Investment Pitches

Pitch Summary:
FTAI Infrastructure saw slower volume growth and performed maintenance at key facilities, weighing on results. However, it announced the acquisition of The Wheeling Corporation, owner of the Wheeling & Lake Erie Railway, marking a strategic pivot toward freight rail operations.

BSD Analysis:
The Wheeling acquisition transforms FTAI into a rail-focused infrastructure platform. Freight rail monetization potential and asset optimization should unlock long-term value.

Pitch Summary:
Ducommun is a critical Tier 1 and Tier 2 supplier of advanced material aerostructures and electrical components to the defense and commercial markets. Boeing’s consistent 737 Max production rate and increasing missile demand globally are driving growth.

BSD Analysis:
Ducommun’s diversified defense and commercial backlog provides multi-year visibility. Exposure to Boeing and missile programs positions it for operating leverage as production scales.

Pitch Summary:
US Lime and Minerals benefited from growing demand from construction, environmental, and steel customers, driving sales growth. Its key markets in Louisiana and Texas are experiencing strong bidding activity indicating robust underlying demand, also supported by infrastructure projects.

BSD Analysis:
Infrastructure tailwinds and regional strength underpin continued revenue growth. Strong pricing power and balance sheet discipline make USLM a steady compounder.

Pitch Summary:
Red Rock Resorts, a casino operator controlling over half the Las Vegas locals market, continues to benefit from broad fundamental strength, which is underpinning steady and stable growth.

BSD Analysis:
Strong local demographics and limited new capacity support Red Rock’s pricing and margin stability. Cash flow visibility is high, and expansion opportunities in Las Vegas should drive incremental EBITDA. Shares remain attractive on normalized free cash flow yield.

Pitch Summary:
Nuclear fuel and services provider Centrus Energy is benefiting from renewed interest in nuclear power in the US to support growing power demand tied to the AI boom. Centrus is a nuclear fuel broker with burgeoning enrichment capabilities, positioning it well as the US seeks to maintain domestic energy independence.

BSD Analysis:
Centrus stands to gain from the structural revival in U.S. nuclear energy. Its HALEU enrichment expansion and domestic sourcing align with federal energy security priorities. Rising AI-driven electricity demand further supports uranium market tightness and long-term pricing.

Pitch Summary:
Shares of mortgage servicing company Mr. Cooper Group rose as its acquisition by Rocket Companies closed as the quarter concluded. Investor sentiment has also been buoyed by the Fed’s recent rate cut, which should give a boost to housing and refinancing demand in the period ahead.

BSD Analysis:
The Rocket merger provides scale and cost synergies, strengthening Cooper’s market position in mortgage servicing. Lower interest rates will likely expand refinancing volumes and drive higher prepayment income. With a strong balance sheet and improving ROE, Mr. Cooper remains well-positioned for sustained earnings growth.

Pitch Summary:
Huntington Ingalls is seeing progress from its efforts to improve employee attrition. Management expects demand to remain strong as the DOD prepares for potential Pacific conflicts, ensuring multi-year backlog visibility. Labor improvement should aid margin expansion.

BSD Analysis:
With steady defense spending and improved labor efficiency, Huntington Ingalls is positioned for multi-year margin expansion. Its $45B backlog and strong free cash flow yield support undervaluation relative to peers.

Pitch Summary:
Industrial distributor WESCO’s data center business is growing rapidly, in turn driving revenue growth. Signs of strong organic growth and improvement in its high-margin utility business further contributed. Management sees secular tailwinds from infrastructure, automation, and electrification.

BSD Analysis:
WESCO’s scale advantage and exposure to secular infrastructure and data center trends underpin sustainable growth. Operating margin recovery and deleveraging potential make valuation attractive relative to peers.

Pitch Summary:
Strong demand for networking systems company Ciena’s hyperscaler offerings has helped drive strong earnings growth. Hyperscaler demand is being fueled by AI-related projects, which management believes should translate to durable demand ahead.

BSD Analysis:
Ciena’s hyperscaler exposure anchors robust order growth, with AI data flow expansion sustaining top-line momentum. Operating leverage and 40%+ gross margins support strong earnings visibility as enterprise cloud investment continues.

