Investment Pitches

Pitch Summary:
Arista returned 42.4% during the quarter, ending as our fifth-largest position with a weight of 4.9%. Arista is the leading provider of data center switches to cloud network and AI customers. Arista is executing extremely well and reported strong second quarter results, with revenue, margins, earnings per share (EPS), and qualitative commentary, all above expectations. In addition, Arista raised revenue guidance for all of 2025 to 25%, up from 17% previously, and provided initial conservative guidance of 14% growth in 2026. Arista also announced they will exceed targets for both their AI and Campus product solutions in 2025. At the recent investor day, CEO Jayshree Ullal was not shy about noting advantages vs. rivals and future opportunities ahead. AI revenue, targeted at $1.5 billion this year, is expected to be $2.75 billion next year, growing 60% to 70%, which means AI will be about 25% of revenue. Looking beyond 2026, Arista gave a target of “mid-teen” growth through 2029. This is similar to their long-term guidance three years ago, which they significantly exceeded at a 27% CAGR.

BSD Analysis:
Arista’s AI-driven growth narrative remains robust. With hyperscale demand from AWS and Meta fueling high-margin network switch sales, EPS growth above 25% seems sustainable. Trading around 30x forward P/E with net cash and rising software mix, the company’s outlook is compelling. AI infrastructure buildout should extend visibility through 2027, and its execution discipline sets it apart from legacy vendors.

Pitch Summary:
Salesforce was a detractor during the quarter. The U.S.-headquartered customer relationship management company’s stock price declined despite reporting earnings that we viewed as solid. Data Cloud and Agentforce performed well, in our view, and management continued to repurchase shares. In our view, there is room for continued growth as the company leverages its unique position to help businesses deploy AI and continues to restructure its sales organization.

BSD Analysis:
Harris remains constructive on Salesforce’s AI-driven growth story. Despite valuation compression to ~24x forward earnings, recurring revenues, AI automation, and strong buybacks underpin earnings durability. cloud, SaaS, AI, CRM, recurring revenue, buybacks, margin expansion

Pitch Summary:
Molina Healthcare was a detractor during the quarter. The U.S.-headquartered managed care company’s stock price declined after it reported challenging second-quarter results and reduced full year earnings per share guidance. This negative revision was caused by cost pressure in the company’s Medicaid and Marketplace businesses. While today’s valuation seems to imply that the headwinds impacting Molina are structural, we believe they’re attributable to temporary factors and expect a meaningful earnings recovery in the coming years.

BSD Analysis:
Harris views Molina’s weakness as cyclical. With P/E ~12x and strong balance sheet, the stock offers asymmetric upside as Medicaid margins normalize. State renewals and cost controls are likely catalysts for EPS recovery.

Pitch Summary:
Keurig Dr Pepper was a detractor during the quarter. The U.S. beverage company’s stock fell after announcing the acquisition of JDE Peet’s, which owns a collection of global coffee brands. Once the combination is complete, Keurig Dr Pepper plans to split into two separate entities. One entity will specialize in coffee, while the other focuses on soft drinks. Separating the coffee and soft drink segments makes strategic sense, as synergy estimates appear conservative, and the multiple paid for JDE Peet’s was undemanding. In our view, investors reacted harshly to this announcement because the two-step transaction adds complexity, increases debt, and unexpectedly raises exposure to the coffee category. We believe the sell-off was overdone since Keurig Dr Pepper’s fundamentals remain healthy, the organization has a proven track record of deleveraging after prior deals, and the upcoming separation will expose the significant sum-of-the-parts discount.

BSD Analysis:
The manager sees upside in KDP’s restructuring despite short-term skepticism. The coffee-spin unlocks value through clearer segment focus, and historical deleveraging supports capital discipline. At ~18x forward P/E and 3% yield, valuation offers margin of safety amid operational stability.

Pitch Summary:
IQVIA Holdings was a contributor during the quarter. The U.S.-headquartered provider of advanced analytics, solutions, and clinical research services saw its stock price appreciate after having delivered solid second-quarter results amidst a challenging pharma environment. The results reaffirmed our thesis that the technology and analytics solutions (TAS) segment is underappreciated and poised for future growth. Further the R&D solutions business showed signs of gaining share, with its win rate improving significantly. We believe forward-looking indicators are encouraging and think the company can extract further value as it leverages next-gen trends.

