Investment Pitches

Pitch Summary:
If India compounds, then Bajaj Finance compounds faster. That leverage to formalization, credit deepening, and rising household balance sheets is why Bajaj sits at the center of our India exposure. Bajaj Finance was one of the few holdings that worked in 2025. In rupee terms, the share price rose roughly 45% in 2025. Earlier this year, I travelled to Pune for the company’s investor day. It reinforced my view of Bajaj as the highest-quality lender in an under-penetrated and rapidly formalizing credit market. It combines a long runway for growth with a culture that is obsessed with risk, underwriting, and operating discipline—a rare mix in financial services. More interesting is how deliberately the company is remaking itself as “FinAI”—a financial services platform built around deep technology and artificial intelligence rather than a traditional branch-and-paper mindset. Management walked through concrete AI initiatives at the investor day, from conversational bots that already handle a meaningful share of loan disbursals and service interactions, to vision and content systems that automate document checks and marketing, to an internal “AI pod” structure that embeds data science across product lines. The goal is a structurally lower cost-to-serve, sharper risk discrimination, and the ability to cross-sell more products to each customer. Looking out over the next several years, the company expects to more than double its customer franchise, from just over 100 million customers today, to 200–220 million by 2030, while increasing its share of India’s overall “system credit.”

BSD Analysis:
Bajaj Finance’s moat is distribution, underwriting, and cross-sell at scale across India’s fast-growing credit market. The concentration risk is macro and regulation: high growth lenders become politically interesting, fast. Funding is a competitive edge until liquidity tightens and spreads compress. Credit costs look “managed” until a cycle tests new borrower cohorts. The bull case is compounding through penetration, data-driven underwriting, and operating leverage. The bear case is policy intervention, sharper competition, or a consumer credit drawdown that hits growth and losses simultaneously. Valuation often assumes best-in-class execution continues uninterrupted. Bajaj is a premier compounder—still a lender at the mercy of cycles and regulators.

Pitch Summary:
Consensus Cloud Solutions Inc (CCSI) was spun off from J2 Global in October 2021. In February 2023, an accounting error led to a restatement of results, which weighed heavily on the stock. In November 2023, the Board authorized a $300 million debt repurchase program, marking a meaningful change in capital allocation strategy. The stock marked a low in April 2024, trading at just 2.5x earnings. Summers Value Partners began buying shares in June 2024 at approximately 3.5x earnings, following improved balance sheet visibility and the launch of new clarity clinical documentation services in Q1 2024. By February 2025, net debt to EBITDA had declined below 3x and the Board renewed its stock repurchase plan. The firm believes the shares are worth $58, representing 145% upside from the entry price.

BSD Analysis:
Consensus Cloud is a cash-flow story built on legacy secure communications (notably eFax), which is both moat and concentration risk. The moat is workflow entrenchment in regulated industries, where “fax-like” compliance persists longer than people predict. The concentration is product relevance: if healthcare and government finally modernize faster, the core revenue base erodes. The company can milk cash flows, but growth requires new adjacencies that are harder than the legacy base suggests. Customer switching is sticky, yet price sensitivity rises when budgets tighten. The bull case is durable cash generation with disciplined capital returns and modest expansion products. The bear case is secular decline accelerating while the market stops paying for yield. Consensus is a melting-ice-cube that can still be a good investment—if you don’t overpay and management behaves.

Pitch Summary:
Provides specialist engineering services to the energy, defence, renewables and marine markets. 175-year-old business, 2,367 employees, 18 countries. ’24 Sales £438m, EBITDA £51m, underlying EBIT £29.5m, ROCE 8.2%. Net margin low (c.6.7%) vs history (>10%) due to loss of operational oversight and some (temporary) external issues. Became over-leveraged due to poorly executed acquisition strategy. Recovery opportunities (company target 10% margin, 15% ROCE): Defence business 2.3% margin ’24, critical stock catalyst. New Chairman, CEO and CFO high quality, CEO already re-organised to 3 divisions and appointed new Heads of each (2 external). Net Debt was elevated (£150m), now materially addressed by recent disposals (£63m). Valuation: Target recovery £75m EBITDA. Current depressed multiples est. ’26 4.6x EBITDA, 0.6x EV/Sales. Upside = >200%.

