Investment Pitches

Pitch Summary:
FSA is an acronym for “Fox Symes Australia”, derived from their long-held position as Australia’s largest provider of personal insolvency services. In the years since COVID-19, this market has dried up considerably and FSA has leaned heavily into non-conforming lending, amplified through the acquisition of Azora Finance in 2021, a small area of the market with more credit risk that requires balancing higher yet competitive lending rates with good underwriting.
The company was founded in early 2000 and has three executive directors all appointed near inception. Tim Maher (34% shareholder) has a background in banking at ANZ and in an accounting firm as a still registered CPA (Alan Kohler did a great interview with Tim back in 2017). Deborah Southon (10%) has experience in government and community services. Cellina Chen (1%) is the current CFO and holds a fellowship with CPA Australia. Stewardship under these individuals has proven to be conservative having never reported a loss as a listed company.

Before we discuss lending, it is worthwhile discussing the reasons for this decline in personal insolvency, observe the below data from the Australian Financial Security Authority (AFSA):

[Chart referenced on page 5]

This decline has been consistent since 2009 and relief has come to Australians from not only a prolonged period of loose credit, but two catalysts in particular. The first, was changes to the Bankruptcy Act in 2017 which introduced regulation of debt agreement administrators. The second, further debt agreement reforms in 2019. Despite turmoil during COVID-19, many creditors loosened collections enforcement and the government provided major financial support in the form of Jobkeeper and Cash Flow Boost, incentives which were administered by accountants like myself. Whilst household stress remains high, FSA seems to simply view their services business as a potential corollary of distress, rather than a main focus since they placed services in hibernation during COVID-19. Below you will see the changing profit mix over time.

[Profit table reproduced in the file]

Moving onto the lending business, the company has shifted focus to a rapid expansion of their loan book, on track to having doubled it between 2021 and 2025 almost entirely from fixed-rate lending. This has not translated to the bottom line due to rising interest rates impacting the margin on their loans, the particulars being fixed-rate loans written at lower rates early on and elevated losses/arrears across the board as creditors nationwide tighten collections once more.
As mentioned previously, FSA operates predominately in the non-conforming loan market (ie. borrowers who can’t borrow from a bank), but, has recently moved toward originating near-prime loans for cars. Similarly, asset finance origination is mostly higher risk sole-traders that want to buy equipment with interesting products such as a no-doc product for businesses that have had an ABN for >2 years and a documented process for 6-24 months.
More than half of the loan pools are fixed-rate loans, with a weighted average lease expiry of 3.5 years. Do the date math and you will see that the company should be on track to start seeing rapid operational gearing starting in fiscal year 2026 provided that rates either stabilize or better yet, continue to fall as seen recently. There has also been a $250m securitisation consisting of predominantly asset finance loans issued to fixed income investors. Of crucial importance to shareholders is that all (except a sliver of unsecured personal loans) warehouse facilities are non-recourse in nature and secured against tangible assets being homes, cars, and equipment.

[Loan pool table reproduced in the file]

For reasons outlined above, Hurdle Rate expects to benefit from operational leverage in the short to medium term along with accompanying growth in fully-franked dividends. If the market ascribes additional value, great! Although based on our purchase price I don’t think we need it to do well if margins expand and loan pools continue to grow. The company has their own target of achieving loan pools of $1.3b, profit of $25m, and an ROE in excess of 25%.

BSD Analysis:
FSA Group is a specialist Australian financial-services firm focused on debt solutions, personal insolvency, and lending. Its countercyclical components — debt agreements and insolvency — provide revenue stability in downturns. The lending segment adds growth but increases credit risk, requiring disciplined underwriting. Regulatory frameworks can shift quickly, but FSA has decades of experience navigating policy changes. Cash flow is typically strong due to low capital intensity. The business is unique, niche, and often misunderstood by generalists. It’s a hybrid countercyclical financial that benefits when economic stress rises.

Pitch Summary:
First quarter results were once again weak on the surface, but an accelerated transition from license to subscription revenues has continued to dilute revenue growth. Revenue grew 4% on the same quarter last year noting that software subscriptions added ¥529m in new revenue relative to ¥680m lost software installation revenue. The latter if sold under one-off purchase contracts would be several fold higher. Recurring revenue continues to grow into a greater proportion of the business and will yield improved margins once the transition slows.
On a profitability basis the company has invested in recruiting a significant number of new graduates in the quarter which has increased expenses leading to lower profit. A deliberate choice constituting an upfront investment.

