Investment Pitches

Pitch Summary:
UnitedHealth Group was purchased in the Value strategy during the quarter. UNH is the largest diversified managed care organization in the United States, operating a leading health insurer (UnitedHealthcare) and a powerful healthcare services platform (Optum). Its vertically integrated model enables UnitedHealth to combine insurance, pharmacy benefit management, data analytics, and provider services, allowing it to better coordinate care, manage medical cost trends, and capture synergies across its businesses. This scale and diversification provide UnitedHealth with a durable cost-advantage and network-effects moat anchored in local scale, switching costs in Optum Rx, and Optum Insight’s leading position in data and technology solutions. Under former CEO Andrew Witty, the company pursued aggressive expansion into new lines of business without fully accounting for the associated risks and acquired numerous companies that were not successfully integrated. In addition, its ambitious membership growth strategy drove higher-than- expected utilization, leading to higher medical costs and a sharp decline in earnings. The company is undergoing a multi-year turnaround under new leadership, pairing cultural reform with operational discipline. Management, led by returning CEO Stephen Hemsley, has reset expectations by guiding to at least $16 in adjusted EPS for 2025, providing a new baseline from which earnings growth is expected to resume in 2026. Hemsley is widely regarded as a strong strategic leader and operator who has emphasized restoring the performance culture and discipline that characterized the company during his tenure. Strategic actions include repricing for higher medical trend, exiting plans serving over 600K Medicare Advantage members, narrowing networks, and taking a more conservative approach to ACA participation. Optum Health has reduced its 2025 new patient growth target by more than half to 300K to focus on mature markets and expects to deliver nearly $1 billion of cost reductions in 2026. Optum Health’s value-based care margins are expected to remain near breakeven in 2026 as the final year of V28 phase-in is absorbed, then advance toward management’s 6–8% long-term target as newer cohorts mature. Optum Insight and Optum Rx provide additional recurring, fee-based revenue streams that diversify earnings and help dampen volatility. Management’s cost reduction initiatives, repricing actions, and benefit re-designs are expected to close the gap between cost trends and premium growth, restoring margin credibility and putting the company on track toward mid-to-high single-digit earnings growth from 2026 onward. UnitedHealth trades at an attractive valuation of ~16x 2027 earnings with a 2.6% dividend yield and a three-year annual dividend growth rate of approximately 12%. In addition, senior management has recently engaged in open market purchases of stock, a vote of confidence in the turnaround of the company. With a clean earnings base, improved operating discipline, and multiple levers for growth and margin recovery, we view UnitedHealth as a high-quality compounder with the potential for accelerating EPS growth and multiple expansion over the next several years as its turnaround and sector recovery unfold.

BSD Analysis:
UnitedHealth's thesis centers on a vertically integrated managed care franchise undergoing a turnaround that should restore high single-digit EPS growth while the market prices it at roughly mid-teens forward P/E with an above-market dividend yield. The manager highlights the return of Stephen Hemsley as a key catalyst to rein in undisciplined growth, reprice under-earning books in Medicare Advantage and ACA, and reset expectations with a credible EPS base for 2025. Optum Health, Insight, and Rx underpin a data-rich, fee-based services platform that diversifies away from pure insurance risk and supports long-run volume growth in value-based care models. Insider share purchases and a three-year double-digit dividend CAGR point to strong free cash flow generation and a shareholder-friendly capital return framework, with room for buybacks as earnings normalize. On fundamentals, UNH continues to deliver high returns on equity and substantial free cash flow after capital spending, and the combination of cost actions, utilization normalization and sector mean reversion offers multiple avenues for re-rating. Policy risk in government programs and execution risk around utilization remain, but the risk-reward is attractive for a dominant franchise with defensive characteristics and visible growth drivers.

