Investment Pitches

Pitch Summary:
James Hardie (Long -15%) declined during the period as rising inflation expectations and higher mortgage rates weighed on the outlook for housing activity. While the company has no direct exposure to the Iran conflict – given that approximately 80% of its sales are generated in North America – it may face indirect pressures. These include softer consumer confidence and elevated input costs, which are likely to act as near-term headwinds. James Hardie is currently trading at around 15x forward P/E, a notable discount to its 10-year average multiple of 21x. In our view, this dislocation presents an attractive entry point, with valuation more than compensating for the cyclical risks in the near term.

BSD Analysis:
L1 Capital views the 15% decline in James Hardie as creating an attractive valuation opportunity despite near-term housing market headwinds. The fund emphasizes that the company's current 15x forward P/E represents a significant discount to its 10-year average of 21x, suggesting the market has overcorrected for cyclical concerns. With 80% of sales generated in North America, James Hardie benefits from geographic diversification away from direct Iran conflict impacts, though indirect effects through consumer confidence and input costs remain relevant. The fund's analysis suggests that current valuation levels more than compensate for near-term cyclical risks in the housing market. James Hardie's market-leading position in fiber cement building products provides defensive characteristics and pricing power during inflationary periods. The valuation dislocation appears driven by macro concerns rather than company-specific fundamentals, creating an opportunity for patient investors. L1 Capital's bullish stance reflects confidence in the company's long-term market position and the attractive risk-reward profile at current valuation levels, particularly given the quality of the business franchise.

Pitch Summary:
Qantas (Long -20%) was weaker as investors became more focused on the near-term earnings impact from sharply higher fuel costs and the uncertainty created by disruption in global fuel markets due to the war in Iran. Qantas has responded to this volatility with a recovery through higher ticket prices and select trimming of capacity where appropriate, with demand remaining resilient so far. Separate to this, the RBA's review of card payment costs and charges created a modest overhang for the Loyalty business, with key changes being the removal of card surcharges and the reduction in the interchange fee cap on domestic credit cards. Qantas' share price was also softer following the H1 result release, despite a result that was slightly ahead of expectations and accompanied by additional capital management. Investors instead focused on softer trends in select international markets. All up, the share price declines appear to reflect nearer-term earnings volatility rather than any deterioration in the group's underlying competitive position.

BSD Analysis:
Despite the 20% quarterly decline, L1 Capital maintains confidence in Qantas's fundamental competitive position and operational resilience. The fund views the share price weakness as primarily driven by near-term fuel cost volatility rather than structural deterioration in the business. Qantas's ability to implement pricing adjustments and capacity management demonstrates operational flexibility in responding to cost pressures. The company's demand resilience, evidenced by successful price increases, highlights the strength of its market position and pricing power. While regulatory changes to card payment structures create some headwinds for the Loyalty business, the fund appears to view this as manageable relative to the overall business value. The H1 results beating expectations, combined with additional capital management initiatives, suggest underlying operational strength. L1 Capital's analysis indicates that current market concerns are cyclical rather than structural, with the share price decline creating an attractive entry point for a fundamentally strong airline with dominant market position and proven ability to navigate challenging operating environments.

Pitch Summary:
Aurizon (Long +9%) shares strengthened over the quarter, with the company announcing a solid operating result in line with previously issued guidance. A key feature of the result was confirmation that Aurizon sees declining growth capex requirements, underpinning improving free cash outcomes moving forward and supporting an increase in its forward dividend policy to a 90% payout ratio. Recently, Aurizon confirmed that it had reached a 10-year extension to the company's regulatory arrangements with miners for access to the Queensland rail network. The agreement, which is subject to approval by the Queensland Competition Authority, enhances long-term earnings and cash-flow certainty for Aurizon's Networks business. From a trading perspective, coal export volumes have been robust, while the recent grain harvest has been extremely strong. Heading into FY27 Aurizon should see improving contributions from its BHP Copper operations which commenced last October, as well as from improving containerised freight volumes.