BSD Analysis:
James Fisher is a niche marine services group where the moat is specialized capability and long-standing customer relationships. The concentration risk is end markets: offshore energy, marine engineering cycles, and government/industrial contracts that can be lumpy. Execution risk is high because project complexity punishes operational mistakes. Balance sheet and working capital discipline matter more than revenue growth optics. The bull case is recovery in offshore activity and improved operational focus. The bear case is another cycle of restructuring, low visibility, and margin disappointments. This is not a steady compounder; it’s a “fix and execute” industrial. James Fisher wins when it’s boring, and historically it hasn’t stayed boring long enough.

Pitch Summary:
Following strong performance in 2021 and 2022, energy stocks have underperformed the S&P 500 by 76% in the last three years. Free cash flow remains strong despite low oil prices, balance sheets are strong and management teams are broadly focused on returning capital to shareholders and consolidating peers. The QV Canadian Small Cap Strategy recently purchased shares in Topaz Energy Corp., an energy royalty and infrastructure business, trading at an attractive 7% free cash flow yield using conservative assumptions which the team feels can grow organic production at a mid-single digit pace in coming years. While outcomes for energy are often at the mercy of oil prices, low current commodity price expectations provide optionality for a future scenario where demand could outweigh supply.

BSD Analysis:
Topaz is a royalty and infrastructure model designed to reduce operating risk, but it concentrates you in one thing: Western Canadian resource activity. The moat is asset-light exposure to production volumes and pricing without direct capex burden. Concentration shows up in basin economics, counterparty health, and commodity-driven drilling intensity. When activity is strong, cash flow looks “infrastructure-like”; when activity slows, the variability shows. The bull case is disciplined capital allocation and stable distributions supported by resilient producers. The bear case is a drilling downturn or counterparty stress that reduces volumes and growth. Royalty models feel defensive until the basin turns. Topaz is lower-risk energy exposure, not no-risk.

Pitch Summary:
Meanwhile, memory chip providers such as Micron and long-term QV Global holding Samsung Electronics surged 240% and 120% respectively in response to surging demand for chips required to power AI data centers. The spike in AI related capital spending extended to industrial businesses as well, with power generation equipment manufacturers such as Caterpillar and QV Canadian large cap holding Finning’s shares rising 60% and ~100% respectively. While the return on all the capital being spent to advance large language models remains uncertain, the required data center investment has durably raised demand for the equipment required to build them. That Finning traded at just ~10.5x earnings and Samsung traded near 1x book value at the beginning of 2025 underscores that there are more ways to benefit from the fervour in AI than chasing the most expensive companies being touted in the daily news. It also shouldn’t go unnoticed that after years of pulling the S&P 500 higher, the biggest of the big tech companies ceded market leadership in 2025.

BSD Analysis:
Finning’s moat is dealer scale, service capability, and embedded relationships around Caterpillar equipment. The concentration is obvious: it’s effectively a CAT franchise tied to a few geographies and the capex health of mining, energy, and construction. Aftermarket service smooths cycles, but it doesn’t eliminate them. Working capital and equipment inventory can swing cash flow violently when demand turns. The bull case is sustained resource and infrastructure spend plus high-margin parts/service growth. The bear case is commodity capex slowdown and margin compression on equipment sales. Finning is a great operator inside a cyclical ecosystem it can’t control. You’re underwriting regional macro and CAT’s competitive position as much as Finning’s execution.

Pitch Summary:
In March of 2025, the QV Global Equity Strategy purchased Dollar General, the largest discount retailer in the U.S. at just 14x earnings, after the shares had declined ~70% and earnings had fallen by 47% following what we saw as fixable cyclical and operational challenges in an otherwise resilient franchise with many years of future growth. In the time since, management has taken steps to improve growth and profit margins and the shares have risen ~80%, showing that even in expensive markets, there are always opportunities to be found.

