Investment Pitches

Pitch Summary:
Turning to short positions, detractors from Fund performance were those stocks that rose in price. One of the largest detractors among our shorts was Lumentum Holdings, Inc. (LITE). We hold the short position to offset the risk of some of our long holdings tied to the AI buildout. We believe the short position in Lumentum will help to mitigate the downside should the stocks of companies tied to AI infrastructure sell off broadly. But on a fundamental basis, we don't think Lumentum has as powerful an economic engine as some of our long holdings tied to the AI buildout, nor do we think Lumentum will be as profitable.

BSD Analysis:
The manager maintains a bearish stance on Lumentum Holdings as part of a hedging strategy against AI infrastructure exposure in the long portfolio. The short position serves as a risk management tool to offset potential downside if AI infrastructure stocks sell off broadly. On fundamental grounds, the manager believes Lumentum lacks the economic strength and profitability potential of their preferred AI infrastructure long positions. This suggests concerns about Lumentum's competitive positioning, margin profile, or growth prospects relative to other companies in the AI buildout theme. The optical and photonic products space faces intense competition and cyclical demand patterns that may pressure profitability. While Lumentum participates in AI infrastructure through optical networking components, the manager appears to view it as a lower-quality play compared to their long holdings. The hedging rationale indicates the manager wants AI infrastructure exposure but prefers to short what they view as weaker participants while maintaining longs in higher-quality names.

Pitch Summary:
Casella Waste Systems, Inc. (CWST) also detracted. Casella is a regional solid waste, recycling and resource management firm in the U.S. Earnings per share growth was a little ahead of expectations in Casella's most recently reported financial results. But profitability declined, which might have weighed on the stock. Although Casella's stock price declined, we continue to like the business and the management team, which has a long history of successfully integrating acquisitions.

BSD Analysis:
The manager maintains a bullish view on Casella Waste Systems despite recent stock underperformance and margin pressure. The investment thesis is anchored by confidence in management's proven track record of successful acquisition integration, a critical capability in the fragmented waste management industry. While the company delivered earnings per share growth that exceeded expectations, declining profitability created near-term headwinds for the stock price. The manager's continued conviction suggests this profitability decline may be temporary or related to integration costs from recent acquisitions. Casella's regional focus in solid waste, recycling, and resource management provides defensive cash flow characteristics and potential for market share consolidation. The waste management industry offers attractive fundamentals including recurring revenue streams, high barriers to entry through regulatory requirements, and opportunities for operational leverage. Management's acquisition expertise positions the company well to capitalize on industry consolidation trends and drive long-term value creation.

Pitch Summary:
One of our largest detractors, ProCore Technologies, Inc. (PCOR), serves as an example of a business where the investors may be underappreciating the durability of its competitive moat. ProCore's software helps businesses manage construction projects. Procore's competitive advantage lies not in its software code, but in its extensive network of contractors and the proprietary data generated across thousands of projects. That network effect and dataset are significantly more difficult to replicate than the software's underlying functionality, and we believe they position the company well in an AI-driven environment.

BSD Analysis:
The manager maintains a bullish stance on ProCore despite recent stock underperformance, arguing that investors are underappreciating the company's durable competitive advantages. The investment thesis centers on ProCore's network effects and proprietary data moat rather than just software functionality. The company has built an extensive network of contractors and accumulated proprietary data from thousands of construction projects, creating barriers to entry that extend beyond replicable code. This network effect becomes more valuable over time as more contractors join the platform and generate additional data insights. The manager believes these competitive advantages position ProCore well in an AI-driven environment, where proprietary datasets become increasingly valuable for training AI models and generating insights. The recent stock weakness appears to be driven by broad software sector concerns about AI disruption, creating what the manager views as a compelling opportunity in a fundamentally strong business with defensible market positioning.

Pitch Summary:
Among short positions, contributors to Fund performance were those stocks that declined in price. The largest contributor on the short side was Asana, Inc. (ASAN). The company is best known for its cloud-based work management platform, which helps teams organize, track, and manage projects, tasks and workflows. Software stocks such as Asana's sold off broadly in the first quarter due to concerns that AI could displace some software services. When it comes to Asana, we believe it would be fairly easy for AI or a competitor to replicate its services. While we maintained a short position, we reduced it during the quarter after the stock sold off.