BSD Analysis:
L1 Capital's bullish view on Aurizon centers on the company's transition to a higher cash-generative phase with improved capital allocation. The fund highlights Aurizon's declining growth capex requirements, which directly translates to enhanced free cash flow generation and supports the increased dividend payout ratio to 90%. The 10-year regulatory extension with Queensland miners provides exceptional earnings visibility and cash flow certainty for the Networks business, reducing regulatory risk significantly. Strong operational metrics including robust coal export volumes and exceptional grain harvest performance demonstrate the resilience of Aurizon's core freight operations. The fund anticipates additional earnings contributions from the BHP Copper operations and recovering containerised freight volumes, providing multiple growth drivers for FY27. Aurizon's defensive characteristics, combined with improving cash returns to shareholders and long-term contract visibility, create an attractive risk-adjusted return profile. The regulatory certainty and diversified freight portfolio position Aurizon well for sustained performance across commodity cycles.

Pitch Summary:
BlueScope (Long +9%) shares rose during the quarter, after receiving two takeover offers from a consortium of SGH and Steel Dynamics. The first offer, received in January 2026 at A$30.00/sh, represented a 27% premium to the pre-offer date share price and was rejected by the Board of Directors of BlueScope. They stated, 'This proposal was an attempt to take BlueScope from its shareholders on the cheap. It drastically undervalued our world-class assets, our growth momentum, and our future – and the Board will not let that happen'. In February 2026, the Consortium offered a revised 'best and final' offer of A$32.35/sh, which was ex A$1.65/sh in dividends declared by the company since the initial offer ($34.00/sh including the dividends paid) representing a 47% adjusted premium. BlueScope has since responded to the offer with a list of conditions necessary for the Company to engage and provide due diligence. This includes adjustment to the offer price/valuation and changes/clarifications to certain conditions. Press speculation has also suggested that BlueScope is separately preparing an auction process for its North American business. We note that the market environment for North American steel assets remains very compelling with steel spreads remaining well above US$600/t and at multi-year highs.

BSD Analysis:
L1 Capital's BlueScope position benefits from a compelling takeover situation that validates the fund's investment thesis. The consortium's escalating bid from A$30.00 to A$32.35 per share demonstrates the underlying value of BlueScope's assets, particularly in the current steel market environment. The fund's analysis highlights the strength of BlueScope's North American operations, where steel spreads exceed $600/tonne at multi-year highs, creating exceptional profitability. The company's board rejection of initial offers suggests management believes in significantly higher intrinsic value, supported by strong operational performance and favorable market dynamics. The potential auction process for North American assets could unlock additional value beyond the current takeover proposals. L1 Capital's position appears well-timed, capturing both the operational leverage to strong steel markets and the strategic value recognized by potential acquirers. The takeover premium provides downside protection while the ongoing bidding process and potential asset sales offer multiple paths to value realization.

Pitch Summary:
Santos (Long +29%) shares rose in the March quarter driven by a more than doubling of the Brent Crude oil price from US$61/bbl to US$127/bbl. Global oil prices increased significantly due to the ongoing conflict in Iran, which has materially disrupted oil supply transiting via the Strait of Hormuz ~20% of the world's oil supply). The Strait remains effectively shut to non-Iranian vessels. Outside of the market environment, Santos continues to make significant progress on its key growth initiatives, with its Barossa project loading the first LNG cargo at the end of January 2026, and its Pikka project anticipating first oil in the coming weeks. The completion of these significant growth projects will conclude a multi-year period of elevated investment and represent an inflection point for earnings and dividends going forward. As a result, we believe Santos is well positioned to deliver attractive future returns and pass on the benefits of higher oil prices to shareholders.

BSD Analysis:
L1 Capital maintains a bullish stance on Santos, driven by both favorable commodity dynamics and company-specific catalysts. The fund highlights Santos' strategic positioning to benefit from the oil supply shock caused by the Iran conflict, which has doubled Brent crude prices to $127/barrel. The completion of major growth projects, including the Barossa LNG project and Pikka oil development, marks a critical inflection point for the company's earnings trajectory. These projects conclude a multi-year capital investment cycle and position Santos for enhanced cash generation and dividend distributions. The fund emphasizes Santos' ability to capitalize on elevated oil prices while transitioning from a growth capex phase to a cash-generative phase. With oil supply disruptions creating a favorable pricing environment and Santos' production capacity expanding, the investment thesis centers on the company's operational leverage to commodity prices and improved capital allocation. The timing of project completions aligns well with the current energy market dynamics, creating a compelling value proposition for shareholders.