Pitch Summary:
Smurfit WestRock was purchased in the EEI strategy during the quarter. The company is well positioned as a global leader in paper-based packaging following the merger of Smurfit Kappa and WestRock in 2024. The combined company benefits from scale across North America, Europe, and Latin America, which provides both market presence and cost advantages. A central catalyst for the investment case is the ongoing integration of the two businesses, with management already demonstrating early progress on synergies that should drive efficiency and earnings growth. Another important driver is the opportunity for margin expansion, as Smurfit WestRock seeks to close the gap with US peers through better pricing discipline and operational improvements. The shift to a regional structure is also a catalyst, since it gives management clearer accountability and the ability to tailor strategies to local demand and pricing conditions. In addition, the company is well positioned to benefit from the secular growth in e-commerce, which drives box demand, and from rising consumer and regulatory interest in sustainable packaging solutions. A further catalyst is the potential for commercial improvements beyond cost synergies, as the business leverages its scale and customer relationships to enhance pricing power and mix. Investor sentiment could improve as Smurfit WestRock demonstrates consistent execution on these initiatives, reinforcing confidence in management’s ability to deliver. Over time, the narrative should shift from integration to growth, as the company capitalizes on its global footprint and innovation pipeline. Smurfit WestRock also has the potential to generate stronger cash flows as capex moderates, opening the door for increased shareholder returns. A rerating of the shares is likely if the company narrows its valuation gap to peers while delivering on execution milestones.

BSD Analysis:
Smurfit WestRock is positioned as a global packaging consolidator with substantial synergy potential and margin upside as integration progresses. The company’s multiregional scale and strong position in sustainable packaging align with secular demand from e-commerce and regulatory shifts. Current valuation remains discounted relative to U.S. packaging peers despite similar or superior cash-flow potential. As capex normalizes and synergies expand EBITDA, free cash flow should inflect higher, enabling debt reduction and rising capital returns. If pricing discipline and operational improvements close the profitability gap, multiple expansion is likely.

Pitch Summary:
BDX is a global medical technology company engaged in the development, manufacture and sale of a broad range of medical supplies, devices, laboratory equipment and diagnostic products used by hospitals, medical offices, physicians, clinical laboratories, the pharmaceutical industry and the general public. BDX has historically been a consistent mid-single-digit top-line growth company given its leadership in medical device categories that are essential to hospitals and medical offices, including syringes, pre-filled syringes, infusion pumps, and other products. However, the company has faced a number of short-term headwinds in recent years: exiting the Covid pandemic in 2022-2023 and the associated inventory destocking dynamics, a slowdown in China’s demand for medical supplies, and more recently the Trump Administration’s cuts to NIH funding and the negative impact on demand for research instruments and supplies. The end result has been choppy top-line growth, below BDX’s long-time mid-single-digit growth average. While BDX has faced short-term headwinds, we believe there have been no long-term impairments to the company or its business model and, as an essential supplier of medical devices to hospitals, it should return to consistent MSD top-line growth over time. Opportunities exist across the portfolio for management to accelerate growth via new product launches. Furthermore, in February of 2025, BDX announced its intention to separate, through a sale or spin-off, its Biosciences and Diagnostic Solutions businesses within its BD Life Sciences segment. Products within this unit trail behind competitors, and we believe a separation of this business will result in a stronger business mix and allow BDX to de-lever the balance sheet and repurchase shares. This shift in business mix to higher growth segments, along with BDX’s position as a top-tier supplier with significant scale advantages over smaller competitors, should also result in operating margin expansion over time. Shares of BDX were purchased at a P/E of 12.0x with a 2.5% dividend yield.

BSD Analysis:
BDX is positioned as a high-quality medical technology franchise temporarily weighed down by post-COVID normalization, China softness, and NIH funding constraints. The company’s essential consumables and durable devices support stable recurring demand, while management’s planned separation of the underperforming Life Sciences unit should meaningfully improve growth and margin mix. Trading at just ~12x earnings with a 2.5% dividend, BDX is materially discounted versus peers despite mid-single-digit revenue potential and margin expansion catalysts. Deleveraging and prospective buybacks add further EPS accretion. With scale advantages, strong hospital relationships, and new product catalysts, BDX appears primed for a multi-year fundamental recovery.

Pitch Summary:
Shares of rating agency and data provider, S&P Global Inc., declined 7.5% in the quarter due to cautious commentary from a competitor about market demand and margins, leading to a broader pullback across information services stocks after industry bellwether FactSet mentioned “tight client budgets” and a “challenging environment” on its quarterly earnings call. However, these headwinds were previously discussed by the company, and management later clarified that these trends remain stable. FactSet also noted margin headwinds from a step-up in growth investments, which investors viewed as an indication of an AI spending cycle that could pressure margins across the broader information services sector. We view these concerns as overblown and expect S&P Global to report good results, driven by elevated debt issuance and tailwinds from the capital market recovery. We continue to own the stock due to the company’s long runway for growth and significant competitive advantages.