BSD Analysis:
The manager maintains a bearish view on Asana, expressing concerns about the company's vulnerability to AI disruption and competitive threats. The investment thesis centers on the belief that Asana's cloud-based work management platform lacks sufficient competitive moats to defend against AI displacement or competitor replication. The manager views Asana's services as relatively commoditized, suggesting that AI tools or competitors could easily replicate the core functionality of organizing, tracking, and managing projects and workflows. This vulnerability became evident during Q1 2026 when software stocks broadly sold off due to AI disruption concerns. The manager's decision to reduce the short position after the stock declined indicates tactical profit-taking while maintaining the core bearish thesis. The lack of defensible competitive advantages in a rapidly evolving AI landscape poses ongoing risks to Asana's market position and pricing power.

Pitch Summary:
Another top contributor was Ensign Group, Inc. (ENSG). Ensign operates skilled nursing and senior living facilities. The company also acquires and leases health care real estate. Ensign's shares moved higher after the company reported strong fourth-quarter and full-year 2025 results, in which annual revenues were up 18.7% from the prior year. Management also issued full-year 2026 earnings and revenue guidance that was well received by market participants, and cited year-over-year improvements in occupancy, skilled nursing days, and Medicare revenue in its same-store and transitioning portfolios. Ensign is a longtime Wasatch holding and we continue to view it as one of the best operators in the health-care sector.

BSD Analysis:
The manager expresses strong conviction in Ensign Group as one of the best operators in the healthcare sector, supported by impressive fundamental performance. The company delivered robust 18.7% annual revenue growth in 2025, demonstrating strong execution in the skilled nursing and senior living space. Key operational metrics showed meaningful improvement including occupancy rates, skilled nursing days, and Medicare revenue across both same-store and transitioning portfolios. Management's 2026 guidance was well-received by the market, indicating continued momentum and visibility into future performance. The dual business model of operating facilities while also acquiring and leasing healthcare real estate provides diversified revenue streams and capital allocation optionality. As a longtime holding, the manager's continued confidence suggests consistent operational excellence and strategic execution over multiple years.

Pitch Summary:
In the first quarter, one of the largest contributors among our long positions was RBC Bearings, Inc. (RBC). The company is a U.S. industrial manufacturer of highly engineered precision bearings and components used in critical aerospace, defense, industrial and energy applications. Companies tied to the aerospace and defense industries tended to have strong stock-price performance in the first quarter, as investors anticipated higher demand for their products in a more geopolitically volatile environment. Separately, fundamentals for RBC Bearings remain strong, and we continue to like the growth potential of this longtime holding.

BSD Analysis:
The manager maintains a bullish stance on RBC Bearings, highlighting the company's position as a manufacturer of highly engineered precision bearings for critical aerospace, defense, industrial and energy applications. The investment thesis is supported by strong fundamentals and continued growth potential in a longtime holding. The company benefited from sector rotation into aerospace and defense stocks during Q1 2026, driven by investor expectations of higher demand in an increasingly geopolitically volatile environment. RBC's specialized manufacturing capabilities in precision components for mission-critical applications provide defensive characteristics and pricing power. The manager's confidence in the company's long-term prospects suggests strong competitive positioning and execution track record. The aerospace and defense exposure offers both cyclical upside from increased spending and secular growth from modernization trends.

Pitch Summary:
The overweight to Mueller Water Products, Inc. was driven by the ML models positive view of its volatility and valuation features. Mueller Water Products is a leading North American supplier of valves, hydrants and smart-water technologies, leveraged to municipal and utility investment in aging water infrastructure. The stock rose following a strong fiscal 1Q26 print and a guidance raise, as investors rewarded better-than-expected execution, margin expansion from the new brass foundry and resilient demand across core product lines.