BSD Analysis:
Harris highlights IQVIA’s mix of stable analytics revenue and cyclical R&D tailwinds. With EV/EBITDA ~14x and steady margin expansion, the TAS segment is driving multiple re-rating potential. Digital trials, AI-driven data use, and recurring software sales reinforce visibility.

Pitch Summary:
Alphabet was a contributor during the quarter. The technology conglomerate’s stock price appreciated following a favorable ruling in the Google Search antitrust case and second-quarter earnings that exceeded expectations across the board. Innovations in the Google Search experience are driving both engagement and revenue benefits. Moreover, Cloud growth is accelerating thanks to robust demand for AI workloads. We continue to believe Alphabet is undervalued on a sum-of-the-parts basis and see potential for the company’s AI leadership to drive further upside across the portfolio.

BSD Analysis:
The fund maintains a bullish stance on Alphabet, emphasizing its AI-driven monetization across Search and Cloud. With forward P/E ~23x and strong free cash flow, Alphabet remains underappreciated given its diversification. Legal overhangs are easing, and AI integration across products like Gemini and Vertex boost revenue visibility.

Pitch Summary:
Warner Bros Discovery (WBD) was a contributor during the quarter. The media company’s stock price surged by 29% in a single trading session in September – its best day on record – amid reports that it is an acquisition target for Paramount-Skydance. In our view, this merger could generate meaningful cost synergies and create a scaled competitor with a deep and unmatched content library. We continue to closely monitor WBD’s evolving outlook and believe its long-term prospects remain attractive, backed by solid recent earnings, renewed distribution deals and growing momentum in its Streaming segment.

BSD Analysis:
Harris Associates is constructive on WBD’s improving fundamentals and merger optionality. Despite high leverage, deleveraging progress and a robust IP library support a rerating. Trading at ~7x EV/EBITDA, WBD is undervalued relative to peers. Cost synergies from a potential merger and improving streaming economics create upside potential.

Pitch Summary:
Naturally, as investors seek out winners, they’re quick to jettison companies they fear may be come “AI Victims”, too. No doubt, this technology will ultimately change the way businesses operate. However, we think it’s premature to declare just who the “losers” may be. For instance, this year we have built a new position in Accenture, a provider of IT consulting and managed services, including additional purchases in the recent quarter. Accenture is rapidly retooling its own operations to incorporate AI technology, and we believe this will play a critical role in the evolution of their clients’ technology stacks as well. This quarter, we also began building a new position in CDW, a value-added reseller of technology solutions to small and medium-sized enterprises, education and government clients. In 2020, CDW helped clients rapidly adapt their organizations for the challenges of remote work. Five years later, the next hardware cycle will also likely include clients asking CDW specialists how to enable their platforms to take advantage of AI. In both cases, these opportunities are not yet reflected in earnings, but for patient investors we think that creates attractive entry points.

BSD Analysis:
CDW is a downstream AI beneficiary positioned to ride the next hardware/infra refresh across SMB, education, and public sectors. Mix shift toward data-center, networking, and endpoint upgrades should lift gross profit dollars even if unit volumes are choppy. Operating leverage and vendor incentives support resilient margins; balance sheet strength enables steady buybacks. Shares trade at a reasonable premium to distributors given higher ROIC and sticky customer relationships; catalysts include accelerating AI-related orders and backlog rebuild.

Pitch Summary:
Naturally, as investors seek out winners, they’re quick to jettison companies they fear may be come “AI Victims”, too. No doubt, this technology will ultimately change the way businesses operate. However, we think it’s premature to declare just who the “losers” may be. For instance, this year we have built a new position in Accenture, a provider of IT consulting and managed services, including additional purchases in the recent quarter. Accenture is rapidly retooling its own operations to incorporate AI technology, and we believe this will play a critical role in the evolution of their clients’ technology stacks as well. This quarter, we also began building a new position in CDW, a value-added reseller of technology solutions to small and medium-sized enterprises, education and government clients. In 2020, CDW helped clients rapidly adapt their organizations for the challenges of remote work. Five years later, the next hardware cycle will also likely include clients asking CDW specialists how to enable their platforms to take advantage of AI. In both cases, these opportunities are not yet reflected in earnings, but for patient investors we think that creates attractive entry points.