BSD Analysis:
Dollar General’s moat is proximity and convenience for value-focused consumers, not premium merchandising. The concentration risk is the customer: a lower-income shopper whose behavior is highly sensitive to inflation, benefits, and wage pressure. Store density is an advantage until it becomes saturation, cannibalization, and rising shrink. Execution risk is outsized—inventory, labor scheduling, and in-stock rates drive outcomes more than strategy. The bull case is trade-down resilience and operational fixes that restore margins. The bear case is persistent shrink, wage pressure, and a consumer that is tapped out. E-commerce isn’t the main threat; it’s store-level profitability degradation. DG is a defensive concept that can become a self-inflicted turnaround if execution slips.

Pitch Summary:
Memory chip providers such as Micron and long-term QV Global holding Samsung Electronics surged 240% and 120% respectively in response to surging demand for chips required to power AI data centers. The spike in AI related capital spending extended to industrial businesses as well, with power generation equipment manufacturers such as Caterpillar and QV Canadian large cap holding Finning’s shares rising materially. That Finning traded at just ~10.5x earnings and Samsung traded near 1x book value at the beginning of 2025 underscores that there are more ways to benefit from the fervour in AI than chasing the most expensive companies being touted in the daily news.

BSD Analysis:
Samsung is a scale titan, but its earnings are far more concentrated than the brand suggests—memory cycles still dominate. The moat is manufacturing scale, process know-how, and vertical integration, yet those strengths don’t eliminate commodity pricing. Concentration shows up in end markets (consumer electronics + memory) and in the brutal cyclicality of DRAM/NAND. When pricing turns, profits surge; when it doesn’t, operating leverage works in reverse. Foundry is a strategic pivot to de-concentrate, but it’s expensive and structurally behind the leader. The bull case is memory normalization plus AI-driven demand and a credible foundry ramp. The bear case is persistent pricing pressure and capex that earns subpar returns. Samsung is quality manufacturing strapped to a commodity profit engine.

Pitch Summary:
TAV Airports operates 15 airports in 8 countries. Their guidance is 10-14% annual passenger growth across its airports, which we believe may continue for decades. TAV has high operating leverage: in our view, if passengers grown12%, cash flow may grow at more than 2x that. We believe it is led by an exceptional management team and is very cheap compared to other global airport operators. 75% of its 2024 revenues were generated in or indexed to hard currencies (EUR and USD) or pegged to USD. In 2021, TAV purchased 85% of Almaty International Airport in Kazakhstan. They invested $120 million of equity. EBITDA was $116 million in 2024 and TAV expects it to be over $129 million in 20251. Almaty is just one of several great assets at TAV, including Havas and Antalya.

BSD Analysis:
TAV Airports is an infrastructure growth story that looks defensive until you stress the concentrations. Traffic is concentrated in specific geographies, regulatory regimes, and concession frameworks that can change with politics. Currency exposure is not incidental—it’s often the main driver of reported returns and investor sentiment. The business benefits from travel recovery and long-duration concessions, but that duration cuts both ways when terms reset unfavorably. Capex cycles are heavy and non-negotiable; airports demand reinvestment regardless of market mood. The bull case is passenger growth, pricing power via commercial revenues, and disciplined bid selection. The bear case is geopolitical shocks, FX drawdowns, or concession risk that reprices cash flows overnight. TAV is infrastructure with sovereign concentration risk baked in.