BSD Analysis:
The manager maintains a bullish view on Mueller Water Products based on attractive valuation metrics and favorable volatility characteristics. The company operates as a leading North American supplier of water infrastructure products including valves, hydrants, and smart-water technologies. The investment thesis centers on exposure to the multi-decade infrastructure replacement cycle as aging water systems require modernization. Recent strong fiscal Q1 results and guidance raise demonstrate solid execution and operational leverage. The new brass foundry is driving margin expansion while core product demand remains resilient. The smart-water technology offerings position the company for higher-margin growth as utilities digitize their networks. The defensive end-market exposure to municipal and utility spending provides stability while infrastructure investment trends support long-term growth.

Pitch Summary:
The overweight to Tri Pointe Homes, Inc. was driven by the ML models positive view of its valuation features (book to price, and EBITDA). Tri Pointe is a regionally focused U.S. homebuilder with a land-light model across high-growth markets. The stock rose sharply in mid-February after the acquisition of Sumitomo Forestry.

BSD Analysis:
The manager favors Tri Pointe Homes based on attractive valuation metrics including book-to-price and EBITDA multiples. The company operates a land-light business model focused on high-growth regional markets, which provides operational flexibility and reduced capital intensity compared to traditional homebuilders. The recent acquisition of Sumitomo Forestry appears to have been well-received by the market, driving significant stock appreciation in mid-February. The land-light strategy reduces inventory risk and capital requirements while allowing focus on higher-margin construction and development activities. The regional focus on high-growth markets positions the company to benefit from demographic trends and migration patterns. The combination of attractive valuation and strategic positioning supports the bullish investment thesis.

Pitch Summary:
The overweight to Tronox Holdings PLC. (TROX) was driven by risk management decisions. Tronox is a vertically integrated global producer of titanium dioxide and zircon, positioned as a key Western supplier with its own mineral sands and pigment assets. The stock rose sharply year-to-date, as it was up roughly mid-double-digits to low-triple-digits by mid-February, even as 1Q26 EBITDA guidance came in below consensus and prompted a pullback after earnings.

BSD Analysis:
The manager views Tronox favorably as a vertically integrated titanium dioxide and zircon producer with strategic positioning as a Western supplier. The company's ownership of mineral sands and pigment assets provides competitive advantages and supply chain control in a concentrated industry. Despite recent EBITDA guidance coming below consensus, the stock has delivered strong year-to-date performance with mid-double to low-triple digit returns. The vertical integration model offers margin protection and operational flexibility compared to pure-play pigment producers. The Western supplier positioning becomes increasingly valuable amid geopolitical supply chain concerns. While near-term earnings face headwinds, the strategic asset base and market position support the investment thesis.

Pitch Summary:
The overweight to Progyny, Inc. was due to the ML model's positive view of its valuation (EBITDA, dividend yield and operating cash flow to price) combined with its features (ROIC and buy back yield). Progyny is a leading provider of employer-sponsored fertility and family-building benefits, differentiated by its Smart Cycle design, integrated pharmacy and curated specialist network. The stock traded lower around results as conservative 2026 guidance and administrative reductions in reported covered lives weighed on sentiment, despite underlying demand and execution remaining solid.

BSD Analysis:
The manager maintains a bullish stance on Progyny based on attractive valuation metrics including EBITDA multiples, cash flow yield, and strong return on invested capital. The company operates in the specialized fertility benefits market with competitive advantages through its Smart Cycle design and integrated service model. Despite recent stock weakness from conservative guidance and administrative covered life reductions, the underlying business fundamentals remain strong with solid demand trends and execution. The valuation disconnect presents an opportunity as the market appears to be overreacting to near-term guidance conservatism. The company's leadership position in employer-sponsored fertility benefits provides a defensive moat in a growing addressable market.

Pitch Summary:
Our position in non-benchmark stock Cleveland-Cliffs Inc. had a negative impact on performance. While the model had a relatively negative view, the position was held for risk management reasons. Cleveland-Cliffs is a fully integrated North American flat-rolled steel producer with significant exposure to automotive and electrical steels, supported by its own iron ore, DRI, and scrap assets. The stock was volatile and generally under pressure around 4Q25 results and a softer-than-hoped 1Q26 outlook, as weaker shipments, pricing and temporary cost headwinds weighed on near-term sentiment even while investors increasingly focused on a 2026 earnings inflection.