BSD Analysis:
Accenture is a leveraged play on enterprise AI adoption, with durable fee-based revenues and strong free-cash-flow conversion supporting capital returns. Its scale and client embeddedness position it to capture AI services demand across strategy, integration, and managed services, while margins should benefit from automation. Valuation is reasonable versus large-cap IT services peers given double-digit bookings and improving headcount productivity. Key catalysts include AI-led deal wins, utilization gains, and resumed buyback cadence.

Pitch Summary:
I also established a capital structure arbitrage in Bel Fuse (“BELFA” / “BELFB”). As you may recall, I previously owned BELFB based first on new management improving sales and profitability and subsequently on the acquisition and integration of Enercon. That investment worked out wonderfully for us, though in hindsight I sold too early as the company posted banner Q2 results. In revisiting the name, I noticed two things. Firstly, the discount in the price of the Class A shares versus the Class B shares had materially widened and was approaching historic levels. Secondly, Gabelli, a large holder of the Class A shares updated his holdings report to note that he is considering resubmitting a shareholder proposal to collapse the share structure. Gabelli had previously submitted similar proposals in 2018 and 2020. At the time those proposals did not pass as the company’s governance documents suppress the voting rights of Class A shareholders who own more than 10% of the outstanding Class A; and with approximately 21% of the outstanding Class A, Gabelli was not able to fully exercise its voting rights. At the 2020 shareholder meeting, the Gabelli proposal received 567k votes in favor and 921k votes against. Had Gabelli been able to vote their 463k shares the proposal would have passed. In the years since, however, Gabelli has sold his Class A shares down to 7.966% and should be able to vote for any proposal. The largest Class A shareholder is Daniel Bernstein, who is allowed to vote his shares through an exemption. Daniel is the son of the company’s founder and former CEO. Since 2020 we have seen Daniel slowly release the reigns of the company as he brought in an outsider as CFO to effect change and ultimately decided to promote him to CEO effective this year. This decision has been incredibly beneficial to Daniel and all shareholders, as the stock price has increased about 10x. Given that 90% of Daniel’s holdings are in Class A which are trading at a material discount to the more liquid Class B shares, Daniel is no longer involved in the day-to-day operations, and has demonstrated the willingness to put ego aside for the greater good, I would not be surprised if he changes his stance on the matter. Collapsing the structure would be a win-win as it would improve corporate governance and provide liquidity to all shareholders.

BSD Analysis:
Bel Fuse presents a classic capital-structure arbitrage opportunity driven by a historically wide discount between the Class A and Class B shares, despite identical economic rights. The spread has ballooned just as governance dynamics are shifting in a way that makes a share-class collapse materially more plausible than in past attempts. Gabelli, the key proponent of unifying the structure, has reduced his Class A ownership below the ten percent threshold that had previously stripped him of voting rights, meaning any renewed proposal now has far greater odds of passing. Meanwhile, Daniel Bernstein — the largest Class A holder and long-time insider — has already stepped back from day-to-day operations, promoted an outside CEO, and benefited enormously from the stock’s tenfold increase under improved leadership. With roughly ninety percent of his economic exposure tied to the discounted Class A shares, he is now heavily financially incentivized to support a unification that would immediately lift the A-share valuation. Governance reform would not only unlock liquidity and narrow the discount but also further institutionalize Bel Fuse’s corporate profile after its operational turnaround and successful Enercon integration. For investors, the upside is driven by both mean reversion in the share-class spread and the prospect of a formal structure collapse, both of which offer asymmetric returns with limited fundamental risk.

Pitch Summary:
I bought shares in American Woodmark (“AMWD”) following their announced merger with Masterbrand (“MBC”). AMWD & MBC are two of the largest US manufacturers of residential cabinets. What stood out to me were the identified synergies relative to their current earnings power. Specifically, the companies have identified $90mm in cost synergies relative to ~$490mm in EBITDA, an 18% increase. Importantly, MBC management is already 1 year into acquiring Supreme and have stated that the integration progress is on track relative to their initial estimates. Unlike Supreme, which has many high-end and customized products, AMWD has a more standardized product offering; as such any rejiggering of manufacturing locations with AMWD should be a lot easier. MBC is run by Dave Banyard who will remain as CEO of the combined company. Having previously worked in senior roles at both Danaher and Roper, he has a lot of experience in acquisitions and operational excellence. Keeping in mind that this is a highly cyclical industry, from 2019 to LTM, Dave was able to grow revenue at MBC by 5.7% organically; this compares positively to AMWD which grew 0.2% during the same period. From a margin perspective, MBC performed favorably as well. MBC expanded its EBITDA margin from 11.1% to 12.5% (+1.4%) while AMWD compressed from 13.9% to 11.1% (-2.8%). I expect that the combined entity will benefit from Dave’s leadership.