Pitch Summary:
Risk & Opportunity: Constellation Software Family Each CSI operating group (and its subgroups) spans a wide range of verticals, and due to poaching rules, businesses are not organized or consolidated strictly by vertical. For example, Vela includes a subgroup, Juniper, that is primarily focused on travel, even though Jonas also owns a significant number of travel-related businesses. As a result, disruption risk is best assessed at the level of customer type, system criticality, and integration depth rather than by vertical label alone. We therefore frame AI-related risk and opportunity along a spectrum defined by customer type, depth of integration, and switching costs, supplemented by scenario thinking for businesses that may be more exposed. At one end of the spectrum are deeply embedded, mission-critical systems serving large enterprises or public-sector customers—such as administrative healthcare systems, utilities, public transport, and core banking—operating in regulated, “can’t-fail” environments. These markets are characterized by complex implementations, deep integration, and high switching costs, which materially constrain both the pace and scope of AI-driven disruption. As shown in the framework outlined in the chart on page 18, the central question in these settings is not whether AI will be adopted, but who is positioned to deploy it effectively. While many underlying workflows are repetitive and economically meaningful, practical constraints around data access, regulation, and accountability favor incumbents already embedded in core customer workflows. Here, AI is more likely to drive upsell and value expansion for trusted vendors than to displace them outright by AI-native entrants. At the other end of the spectrum are more consumer-facing or SMB-oriented markets built around point solutions with lower switching costs, including digital marketing, travel, fitness and club management, real estate platforms, and select clinical point solutions in healthcare. Customers in these markets prioritize speed, convenience, and price, and are generally more willing to switch providers. Lower integration requirements, shorter sales cycles, and fewer structural constraints make these segments more susceptible to disruption. Overwhelmingly, solutions that are too small, overly point-specific, or not truly mission-critical fall outside CSI’s core focus and represent a limited portion of the portfolio where they do exist. Where CSI does operate, its businesses are typically structured as integrated systems rather than isolated applications, consisting of layered backend components, core processes, and integrations. Constellation generally owns the backend core and incrementally expands functionality through customization, which supports professional services revenue and increases wallet share over time.

BSD Analysis:
Constellation Software is the gold standard in vertical-market software acquisition, compounding capital through thousands of tiny, mission-critical software businesses. Its decentralized structure and incentive alignment are unmatched. Each acquisition is boring, sticky, and incredibly profitable. Growth comes from reinvestment discipline rather than TAM expansion. Transparency is limited by design, but results speak loudly. Capital allocation is the product. This is arguably one of the best long-term compounding machines ever built.

Pitch Summary:
The share price of the US insurance broker Brown & Brown fell 21% in 2025 despite growth in operating cash flow of 24% during the first nine months. We believe the main reasons for the decline are the wait-and-see attitude toward the outcome of the largest acquisition in the company’s history and weaker-than-normal trading due to market conditions. The acquisition of Accession is large relative to historical deals and has raised investor skepticism. Importantly, there is nothing wrong with cash generation at Brown & Brown. The company increased its dividend by 15%, marking the 32nd consecutive year of increases.

BSD Analysis:
Brown & Brown is one of the most consistent performers in insurance brokerage, thriving on steady rate increases and relentless execution. Its decentralized culture keeps local producers motivated while benefiting from scale economics. The company avoids underwriting risk, focusing instead on commissions and fees. M&A remains disciplined, targeting cultural fit over size. Rising premiums directly lift revenue without incremental risk. Margins and cash flow are remarkably stable. Brown & Brown is a low-drama, high-quality compounder in financial services.

Pitch Summary:
Freshly spun off from Unilever, Magnum Ice Cream Company is incredibly defensive, given its predictability. It’s simple to model. Easy to value. Easy to like. What we found was a jewel box tucked inside three million freezers globally. These are lent to shops for free, provided they agree to sell only Magnum company ice cream. Aside from the eponymous Magnum, it owns several other well-known brands, including Wall’s and Ben & Jerry’s. This is a high-margin activity with a captive audience. Its closest competitor, Froneri, is 40% smaller and was recently valued at £13bn. Magnum, on the other hand, shows an overall Kernow equity value of £8bn. That’s twice the current share price. Yes, we priced in inflation growth, GLP-1 risk and fleeting politics. So, whats wrong with it? Well, it's two-fold. It suffers from a weak culture and chronically neglected effective capex. There lies the opportunity. Fixing this will require a major and sustained re-engineering of the entire organisation. Bottom line, we have taken a small bite, and this could be a sweet double in five years.

