Investment Pitches

Pitch Summary:
Limoneira Company (LMNR) declined 14% in the quarter and was our largest detractor for the full year. The agricultural company's stock has been pressured by the cessation of a strategic alternatives review and by weaker cash flows stemming from a reorganization of its citrus business. Despite the disappointing price action, we continue to believe the company's land and water rights are significantly undervalued relative to the current stock price. We expect non-core asset sales in 2026 as well as improved cash flows from its citrus operations.

BSD Analysis:
Limoneira is often dismissed as a volatile citrus grower, but that view misses the real asset value embedded in the business. The company controls high-quality farmland, water rights, and long-held real estate that quietly appreciate regardless of lemon pricing cycles. Agricultural results swing with weather and supply, yet those swings tend to dominate sentiment more than intrinsic value. The Harvest at Limoneira development provides a non-agricultural cash flow stream that helps smooth earnings over time. Rising food inflation and land scarcity add long-term tailwinds that don’t show up in quarterly numbers. Investors treat Limoneira like a commodity producer, ignoring its balance sheet optionality. Execution is slow and unglamorous, which frustrates the market but protects capital. This is a patient-asset story where time, not volume growth, does the heavy lifting. For investors willing to look past near-term noise, Limoneira offers real-asset leverage at a discount.

Pitch Summary:
Grand Canyon Education, Inc. (LOPE) was the portfolio’s top underperformer in the fourth quarter, despite reporting solid operating results that were largely in line with expectations. The stock’s weakness was driven less by company-specific fundamentals and more by negative read-throughs from peers and competitors that reported weaker-than-expected enrollment trends. In addition, potential, and eventual, government shutdown during the quarter created an external overhang, raising concerns around Title IV funding flows, even though LOPE’s direct exposure remains limited. These factors contributed to multiple compression and overshadowed the company’s strong execution and resilient demand profile. Notwithstanding the recent selloff, we continue to view LOPE as a high-quality compounder with a compelling long-term growth runway and consistently high returns on invested capital.

BSD Analysis:
Grand Canyon Education runs one of the most efficient and cash-generative education service platforms in the U.S., even though the market still lumps it in with troubled for-profit peers. Its asset-light model and long-term service agreement with Grand Canyon University drive strong margins without the capital intensity typical of higher education. Enrollment trends have proven more resilient than expected as working adults continue to favor flexible, online programs. Regulatory scrutiny is a constant overhang, but GCE has navigated oversight better than almost anyone in the space. Cash flow remains robust, supporting buybacks and reinvestment without balance-sheet stress. Investors fixate on headline risk rather than operational execution. The business doesn’t need rapid growth to work — it just needs steady enrollment and compliance discipline. In a sector full of broken models, GCE quietly keeps doing the math right. This is education infrastructure masquerading as a controversial stock.

Pitch Summary:
Ciena Corporation (CIEN) was the top performer for the year with a remarkable 176% return. As a leading supplier of optical communications infrastructure, CIEN grew its revenue and EPS during 2025 as its equipment was deployed by the major hyperscalers and telecom service providers to enable movement of data within AI datacenter networks. CIEN’s leading position and large backlog should enable the company to continue to benefit from this trend, particularly given that networking is a new key bottleneck for deploying AI widely. We trimmed our CIEN position several times during 2025 when its weight grew above 5%.

BSD Analysis:
Ciena builds optical networking gear that underpins global data traffic. Carrier capex cycles create volatility. AI and cloud traffic growth drive long-term demand. Technology transitions reset upgrade cycles. Margins depend on mix and execution. Investors trade sentiment around telco spending. Over a cycle, bandwidth demand always wins. Ciena survives downturns to benefit from rebounds. This is infrastructure for data growth.