BSD Analysis:
MJS provides accounting, tax, and ERP software for Japanese SMEs and accounting firms — a niche with exceptionally sticky demand. Japan’s slow adoption of cloud software creates a long runway for modernization, and MJS is well positioned to capture that shift. The company’s distribution through tax accountants forms a powerful channel moat. Recurring revenue continues rising as customers migrate to subscription models. Margins are healthy, and the balance sheet is rock solid. Growth is steady, predictable, and rooted in essential business processes. MJS is a classic Japanese software compounder hiding in plain sight.

Pitch Summary:
Unaudited results revealed slight outperformance of guidance with revenue and pre-tax profit up 13% and 30% respectively. Critically, the adviser base increased by 4% (3.5% organic) in the financial year and FUM within the iQ portfolios increased by 40% noting that the IconIQ wealth and super platforms are still in the early days of commercialisation.

BSD Analysis:
Centrepoint Alliance provides licensing, compliance, and business services to Australia’s financial-advisory community, benefiting from regulatory complexity that pushes advisers toward professional networks. The company’s recurring revenue model offers visibility and defensiveness. Growth comes from adviser recruitment and deeper monetization of existing practices. Regulatory shifts remain the biggest risk but also drive consolidation — which Centrepoint can exploit. Operating leverage should improve as scale increases. The business generates strong cash relative to its size. This is a consolidation and compliance infrastructure play inside wealth management.

Pitch Summary:
The strategy consulting business reported 1st half revenue growth of 35% (17% organic) with consistent margins. With its recent uplisting to the main market of the LSE it is well positioned to attract greater interest from institutional investors. The company comments that “The Board remains confident that results for full year FY 2025 will be in line with market expectations” which implies quite significant margin contraction compared to the prior year. Given their history of exceeding expectations, this could merely be management of expectations given economic uncertainty around tariffs and the like, which may impact client service necessitation.

BSD Analysis:
Elixirr is a high-performance consulting firm positioned as a challenger to traditional global consultancies, focusing on strategy, digital transformation, and innovation. It wins by being faster, more entrepreneurial, and less bureaucratic. Growth has been exceptional, both organically and through small, bolt-on acquisitions. Margins remain strong due to premium pricing and lean structure. Client relationships deepen quickly because Elixirr often works on high-impact transformation projects. The company scales by adding expert partners rather than building bloated pyramids. This is a sleek consulting growth story with an impressive execution record.

Pitch Summary:
I had the pleasure of speaking with Shrutisha Morris for the first time in July. I came out of that meeting having bedded in respect for what Shru has to offer the business.
Perhaps of most importance is that Shru has brought in a fresh commercial view to the business which has materialised in several ways already. Take for example, the company has always been underrepresented in certain areas and has only just recently embraced collaboration with partners in return for a share of revenue. In June the company started referring work to a “well-known” tax business which should bring a nice source of referral revenue to the group.
The full year report was very pleasing, marking a return to what I would consider normal M&A volumes measured over a whole year, despite being concentrated in October due to vendor behaviour to ‘beat the budget’. DR Solicitors contributes remarkably well to revenue, profit, and capital efficiency after stripping out intangible assets.

“We constantly seek to buy new businesses that meet three criteria. First, they must earn good returns on the net tangible capital required in their operation.”
~ Warren Buffett, Berkshire Hathaway 2019 Shareholder Letter

In thousands of GBP

DSW DR Solicitors Combined
Network Revenue 24,418 1,426 25,844
License Income 3,539 844 4,383
Revenue Share 14.5% 59.2% 17.0%
Net Profit 636 348 984
Segment Tangible Equity 2,897 166 3,063
Return on Tangible Equity* 22.0% 503.1% 32.1%

* ROTE for DR Solicitors has been annualised

The key difference to each model is that DR is responsible for sourcing work for its consultant lawyers and bills it on their behalf. By comparison, DSW supports partners to scale their client base and bills them (not clients) quarterly. Whilst the profitability of DR is huge, client acquisition is centralised and unless they can expand this beyond the reach of vendors (Nils Christiansen & Daphne Robertson) there may be limits to how scalable DR can be in comparison to DSW. In our conversation, Shru noted that she was about to appoint a rainmaker to drive delivery for the DR business and take the pressure off Daphne to generate workflow.
Shru told me the rationale on the acquisition of DR was predominately to acquire an established legal platform which will allow them to continue with consultants but also allow for the future appointment of legal licensees more in line with their traditional model, addressing scalability.
Looking out, results still exclude 7 months worth of DR operations which will contribute meaningfully to 2026 results, and an Autumn budget may bring rise to another period of buoyancy in the M&A market keeping productivity strong in the corporate finance part of the business. Recruitment will continue to be my primary focus for long-running value creation, but, value is contingent on maintaining a lean cost base and continuing to use capital wisely.