BSD Analysis:
Baron characterizes S&P Global as a high-quality, wide-moat data and ratings franchise where recent weakness reflects sector rotation and read-throughs from peers rather than company-specific deterioration. Elevated debt issuance and improving capital markets should support strong Ratings revenue, while data and index businesses provide recurring, high-margin growth. The firm’s willingness to invest in AI and data platforms may pressure margins near term but should enhance competitive positioning and pricing power over time. Given its durable mid-teens ROIC, strong FCF, and long growth runway, SPGI’s premium EV/EBITDA and P/E multiples remain justified. As results confirm resilient demand and operating leverage, the stock could see a re-rating from current, sentiment-depressed levels.

Pitch Summary:
Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (TSMC) contributed to performance during the quarter as shares rose 23.6%, driven by robust demand for AI chips. We retain conviction that TSMC’s technological leadership, pricing power, and exposure to secular growth markets, including AI and high-performance computing, automotive, 5G, and Internet of Things—will allow the company to sustain strong double-digit earnings growth over the next several years. We believe that while near-term uncertainty is heightened due to the evolving China-U.S. geopolitical relations, TSMC’s competitive positioning in leading-edge semiconductor manufacturing remains unmatched with 90% market share (and 65% overall). TSMC’s unique positioning in the market is underlined by the company’s ability to raise prices as demand for its next generation nodes continues to be robust – this should also enable TSMC to offset any margin pressures from cost inflation or the headwinds from opening fabs in the U.S. at an accelerated pace. We also believe that TSMC will benefit from a long duration of growth as the adoption of AI continues to accelerate. Note that TSMC will benefit regardless of the ultimate market share split between NVIDIA, AMD, OpenAI, or Anthropic and whether application-specific integrated circuits would garner any significant market share. It’s the ultimate picks and shovels supplier to AI.

BSD Analysis:
Baron sees TSMC as the indispensable foundry in global AI and advanced computing, with overwhelming share at the leading edge and pricing power to protect margins despite rising capex and U.S. fab investments. Secular demand from AI, HPC, autos, and 5G should support high-single to low-double-digit revenue growth and double-digit EPS growth over the medium term. At a mid-teens forward P/E, TSMC trades at a discount to Nvidia and other AI beneficiaries despite comparable strategic importance and strong free cash flow generation outside peak capex years. Geopolitical risk around Taiwan is the primary overhang, but the manager believes TSMC’s strategic value to both East and West reduces the likelihood of extreme downside scenarios. As the ultimate foundry “picks and shovels” for AI, any broad acceleration in AI chip demand is a direct tailwind to TSMC’s earnings and valuation.

Pitch Summary:
NVIDIA Corporation is a fabless semiconductor company specializing in compute and networking platforms for accelerated computing. Its dominant position in AI infrastructure with a comprehensive portfolio spanning GPUs, systems, software, and high-performance networking solutions, continues to drive strong performance. Shares rose 18.1% during the quarter as investor confidence in AI infrastructure expansion grew. NVIDIA reported mid-term visibility of tens of GWs in AI buildouts, with each GW representing an estimated $35 billion total addressable market (TAM). During its last earnings call, the company announced that its long-term TAM expanded from $1 trillion to between $3 and $4 trillion, while more recently announcing a 10 GW deal with OpenAI. As AI infrastructure investment accelerates, NVIDIA’s leadership continues to strengthen through durable moats across compute silicon, networking, systems, software, and supply chain. We maintain a long-term constructive view, as leading AI labs show growing confidence in their ability to achieve human-level intelligence and deploy AI products in enterprise settings. All the industries bottlenecked by intelligence will leverage AI, unlocking trillions of dollars in value. Most of these AI workloads will be supported by large language models running in the datacenters. NVIDIA is uniquely positioned to power this transformation through its full-stack approach, spanning silicon, systems, software, and developer ecosystem, and hence its competitive moat continues to widen.