Pitch Summary:
Haemonetics Corporation (HAE) was the top contributor in the quarter. It was the worst performer during the 3rd quarter, when the stock sank 33% following a slightly disappointing second quarter report for its Hospital segment and lingering concern by some about the health of its plasma collections equipment business. We had high confidence that the plasma market was returning to its historic high-single-digit growth rate, and that HAE’s Hospital portfolio has great potential; therefore, we added to our position. In November, HAE reported strong third quarter results in both its Hospital and Plasma segments, propelling the stock to recoup its prior losses and more. We believe these trends offer opportunities for HAE going forward.

BSD Analysis:
Haemonetics supplies blood and plasma collection technology with strong recurring consumables revenue. Plasma demand continues to rise structurally. Operational missteps hurt credibility, but core demand remains intact. Switching costs are high for collection centers. Margin recovery depends on execution, not TAM. Investors punished the stock aggressively. Stabilization alone would drive upside. This is a franchise repair story. Demand is not the issue.

Pitch Summary:
Warby Parker is a compelling long-term growth opportunity built on a differentiated, vertically integrated eyewear and vision-care platform. The company has significant room to expand both units and economics. It holds roughly 1% share of the $66 billion U.S. eyewear market and continues to scale its omnichannel footprint. New stores drive higher conversion, more efficient customer acquisition, and stronger lifetime value—especially as more locations add in-house eye exams and optometrists. Eyewear replacement cycles of two to three years create durable, recurring demand. After recent delays in discretionary purchases, this demand should normalize. A key driver of the earnings inflection is margin expansion as stores mature, optometrist density rises, insurance participation increases, and fixed costs are leveraged. The core business also includes a meaningful call option on smart glasses and AI-enabled eyewear, as Google chose WRBY as its partner for new AI glasses. We expect ROIC to inflect and eventually exceed 20% as profitability improves and scale benefits accrue.

BSD Analysis:
Warby Parker built a brand, but scaling profitability is the real test now. Stores drive conversion but add fixed costs. Gross margins are solid, operating margins are not. The customer base is loyal, but competition is intense. Management is dialing back growth to focus on unit economics. Investors price in skepticism. If store productivity improves, leverage appears quickly. This is brand strength versus retail math. The next phase is execution.

Pitch Summary:
We added to our position in Adeia, Inc. during the quarter. The stock sold off after its third quarter earnings release when the company announced it had initiated patent infringement litigation against Advanced Micro Devices Inc. relating to its hybrid bonding IP. ADEA had believed AMD was ready to sign a license agreement without legal proceedings. Later in the quarter, ADEA and Walt Disney Co. entered into a media IP license agreement to settle their prior IP litigation, which lifted the stock again. Please see our deep dive on ADEA.

BSD Analysis:
Adeia monetizes IP licensing tied to media, semiconductors, and consumer electronics. Cash flow is strong, but growth depends on renewals and litigation outcomes. The model is opaque, which keeps valuation low. IP portfolios can surprise when standards shift. Capital returns matter more than revenue growth. Investors distrust licensing stories by default. Adeia benefits from embedded technology usage. This is cash flow with legal optionality. Not pretty, but real.

Pitch Summary:
During the quarter, we added NPK International Inc., a manufacturer, renter, and seller of composite matting solutions primarily serving utility and energy-related end markets. We view NPKI as a differentiated way to participate in the multi-year infrastructure buildout required to support grid expansion, electrification, and energy system upgrades. As new infrastructure is constructed, composite mats provide a stable working surface that protects the environment while offering meaningful advantages over traditional timber mats, including longer useful life, easier transportation, and superior long-term cost efficiency. Following several years of portfolio optimization, NPKI is now at an inflection point, positioned to benefit from incremental capacity additions, internal efficiency improvements, and accelerating customer adoption. Collectively, these factors support improving margins, stronger free cash flow generation, and an attractive risk-adjusted return profile as infrastructure investment continues to scale.