BSD Analysis:
The manager holds Cleveland-Cliffs despite the model's negative view, using it primarily for portfolio risk management purposes. The company operates as a vertically integrated steel producer with strategic assets including iron ore, DRI, and scrap facilities, providing some competitive advantages. However, the investment faces near-term headwinds from weaker shipments, pricing pressure, and temporary cost increases. The automotive and electrical steel exposure provides some differentiation but hasn't offset cyclical pressures. While investors anticipate a 2026 earnings recovery, current fundamentals remain challenging. The manager's approach suggests this is a tactical position rather than a high-conviction investment, held more for portfolio construction than fundamental merit.

Pitch Summary:
The overweight to Kohl's Corp. had a negative impact to performance. Driving the overweight was the model's neutral view of the stock combined with its attractive factor exposures which helped balance risk in the overall portfolio. The stock fell as persistent negative comparable sales, cautious guidance and continued share loss to off-price and other channels reinforced skepticism about a near-term sales inflection in a choppy low-income consumer environment.

BSD Analysis:
The manager maintains an overweight position in Kohl's despite acknowledging significant operational headwinds. The investment thesis appears driven more by portfolio risk management and factor exposures than fundamental conviction. The company faces persistent challenges including negative comparable store sales, cautious management guidance, and market share losses to off-price retailers. The deteriorating performance reflects broader pressures on traditional department stores, particularly from low-income consumer weakness. The manager's neutral model view combined with continued negative fundamentals suggests limited near-term catalysts for improvement. This appears to be a defensive holding rather than a growth opportunity.

Pitch Summary:
Liquidia shares increased from $34.49 at the end of 2025 to $37.74 at the end of the first quarter. I have written extensively about our investment in Liquidia. The launch of their Yutrepia product has been nothing short of outstanding. We will be receiving a company update in the next few weeks and expectations continue to be high. The current short term market moving event is the judicial decision in Liquidia's patent infringement case with United Therapeutics (UTHR) involving PH-ILD. We should receive the decision at any moment. The math checks out as follows: If Liquidia wins outright with no infringement found, Liquidia should be able to produce $1.2 billion in revenue in 2027 with net margins of at least 60%. If we apply the current market multiple of their competitor, United Therapeutics, then Liquidia shares are worth at least $140 per share fully diluted. If Liquidia is found to have infringed on the United Therapeutics patent, the likely outcome is for the court to impose a royalty on Yutrepia sales involving PH-ILD with a royalty range between 3% and 10%. Assuming PH-ILD-related Yutrepia sales are 70% of overall 2027 sales of $1.2 billion, and assuming the worst-case scenario of a 10% royalty, Liquidia shares are worth approximately $123 per share fully diluted. In the worst-case scenario, the judge could find that Liquidia infringed on the United Therapeutics patent and issue a permanent injunction on the sale of Yutrepia to PH-ILD patients. I believe this potential outcome has less than a 5% chance of happening. However, if it does happen and there are no sales to PH-ILD patients in 2027, Liquidia shares would still be worth $70 per share in 2027 on sales to PAH patients alone. To be clear, if the patent infringement decision goes against Liquidia, I would expect shares to decline in the short term, perhaps sharply. But, if you follow the math I have laid out above, Liquidia is extremely cheap today under any outcome. Additionally, I believe the company can continue to significantly grow revenue with stable margins in 2028 and beyond. $1.2 billion in 2027 is just the beginning. Treprostinil formulations like Liquidia's Yutrepia currently generate $2.9 billion of annual industry revenue. Liquidia has already shown that they can not only take the majority of the treprostinil market, but they can also expand the total addressable market by treating patients who are both naïve (i.e., not currently being effectively treated), and by more effectively addressing patients who are currently being treated by non-treprostinil treatments. I have never been this bullish on a position we have held in the fund. Again, there certainly could be short term volatility in the stock, but if you look at the numbers above, Liquidia is well positioned to trade at a stock price much higher than today in 2027 and beyond even if there is an extreme negative outcome in the patent infringement case.