BSD Analysis:
DSW Capital operates a network-based professional services model in corporate finance, tax, and accounting, leveraging a capital-light franchise approach. Its consultants operate with autonomy, creating strong incentives and scalability. The firm benefits from the shift toward flexible, decentralized professional services platforms. Economic cycles influence deal volumes, but the model remains structurally profitable. Cash generation is strong due to minimal capex. Execution depends heavily on partner recruitment and retention. This is a boutique professional-services compounder with attractive economics.

Pitch Summary:
During the quarter we made a new investment in Informa PLC, the global leader in B2B live events. The company connects buyers and sellers in various industries, enabling business interactions, and disseminating knowledge across verticals. We believe Informa has built a strong, underappreciated moat around its core events business benefiting from network effects, scale, and process power since managing events with tens of thousands of attendees is not an easy endeavor. For example, some trade associations have reported incurring losses on their annual shows, while Informa enjoys ~30% margins. Well-run scale events build a brand and become "must-attend" franchises for industry participants. Informa owns and runs some of the most recognizable events globally, including the Monaco/Ft. Lauderdale Boat Shows, the Dubai Air Show, Cannes Lions, SuperReturn, BlackHat, and Money 20/20. The business has strong visibility and positive working capital dynamics. Often, next year's iteration of an event will be more than half pre-sold by the end of the current year's show, giving the company elevated levels of predictability and relatively low cyclicality. Informa has also carved out what we see as a generational opportunity in the Middle East, establishing JVs within both Saudi Arabia and the UAE. Attracting business travel is a core priority for both economies, and local governments are investing heavily in event venues that will support growth in B2B events for years to come. These JVs also allow Informa to bring new iterations of its existing and successful brands into the Middle East, underscored by Money 20/20 adding a Middle East show in Riyadh this fall. We expect more of Informa's marquee franchises to expand to the Middle East in short order. One insight we have derived from our investment in Live Nation and have applied here is that in a world that is becoming increasingly more digital, the value of high-quality live events should meaningfully increase to both exhibitors and attendees. We believe the company will accelerate revenue growth, particularly through its Middle East strategy, and compound earnings at a double-digit rate for many years, all while returning meaningful cash to shareholders through share repurchases and dividends and acting as the sole consolidator of the fragmented events industry. Despite these qualities, the stock trades at a mere 14x forward earnings multiple.

BSD Analysis:
Informa is a high-quality, high-margin B2B services giant whose stock is a conviction bet on the secular growth of specialist human connection and data monetization. The core thesis is driven by the post-pandemic resurgence of its Live B2B Events, which delivered 8.5% underlying revenue growth in H1 2025. The company's unique moat is its ability to own and monetize niche, essential B2B brands (like Money 20/20) across global growth markets (India, UAE, Saudi Arabia). This is generating exceptional profitability: the Adjusted Operating Margin hit 28.4% in H1 2025, underpinned by strong underlying growth and ongoing AI Data Licencing Agreements. Informa is a high-conviction play on the non-cyclical, structural need for professional knowledge and connectivity.