BSD Analysis:
NPK is a niche industrial supplier tied to infrastructure, construction, and energy projects. Revenue is project-driven and lumpy, which scares institutions away. Asset specialization creates barriers to entry. Management has focused on cost control and simplification. Demand benefits from infrastructure spending cycles. Balance sheet matters more than growth rate here. Investors price in permanent volatility. If execution stabilizes, upside follows quickly. This is cyclical leverage with discipline.

Pitch Summary:
We added Kodiak Gas Services, Inc., a leading provider of contract compression services to the exploration and production and midstream energy markets. Founded approximately 15 years ago and remaining founder-led, KGS operates in a consolidated industry with a limited number of scaled competitors and has distinguished itself through innovation, best-in-class training programs, and disciplined capital allocation. The long-term demand outlook appears favorable, with continued growth in oil and gas production volumes—particularly natural gas—driven by LNG export expansion, rising power demand from data centers, and broader electrification trends. While commodity prices are inherently volatile, we believe volume growth is the more relevant driver for compression demand, which directly benefits KGS. Supported by long-term, take-or-pay style contracts, the company is well positioned to generate durable free cash flow, return capital through dividends and share repurchases, and compound earnings at an attractive and consistent rate over time.

BSD Analysis:
Kodiak provides contract compression services with long-term agreements that stabilize cash flow. Exposure to Permian gas volumes aligns it with LNG growth. Contracted revenue reduces commodity price sensitivity. Scale improves maintenance efficiency and margins. Leverage is meaningful but manageable. Investors worry about energy cyclicality. Yet utilization trends remain strong. Kodiak is a toll-booth, not a driller. Volume growth is the thesis.

Pitch Summary:
During the fourth quarter, the team initiated a position in BioHarvest Sciences Inc. The BHST story has been on our radar for approximately 18 months, with multiple meetings with the CEO both in person and virtually. The firm participated in the company's recent secondary offering at a discount to its recent trading valuation. BHST's Botanical Synthesis platform is particularly compelling—it grows plant cells in a proprietary BioHarvester for use in food, beverage, pharma, and cosmetics products. This technology enables the mass production of plant phytochemicals without the need for a vast environmental footprint. BHST currently generates revenue from its VINIA nutraceuticals franchise, which uses resveratrol derived from grapes to promote strong circulation and other health benefits. We initiated a small initial position and intend to increase it over the next 6–12 months as we see the company execute on its plan. We believe BHST can be a long-term compounder over time.

BSD Analysis:
BioHarvest is a speculative biotech-nutrition hybrid built around plant-cell cultivation technology that bypasses traditional farming. The promise is compelling: consistent yields, lower resource intensity, and scalable production of high-value compounds. The risk is equally clear — commercialization and scaling are still unproven, and capital needs remain a constant pressure. Early traction in nutraceutical applications provides a proof-of-concept, but it’s not yet validation of a durable business model. If the platform scales, margins could be far superior to conventional agriculture or extraction-based methods. The market treats BioHarvest like a science experiment, which keeps expectations extremely low. That pessimism creates asymmetric upside if manufacturing economics improve. This is not a steady compounder; it’s an option on execution. Investors should size it accordingly and watch progress, not narratives.

Pitch Summary:
Limoneira (LMNR) was our top underperformer in 2025 as near-term results failed to reflect the value of long-cycle investments the company has been making for several years, testing investor patience despite a sound strategic foundation. As a 132-year-old California agribusiness and the largest avocado grower in the United States, Limoneira has methodically expanded its avocado acreage, planting roughly 1,500 acres, with approximately 700 acres still progressing toward full production—a process that inherently takes four to five years and cannot be accelerated. Short-term earnings pressure, combined with the company’s restructuring away from lemons to focus on avocados and the conclusion of a strategic review after bids failed to reflect intrinsic value, weighed on sentiment. However, this long-duration capital allocation increasingly looks well-timed given that the U.S. imports roughly 90% of its avocados from Mexico, where cartel-related disruptions, USDA inspection suspensions, and tariff uncertainty have highlighted supply chain fragility. As Limoneira’s Southern California orchards approach peak production—maturing during periods when Mexican supply is seasonally constrained—we believe the disconnect between near-term stock performance and long-term asset value underscores exactly the type of patient, hard-to-replicate opportunity we seek to own through difficult periods.