Pitch Summary:
One example is how advanced chips are likely to be packaged over the next several years. Today, chips are stacked and interconnected through increasingly sophisticated packaging technologies. A leading solution used by TSMC is Chip-on-Wafer-on-Substrate (CoWoS), where highly precise micro-holes are formed within a silicon-based substrate to connect GPUs, CPUs and memory. As chips become more complex and additional layers of memory are integrated onto the interposer, the substrate must become larger and more capable of withstanding extreme thermal loads. As a result, NVIDIA's future Feynman series is widely expected to adopt Chip-on-Panel-on-Substrate (CoPoS). A major shift within this architecture is the use of glass substrates rather than silicon. Globally, only a small number of companies possess the laser technology required to precisely shape the glass and drill the micro-holes needed to connect the chips. We are invested in one of them, LPKF Laser & Electronics. This illustrates how advances in chip manufacturing can materially alter the commercial prospects of specialised suppliers.

BSD Analysis:
The manager presents a compelling thesis on LPKF Laser & Electronics based on a structural shift in semiconductor packaging technology. The investment rationale centers on NVIDIA's expected transition from CoWoS to CoPoS architecture for their future Feynman series chips, which requires glass substrates instead of silicon. LPKF possesses specialized laser technology capable of precisely drilling micro-holes in glass substrates, positioning them as a critical supplier in this technological evolution. The manager emphasizes the scarcity value, noting that globally only a small number of companies have this capability. This creates a potential bottleneck opportunity as chip complexity increases and thermal load requirements become more demanding. The thesis is supported by broader AI infrastructure demand trends and supply chain constraints the manager observes across multiple components. The positioning appears to capitalize on a specific technological inflection point that could materially expand LPKF's addressable market and revenue potential.

Pitch Summary:
eBay Inc. has seen a significant rise in its stock price, up nearly 37% since the initial recommendation in summer 2025, and an additional 24% since February 2026. The company's recent acquisition of Depop and ongoing cost-cutting measures, including layoffs, suggest a focus on efficiency and value. However, the current valuation appears high, with risks potentially outweighing the limited upside. The company's margins, while strong for retail, do not match those of high-performing tech companies, suggesting a need for cautious valuation. Consequently, the recommendation is downgraded to a hold, as the stock may be overpriced in the current market.

BSD Analysis:
eBay's strategic moves, such as the acquisition of Depop, aim to enhance its market position by focusing on value and efficiency. The company's investment in AI could potentially optimize operations and reduce costs, particularly in customer service. However, the high valuation relative to its retail peers and the mixed growth prospects suggest that the stock may not sustain its recent momentum. The company's free cash flow remains solid, but growth rates are modest compared to tech companies. Investors might find better entry points in the future, especially if the market contracts. Despite these concerns, eBay's long-term prospects remain positive, making it a candidate for consideration during market downturns.

Pitch Summary:
Trulieve Cannabis Corp. is experiencing a surge in stock price due to potential regulatory changes under the Trump Administration that could reschedule cannabis, impacting tax burdens. Despite the positive news, the investment thesis remains neutral, suggesting investors buy on dips rather than chase rallies. The company has a strong financial position with significant cash flow and a manageable debt level. However, uncertainties around tax liabilities, specifically the 280E tax requirement, pose risks. The reclassification could alleviate tax pressures and open opportunities for uplisting to U.S. exchanges, but the process is lengthy and uncertain.

BSD Analysis:
Trulieve Cannabis has been proactive in challenging the 280E tax code, which currently prevents cannabis operators from deducting operating expenses, leading to substantial tax liabilities. The company's financial health is robust, with a solid cash balance and strong EBITDA margins, positioning it well to capitalize on regulatory changes. However, the market's reaction to potential rescheduling may be premature, as the process involves multiple administrative steps and could face delays. Investors should remain cautious and consider the stock's valuation in light of potential tax liabilities and the broader regulatory environment. The company's strategic focus on expanding in states like Georgia and Texas could drive future growth, contingent on favorable regulatory outcomes.