BSD Analysis:
Magnum Ice Cream is Unilever’s former ice cream division re-emerging as a standalone global giant with brands like Ben & Jerry’s, Magnum, and Cornetto. The moat is brand + distribution + freezer real estate—ice cream is supply-chain and point-of-sale intensive, which keeps entrants small. The risk is that ice cream is seasonal and promotion-heavy, and consumers are increasingly health-conscious. Management is explicitly targeting strong free cash flow (up to ~€0.8–1.0B by 2028–29), which frames the story as cash-yield infrastructure rather than growth glamour. It aims to run with moderate leverage, which matters because the category is volatile on inputs and demand. There’s also brand-governance noise (Ben & Jerry’s activism disputes) that can become a headline tax. The bull case is a focused operator extracting efficiency and defending premium brands. The bear case is multiple compression if growth disappoints and health trends bite. Magnum is a real cash-flow asset—just don’t pretend it’s a tech multiple story.

Pitch Summary:
Cue the largest IPO in the UK in 2025 that you have never heard of. A £12bn dual US/UK listing called Fermi. We started betting against it as it arrived neatly at the peak of AI data centre euphoria. The company has no credible balance sheet to fund its Frankenstein build and no clients to fill the racks. Our thesis relied on political shifts in 2029 and breakthroughs in tech that would reshape the data centre landscape. The stock dropped 70% within three months of listing. The cat’s out of the bag; more than 30% of shares are now shorted. We covered our position.

BSD Analysis:
Fermi is a data center infrastructure REIT built around the AI power-and-compute boom, but it’s early-stage and capital intensive. It’s effectively a bet on securing massive redundant power at gigawatt scale—an actual bottleneck for AI growth. The “moat” is site control and power strategy, not technology. The risk is development execution: timelines slip, costs rise, and the market stops funding dreams. The bull case is hyperscaler tenant demand and scarcity of power-heavy campuses. The bear case is no near-term revenue and big capex obligations, turning equity into a financing vehicle. It trades like infrastructure, but behaves like a startup until cash flows arrive. Fermi is optionality on AI power scarcity—priced by capital markets mood.

Pitch Summary:
Judges Scientific continues to face headwinds in its end markets. The company supplies scientific instruments to universities in the US, and recent reductions in federal research funding have affected short-term performance. However, we have witnessed similar challenges over the years, often followed by significant rebounds in activity and the share price. We do not believe the current soft environment is structural and remain optimistic about the company’s long-term prospects. Over the past 18 years, Judges has grown revenues at a compound annual rate of 20% and EBIT at 26%, while increasing dividends by 22% annually. We continue to have confidence in its operating model and expect to see a recovery in the coming years.

BSD Analysis:
Judges Scientific is a masterclass in niche industrial roll-ups, acquiring small, high-margin scientific instrumentation businesses and letting them thrive autonomously. Each subsidiary dominates a narrow technical market with minimal competition. The group’s decentralized structure preserves entrepreneurial culture while extracting financial discipline. Organic growth is modest, but acquisition returns are exceptional. Cash conversion is strong, funding the next deal cycle. Judges rarely overpays and almost never sells. This is one of Europe’s quietest and most effective compounding machines.

Pitch Summary:
Dragging down Kernow’s performance this month was Card Factory, after a harsh profit warning blamed on weaker high street footfall. What’s less clear is whether this signals a tough retail environment or something more troubling in the company’s competitive position. For now, we’ve let sleeping dogs lie. The next year should make it clear whether the dog’s just napping or quietly chewing through the furniture.

BSD Analysis:
Card Factory’s moat is scale purchasing and value positioning in a category that sounds trivial until you see the repeat behavior. The risk is footfall: physical retail is always one bad consumer cycle away from margin pressure. Input costs and wage inflation matter because unit economics are tight. Competition from supermarkets and online is persistent, even if not always fatal. The bull case is disciplined store economics plus adjacent categories lifting basket size. The bear case is volume decline and promotional pricing. This is a cash-flow business, not a growth story. The multiple stays capped because the category is mature. Card Factory works when execution is boring and costs behave.