Pitch Summary:
During the quarter, we continued adding to a new long position in Casey's General Stores. At ~2,900 locations, Casey's is the third largest convenience store chain in the US by store count. More importantly, it is the fifth largest pizza chain in the country. It is a "boring" business to some, but there is an art to boring - we believe the returns and their consistency have been exceptional and stem from a quirky counter-positioning of the business. When a company chooses not to do the easy thing, it is often a powerful signal that something special is at work. Selling gas and cigarettes is easy. Selling fresh food at scale as successfully as Casey's is not. Figuring out food creates a powerful feedback loop - Casey's earns more profit dollars per visit, enabling them to price fuel at a discount to independent gas stations and pizza at a discount to competing QSRs. Consumers save on both purchases, and the result is a brand beloved by a loyal customer base, whose Net Promoter Scores look nothing like the rest of the industry. How has Casey's solved for food? We attribute their success to differentiated employee retention and approaching the business like a community-centric restaurant that consumers trust to feed their families. Annualized labor churn rates north of 100% have long plagued convenience stores it is hard to retain employees, let alone incentivize them to sell perishables and run open air kitchens. Not so with Casey's. Their stores have 40% more staff than your typical gas station and they have used this as an opportunity to offer viable career paths on a store-by-store basis throughout rural America. We have eaten our fair share of Casey's brisket pizza, and in our store tours we were impressed by the consistency of quality and employee and customer loyalty that they have created at the store level. A recent test roll-out of chicken wings has seen high satisfaction scores and we believe the company is on its way to a system wide rollout of wings that has the potential to meaningfully increase sales densities. Casey's stock has performed well over the last ten years and is up over 30% this year alone; yet we believe the team from Des Moines is just getting started. The recent acquisition of 200 stores from Fike's marked their entrance into the South, and management has since commented that Texas alone could offer 2,000 more units (vs. today's national footprint of 2,900), reinforcing our belief that there are plenty of towns across the South that would love a Casey's. Our expectation is that this unit growth story is likely to play out more quickly than broadly expected given Casey's demonstrated ability to do accretive M&A. In the Fike's example, Casey's paid 11x headline EBITDA, but the pro forma multiple looks more like 7x when pizza is rolled out across the footprint. How many companies have the luxury of replicable, accretive M&A at EBITDA multiples that are half of its own trading levels? In Casey's we see a world class management team with a differentiated mousetrap and a decade of profitable growth ahead of them - whether they are labeled a restaurant or a gas station or a general store is semantics.

BSD Analysis:
Casey's is an unassailable, high-growth convenience store giant whose stock is a conviction bet on its dominant rural position and its high-margin food-service strategy. The core thesis is driven by its Inside Sales segment—which includes high-margin prepared food and dispensed beverages—which is the engine for profit dollar growth, driving an impressive ∼41.2% Inside Margin. The company is executing a ruthless growth plan, adding a record 270 stores in FY2025, the largest expansion in its history, and is on track to add 500 new stores by FY2026. This disciplined expansion and successful shift to high-margin food offerings is translating to the bottom line, with EBITDA hitting $1.2 billion and management targeting 8%–10% annual growth. Casey's is a high-quality compounder leveraging its rural focus and superior execution to deliver outsized returns.

Pitch Summary:
We initiated a position in Rocket Companies during the Second Quarter based on its transformative all-stock acquisition of Mr. Cooper. Rocket has been a persistent share gainer in the fragmented mortgage origination industry, with a 12% market share of refi originations and a 4% share of purchase originations. It has differentiated, industry-leading cost and time to originate, driven by its continuous reinvestment in technology and automation. While the average originator takes 45 days to close a refi loan, Rocket only takes 20 days and that key metric continues to fall. In fact, over 50% of loans now close in less than 15 days. Mr. Cooper is the leading mortgage servicer, with 11% market share, making it over 50% larger than its next largest competitor. Much like Rocket in the origination space, Mr. Cooper has industry-leading cost-to-service that has fallen by ~50% over the last five years. These differentiated unit economics have allowed Mr. Cooper to be a primary beneficiary of MSR sales by cash-poor, subscale originators struggling to keep afloat in the current high-rate environment. We view the combination of Rocket and Mr. Cooper as a transformative, synergy-rich merger between two technology leaders in the otherwise parochial and cost inflationary mortgage industry. Combining the largest refi originator with the largest servicer will, we believe, enable pro forma Rocket to turn ecosystem unit economics on its head. Rather than an originator having to reacquire a customer in 5-7 years or a servicer having to reacquire the MSR, Mr. Cooper's servicing portfolio could feed Rocket's refi origination machine, leveraging Rocket's ~85% refi recapture rates which are already >3x the industry average. On top of this compelling combination, enter AI. Rocket has begun to realize the benefits of automating workflows - from income verification to document submission, to credit score verification - in ways that set it apart from others in the industry. De-bottlenecking these monotonous administrative chores should enable the company to improve both throughput (applications processed per officer) and conversion (applications that result in a mortgage) and pass through a portion to the end consumer to drive further market share gains.

BSD Analysis:
Rocket Companies is a high-beta, high-risk mortgage technology pure-play whose stock is a leveraged bet on the eventual, inevitable decline in interest rates. The core moat is its status as a non-bank mortgage origination leader, leveraging its Rocket Mortgage brand and proprietary technology to capture market share. The company's stock is currently trading at a steep discount, penalized by the cyclical low in mortgage origination volume. Rocket is a high-conviction bet that its operating leverage will drive a massive earnings inflection the moment interest rates fall and refinancing volumes surge.