BSD Analysis:
Limoneira is routinely treated as a volatile citrus grower, but that framing ignores the real source of long-term value: land, water, and optionality. The company controls high-quality farmland in supply-constrained regions where replacement costs keep rising. Lemon pricing and weather drive short-term earnings noise, yet those cycles distract from the steady appreciation of hard assets on the balance sheet. The Harvest at Limoneira real estate development adds a non-agricultural cash flow stream that meaningfully diversifies the model. Water rights in California are increasingly strategic and underappreciated by public market investors. Inflation works in Limoneira’s favor over time, even when operating margins wobble. Execution is slow and not optimized for quarterly optics, which keeps the stock perpetually misunderstood. Investors trade fruit prices while land quietly compounds. This is a patient real-asset story hiding inside an ag ticker.

Pitch Summary:
Grand Canyon Education, Inc. (LOPE) was our largest detractor during the quarter despite reporting solid operating results that were largely in line with expectations. The stock’s weakness was driven less by company-specific fundamentals and more by negative read-throughs from peers and competitors that reported weaker-than-expected enrollment trends, which weighed on sentiment across the for-profit education space. In addition, the potential government shutdown during the quarter created an external overhang, raising concerns around Title IV funding flows and broader regulatory uncertainty, even though LOPE’s direct exposure remains limited. These factors contributed to multiple compression and overshadowed the company’s strong execution and resilient demand profile. Notwithstanding the recent selloff, we continue to view LOPE as a high-quality compounder with a compelling long-term growth runway and consistently high returns on invested capital.

BSD Analysis:
Grand Canyon Education runs one of the most efficient education service platforms in the U.S. Asset-light operations drive strong margins and cash flow. Online enrollment remains resilient despite regulatory scrutiny. The company has navigated oversight better than most for-profit peers. Growth is steady, not explosive. Investors still apply legacy stigma. But outcomes and economics tell a different story. Capital discipline supports buybacks and reinvestment. This is education infrastructure, not a diploma mill.

Pitch Summary:
Centrus Energy (LEU) was our top performer for the year as the market increasingly recognized its unique strategic positioning at the nexus of U.S. national security, nuclear energy independence, and next-generation reactor deployment. As the only U.S.-owned and licensed producer of both LEU and HALEU (high-assay low-enriched uranium), Centrus is a critical beneficiary of the structural shift away from Russian nuclear fuel supply and toward domestic enrichment, a theme reinforced by strong bipartisan and Department of Energy support. Performance was further driven by rising demand expectations tied to advanced reactors and SMRs (small modular reactors), as well as the growing role of nuclear power in supporting AI-driven data center load growth and long-term decarbonization goals. This thesis was validated when Centrus was awarded approximately $900 million on January 5, 2026 by the Department of Energy to build out additional enrichment capacity, materially strengthening its long-term earnings visibility and strategic value. Following the significant re-rating, we exited the position in full as we believe a substantial portion of the favorable policy, contract, and growth outlook has now been reflected in the share price.

BSD Analysis:
Centrus is a strategic choke point in Western nuclear fuel enrichment. HALEU capability makes it essential to advanced reactor deployment. Government backing lowers commercial risk over time. Revenues are lumpy, but strategic value is compounding. Investors struggle to value policy-driven businesses. Western energy security shifts favor Centrus structurally. Balance sheet repair unlocked upside. This is not a uranium miner — it’s enrichment scarcity. Scarcity gets paid.