BSD Analysis:
American Woodmark’s merger with MasterBrand creates a scaled cabinetry manufacturer with unusually clear, quantifiable synergy potential relative to its current earnings base. The companies have already identified ninety million dollars in cost synergies, equivalent to roughly an eighteen percent uplift on combined EBITDA — a sizable value creation lever before considering any cyclical recovery in housing or remodeling. MasterBrand’s leadership has de-risked execution by already being a year into integrating the Supreme acquisition, a far more complex, customization-heavy business than AMWD’s largely standardized product lines. That experience, combined with AMWD’s simpler manufacturing footprint, suggests that footprint consolidation and operational optimization should be meaningfully easier this time around. The combined entity will be led by Dave Banyard, whose background at Danaher and Roper reinforces confidence in his ability to execute disciplined integrations and margin expansion. Notably, under his tenure MasterBrand delivered positive organic growth and margin improvement through a cyclical period when AMWD stagnated, highlighting a real leadership upgrade. While cabinetry is a cyclical market, the structural efficiencies and management quality embedded in this deal position the merged company to exit the downturn stronger, with higher through-cycle profitability and a more defensible competitive position.

Pitch Summary:
During the quarter I re-established a position in Victory Capital (“VCTR”). VCTR has closed their acquisition of the Amundi US business and now boasts over $300bn in assets under management. Net flows for the acquired business were positive in 2024 and for 2025 YTD. On a consolidated basis, there is upside to flows should VCTR be able to realize the immense cross-selling opportunity at hand. As a reminder Amundi globally manages over $2 trillion in assets, has a 15-year distribution agreement with VCTR, and economic exposure to VCTR with ownership of 23mm equivalent shares (worth about $1.5bn). Management increased their cost synergy target to $110mm and have historically exceeded their guidance. I believe that the company can achieve at least $7.00 / share next year in free cash flow, putting them at about 9x. This level is at a discount to comparable asset managers and does not give the company credit for operational upside and strong capital allocation.

BSD Analysis:
Victory Capital’s acquisition of Amundi US materially reshapes the firm’s scale and distribution reach, taking assets under management above three hundred billion dollars and positioning the platform for sustained organic growth. Early signs are encouraging, with net flows turning positive both in 2024 and year-to-date in 2025, and the far larger opportunity lies in cross-selling across Amundi’s global ecosystem. Amundi’s two-trillion-dollar asset base, its fifteen-year distribution agreement with VCTR, and its sizeable equity exposure through twenty-three million equivalent shares create unusually strong alignment and long-term incentives for collaboration. Management has already raised its cost-synergy target to one hundred ten million dollars and has a track record of over-delivering on integration commitments. On forward free cash flow, VCTR is positioned to generate at least seven dollars per share next year, implying a valuation around nine times — a meaningful discount to peers despite better capital allocation and clearer operational catalysts. The combination of scale, distribution leverage, and a proven acquisitive playbook provides a multi-year runway for growth in earnings and free cash flow. With aligned strategic partners and improving flow trends, VCTR offers an attractive mix of undervaluation, operating momentum, and disciplined capital deployment.

Pitch Summary:
The portfolio was most impacted by the strong performance of Kratos (“KTOS”), a position I initiated in Q2. The stock nearly doubled in Q3 driven by positive industry developments and company specific releases. In July, Defense Secretary Pete Hegseth announced that the U.S. would ramp production and fielding of drones. In August the company released their Q2 earnings which beat consensus; but the real mover here was commentary around their future outlook. Management identified several large wins post quarter end that will boost Q3 bookings and give increased confidence on their guidance for 2026-2027. They also noted that additional upside lies in tactical drones, which are currently being discussed by customers and would immediately increase revenue and profitability since they are already in production. I have reduced our position into this strength to ensure that it is not oversized.