Pitch Summary:
DR returned 29% during Q2 and was our third largest contributor. The company executed two notable transactions during the quarter. First, they announced the sale of the South Carolina hospital for about $34 million CAD (all cash), resulting in an estimated 40% gain on the asset. Shortly thereafter, DR announced the acquisition of Bainbridge Surgery Center in Georgia for $26 million CAD inclusive of transaction costs, which has historically generated approximately $7 million USD in revenue and roughly a 35% EBITDA margin. These two deals, in addition to the company’s shift toward a more focused ownership model and stable performance at its remaining facilities, meaningfully strengthen the company’s financial position. As DR divests non-core assets and targets higher-quality facilities, I believe margins and cash flows should continue to improve, supporting rerating potential.

BSD Analysis:
Medical Facilities appears to be intelligently reallocating capital by divesting lower-return assets and acquiring high-margin surgical centers with strong historical performance. The Bainbridge acquisition offers attractive economics with a 35% EBITDA margin profile, and proceeds from the South Carolina sale improve liquidity. The company’s pivot toward a more focused, higher-quality asset base should lift blended margins and earnings stability. Valuation remains compelling relative to cash flow potential, though exposure to reimbursement risk and case mix should be monitored.

Pitch Summary:
KITS returned 52% during Q2 and was our second largest contributor. Encouragingly, customer LTV to CAC ratios remain above 3x and repeat purchases are continuing to grow. As the company’s refraction services begin to scale and higher-value customers begin to mix into the buyer cohort, this could result in increased customer frequency and improved unit economics. I believe that KITS offers a more convenient and cost-effective product compared to incumbents and will continue to take share in what remains a growing market. With shares continuing to trade at a discount to fundamentals, the return potential over the next 2-3 years remains outsized.

BSD Analysis:
Kits is scaling efficiently with strong customer retention metrics and improving unit economics as refraction services and proprietary frames expand margins. The vertically integrated model enables competitive pricing and faster delivery than incumbents, supporting share gains in a large, fragmented market. As CAC efficiency improves and repeat purchasing increases, operating leverage should boost profitability. Valuation appears discounted relative to growth potential, though competition and marketing efficiency remain areas to watch.

Pitch Summary:
SYZ returned 57% during Q2 and was our largest contributor for the second quarter in a row, contributing about 3.8% to overall returns. The company reported one of the strongest quarters in its history, with over 40% topline growth and EBITDA margins approaching 25%. Revenue quality remains strong, with recurring revenue now making up over 80% of the total, and leadership continues to execute at a high level. I believe we are still in the early innings of the company’s growth story as management continues to successfully integrate tuck-in acquisitions and cross-sell upgraded software products across the customer base. SYZ remains one of our highest conviction positions as the multiyear rollout of the new platform drives increasing demand, margin expansion, and high returns on capital.

BSD Analysis:
Sylogist continues to deliver breakout growth, with accelerating ARR penetration and strong operating leverage boosting margins. The company’s public-sector niche provides sticky customers and low churn, supporting durable cash flows. Management’s disciplined M&A integrations and product modernization strategy create a long runway for both organic and acquired growth. Valuation remains attractive relative to SaaS peers when adjusting for recurring revenue scale and improving profitability. Key risks include execution on platform upgrades, but momentum appears firmly positive.

Pitch Summary:
APG was our second largest position and ended Q2 as our third-largest contributor contributing about 2.7% to overall returns during the quarter. The company reported inline results with decent organic growth across all business lines, expanding margins, and management reiterating their organic growth targets for the remainder of the year. The steady drumbeat continues, which makes sense given the company’s business line stability and management’s intense focus on executing a multi-year value creation plan that should work for a long period of time. I continue to believe APG is a high-quality business trading at a reasonable price benefiting from positive secular tailwinds such as building automation, increasing regulations related to fire and life safety, and environmental concerns. Organic growth is accelerating and price-insensitive FCF yield targets provide plenty of room for share repurchases or improvements in the capital structure over the next several years as the company continues to execute on a strategy that is not reliant on M&A.

BSD Analysis:
APi’s execution remains strong, with consistent organic growth, margin expansion and a long pathway for value creation supported by regulatory tailwinds in fire and life safety. The company’s recurring service revenues and diversified customer base underpin steady free cash flow, enabling ongoing deleveraging and potential buybacks. Valuation remains appealing given mid-teens earnings growth potential and robust secular demand. Risks relate to cyclical construction activity, but APi’s service-heavy mix reduces volatility relative to peers.