Pitch Summary:
Rivian Automotive, Inc. is poised for significant growth with the upcoming launch of its R2 model. Despite a recent decline in share price, the company remains the second-largest EV maker behind Tesla, and its growth prospects are strong. The upcoming Q1 earnings release and the start of R2 pre-orders are major catalysts that could drive the stock higher. Rivian's delivery figures have exceeded expectations, and its software revenue is growing rapidly, providing a competitive edge. The company's Autonomy+ software is priced competitively, offering a cost advantage over Tesla's FSD package. Rivian's strategic partnerships and potential licensing deals with traditional carmakers could further enhance its market position.

BSD Analysis:
Rivian's strategic focus on premium electric vehicles and competitive software pricing positions it well against Tesla, especially as the price gap narrows with the introduction of the R2 lineup. The company's ability to exceed delivery expectations and grow software revenue at a rapid pace highlights its operational strength. Rivian's potential to license its software to other OEMs could provide a capital-light revenue stream, enhancing its gross margins. The recent rise in gas prices due to geopolitical tensions may increase consumer interest in electric vehicles, benefiting Rivian's sales. However, the company must successfully execute the R2 launch and improve its gross margins to sustain long-term growth.

Pitch Summary:
TUI AG has experienced significant volatility due to geopolitical tensions, notably the Iran conflict, which has impacted its stock price. Despite these challenges, the company has shown resilience with a solid balance sheet and a strong business model centered around vacation experiences. The recent drop in stock price presents a buying opportunity, as TUI is expected to recover and continue its growth trajectory. The company has demonstrated baseline profitability and operational upside, particularly in its cruise segment, which has seen substantial growth. TUI's strategy of maintaining an integrated marketplace and optimizing its airline operations is expected to enhance profitability. The company's current valuation is attractive, with a potential upside of 50%+ per year based on a target price of €15/share.

BSD Analysis:
TUI AG's financial strategy includes reducing net debt and redeeming convertible notes, which strengthens its financial position. The company's diversified operations mitigate the impact of regional geopolitical issues, allowing it to redirect resources to more stable markets. TUI's focus on operational efficiencies, such as upgrading its fleet and maintaining a one-stop-shop holiday model, positions it well for long-term profitability. Despite the temporary setbacks from the Iran conflict, TUI's reaffirmed guidance and strategic initiatives suggest it is on track to achieve its financial targets. The company's ability to adapt and thrive in a volatile environment underscores its potential for significant value appreciation.

Pitch Summary:
Travel + Leisure Co. has shown strong performance with a significant increase in stock value over the past year, driven by aggressive stock repurchases and robust free cash flow. Despite a recent 13% drop due to mixed results and concerns about credit quality, the company has maintained its guidance for the year. The vacation ownership segment is performing well, with a 20% increase in EBITDA and strong sales growth. The company's balance sheet is solid, with a manageable level of debt and a secure dividend yield. The recent pullback in stock price presents an opportunity for investors to add shares, as the company's conservative underwriting standards should mitigate the impact of rising delinquencies.

BSD Analysis:
Travel + Leisure Co. has demonstrated resilience in its core business, particularly in the vacation ownership segment, which continues to show strong growth. The company's conservative approach to underwriting, with high FICO scores and substantial down payments, suggests that the current rise in delinquencies may be a temporary issue rather than a systemic problem. The management's decision to maintain guidance despite macroeconomic uncertainties indicates confidence in the company's ability to navigate potential challenges. Additionally, the company's strategy of returning capital to shareholders through dividends and buybacks is supported by its strong cash flow generation. While the market has reacted negatively to recent developments, the underlying fundamentals remain robust, and the stock is poised for recovery.

Pitch Summary:
Tesla's Q1 2026 results showed a positive surprise in both revenue and EPS, with automotive revenues increasing by 16% and services and other revenue growing by 42%. The company demonstrated improved gross margins, indicating higher efficiency and a positive impact from Full Self-Driving (FSD) growth. However, the valuation remains a concern, with a forward P/E close to 200x. Tesla's future growth hinges on proving the viability of its optionalities, such as scaling FSD, developing Optimus, and expanding the Robotaxi network. The company needs to demonstrate that these ventures can significantly contribute to its revenue and justify its high valuation.