BSD Analysis:
Kratos has quickly become one of the most compelling pure-play beneficiaries of the U.S. shift toward lower-cost, high-volume drone systems, and the stock’s surge reflects rapidly improving industry fundamentals. The July announcement by Defense Secretary Pete Hegseth to accelerate drone production meaningfully expands Kratos’ addressable market, given its long-standing focus on affordable, attritable unmanned systems rather than traditional big-ticket platforms. The company’s Q2 results were ahead of expectations, but the more important driver was post-quarter commentary highlighting several significant program wins that will meaningfully boost Q3 bookings. Management also indicated rising customer interest in its tactical drone line, which is already in production and would translate into near-immediate revenue and margin upside if contracted. With visibility improving for both 2026 and 2027, Kratos is transitioning from a speculative growth story to one with tangible backlog expansion and clearer profitability pathways. The company retains meaningful optionality across its drone, space, and defense-systems portfolio, all leveraged to budget priorities that are accelerating rather than slowing. While the recent rally justified trimming position size for risk control, Kratos remains well positioned to compound value as demand for next-generation defense systems scales.

Pitch Summary:
Tesla remains one of our highest-conviction short positions. The company faces intensifying competition from established automakers and a weakening demand backdrop in key markets such as China. Margins have deteriorated due to aggressive price cuts, and we view the company’s AI and autonomy narrative as overhyped relative to commercial viability. We continue to see significant downside risk given stretched valuation and operational headwinds.

BSD Analysis:
Tesla remains one of the most compelling large-cap short opportunities because its competitive position is weakening at the same time its valuation still assumes years of hypergrowth. Demand has softened meaningfully in key markets, especially China, where local EV manufacturers now out-innovate and out-price Tesla across multiple segments. To defend share, Tesla has resorted to repeated price cuts that have driven a material deterioration in automotive margins, revealing how little true pricing power the company has without tax incentives and scarcity. Meanwhile, the company’s AI and autonomy storyline continues to outpace commercial reality, with timelines repeatedly slipping and regulatory constraints limiting near-term monetization. As legacy automakers ramp EV platforms and hybrids regain traction, Tesla’s once-dominant position looks far more vulnerable than the stock implies. The company also faces operational risk from its aging product lineup and a CEO whose distractions increasingly create reputational and execution overhangs. With a valuation that still reflects a tech-platform premium rather than the economics of a maturing automaker, the risk-reward skews heavily to the downside.

Pitch Summary:
NVIDIA was one of the fund’s largest short positions during the month. The fund believes the company’s current valuation reflects an unsustainable AI-driven bubble. While fundamentals remain strong, the pace of capex expansion across hyperscalers appears excessive relative to near-term monetization opportunities. We believe market expectations for growth are unrealistic and current multiples provide a poor risk/reward setup.

BSD Analysis:
NVIDIA sits at the center of the AI hardware boom, but its current valuation assumes a straight-line continuation of hyperscaler capex that increasingly looks unsustainable. The company’s fundamentals are undeniably strong, yet the pace of infrastructure build-out has far outstripped the near-term monetization of AI models, creating a classic mismatch between investment intensity and cash-return timelines. Hyperscalers are already signaling more discipline around spending, and several are accelerating efforts to build or source lower-cost alternatives, narrowing NVIDIA’s future pricing power. Market expectations for growth appear detached from industry cyclicality, especially given that semiconductor spending historically moves in waves rather than infinite vertical climbs. The current multiple embeds a belief that NVIDIA can capture a disproportionate share of an AI profit pool that itself remains highly speculative. Any moderation in orders, delay in deployment, or shift toward in-house accelerators could materially reset investor expectations. Taken together, the setup offers poor risk-reward: extraordinary performance is already priced in, while the path to disappointment requires only a modest deceleration.

Pitch Summary:
Leading defense technology provider Kratos Defense & Security Solutions, Inc. contributed to performance following a strong earnings report and continued momentum across its business segments. Years of investment are beginning to pay off, with the company winning new contracts across multiple divisions. The current defense spending cycle appears to be in a generational upswing amid heightened global conflicts, and Kratos’ innovative solutions position it well to support the U.S. Armed Forces. The current administration’s openness to smaller, agile defense contractors further strengthens Kratos’ opportunity to secure larger awards, supporting our continued conviction in the company.