BSD Analysis:
The manager expresses extreme bullishness on Liquidia Corporation, calling it the most bullish position ever held in the fund. The investment thesis centers on the outstanding launch of Yutrepia, with projected 2027 revenue of $1.2 billion and 60%+ net margins. The manager provides detailed scenario analysis around the pending patent litigation with United Therapeutics: a complete win yields $140+ per share, a loss with 3-10% royalty still supports $123 per share, and even a worst-case permanent injunction scenario supports $70 per share based on PAH sales alone. The company operates in a $2.9 billion treprostinil market and has demonstrated ability to both capture market share and expand the total addressable market by treating previously untreated patients. Liquidia's competitive advantage lies in more effective treatment delivery compared to existing non-treprostinil therapies. The manager acknowledges potential short-term volatility around the litigation outcome but maintains conviction that all scenarios support significantly higher valuations. The thesis combines strong commercial execution with favorable risk-adjusted return potential across multiple outcome scenarios.

Pitch Summary:
Finch shares declined from $13.49 at the end of 2025 to $9.64 at the end of the first quarter. They are lower today. Don't let this declining price fool you. As I will explain below, no actual value within the company has declined. Consistent with the liquidating biotech and biopharma theme, Finch is one of the rare companies that is doing the economically rational thing. As I have mentioned in previous letters, they won a jury trial in August 2024 against Ferring Pharmaceuticals, with the jury finding that Ferring infringed on three of Finch's patents. The value of that award to Finch is between $25 and $80 per share depending on the post-trial decision from the judge. The judge must determine an ongoing royalty rate and determine whether enhanced damages will be awarded. We have now waited more than 20 months for the judge's decision. No matter the outcome, an appeal is highly likely and will cost money. Finch also had a lease that they needed to get out of. Due to these two items, even when the judge provides a decision, the market will give a substantial discount to its shares compared to the overall award. Because of this, the company decided to move forward with a strategic Chapter 11 filing in order to eliminate the lease obligation and organize an outright sale of the entire company. This sale involves the litigation claim above, 160 issued patents that Finch owns or exclusively licenses, an additional potential case of infringement involving a global corporation, and the corporate shell, which has significant net operating loss carryforwards. The company has disclosed that there has been healthy interest from potential buyers. We should have a resolution in early June. I believe that this process will maximize the value of Finch for shareholders and will monetize the assets more effectively than if Finch remained a publicly traded company. While the ultimate sale price won't be known until June, I continue to believe that we will get a healthy premium over our purchase price.

BSD Analysis:
The manager maintains a bullish stance on Finch Therapeutics despite the stock declining from $13.49 to $9.64 in Q1 2026, arguing that no fundamental value has been lost. The investment thesis centers on a significant patent infringement victory against Ferring Pharmaceuticals in August 2024, with potential value of $25-80 per share pending the judge's final decision on royalty rates and enhanced damages. Finch owns a valuable IP portfolio of 160 issued patents and has additional litigation potential against a global corporation. The company's strategic Chapter 11 filing is positioned as value-maximizing, designed to eliminate lease obligations and facilitate an outright sale of all assets including the litigation claim, patent portfolio, and tax loss carryforwards. Management reports healthy buyer interest with resolution expected in early June. The manager believes this liquidation process will monetize assets more effectively than remaining public, expecting a premium to their purchase price. The thesis represents a classic special situation play on asset monetization rather than ongoing business operations.

Pitch Summary:
ENDI shares declined from $16.75 at the end of 2025 to $15.00 at the end of the first quarter. In March, the company reported strong results for full year 2025. Assets Under Management increased by 21% to $4.1 billion at the end of 2025 compared to the end of 2024. Overall revenue increased by 38% to $21.3 million. Adjusted EBITDA increased to $11.1 million from $6.5 million compared to the year before. ENDI ended 2025 with $53 million of total cash and investments compared to $20.1 million at the end of 2024. The company will report Q1 2025 results in May.