Pitch Summary:
On Alyx’s 40th birthday, Kistos sent him a gift way better than cake. It doubled its oil and gas production and resources. What more can anyone ask for… It pulled this off through an acquisition in the Middle East. And oh man, it was a good deal. Non-dilutive to shareholders, funded entirely with existing resources. Frankly, given the near-term catalysts, this share is the most mispriced stock in our portfolio. Of course, the macro backdrop looks grim. Oil dropped 20% in 2025, and Trafigura expects it to fall further amid a supply glut. Naturally, as contrarians, we’ve been buying more. Buy low. Sell high. The hard part isn’t knowing the rule. It’s surviving the bit in between.

BSD Analysis:
Kistos is an upstream energy operator whose economics are mostly commodity price and capital discipline. The “moat” is low-cost assets and opportunistic M&A, not structural barriers. The risk is obvious: leverage to oil/gas prices and political/regulatory hostility to hydrocarbons in Europe. Execution matters because production declines and maintenance capex are real. The bull case is strong free cash flow with disciplined returns to shareholders. The bear case is price weakness plus higher taxes/regulatory intervention. Investors often overpay in upcycles and underappreciate decline rates in downcycles. Kistos is a cash-flow trade, not a secular story. You own it for cycle torque—accept the volatility.

Pitch Summary:
To be fair, two minutes before market close on Christmas Eve, one of our biggest positions, Secure Trust Bank, gave us a fright. The announcement? A major division sold for £459m. At a premium to book value… wait… that’s not bad news. That’s excellent news. The whole company is trading at half its book value. Investors are effectively buying £1 for 50p. We scrambled to buy more but missed the bell. It gets better. This working capital boost will put the company in a much better position to exploit its new lending strategy, earmarked to be officially announced at the Capital Markets Day in a couple of months. The cherry on top? The CEO has been buying shares in the open market. Not options. No freebies. Real money. His own. That’s as strong a signal as it gets.

BSD Analysis:
Secure Trust is a niche UK lender where the “moat” is specialization in segments the big banks under-serve. That’s also the risk: niche credit can go bad quickly when macro deteriorates. Funding costs and deposit competition matter more than loan growth. Regulatory capital discipline is a constant constraint on upside. The failure mode is credit losses rising faster than repricing, compressing spreads. The bull case is stable net interest margins with controlled impairments. The bear case is a UK consumer downturn hitting non-prime pockets first. Challenger banks don’t get the benefit of the doubt. STB is about underwriting and funding—nothing else.

Pitch Summary:
Another new addition is Chrysos, an Australian mining technology company focused on improving the analysis of gold, silver, copper, and other critical metals. Its proprietary PhotonAssay technology allows miners to test ore samples faster, safer, and more consistently than traditional methods. Chrysos is steadily expanding its installed base with large mining operators and global laboratory partners, embedding its systems directly into customer workflows. In our view, investors are undervaluing both the durability of its business model and the earnings potential from broader industry adoption.

BSD Analysis:
Chrysos sells PhotonAssay, a faster, safer, environmentally friendlier way to analyze gold and other elements—basically, mining lab disruption. The moat is technical differentiation plus installed-base inertia once a site standardizes its assay workflow. Revenue scales with deployments and utilization, not commodity prices directly, which makes it more “tech picks-and-shovels” than miner beta. The risk is adoption friction: mine sites are conservative and capex approvals can lag. Competition and in-house lab alternatives can pressure pricing if differentiation narrows. Execution risk is manufacturing, servicing, and expanding globally without quality slips. The bull case is broad rollout across miners chasing speed and safety. The bear case is slower adoption and a lower-margin service reality. Chrysos works if the technology stays clearly superior and the rollout stays disciplined.

Pitch Summary:
We recently added a compelling new holding to the fund in Circus SE, a German-based company developing AI-driven robotics that automate food preparation and logistics across both commercial and defense markets. The company has gained early traction through partnerships such as its collaboration with Meta Germany and agreements with military branches to deliver its technology directly to troops, highlighting the real-world value of its platform. While current market expectations take a conservative view of future profitability, we believe Circus SE’s long-term earnings potential is meaningfully undervalued as adoption broadens and the business scales.