BSD Analysis:
Kratos is emerging as one of the most compelling growth stories in defense technology as years of internal R&D investment are now converting into tangible contract wins across its unmanned systems, space, and tactical defense businesses. The company’s portfolio is aligned with the Pentagon’s shift toward lower-cost, rapidly deployable, and attritable systems, giving it a structural advantage versus legacy primes that remain anchored to slower, high-cost programs. Recent earnings reinforced the inflection, with broad-based momentum and accelerating bookings that signal increasing customer confidence. The current defense spending cycle is in a rare, multi-year upswing fueled by geopolitical tensions, and Kratos is one of the few pure-play names positioned directly in the priority areas of that budget growth. The administration’s willingness to diversify awards toward smaller, more innovative contractors further widens Kratos’ opportunity set for larger, program-level wins. With growing scale, improving margins, and expanding visibility, the company’s trajectory is shifting from speculative to increasingly durable. Altogether, Kratos continues to look like an underappreciated beneficiary of the next generation of defense modernization.

Pitch Summary:
Wingstop Inc. is a fast-casual restaurant chain known for its cooked-to-order chicken wings and wide flavor variety, operating a highly franchised model across the U.S. and abroad. Shares fell during the quarter amid softening sales momentum. While the company reported better-than-expected quarterly results over the summer, subsequent market data indicated weakening sales trends as the quarter progressed. We attribute this to a broader slowdown in industry spending that has affected Wingstop’s customer base. Despite these short-term headwinds, we maintain conviction in Wingstop’s long-term growth prospects. The company’s asset-light, franchised business model and best-in-class unit economics should continue to support double-digit unit growth for the foreseeable future. We also believe Wingstop’s technology initiatives to reduce order times will drive improved sales and that the company will benefit from continued growth in marketing and brand awareness.

BSD Analysis:
Wingstop remains one of the strongest long-term growth stories in fast casual dining, even if near-term sales trends have softened alongside broader industry spending. The company’s highly franchised, asset-light model produces some of the best unit economics in the restaurant space, giving franchisees strong incentives to keep opening new stores and supporting sustained double-digit unit growth. While market data pointed to weakening sales as the quarter progressed, we view this slowdown as cyclical rather than a sign of brand fatigue, especially given Wingstop’s long track record of traffic and ticket resilience. Technology initiatives aimed at reducing order and pickup times should help improve throughput and drive better same-store sales as digital mix increases. The brand also continues to benefit from rising marketing spend and expanding national awareness, both of which support long-term customer acquisition. With strong cash-on-cash returns, disciplined franchising, and a unique product niche that has proven highly scalable, Wingstop remains well positioned for multi-year compounding once consumer trends normalize.

Pitch Summary:
Inspire Medical Systems, Inc. is a medical device company offering a treatment option called hypoglossal nerve stimulation for patients with moderate-to-severe obstructive sleep apnea. Shares fell during the quarter as management lowered 2025 financial guidance, citing several factors behind the slower-than-expected rollout of Inspire 5, the company’s next-generation device. These included delays onboarding centers to a new patient management platform, a postponed Medicare reimbursement code that did not take effect until July 1 due to a software update, patients deferring procedures in anticipation of Inspire 5’s availability, and management’s decision to pause marketing efforts and new center expansion. In addition, management noted anecdotal reports of some patients delaying procedures to try GLP-1 medications. We exited our position.

BSD Analysis:
Inspire Medical Systems remains the clear category leader in hypoglossal nerve stimulation for obstructive sleep apnea, a therapy with strong clinical data, high patient satisfaction, and minimal direct competition. That said, the company’s near-term execution has faltered, with management cutting 2025 guidance due to delays in rolling out its next-generation Inspire 5 device and disruptions tied to onboarding centers onto a new patient management platform. The postponed Medicare reimbursement code and management’s pause in center expansion further compounded the slowdown, making growth appear far lumpier than investors expected. Some patients also delayed procedures in anticipation of the new device, while anecdotal deferrals tied to GLP-1 drug interest added another variable to near-term demand. Despite these hurdles, the long-term need for effective, durable sleep apnea treatments remains substantial, and Inspire’s installed base of trained implanting centers provides a foundation for recovery once operational issues normalize. The company’s technology remains differentiated, and broader awareness among sleep specialists continues to climb. With execution back on track, Inspire could resume its trajectory as a high-growth med-tech leader, but the current setup requires patience and a willingness to look past short-term volatility.