BSD Analysis:
The manager presents a bullish case for ENDI Corp. despite the stock's decline from $16.75 to $15.00 in Q1 2026. The investment thesis is anchored on strong fundamental performance in 2025, with Assets Under Management growing 21% to $4.1 billion and revenue surging 38% to $21.3 million. The company's profitability improved significantly, with adjusted EBITDA increasing from $6.5 million to $11.1 million year-over-year. ENDI's balance sheet strengthened considerably, with total cash and investments more than doubling from $20.1 million to $53 million. The manager appears to view the recent price decline as a temporary disconnect from the underlying business performance. The upcoming Q1 2026 earnings report in May could serve as a catalyst to close this valuation gap. The strong cash position and growing AUM suggest the company is well-positioned for continued growth in the asset management sector.

Pitch Summary:
During the quarter, the Fund reinitiated a core position in KKR after it declined more than 30%, caught up in a private credit scare that was exacerbated by the previously mentioned Citrini report. As a reminder, the Fund profitably owned KKR from 2019 to 2024, with the view that alternative asset managers ("alts") would take share from traditional asset managers, and that KKR was one of the top-tier firms ("mega-alts") positioned to take share within the alts. Since we initially invested, KKR's AUM has more than tripled from $200 billion to $700 billion. In 2026, the firm should generate over $5 billion of annual management fees at 70% operating margins, split roughly evenly across private equity (37%), real assets (33%), and credit (30%). PE, the most mature of the three, continues to grow AUM and fees at a double-digit pace. Real assets AUM has grown 8x to $200 billion since 2019, the Asia platform has grown 4x to $80 billion, and its K-Series retail platform more than doubled AUM to $34 billion in 2025 alone. Despite this growth, the runway ahead remains long. Management anticipates exceeding $1 trillion in AUM by 2030 — a target I believe will prove conservative. For context, Blackstone already manages $1.3 trillion today, while BlackRock manages over $10 trillion. In addition to management fees, KKR generates performance income, investment income on firm capital co-invested alongside clients, and profits from Global Atlantic, its wholly owned insurance subsidiary. At its 2024 investor day, KKR guided to 2026 adjusted net income per share of more than $7. The market is mainly concerned about two things, however: a private credit bubble and AI's impact on service companies. I believe both fears are overblown, particularly as they relate to KKR. The firm's credit business accounts for just 30% of total fees and a smaller percentage of profits. Within that 30%, roughly half is in leveraged credit — liquid bonds and loans with externally validated marks — and roughly a third is in asset-based finance backed by hard assets. Direct lending, where the bubble fears are most concentrated, represents less than 20% of the credit book and just 5% of total AUM. Meanwhile, software companies account for only 7% of AUM, a smaller share than many competitors and even the broad public equity and credit indices. KKR's team has been aware of AI risks and incorporating them into underwriting for years. Even if there are losses, I expect KKR to shine on a relative basis — and I believe the coming years will see a shakeout among mid-sized alt managers, with mega-alts like KKR taking further share as allocators gravitate toward blue-chip names with the longest track records and the least career risk. Additionally, after four years during which many institutions were overallocated and overcommitted to alts, allocations finally appear to be getting back into balance making it easier for new commitments. It is also worth noting that KKR just closed its flagship Americas NAX4 fund at $23 billion, meaningfully reducing near-term fundraising risk. And the firm has already notched several high-profile exits this year, including the $5 billion sale of CoolIT to Ecolab — a 15x return in three years. Near-term market volatility may weigh on additional exits and performance income, but KKR remains an exceptionally high-quality business poised to grow earnings at a double-digit rate for the foreseeable future. Insiders seem to agree, and despite already owning nearly a third of the company, they spent $50 million on open market purchases as the stock pulled back. At a low double-digit multiple of 2026 owner's earnings, the risk/reward looks compelling.