BSD Analysis:
Tesla's Q1 performance suggests a stronger bullish narrative, with operational advances in segments like CyberCab and Optimus. The cumulative deliveries and active FSD subscriptions show potential for significant revenue growth. However, the company's valuation is heavily reliant on the success of these optionalities, which are still in early stages. The market's expectation is that Tesla will achieve substantial growth in these areas by 2030 to justify its current market cap. Any delays or increased competition could erode the margin of safety, making the stock a risky investment at present. Investors should monitor Tesla's progress in scaling these new ventures and achieving profitability in GAAP terms.

Pitch Summary:
ServiceNow, Inc. is currently experiencing a significant stock price drop, largely driven by market-wide concerns in the Software sector rather than fundamental weaknesses within the company. Despite a 14% decline in shares post-earnings release, the company's quarterly results were not as disastrous as perceived. The market's reaction appears to be an overreaction to temporary issues such as minor margin adjustments and delayed transactions due to geopolitical uncertainties. ServiceNow's underlying metrics continue to reflect strong demand for its products, solid execution from management, and growth in enterprise relationships.

BSD Analysis:
ServiceNow's recent quarterly results exceeded revenue estimates, and the company raised its FY26 subscription revenue guidance, indicating strong demand. The reduction in gross margin is attributed to the integration of Armis and is expected to be a short-term issue. Delays in closing large contracts are seen as timing issues rather than a decline in demand. The company's CRPO grew by 22.5% year-over-year, and the number of large deals increased significantly, suggesting continued enterprise commitment to ServiceNow's platform. The market's reaction to AI-related fears seems misplaced, as ServiceNow's platform is likely to become more central to customers' use cases through AI.

Pitch Summary:
JPMorgan Core Plus Bond ETF (JCPB) has shown significant improvement in its performance and risk management over the past year. The fund is actively managed, allowing it to pivot between market segments and align with current macroeconomic conditions. It is currently overweight in treasuries and corporate bonds, with a substantial portion in investment-grade assets. The ETF has posted attractive risk-adjusted returns and is positioned to benefit from potential rate cuts and macroeconomic shifts. With a healthy SEC yield and improved downside risk management, JCPB is poised for robust returns.

BSD Analysis:
JCPB's active management strategy allows it to navigate volatile macroeconomic conditions effectively. The fund's ability to adjust its portfolio dynamically has led to improved downside risk management, particularly after challenges in late 2024 and early 2025. With rates currently overextended to the upside, JCPB is well-positioned to capitalize on potential rate cuts and normalization of inflation expectations. The fund's intermediate duration and focus on investment-grade assets provide a solid foundation for achieving total returns exceeding 7% this year. The ETF's strategic adjustments and robust performance metrics make it an attractive investment opportunity.

Pitch Summary:
WM Technology, trading under the ticker MAPS, is positioned as a unique player in the cannabis industry by providing a marketplace and software solutions to dispensaries. Despite the recent voluntary delisting from Nasdaq and transition to OTCQX, the company maintains a strong cash position with $57 million and no debt. The potential rescheduling of cannabis to Schedule III could significantly improve the financial health of its customers, enhancing their ability to invest in digital marketing and software solutions. This could lead to increased revenue for WM Technology. The stock's current valuation, trading at roughly cash value, presents an attractive entry point for investors willing to navigate the risks associated with OTC trading.

BSD Analysis:
The decision to delist from Nasdaq and move to OTCQX reflects management's belief that the stock is undervalued and that public company costs are no longer justified. While this move introduces liquidity and governance risks, it also positions the company to operate with greater flexibility outside the public markets. The potential improvement in the 280E tax environment could provide a significant boost to WM Technology's customer base, enhancing their profitability and spending capacity. However, investors must weigh these opportunities against the risks of reduced transparency and potential management actions, such as a take-private proposal. Overall, the stock offers a speculative opportunity with potential upside tied to regulatory changes and improved market conditions.