Pitch Summary:
CNX Resources Corporation (CNX) was our top contributor for the quarter. Natural gas prices rose into the end of the quarter. The gain was largely weather-driven and with $5/mcf levels viewed as unsustainable in our long-term projections—CNX benefited in the short-term from a favorable near-term pricing backdrop. At the same time, the company continued to execute consistently, delivering on production targets, generating strong free cash flow, and returning capital through a disciplined and accretive share repurchase program, which together supported multiple expansion. The combination of improved commodity sentiment and company-specific execution proved to be a catalyst for strong stock performance. We remain encouraged by the structural demand drivers for natural gas, which should support higher volumes over time while maintaining prices near historical norms. Given the strength of the move, we elected to realize a portion of our gains during the quarter while maintaining a constructive long-term view on the business.

BSD Analysis:
CNX is a gas producer that thinks more like a capital allocator than a driller. Free cash flow generation and buybacks matter more than headline production growth. Appalachian gas faces takeaway constraints, but LNG exports change the math long term. Emissions management and ESG positioning differentiate CNX within gas. The stock trades like gas prices never recover. Balance sheet discipline lowers existential risk. Volatility is unavoidable, but leverage is improving. This is gas optionality with shareholder alignment. Cycles favor survivors.

Pitch Summary:
Douglas Dynamics (PLOW) is a leading North American manufacturer of commercial snow and ice control equipment and work truck solutions. The company offers asymmetric exposure to a normalization in winter weather after several consecutive years of below-average snowfall that suppressed equipment usage and replacement cycles. Data from the 2025–2026 season indicate one of the harshest winters in six to seven years across key regions, driving wear-and-tear and future replacement demand. Dealer inventory levels remain lean, setting up a favorable replacement cycle. Financially, the business is already inflecting, with margin improvement driven by pricing discipline, operational efficiency, and diversification into less weather-dependent solutions.

BSD Analysis:
Douglas Dynamics dominates niche markets for snowplows and work-truck attachments, categories defined by replacement demand rather than growth hype. Weather volatility drives year-to-year earnings swings, but fleets must remain equipped regardless of snowfall patterns. Aftermarket parts and service provide steadier cash flow than new equipment sales alone. Municipal and contractor customers value reliability and brand reputation over marginal price differences. Diversification into non-snow attachments reduces seasonality over time. Investors tend to overreact to weak winters and extrapolate short-term softness. The balance sheet supports dividends and disciplined capital allocation. Over a full cycle, margins prove more resilient than expected. This is unglamorous industrial durability hiding behind weather noise.

Pitch Summary:
During the fourth quarter we purchased Natural Gas Services Inc. (NGS), an energy services company located in Texas, primarily in the Permian region. NGS rents and maintains natural gas compression units used in oil and gas transportation, production and processing facilities. NGS is a unique energy play because they are largely price and commodity agnostic as their focus is on volumes rather than being reliant on the economics of a given commodity. A large percent of their revenue is under long term contracts. Additionally, NGS is in the process of optimizing their portfolio to large horsepower compressors while reducing exposure to small and medium horsepower. We are optimistic about volume growth, portfolio optimization, and margin improvement as the fleet evolves.

BSD Analysis:
Natural Gas Services Group provides compression equipment that sits directly in the flow of U.S. natural gas volumes. Demand is driven by throughput and reliability, not daily commodity prices, which makes the business more stable than typical energy names. The rental model creates recurring revenue and improving utilization as gas infrastructure tightens. LNG exports and rising gas demand extend the long-term volume story. Fleet expansion and refurbishment drive operating leverage when utilization improves. Investors often lump NGS in with volatile E&P exposure, which misses the infrastructure angle. Balance sheet management has been conservative, limiting downside risk. If gas volumes continue growing, pricing power follows quietly. This is an overlooked tollbooth on gas flow.