Pitch Summary:
Natural Resource Partners (NRP) was our largest position and ended Q2 as our second largest contributor. Increased coal demand means increased contract volumes and contract rates across its primary assets. We remain optimistic about the go-forward potential for the business and are excited by management’s deleveraging goals, liability-reduction actions, and commitment to retiring legacy obligations. Importantly, when thinking about supply and demand imbalances, it’s somewhat irrelevant to discuss the potential for new coal supply additions given the lack of capital available to operators, as well as a structural decline in capital allocated to the industry. This backdrop puts many of NRP’s expensive and uneconomical assets that normally carry little value as sitting in the money as a result of price inflation.

BSD Analysis:
NRP continues to benefit from structurally tight coal markets, where limited new capital investment constrains supply while demand remains resilient in both thermal and metallurgical markets. The partnership’s royalty model provides high-margin cash flows, which management is directing toward debt reduction and liability cleanup, strengthening equity value. With coal price volatility still elevated, NRP’s low operating cost exposure and conservative balance sheet offer downside protection. Longer-term risks include eventual demand normalization and environmental regulation, but for now cash generation remains robust.

Pitch Summary:
Ferguson – Slow and Steady Wins the Race. Not every investment in the Partners Fund is about change. Sometimes, the investment thesis lies in the power of continuity – in accepted realities that have proven themselves over the years. One example is Ferguson. As by far the largest distributor of plumbing and water infrastructure supplies in the USA, the company boasts a structurally stable business model and excellent profitability that has endured for decades. Despite artificial intelligence, one truth will always hold: when there’s a water leak or the air conditioning fails, repairs still need to happen quickly. The U.S. housing stock is, on average, old and in need of renovation, while new construction lags behind actual demand, providing Ferguson’s service business with long-term tailwinds. At the same time, Ferguson leverages its scale to invest more heavily than competitors in digitalisation, supply chain efficiency, and service quality. This is neither spectacular nor exciting, and it’s a bit of a reporting challenge, as the company continues to make steady progress without major upheavals. Since the Partners Fund’s initial investment over three years ago, the company has continued to evolve steadily – with a pleasing performance. Precisely these “boring” investments should be a deliberate component of the fund. After all, the goal is not to invest in particularly clever or spectacular ways but to achieve the highest possible return over the long term with manageable entrepreneurial risk. However, such companies are rarely available at a bargain price. In Ferguson's case, an opportunity arose during the re-listing of its stock from the UK to the USA, accompanied by a temporary valuation dip during the COVID-19 crisis. I aim to include such stable, widely accepted realities more purposefully in the portfolio going forward—and then hold them for the long term.

BSD Analysis:
Ferguson remains one of the best-run distributors in North America — a scale-driven, logistics-obsessed machine that turns plumbing, HVAC, and construction supplies into a high-return, cash-generating empire. Its end markets may be soft in the short term, but Ferguson’s pricing power, supplier relationships, and service moat mean it outperforms peers whether the cycle is good or bad. The company continues taking share from fragmented independents, and its technology and fulfillment network give it a competitive edge that’s widening, not shrinking. Free cash flow remains strong, the balance sheet is disciplined, and buybacks continue to enhance per-share growth. The market often treats Ferguson like a boring distributor, but it’s really a scaled infrastructure platform leveraged to multi-year growth in residential, commercial, and repair-and-remodel activity. When construction activity stabilizes, Ferguson’s operating leverage will show up fast.

Pitch Summary:
A counterexample to Moltiply – and one of the most disappointing investments of the Partners Fund to date – is Naked Wines. The basic idea was simple and compelling: a digital direct-to-consumer wine sales model with a loyal customer base, a long-established business model in the UK, and a solid recipe for conquering the vast and still inefficient U.S. market. The goal was clear: capitalise on change, bypass inefficient distribution structures, and smartly scale customer preferences and subscriptions. For a long time, the puck seemed to be heading in the right direction—toward digitalisation, community-building, and margin expansion. What seemed so plausible in theory – and initially also in practice – was ultimately overtaken by reality, especially during COVID-19. The pandemic-driven online boom initially boosted the numbers, but even more so, it stoked ambitions and overconfidence. Naked Wines expanded aggressively into the U.S., built a giant inventory base, massively ramped up marketing expenses, and progressively lost control over complexity, costs, and customer selection. In hindsight, this wasn’t a case of change failing to materialise – it was a case of far too much change, too quickly, and seemingly without a compass. Today, however, a glimmer of hope is emerging on the horizon. With the new management under Rodrigo Maza, an experienced leader with a healthy focus, costs are being cut, inventory levels normalising, and significant capital is being freed up. Many operational indicators, most recently reported during a Capital Markets Day in March 2025, are pointing in the right direction. While it is still far too early to speak of a successful investment even remotely, it is no longer too early for justified hope for better times ahead.