Pitch Summary:
Hydreight is positioned as a strong buy due to its rapidly expanding VSDHOne platform, which has seen a significant increase in licenses from 2.5K to 11K within a few months. The platform provides a comprehensive solution for healthcare compliance, allowing businesses to operate across all US states without the usual legal and logistical hurdles. The tightening of regulations in the healthcare sector further strengthens Hydreight's market position, as their platform ensures compliance and simplifies operations for pharmacies and medical groups. With a robust network of doctors and pre-integrated pharmacy solutions, Hydreight is poised to capture a significant share of the market.

BSD Analysis:
Hydreight's VSDHOne platform is a game-changer in the healthcare industry, offering a seamless way for companies to navigate the complex regulatory landscape. The platform's ability to provide instant access to a network of doctors and pharmacies, along with its compliance infrastructure, makes it an attractive option for businesses looking to expand their reach. As regulations become more stringent, Hydreight's comprehensive solution becomes even more valuable, creating a strong competitive moat. The company's growth potential is underscored by its rapid license expansion and the increasing demand for compliant healthcare solutions.

Pitch Summary:
Meridian Holdings, trading under the ticker MRDN on NASDAQ, represents a rare asymmetric opportunity in the gaming industry. The company has transformed into a high-growth, international gaming powerhouse with proprietary AI technology and synergistic acquisitions that position it for global scaling. Despite a significant drop in share price, the company is fundamentally stronger, with a profitable business model and a diversified revenue stream across B2B and B2C segments. The stock is currently undervalued, trading at a fraction of its peers, with a market cap of $86 million compared to a potential valuation of $500 million. The company's strong insider ownership, low debt ratio, and strategic positioning in emerging markets like Brazil provide a solid foundation for future growth.

BSD Analysis:
Meridian Holdings has a robust omni-channel ecosystem, including subsidiaries like Meridianbet, RKings, and Expanse Studios, each contributing to its diversified revenue streams. The company has a proven track record of execution and profitability, with recent acquisitions and licenses, such as the Federal Brazil Gaming license, serving as major catalysts for growth. The upcoming FIFA World Cup presents a significant branding and revenue opportunity, potentially boosting the company's market presence. Meridian's proprietary AI technology offers a competitive edge in player acquisition and retention, allowing it to operate efficiently in diverse markets. Despite the risks associated with micro-cap stocks, Meridian's strategic focus on organic growth, technology integration, and community impact positions it well for long-term success.

Pitch Summary:
In the wake of its sharp selloff during March (-34%), we initiated a purchase in the cosmetic label e.l.f. Beauty, prompted by its exceedingly high free cash flow yield at 6.2%, coupled with the potential for mid-to-high teens annualized growth in free cash flow over the next several years. Considering these valuation and growth dynamics, we believe the selloff was too extreme, representing a discount not seen since the COVID panic of March 2020; perhaps reaching a point of maximum pessimism. We suspect the pessimism became too focused on the potential for demand destruction among some of its customer base (in light of rising fuel costs), given its strong positioning towards lower to middle income consumers, but in our view, it stands to gain share as higher price-point consumers trade-down to more affordable alternatives given its popularity and increasing shelf-space in Sephora, Target, Ulta, and other large-scale retail stores. We also noted that the company is not expected to experience a material impact from the supply chain disruption in the Middle East, with most of its shipments arriving from Asia via the Pacific Ocean. Also, it is important to note that oil is not a major feedstock or price input for its cosmetics. Alongside these cost advantages, the company's acquisition of rhode appears to be proceeding well and contributing to near-term growth. A notable piece of its acquisition strategy has rested upon e.l.f.'s ability to leverage its retail footprint and relationships in key outlets, since rhode was previously only a DTC brand prior to the acquisition. Currently, rhode is still only available in less than 20% of Sephora stores, leaving a significant opportunity in the remaining 80% of Sephora's 2,700 global stores (500 in the Americas). Longer-term, we favor e.l.f.'s ability to gain market share in the so-called K-shaped economic environment where inflation and affordability remain top of mind for many consumers. For instance, the company's average price point sits around $6.50-$7.50 compared with legacy mass brands at $9.50 and prestige brands at $30.00. The company's ability to innovate and gain market share in the cosmetic space is highlighted by its recent addition of a vitamin C serum that retails at $16.00 compared with prestige equivalents priced at $185.00. Although we do not have a strong view on the potential for continued risk premium in the oil and gas markets, we believe that any persistent pressure from these consumer costs will favor bargain hunting and budget-conscious spending habits in the consumer space for the foreseeable future.