BSD Analysis:
The manager reinitiated a position in KKR after a 30% decline driven by private credit fears and AI concerns, viewing both as overblown relative to KKR's diversified business model. KKR's AUM has tripled to $700 billion since 2019, with management targeting over $1 trillion by 2030. The firm generates $5+ billion in annual management fees at 70% margins across private equity (37%), real assets (33%), and credit (30%). Direct lending exposure, where bubble fears are concentrated, represents only 5% of total AUM. The manager expects consolidation favoring mega-alts like KKR as allocators seek blue-chip names with proven track records. Recent developments include closing the $23 billion NAX4 fund and achieving a 15x return on CoolIT's sale to Ecolab. Insider buying of $50 million during the pullback signals management confidence. Trading at a low double-digit multiple of 2026 earnings with double-digit growth prospects, the risk/reward appears compelling for this market-leading alternative asset manager.

Pitch Summary:
While the market reacted with its customary "shoot first ask questions later" mentality, I continue to believe that our investment in IWG will yield strong results in the years ahead. With respect to management's FCF commentary, some 2026 FCF was instead pulled into 2025, which came ahead of expectations. More importantly, IWG's medium-term business outlook remains compelling. The company expects at least 4% top-line growth this year, with significant operating leverage driving low-teens EBITDA growth. It also continues to target $1 billion of EBITDA over the medium term, which I believe is conservative. If achieved, the stock is currently trading at less than 3x 2030 free cash flow, after accounting for the ongoing share count reduction driven by an aggressive buyback program. As for AI, I believe that IWG is a stealthy winner. On the demand side, AI should drive startup formation and push enterprises to accelerate their adoption of short-term leases. On the supply side, rising office vacancies created by shrinking demand for long-term leases should generate a growing pipeline of landlords open to partnering with IWG under its asset-light managed partnership model. This combination should result in more short-term supply for IWG to fill and more short-term demand to fill it with — and all of it coming from locations where IWG manages the operations in exchange for a management fee of approximately 15% of revenues with none of the associated costs. Additionally, while higher oil prices may cause a near-term economic slowdown and impact occupancy in IWG's owned centers, a temporary slowdown should have no meaningful bearing on the long-term value of the business.

BSD Analysis:
The manager maintains a bullish stance on IWG despite a 25% quarterly decline, viewing the selloff as an overreaction to AI disruption fears and geopolitical concerns. The investment thesis centers on IWG's asset-light business model and positioning as an AI beneficiary rather than victim. Management expects 4% revenue growth with significant operating leverage driving low-teens EBITDA growth, targeting $1 billion EBITDA medium-term. At current valuations, the stock trades at less than 3x 2030 free cash flow after accounting for aggressive share buybacks. The manager sees AI as a catalyst for both demand (startup formation, enterprise adoption of flexible leases) and supply (office vacancies creating partnership opportunities). IWG's managed partnership model generates approximately 15% management fees on revenues without associated costs. The thesis appears compelling given the structural shift toward flexible workspace solutions and IWG's market-leading position.

Pitch Summary:
AvalonBay Communities, Inc. (AVB) is positioned to capitalize on the persistent valuation gaps between private and public real estate markets. Historically, AVB has been one of the most expensive REITs in the multifamily sector due to its high-quality coastal assets and stable balance sheet. The company has been actively reshaping its portfolio by selling older assets and repurchasing shares at attractive valuations, a strategy supported by the current market conditions. AVB's focus on high-income tenants and premium units provides a buffer against economic downturns, while its development-heavy business model allows for significant earnings retention. The company's recent share repurchases at low valuation multiples highlight management's confidence in AVB's long-term growth prospects.

BSD Analysis:
AVB's strategic focus on coastal markets and high-quality assets positions it well against the backdrop of a tumultuous multifamily real estate market. The company's decision to repurchase shares instead of pursuing new acquisitions reflects a calculated move to leverage valuation discrepancies between public and private markets. By recycling capital from asset sales into share buybacks, AVB enhances its earnings profile while maintaining a strong balance sheet. The anticipated easing of supply-side pressures in the multifamily market by the second half of 2026 further supports AVB's growth outlook. Additionally, the potential merger with Equity Residential could create one of the largest multifamily REITs globally, offering significant scale advantages.