BSD Analysis:
Naked Wines has been in the penalty box after years of overexpansion and chaotic customer acquisition spending, but the business is finally behaving like a rational e-commerce operator. The shift toward profitability over growth is paying off: churn is stabilizing, marketing ROI is improving, and the company is focusing on high-value subscribers rather than vanity metrics. Naked still has a differentiated model — funding independent winemakers upfront in exchange for exclusive supply — and that vertical integration gives it unique gross margin potential if execution stays disciplined. Inventory cleanup and cash-flow stabilization suggest the worst is behind them, and any recovery in discretionary spend could provide real upside. The stock trades like a failing subscription business, but the unit economics say otherwise. If management avoids past mistakes, Naked could stage a recovery far more dramatic than its current valuation implies.

Pitch Summary:
Fiserv is a payments and financial technology leader serving banks, merchants, and consumers globally. The market has fixated on Clover’s GPV growth, but management emphasizes revenue and value-added services as more relevant KPIs. Clover has become the leading SMB operating system by leveraging Fiserv’s distribution network, and penetration remains under 3% in the U.S. and negligible internationally. The platform is expanding vertically (hospitality, healthcare) and horizontally (ADP payroll integration, CashFlow Central). Recent revenue growth has outpaced GPV, with VAS penetration climbing to 24% and guidance for $3.5bn revenue in 2025. Stock declines have followed perceived Clover slowdowns, but management insists long-term growth remains intact. Buybacks add torque, with ~$7.2bn planned in 2025 (~130% of FCF). Valuation is at decade-high FCF yields, setting up for multiple expansion if guidance is met. Risks include litigation over Payeezy/Clover migration and hitting ambitious Clover revenue targets. Overall, the risk/reward appears compelling with potential 30% IRR.

BSD Analysis:
Variant view: market too focused on Clover GPV; broader business mix and buybacks underpin upside.

Pitch Summary:
Align Technology is the global leader in clear aligners, best known for Invisalign. The company has faced a post-Covid slowdown, but demand is stabilizing with improving teen case growth and Google Trends data. Invisalign has strong competitive moats from brand, data scale, R&D spend, and clinical efficiency. Dentists and patients prefer Invisalign for aesthetics, convenience, and process speed, positioning it as the default choice in clear aligners. TAM is large and growing, with significant long-term adoption potential in both teens and adults. Case growth appears to be reaccelerating, and Align’s dominance is unlikely to erode materially. Financial scenarios suggest significant upside: a base case to $276/share, bull to $509, and bear to $171. With a current price near $204, risk/reward skews positively. Near-term catalysts include faster-than-consensus case growth. Risks include competitive pricing, macro weakness, and slower TAM penetration.

BSD Analysis:
High-quality compounder with cult-stock potential; near-term reacceleration supports entry point.

Pitch Summary:
The author argues that Onity Group ($ONIT) is a mispriced turnaround and hidden-asset play following years of distress and a management reset that began in 2018. The business has returned to sustained profitability, and management expects to release a large deferred tax asset allowance this year, potentially lifting reported book value. ONIT trades at ~0.5–0.65× book value (depending on DTA treatment), a steep discount to peers such as PennyMac Financial Services, Rithm Capital, and Mr. Cooper Group, the latter of which is being acquired at a premium. The author acknowledges a size discount is warranted but views the gap as excessive given improved fundamentals. Sale rumors surfaced in April, and even a conservative takeout multiple could imply ~20% upside. Downside is framed as limited at current valuation levels.

BSD Analysis:
The mortgage servicing industry is structurally attractive for scaled operators, with recurring fee income, countercyclical dynamics, and meaningful operating leverage once fixed costs are covered. ONIT’s competitive position has improved materially post-turnaround, but it remains subscale versus peers, justifying some valuation discount. The deferred tax asset is a real but timing-dependent catalyst, contingent on sustained profitability and regulatory clarity around allowance release. Relative valuation is compelling, particularly against recent M&A benchmarks, suggesting public markets are slow to recognize balance-sheet normalization. The principal risks are interest-rate volatility, MSR valuation swings, and the durability of earnings through a full housing cycle. A sale is plausible given sector consolidation and ONIT’s discounted trading level, though not guaranteed. Absent a transaction, incremental multiple expansion hinges on consistent ROE delivery and capital returns. Overall, the setup offers asymmetric upside with asset-backed downside protection, but realization depends on execution and external catalysts rather than organic growth alone.