BSD Analysis:
Baron’s thesis is that NVIDIA is the core picks-and-shovels provider for the AI revolution, with unmatched share in high-end accelerators and a rapidly expanding TAM now estimated in the multi-trillion dollar range. With mid-term visibility into tens of gigawatts of AI capacity and long-term commitments like the 10 GW OpenAI deal, revenue and free cash flow growth should remain exceptional. While the stock trades at a premium forward P/E versus the market, its growth-adjusted valuation (PEG) remains reasonable and supported by best-in-class margins and ROIC. NVIDIA’s integrated stack – GPUs, networking, systems, and CUDA software – raises switching costs and reinforces a powerful ecosystem moat. As AI adoption broadens beyond hyperscalers into enterprises and vertical industries, the company’s earnings power is likely to surprise to the upside.

Pitch Summary:
Alphabet Inc. is the parent company of Google, the world’s largest search and online advertising company. Shares rose 37.4% during the quarter on strength in the company’s core businesses, as well as in Google Cloud and Other Bets. Despite rising usage of AI competitors such as ChatGPT, both Google Search and YouTube delivered double-digit revenue growth year-over-year. Additionally, Google Search paid clicks increased compared to the prior year, Google's AI assistant Gemini reached the top spot on Apple’s App Store, Gemini Pro 2.5 has topped the AI eval ranking LMArena5, and new AI-powered features for Chrome were announced. Cloud revenue growth also accelerated 32% year-over-year, driven by demand for AI cloud services. Meanwhile, the resolution of the Department of Justice’s antitrust case concerning Google Search was better than feared, lifting an overhang on the stock. Long term, even though we continue to monitor the potential impact of AI chatbots on search, we believe Alphabet would emerge as an AI winner, leveraging its extensive AI talent, expertise, full stack offering (from hardware to software) and vast ecosystem. Specifically, the company's DeepMind research and AI talent, coupled with the development of custom tensor processing units, provide a full-stack advantage for cost efficiently scaling its AI products, such as the Gemini models. This technological edge is magnified by its massive user base, often called the "billion user club" (across 9 products: Search, YouTube, Maps, Gmail, Chrome, Android, Play store, Photos, and Drive), which dramatically lowers customer acquisition costs and creates a powerful flywheel effect for attracting developers. Furthermore, Alphabet is uniquely positioned to dominate the future of AI-powered commerce, where its scaled surfaces like YouTube can use real-time object recognition to make virtually any piece of content shoppable, while also making content creation easier, and ads more personalized.

BSD Analysis:
Baron positions Alphabet as a core AI platform winner, supported by resilient double-digit growth in Search and YouTube and a re-accelerating, profitable cloud business. The company’s proprietary TPUs, Gemini models, and DeepMind research, combined with its “billion-user” distribution, create a defensible full-stack AI moat that should sustain high-teens EPS growth over time. With the DOJ search case overhang easing, regulatory risk is less acute than feared. Alphabet trades at a mid-20s forward P/E, only a modest premium to the market despite a superior growth, margin, and balance sheet profile with significant net cash and ongoing buybacks. Increased AI monetization across Search, YouTube, and Cloud plus operating leverage provide multiple potential catalysts for re-rating.

Pitch Summary:
We recently initiated a position in Loar Holdings Inc., a niche manufacturer of aerospace parts. Loar boasts an 85% proprietary product portfolio, with over 50% of its revenues derived from aftermarket replacement sales. We believe this is perhaps the best market in the aerospace and defense industry, as evidenced by the experience of TransDigm, a similar company that has been a successful long-term investment for Baron Capital. We believe this market is especially attractive for several reasons. First, the aerospace industry is growing, with passenger miles increasing at a multiple of global GDP, or approximately 4% annually. Second, Loar benefits from strong pricing power due to the critical nature of its components, the absence of substitute products (owing to high proprietary content), and high barriers to entry. These components are both high risk and relatively low cost for airlines, which are reluctant to compromise safety for minimal cost savings. Most Loar parts cost less than $1,000. In addition, these parts require lengthy and costly approval by the Federal Aviation Administration. Given the high-variability, low-volume nature of aircraft components (millions of parts per aircraft, each with low production volumes), it is difficult for competitors to produce these parts. The aerospace supply chain is fragmented with many components supplied by smaller privately owned businesses that, in turn, sell to system integrators, Tier 1 or Tier 2 manufacturers, or large original equipment manufacturers. Loar has acquired many of these smaller firms with the goal of doubling their EBITDA over a three- to five-year time frame. Loar will continue to seek deals with a focus on: 1) aerospace and defense businesses; 2) proprietary content and processes; 3) significant aftermarket exposure; 4) niche markets or products with strong market positions; 5) the opportunity to cross-sell an existing portfolio of products; and 6) long-standing customer relationships. Loar’s strong M&A track record has been integral to its growth, with revenue and EBITDA compounding 17% and 18%, respectively, over the last five years, and 26% and 35% over the last decade. Given the strength of its business model and management team, we see a long opportunity for Loar to compound EBITDA organically in the mid-teens with a double-digit addition from M&A.