Pitch Summary:
Limoneira (LMNR) was our top underperformer in 2025 as near-term results failed to reflect the value of long-cycle investments the company has been making for several years, testing investor patience despite a sound strategic foundation. As a 132-year-old California agribusiness and the largest avocado grower in the United States, Limoneira has methodically expanded its avocado acreage, planting roughly 1,500 acres, with approximately 700 acres still progressing toward full production. Short-term earnings pressure, combined with the company’s restructuring away from lemons to focus on avocados and the conclusion of a strategic review after bids failed to reflect intrinsic value, weighed on sentiment. However, this long-duration capital allocation increasingly looks well-timed given that the U.S. imports roughly 90% of its avocados from Mexico, where cartel-related disruptions, USDA inspection suspensions, and tariff uncertainty have highlighted supply chain fragility. As Limoneira’s Southern California orchards approach peak production during periods of constrained Mexican supply, we believe the disconnect between near-term performance and long-term asset value is compelling.

BSD Analysis:
Limoneira is commonly viewed as a volatile citrus grower, but the real value sits beneath the soil rather than in quarterly fruit pricing. The company owns high-quality farmland and increasingly scarce water rights in regions where replacement costs keep rising. Lemon supply cycles dominate earnings headlines but obscure long-term asset appreciation. The Harvest at Limoneira real estate development adds a non-agricultural cash flow stream that reduces pure commodity risk. Inflation is a tailwind for land-based businesses even when operating margins wobble. Investors focus on agricultural volatility and miss balance-sheet optionality. Execution is deliberately slow, which frustrates traders but protects asset value. Over time, land scarcity tends to assert itself. Limoneira is a patient real-asset compounder hiding in an ag ticker.

Pitch Summary:
American Vanguard Corp. (AVD), a developer and marketer of agricultural products, underperformed during the quarter despite clear evidence of operational improvement. Since the appointment of a new CEO, management has executed on a turnaround plan that has meaningfully strengthened the business, though the stock price has moved in the opposite direction. Inventory levels have been materially reduced and are now more manageable, declining approximately 20% year over year, while gross margins expanded sharply to 29% from 15%. Adjusted EBITDA improved to $8 million from $2 million in the prior year, reflecting better execution, cost discipline, and pricing. While we remain cognizant of the risks inherent in the agricultural end markets, we believe AVD is clearly on a path toward a significantly stronger and more durable operating profile than the market currently reflects.

BSD Analysis:
American Vanguard is a specialty crop protection company trying to reposition itself as regulation reshapes the agricultural chemicals market. Legacy products face pressure, but tighter rules also push weaker competitors out and raise the value of compliant, niche solutions. The company’s pivot toward biologicals and higher-value formulations is slow, but strategically necessary. Near-term margins have been stressed, forcing balance-sheet and cost discipline that should improve earnings quality over time. Weather and planting cycles add volatility that the market often over-penalizes. Food security concerns don’t go away just because sentiment turns negative. Investors price American Vanguard as structurally impaired rather than cyclically challenged. If management stabilizes execution, operating leverage is meaningful. This is a repair story where expectations are already washed out.

Pitch Summary:
IRadimed Corporation (IRMD) was our top contributor for both the quarter and the full year. The MRI-compatible medical device company rallied nearly 38% in the fourth quarter and gained approximately 80% for the year. IRMD won FDA approval for its MRI-compatible 3870 IV infusion pump in July 2025, as expected. The company estimates that it will be able to generate $50 million of 3870 revenue during 2026, in addition to its strong monitor revenue, with more growth to come in 2027. The company’s accelerating revenue growth and profitability should enable the stock to continue to perform well in 2026 and beyond. IRadimed remains our largest position and a good example of accelerating growth with high returns on invested capital.

BSD Analysis:
IRadimed operates in a niche that sounds small until you realize hospitals can’t operate MRIs safely without its equipment. Its MRI-compatible patient monitoring systems face almost no credible competition. Regulatory approvals and switching costs create a durable moat. Revenue is lumpy but margins are exceptional. Hospital capex cycles create timing risk, not demand risk. Investors ignore IRadimed because the TAM looks narrow on paper. But narrow markets with monopolistic positioning compound quietly. Expansion into adjacent MRI-safe devices adds optionality. This is niche dominance done right.