Actual Post Content:
$ONIT is a cheap loan servicing biz that went through the wringer between 2013 and 2017. A turnaround began in 2018 when new management came in through a merger. Today, it’s an interesting hidden asset play + rumors of a potential sale. Co trades meaningfully below peers. 1/ $ONIT finally seems to have turned a corner, profitable all of last year and YTD. It holds a large DTA that's been hidden due to significant allowance write-downs during unprofitable years. Mgmt expects to release some or all of that allowance this year. 2) $ONIT is by far the cheapest among peers, trading at 0.5x–0.65x BV depending on how you treat the DTA. Peers $PFSI, $RITM, and $COOP trade at 1.3x, 0.8x, and 2x BV, respectively. $COOP, in particular, is currently being bought out at a large premium. 3) All peers are larger, so some valuation discount for $ONIT is justified, but the gap is too wide. Also worth noting: $RITM, the lowest-valued peer, has other businesses besides loan servicing that weigh on its valuation, something to keep in mind. 4) In April, rumors surfaced that $ONIT is exploring a potential sale. Nothing official since, but the move seems logical given the market appears to be underappreciating the transformation since 2018. A buyout at just 0.8x BV ex-DTA would imply ~20% upside, likely conservative. 5) Downside seems well protected at the current valuation while waiting to see if anything gets announced in the coming months. Interesting setup here—curious to hear your thoughts.

URL: https://chatgpt.com/share/693445fe-7440-8008-ac59-4fc33e42d191

Pitch Summary:
PepsiCo was a modest detractor in Q2, as soft beverage volume and margin pressure led to a weaker-than-expected results. The company reported revenue of $17.9 billion, down 1.8% year-over-year, as FX headwinds and promotional activity in North America impacted performance. EPS also declined year-over-year, and guidance remained cautious given ongoing input cost inflation. Despite solid international performance, investor sentiment was dampened by concerns over slowing U.S. consumption and rising competitive intensity. Analysts revised margin expectations slightly lower for the back half of the year, and the stock trailed other staples during the quarter. We continue to view PepsiCo as a high-quality, defensive compounder with strong global brands and consistent cash generation. . With a growing dividend, geographic diversification, and strong balance sheet, we believe PepsiCo remains a great investment.

BSD Analysis:
PepsiCo is a high-quality, high-yield consumer staples giant whose stock is a conviction bet on innovation-led, portfolio-reshaping growth. The core moat is its massive scale and ownership of iconic beverage and convenient food brands, which allows it to maintain a defensive position. The key catalyst is a successful pivot to meet consumer trends: organic sales increased 2% year-over-year, marking the first instance of positive top-line growth in a year. The company is heavily investing in productivity-enhancing initiatives and expanding its $2 billion permissible snack portfolio. PepsiCo is a defensive investment, offering a 3.8% dividend yield and poised for 18% upside based on its strong, resilient market position.

Pitch Summary:
SBUX shares declined during Q2 following disappointing earnings in late April. Global same-store sales declined 4%, driven by a 6% drop in North America and flat results in international markets. Traffic trends turned negative, and operating margins compressed to 11.6%, down from 18% a year earlier. Management cited macro headwinds, competitive pressure, and weaker-than-expected loyalty engagement. The stock continued to slide through May and June as investors grew skeptical of the pace and effectiveness of turnaround efforts. Management acknowledged that customer traffic softness may take multiple quarters to resolve, and analysts lowered near-term earnings forecasts. Despite continued investment in digital and labor, visibility into a meaningful recovery remains limited. We continue to believe Starbucks is an incredibly valuable consumer franchise with strong brand equity and long-term pricing power. The company’s global scale, loyalty ecosystem, and real estate footprint provide strategic advantages. While near-term results remain challenged, we see significant upside once comps stabilize and customer engagement improves.

BSD Analysis:
Starbucks is a global lifestyle brand oligarch undergoing a high-stakes, "Back to Starbucks" turnaround. The core thesis is a conviction bet on the successful execution of this strategy to re-accelerate growth in core and international markets. The stock is overwhelmingly an institutional favorite (87.43% ownership), which provides a crucial floor for the price despite short-term operational hiccups. Q4 FY25 saw a return to positive global comparable store sales growth of 1%, marking the first positive growth in seven quarters. The presence of activist investors like Elliott Management adds pressure on management to deliver margin recovery and execute the turnaround, signaling professional money managers see underlying value despite the recent volatility.