BSD Analysis:
Circus SE is a robotics automation bet aimed at food service, where labor pressure creates a real economic need. Its “moat” is still under construction—product reliability, deployments, and unit economics will decide whether this is platform or prototype. The risk profile is venture-like: capital needs, execution slips, and slow adoption cycles in messy real-world environments. If the tech works, distribution and servicing become the next bottlenecks. If it doesn’t, the equity is pure optionality with a burn rate. The bull case is successful commercialization of autonomous solutions for kitchens/food operations. The bear case is that adoption proves slower and costlier than the story. This trades on milestones, not fundamentals. Circus is optionality—size it like optionality.

Pitch Summary:
Builders FirstSource (BLDR) was one of the biggest detractors in the quarter, but one where we have continued faith. BLDR is the largest distributor of lumber and building products materials for contractors and home builders. The company has been a consolidator of smaller regional lumberyards over time and made a push towards increasing value-add building products such as pre-assembled trusses to save builders time and labor on the job site. Housing starts weakened in 2025 as high interest rates cooled housing demand amid decreased housing affordability and an oversupply of new homes. As a result, BLDR earnings and estimates have been revised lower, and the stock is down nearly 40% since late January. We believe it’s early days in the housing market’s cyclical recovery and fundamental improvement. Moreover, BLDR’s chairman bought $55 million of stock in the summer. The company has also been a consistent acquirer of its own shares through buybacks, so the business checks two of the three capital allocation boxes we look for. The company should have considerable EPS upside when housing fundamentals improve, which is more likely now as interest rates are falling. We believe housing starts are likely to normalize back to long-term averages, as the country is in dire need of more housing supply. Management has said it believes the business can generate $2.1 billion to $2.4 billion of EBITDA in a normalized housing start environment. Even if we take the low-end of that range, that still represents very strong upside. Yet the stock trades at less than 11 times EBITDA.

BSD Analysis:
Builders FirstSource is leveraged to housing starts and repair/remodel—rates are the throttle. The moat is scale and integrated offerings that help pro builders simplify procurement. But when housing slows, pricing power disappears quickly and volumes follow. The failure mode is fixed-cost deleverage plus inventory/working capital pain. Consolidation has improved industry structure, but it didn’t repeal cyclicality. The bull case is a housing recovery and margin resilience from value-added products. The bear case is prolonged affordability stress and lower activity. BLDR is a quality cyclical—timing matters. Don’t treat it like a secular compounder.

Pitch Summary:
Another overlooked stock with notable upside potential in 2026 is WESCO International (WCC), a logistics and supply chain solutions company in which we initiated a new position during the quarter. Shares of WESCO, which connects suppliers and customers around the world for electrical, industrial, utility, and communications products, had been underperforming the Industrial sector in 2024 and the first half of 2025. That was largely due to double-digit declines in its Utility and Broadband Solutions segment as well as the ongoing slowdown in its Electrical & Electronic Solutions segment. EBITDA margins declined during this period, but they appear to be set to expand going forward as we expect WCC to return to mid-single-digit growth rates within both segments. We also expect WESCO’s EBITDA margins to improve from an expected 6.6% in FY 2025, thanks in part to cost savings from prior investments in automation. With improving growth prospects and a healthy potential to expand EBITDA margins, WCC could offer double-digit EPS growth for several years to come. Yet the stock trades at less than 1 times FY 2027 sales and around 10 times EBITDA.

BSD Analysis:
WESCO is a scale distributor—value is earned through logistics, procurement, and project execution, not brand magic. The moat is customer embedment in large projects where reliability beats lowest price. The risk is classic distribution fragility: working capital, margin compression, and cycle exposure. When demand turns, inventories become an enemy fast. M&A can help scale but introduces integration and complexity risk. The bull case is electrification, data centers, and industrial capex sustaining volumes. The bear case is a cyclical downturn hitting both volumes and pricing. WESCO is an execution stock in a cyclical wrapper. It compounds only if discipline stays intact.