Pitch Summary:
Fortrea helps its biotech and pharmaceutical customers to run clinical trials with the goal of receiving marketing authorization in the U.S. and other countries. Fortrea helps design the trials, recruit investigators and participants, prepare data for regulatory review, and other tasks needed to win the authorization to market new treatments. The company spun out of Labcorp in June 2023, and is attempting to turn around the business. Fortrea currently trades at an attractive upside-to-downside ratio.

BSD Analysis:
Fortrea’s CRO turnaround offers asymmetric upside as restructuring stabilizes operations post-spin. With improving client retention, margin recovery, and deleveraging, shares could re-rate toward peer multiples (~13x EBITDA).

Pitch Summary:
With Thinkific, we bought shares in a Canadian company that helps its customers create and get paid for online courses. It is managed by one of its founders, and it is shedding customers as it pursues a new strategy targeting larger, higher lifetime-value customers. Despite the lower customer count, management has continued to find ways to grow revenue and improve cash flow. We paid C$1.87 per share, which I thought was a fine price for a well-managed business that should grow over time.

BSD Analysis:
Curreen’s thesis centers on Thinkific’s shift toward higher-value enterprise clients. The pivot sacrifices user volume for margin expansion and ARPU growth. With founder-led execution and improved cash discipline, upside potential remains as scale returns.

Pitch Summary:
GetBusy was already our largest position, but we bought a bit more (paying £0.66/share) after management forecast “material acceleration” in the SmartVault business. Then each of the CFO, CEO and a director added weight to those words by personally buying stock.

BSD Analysis:
Curreen remains confident in GetBusy’s organic growth and recurring-revenue model. Insider buying reinforces conviction in near-term acceleration. With SmartVault adoption and improving operating leverage, upside exists despite small-cap volatility.

Pitch Summary:
Later in the quarter we sold shares of Credit Acceptance, reducing it to a bit more than 1% of the fund. We used the bulk of the proceeds to buy Kontoor, a stock that we have owned before. Kontoor spun out of VF Corp in 2019, comprising the jeans businesses Wrangler, and Lee. Since the spinoff, Kontoor has been a well-managed cash cow that has paid dividends and repurchased its stock. I think the Kontoor story changed earlier this year when the company bought Helly Hansen, an Outdoor and Workwear brand. The acquisition closed in July and appears to be going well. Before this acquisition, Kontoor was a well-managed cash cow that did not grow, as exemplified by their annual revenues still lagging behind their 2007 level. With the Helly Hansen acquisition, Kontoor appears to be dusting off the old VF Corp playbook: borrow to buy a good brand, manage it well, pay down debt, and repeat. Adding growth makes a well-managed cash cow more valuable, and that is what I believe is happening at Kontoor. We paid $72.54/share for our position.

BSD Analysis:
The fund is bullish on Kontoor’s transition from cash cow to growth compounder post-Helly Hansen acquisition. Strong cash flow, disciplined capital deployment, and brand synergies support mid-teens EPS growth. Trading at ~12x P/E with dividend yield >4%, risk/reward remains attractive.

Pitch Summary:
While Enhabit has been doing fairly well with its turnaround, I did not like the increasing headwinds facing the business and decided that we would be better off investing our money elsewhere. In early July, the Centers for Medicare and Medicaid Services (CMS) proposed cutting Medicare home health reimbursement rates even more aggressively than they have in the past few years. Medicare is Enhabit’s best-paying customer, and this cut—deeper than those of the past few years—was unexpected. With the prospect of not only continuing rate cuts but even deeper rate cuts, I reduced my valuation for the company. Enhabit has navigated the home health industry headwinds well so far, and its Hospice business is doing very well, but the headwinds are worse than I thought. As the U.S. population ages, demand for home health services will grow, but getting CMS and insurers to pay the rates that will allow home health companies to profitably expand supply now appears more challenging than I had expected.

BSD Analysis:
Curreen Capital exited Enhabit due to structural reimbursement headwinds and regulatory uncertainty. CMS rate cuts compress margins in a fixed-cost industry, and while demographics are favorable, policy risk and limited pricing leverage cap upside. With forward EV/EBITDA ~8x and stagnant earnings visibility, redeployment to higher-growth, less policy-sensitive names is prudent.