Pitch Summary:
PAYC provides cloud-based human capital management (HCM) software for small to mid-sized companies in the USA. Its software includes a suite of applications in talent acquisition (recruitment & onboarding), time & labour management, and payroll. The Fund established a position in Mar-24, before adding on weakness in Sep-25. At its core PAYC’s software helps customers to eliminate inefficiencies, reduce manual work, improve accuracy, and reduce compliance risk. Labour cost reduction is the biggest single source of value, which is achieved thanks to the company’s unified technology stack. Put simply, PAYC consolidates HR, payroll, time and labour, and recruitment in the one piece of software, reducing the need to run multiple applications and thus to perform data reconciliations between them. Recent share price weakness comes as PAYC continues to deliver above-market revenue growth on the strength of its unified tech stack and market leading innovations. The weakness is attributable to a soft US jobs market, which will be a volume headwind for all HCM providers including PAYC. In the meantime, PAYC continues to focus on the controllables, recently launching an Ai-powered feature that allows users to instantly access HR and payroll data simply by asking for it in natural language. Whilst the HCM space is competitive, and the soft jobs market may temper near term revenue growth, investors are being more than compensated for this at a 13.5x EBIT multiple. In addition, the business has a net cash balance sheet and is well placed to generate further market share gains in the medium term.

BSD Analysis:
Paycom built a differentiated HCM platform by forcing employees to self-manage data, reducing errors and cost. That design choice creates strong margins but caps how fast it can sell into complex enterprises. Growth has slowed, and the market is punishing the stock accordingly. Yet retention remains high because switching payroll systems is painful. Paycom still prints cash and runs a clean balance sheet. The bear case assumes structural decline rather than maturation. If sales execution stabilizes, valuation compression looks overdone. This is a high-quality business priced like a broken one. Execution, not demand, is the swing factor.

Pitch Summary:
JKHY is a Missouri-based provider of mission-critical banking software to US regional and community financial institutions. Founded in 1976, JKHY provides software that sits at the heart of a bank or credit union’s operations, with offerings spanning core banking platforms, online and mobile banking, fraud and risk tools, and cloud-delivered solutions that help their clients modernise legacy systems, enhance customer experience and meet increasingly complex regulatory requirements. Within US banking software, JKHY is known for its strong culture, service and execution servicing the community and regional banking landscape. High switching costs, multi-year contracts and the operational risk of changing core providers create a durable moat, supporting resilient revenue and pricing power over time. JKHY has grown revenue at ~7% p.a. CAGR over the past five years while maintaining stable margins despite end-customer consolidation, with over 90% of revenue recurring and minimal customer churn. During the quarter the business reported a robust Q1 result, delivering solid revenue growth and margin expansion driven by expense control and favourable mix. Management cited an improved pricing environment, as well as continued momentum in migrating on-prem customers to JKHY's private cloud. In addition to this, market leader Fiserv announced an earnings downgrade in combination with a leadership shake-up and a commitment to greater price discipline going forward. This clearly bodes well for JKHY. With healthy top-line growth and consistently stable margins through the cycle, JKHY ticks many of the Fund’s boxes, including strong cash flow, high returns on invested capital and a net cash balance sheet. We initiated a position in the business last August when the stock was under pressure and we remain optimistic that it can continue to deliver strong returns for the Fund going forward.

BSD Analysis:
Jack Henry is embedded deep inside community banks and credit unions, making it incredibly hard to displace. Core processing software is mission-critical, compliance-heavy, and sticky by design. Growth is steady rather than explosive, but recurring revenue is highly predictable. Digital and payments modules expand wallet share without requiring new customer wins. Banks may cut discretionary spend, but they don’t rip out their core systems. Investors worry about fintech disruption, yet incumbency is the moat here. Margins reflect long-term contracts, not hype cycles. This is financial infrastructure disguised as boring IT. Boring works.