BSD Analysis:
Templeton & Phillips initiated a position in e.l.f. Beauty following a 34% March selloff, attracted by the 6.2% free cash flow yield and potential for mid-to-high teens FCF growth. The managers view the selloff as excessive, reaching maximum pessimism levels not seen since COVID-19. The investment thesis centers on e.l.f.'s positioning to benefit from consumer trading down in an inflationary environment, with average price points of $6.50-$7.50 versus $9.50 for mass brands and $30 for prestige brands. The company's rhode acquisition provides growth opportunities, with expansion potential in 80% of Sephora's remaining stores. e.l.f. maintains supply chain advantages with Pacific Ocean shipping routes avoiding Middle East disruptions, while oil is not a significant input cost. The managers expect continued market share gains driven by affordability focus and product innovation, exemplified by their $16 vitamin C serum versus $185 prestige equivalents.

Pitch Summary:
One example from the war in Iran resulted in our purchase of shares in Canadian National Railway (CNI), which we believe are too depressed in relation to its strategic positioning following the Iranian attack on Qatar's Ras Laffan LNG facility. For review, Iran's damage to the Ras Laffan facility destroyed 14% of Middle Eastern LNG (liquefied natural gas) supply, which will take several years to restore. In the meantime, production from the U.S. and Canada is stepping into the supply deficit. Within this context, we believe CNI's recently completed multi-year capex to double its tracks into the two Pacific Ports, Kitimat and Prince Rupert, is shifting a former earnings headwind into a tailwind. For example, CNI has a monopoly on both ports and their LNG terminals, while LNG transit time to Asia from the west coast of Canada is 10 days versus 20 days from the U.S. Gulf Coast. We see this structural advantage as a competitive edge for Canadian LNG exports given Asian consumers of LNG are likely to continue to diversify supplies away from the Persian Gulf. Turning to valuation, we believe CNI shares presented a unique opportunity to purchase a high-quality railway during the Iran-related selloff. Notably, CNI carried the lowest valuation of the North American Class I rails since the preexisting market narrative has been that it needed a U.S. housing recovery to provide an earnings catalyst; a view that was damaged further by U.S. lumber tariffs. While the shares have begun to rise in the recent recovery, we believe its growth opportunity is long-term and could sustainably accelerate in the years to come as key energy firms are planning further LNG terminal expansions within these strategic LNG ports. In addition to CNI's LNG shipping capacity, the firm would also likely benefit from the freight of goods and materials needed for future expansion of these ports, since the surrounding roads cover difficult terrain and are poorly suited for commercial freight. As we mentioned earlier, these potential catalysts follow relatively extensive capex to de-bottleneck its access to the western ports of Canada. As such, current and future capex projections have materially declined, meaning that an uptick in volumes should lead to a significant rise in free cash flow (and earnings per share) given the inherent operating leverage to the business model, as well as an announced repurchase plan for 24 million CNI shares (4% of outstanding).

BSD Analysis:
Templeton & Phillips initiated a position in Canadian National Railway following the Iran-related market selloff, viewing the shares as undervalued relative to the company's strategic positioning in LNG transportation. The managers highlight CNI's monopolistic control over two Pacific ports (Kitimat and Prince Rupert) and their LNG terminals, providing a structural competitive advantage with 10-day transit times to Asia versus 20 days from the U.S. Gulf Coast. The investment thesis centers on CNI benefiting from the supply deficit created by Iran's damage to Qatar's Ras Laffan LNG facility, which destroyed 14% of Middle Eastern LNG supply. The company recently completed multi-year capex to double tracks to these strategic ports, transforming previous earnings headwinds into tailwinds. With the lowest valuation among North American Class I rails and declining future capex requirements, the managers expect significant free cash flow growth from operating leverage as volumes increase. The 4% share repurchase program provides additional shareholder value creation.