BSD Analysis:
Baron clearly sees Loar as a TransDigm-style compounder in niche aerospace, combining high proprietary content, mission-critical but low-cost parts, and an aftermarket-heavy revenue mix that supports strong pricing power and margins. FAA approvals and complex, low-volume part economics create formidable barriers to entry, sustaining high ROIC. Management has already delivered impressive revenue and EBITDA CAGRs in the high teens to mid-30s, validating the roll-up strategy. While LOAR trades at a premium multiple on forward earnings and EV/EBITDA relative to broader aerospace, the manager argues that mid-teens organic EBITDA growth plus accretive M&A justifies the valuation. With secular air traffic growth, defense demand, and a fragmented supplier base, Loar has a long runway to reinvest capital at attractive returns.

Pitch Summary:
Verisk Analytics, Inc. is a leading data and analytics vendor focused primarily on providing critical information to the property and casualty insurance industry. The stock detracted from performance after management issued a conservative outlook for the second half of 2025. Verisk also announced the $2.35 billion acquisition of AccuLynx, cloud-based construction management software for the roofing industry, which is expected to be modestly dilutive to earnings in the first year. Lastly, shares suffered from concerns about a slowing property and casualty insurance pricing backdrop and broader industry-wide uncertainty about the impact of AI. Nonetheless, Verisk reported strong quarterly earnings and CEO Lee Shavel sounded upbeat on the company's growth potential moving forward. We maintain conviction in the competitive positioning, long-term growth, margin expansion, and capital deployment prospects for the business.

BSD Analysis:
Verisk is a mission-critical data utility for P&C insurers whose long-term growth is intact despite near-term guidance conservatism and modest acquisition dilution. The AccuLynx deal deepens Verisk’s presence in roofing and contractor workflows and should enhance its claims and underwriting datasets, supporting cross-sell and pricing power over time. With high recurring revenues, strong EBITDA margins, and consistent mid-single to high-single-digit organic growth, Verisk justifies a premium EV/EBITDA multiple. The manager expects FCF growth, disciplined M&A, and buybacks to compound shareholder value even if insurance pricing moderates. AI should ultimately be a tailwind, improving the value of Verisk’s data and analytics franchises rather than displacing them.

Pitch Summary:
StubHub Holdings, Inc., the leading marketplace for the resale of live event tickets, detracted from performance following its September IPO. The company has been investing heavily both to expand its market share and to develop its capabilities to sell tickets in the primary market - tickets sold directly by sports teams to fans. Its near-term results were also affected by challenging annual revenue comparisons after the outsized success of Taylor Swift tour ticket sales last year. Despite these temporary headwinds, we remain optimistic that StubHub’s revenue growth and profitability are poised to accelerate meaningfully.

BSD Analysis:
StubHub is a structurally advantaged ticketing marketplace temporarily obscured by tough comps and upfront investment. As a scaled platform with powerful network effects and data-driven pricing tools, StubHub should convert high gross merchandise volume into attractive incremental margins once growth investments normalize. The expansion into primary ticketing and ancillary services (advertising, merchandising, experiences) broadens the TAM and supports a multi-year revenue growth runway. While IPO volatility may leave shares trading at a discount to intrinsic value on EV/sales versus global marketplace peers, accelerating growth and operating leverage could drive rapid multiple re-rating. In a world of robust live-event demand, StubHub offers leveraged exposure to consumer experiences with platform economics.