Pitch Summary:
In the third quarter we purchased shares of Birkenstock Holding plc. Birkenstock is a global footwear brand with roots dating back to 1774. The brand is most known for its iconic “Arizona” and “Boston” sandals, and the brand has been embedded in U.S. culture since the 1960s and 1970s. Although the Birkenstock brand has been around for over 250 years, in 2009 the Birkenstock family brought in its first outside management team led by Oliver Reichert. Under new leadership and vision, the business has been transformed from a family-owned, production-oriented company into a global, professionally managed enterprise committed to growing the Birkenstock brand. Following the addition of outside management, Birkenstock revenues have grown at a 20% CAGR from fiscal 2014 to fiscal 2025. In 2025, the company generated revenues of €2.1 billion with profitability margins in the mid 30% range. This combination of an iconic brand with high growth and industry leading profitability makes the Birkenstock brand a unique asset. Unlike almost all other footwear brands, Birkenstock manufactures its products in-house with over 95% of its products manufactured in Germany. This provides Birkenstock with better quality control and less external risk. Birkenstock products are sold both direct and through wholesale partners. Wholesale represents roughly 64% of sales and Birkenstock products were sold in 6,000 selected wholesale partners in over 75 countries ranging from orthopedic specialists to major department stores, to high-end fashion boutiques. The remaining 36% of sales are generated direct-to-consumer, with the vast majority sold through e-commerce. The company has just 90 stores, which we expect to continue growing. Birkenstock’s strongest, most developed regions are the Americas and Europe, which represented 53% and 36% of revenues in fiscal 2022, respectively. We believe that Birkenstock will be able to grow revenue in the mid-high teens over the medium term. The company’s growth should be driven by continued growth in its core styles, an expanding year-round product mix, growing the number of stores, and geographic expansion, particularly in the APAC region. We also believe that Birkenstock will be able to maintain its industry leading profitability due to high brand awareness, vertical integration, and the high proportion of products sold at full prices.

BSD Analysis:
Birkenstock is one of the rare global footwear brands that combines deep cultural heritage with genuine modern growth, transforming a 250-year-old German maker of orthopedic sandals into a high-end lifestyle brand with accelerating global relevance. Since bringing in professional management in 2009, the company has shifted from a family-run production shop to a disciplined, brand-centric enterprise, delivering roughly twenty percent compound revenue growth for more than a decade. Its mid-thirty-percent profit margins place it among the most profitable footwear brands globally, supported by unusually high vertical integration with more than ninety-five percent of production still in Germany. This in-house manufacturing gives Birkenstock greater quality control, pricing power, and supply reliability than competitors reliant on outsourced Asian production. The wholesale channel remains robust across six thousand carefully selected partners, while direct-to-consumer continues to scale through e-commerce and a small but expanding retail footprint. Growth should remain in the mid-to-high teens as Birkenstock broadens its year-round product mix, increases store openings, and accelerates geographic expansion in underpenetrated APAC markets. With iconic core styles, strong pricing integrity, and industry-leading margins, the brand remains a unique asset capable of compounding value for many years.

Pitch Summary:
Braskem’s bonds declined sharply after the company reportedly hired restructuring advisors. Given the extent of negative news already priced in, we have chosen to maintain our current exposure after extensive internal and external discussions.

BSD Analysis:
Braskem’s bonds sold off sharply following reports that the company hired restructuring advisors, accelerating already significant spread widening. Much of the pessimism appears to be fully reflected in current prices, which embed severe downside scenarios regarding liquidity, litigation exposure, and petrochemical-cycle weakness. After extensive internal and external consultations—including legal, restructuring, and sector specialists—we concluded that the risk/reward at today’s levels is more balanced than market sentiment suggests. The company continues to possess sizeable hard assets, strategic importance within Brazil’s industrial base, and multiple potential levers to stabilize liquidity. While the path forward remains uncertain and headline volatility is likely to persist, current bond pricing assumes a restructuring outcome that is far from assured. Given the extent of negative developments already capitalized into valuations, we chose to maintain our existing exposure rather than crystallize losses into extreme fear.