reflects confidence in both the business model and management team's execution capabilities.

Pitch Summary:
Esker is a French software company and one of our portfolio holdings. The business provides mid-to-large enterprises' finance departments with highly sticky software the digitizes business logic and automates workflows in areas of order-to-cash and source-to-pay. Notable customers include NVIDIA, Dairy Queen, Heineken, and the Trudeau International Airport. On September 18th, Esker Management announced a cash offer together with private equity firms Bridgepoint and General Atlantic. The €262 per share bid implies a valuation of 7.2x 2024 EV/Sales and 67.6x EV/EBIT, after expensing capitalized R&D which is roughly 2x on our cost and a 61% IRR. The company had been on our watchlist from Langdon's inception, and while SNCF strikes prevented us from visiting Esker's HQ during our 2022 trip to France, it did not stop us from organizing a three-hour demo of their solutions upon our return. This gave us a clear sense of the value-add and future growth prospects. We made our first investment in July 2023 after several months of diligence, and increased our weight in November, after gaining conviction in their ability to improve margins without sacrificing growth. This healthy tension between profitability and growth is even more pronounced for a company like Esker, given the length of sales cycles, lower implementation margins, and upfront sales bonuses. While the company continued to experience record bookings, management grew increasingly frustrated with the market's underappreciation of their success. To paraphrase the COO Emmanuel Olivier, they were drinking champagne to celebrate record contracts signed, while the market was concerned with the upfront costs it required. With new owners, Esker's Management believes they can focus on longer-term value creation. While Esker has delivered a solid return for clients, we regard it as only a satisfactory outcome relative to the time invested. We believe the company could have exceeded Bridgepoint's offer through compounded earnings growth over a 3–5-year horizon. On the other hand, there is no shortage of high-quality ideas we think we can redeploy our proceeds into if the deal goes through.

BSD Analysis:
The manager presents a detailed case study of Esker, a French enterprise software company specializing in finance department automation. The investment thesis centered on the company's highly sticky software solutions that digitize business logic and automate workflows for order-to-cash and source-to-pay processes. The manager conducted thorough due diligence including a three-hour product demo, which provided conviction in the value proposition and growth prospects. The investment was initiated in July 2023 and increased in November 2023 based on management's ability to balance margin improvement with growth. The takeover offer at €262 per share represents a 2x return and 61% IRR, validating the investment thesis. However, the manager views this as only a satisfactory outcome, believing the company could have delivered superior returns through organic growth over 3-5 years. The successful exit demonstrates the manager's ability to identify undervalued software companies with strong fundamentals and sticky customer relationships.

Pitch Summary:
Travel is usually anchored around 1-5 critical or "must-meet" situations, and then density is built out from there. For this trip, the anchors included Yeti, where Isaac requested more detail on their point of sale retail presence across Europe; Euronext, both at its global headquarters in La Defense and the recently integrated Borsa Italia Exchange in Milan; and a visit to the brewery recently acquired by Royal Unibrew in San Giogio di Nogaro, Italy. The Yeti work involved touring dozens of retail locations to get a better sense of the brand's presence across Western Europe. This research confirmed some concerns around their progress in Europe - which was highlighted as a priority several years ago - but also revealed the still untapped potential of the region once their product portfolio is better aligned with local preferences. In other words, that market is not interested in expensive hard coolers, given that ice is not commonly purchased in Europe, nor are 40oz drinking cups. We did revise lower our forward-looking assumptions for Europe, which today represents about 1-2% of the revenues overall.

BSD Analysis:
The manager conducted extensive field research across Western Europe to assess YETI's retail presence and market penetration. The analysis revealed mixed findings regarding YETI's European expansion strategy, which had been identified as a priority several years ago. While the research confirmed existing concerns about the company's progress in Europe, it also highlighted significant untapped potential in the region. The key insight was that YETI's current product portfolio is misaligned with European consumer preferences, particularly regarding hard coolers and large drinkware. European consumers don't commonly purchase ice and show little interest in 40oz drinking cups, which are core YETI products. As a result of this field research, the manager revised downward their forward-looking assumptions for YETI's European business, which currently represents only 1-2% of total revenues. The stance appears neutral as the manager sees both challenges and opportunities in the European market.

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.