Investment Pitches

Pitch Summary:
dLocal, a company providing cross-border payment technology and infrastructure that enables global merchants to reach and serve customers in emerging markets, demonstrated a return to solid double-digit top-line growth and strong cost control, driving healthy margin expansion. During the second quarter, the company also paid out its first-ever dividend, which equated to a yield of almost 5%. As we stated last quarter, we believe dLocal's underlying value proposition is extremely attractive in a massively underpenetrated space, and the company has a multi-year expansionary phase.

BSD Analysis:
dLocal is a high-growth, high-margin payments pure-play whose stock is a conviction bet on the structural, long-term growth of e-commerce in volatile emerging markets. The core thesis is driven by its exceptional ability to handle both pay-ins and pay-outs across a vast network of local payment methods, making it an indispensable partner for global merchants expanding into these regions. The company is a cash-generating machine, with Free Cash Flow hitting $48.4 million in Q2 2025. Crucially, dLocal maintains a near-zero Debt-to-Equity ratio of 0.01, which is a massive differentiator in the payments space, insulating it from the high interest rate environment. Despite a recent compression in gross profit margin (to 37%) due to regional volatility (Egypt, Argentina, Mexico), the risk is the cost of securing massive 52% year-over-year revenue growth.

Pitch Summary:
Alibaba, a large Index position that we do not own, suffered from signals of increased investment and competition in its core e-commerce business as well as its restaurant delivery and grocery e-commerce segments. Its more attractive Cloud and AI operations are still a small part of its consolidated revenues, and carry lower unit economics. However, a continued acceleration in growth, combined with evidence of customer appetite to pay a premium for AI services, could make Alibaba's investment case more attractive. For now, we maintain that the current share price more reflects the risks and headwinds created by aggressive Cloud investments and the continuing slowdown in its domestic operations. Thus, we remain on the sidelines.

BSD Analysis:
Alibaba is a deep-value Chinese tech titan whose stock is trading at a massive discount, punished by geopolitical noise that masks its unassailable market dominance. The core thesis is a generational arbitrage play on the company's sheer scale and its leadership in e-commerce, cloud computing, and fintech. Alibaba is the market leader in these three fast-growing industries in China. Its core business is e-commerce, generating 67.7% of revenue through platforms like Taobao and Tmall, which dominate the B2C online retail market. The stock is traded at a lower P/E multiple compared to Chinese and US tech giants. The conclusion of antitrust investigations has eliminated short-term risks, and the stock provides a rare opportunity for reverse investment, given its wide moat and high 15%+ return on equity (ROE).

Pitch Summary:
Tencent Music Entertainment, a music streaming platform in China, again reported better-than-expected quarterly results. While its social entertainment business remained challenged, its online music operations grew 16%, enabling a continued margin expansion. We expect this trend to continue in 2025, particularly as online music accounts for almost 80% of the company's revenue mix. With a paying user ratio significantly lower than Spotify's, we believe this company has a long runway of sales growth and margin expansion ahead.

BSD Analysis:
Tencent Music is a structurally defensive Chinese music giant that has successfully pivoted from a volatile social entertainment model to a sustainable, high-growth subscription annuity. The core thesis is a post-regulatory cleanup: the company shifted its reliance from one-time virtual gifts (60% of revenue in 2021) to a robust music segment, with 80% of 2025 revenue from music and over half from recurring subscriptions. This subscription monetization is accelerating: the percentage of paying users rose to 22.8% in Q3 2025. The company is driving Average Revenue Per Paying User (ARPPU) higher through the successful introduction of the Super VIP price tier (reaching 15 million subscribers by Q2 2025). This is a high-quality compounder with predictable subscription and advertising revenue, positioned for sustainable revenue growth of over 20% per year.

Pitch Summary:
Back in 2019, we pitched US big-box specialist hard-surface flooring retailer, Floor & Decor, as our stock pick at the Sohn Conference. Since Sohn, Floor & Decor has grown its business through the pandemic, subsequent years of record low housing turnover and the recent tariff announcements. We believe these external challenges have been extrapolated by the market; meanwhile, Floor & Decor exhibits an even stronger business case than it did in 2019 and is poised to accelerate its growth over the coming years. Below, we answer six key questions to demystify Floor & Decor’s performance and potential. 1. Let's start with the housing market in the US. What's the backdrop there today? And what does this mean for Floor & Decor? The US is experiencing a multi-year cyclical downturn in housing market activity, with the number of transactions falling despite a relatively solid broader economy. Yet looking further out, the underlying structural growth drivers of the US housing market have never been stronger. Existing home sales, which are a major driver of flooring demand, are down at levels we haven't seen since the 2008 Global Financial Crisis. The primary reason for this is persistently high US interest rates; the 30-year fixed mortgage rate has been hovering around 7% for the past three years, a noticeable jump from 3–4% during the last decade. About 60% of existing mortgages are locked in at rates at or below 4%. Naturally, if you have one of those great rates, you're ideally not choosing to sell and refinance at 7%. That’s effectively frozen a large portion of the housing market. And with that, the associated flooring replacements. New housing starts are also quite subdued, running at 1960s levels. That’s shocking considering the US population is now growing at around 3.3 million people per year, much higher than the two million annually back in the ‘60s. So new home construction hasn’t kept up with population growth, meaning there’s been an undersupply for the last two decades. Moreover, the existing stock of US homes is getting older, with a median age of 44 years; many homes are even 70 or 80 years old. Older homes need to be renovated and improved more frequently, including new flooring. A record $11.5 trillion exists in tappable home equity today – 50% higher than 2019 levels. So there’s plenty of funding available for home improvement projects once homeowners are comfortable with interest rates. These factors have combined to slow down Floor & Decor’s business in the near-term. While the timing of a rebound is uncertain, we expect lower interest rates to unlock these large and durable drivers of pent-up demand. 2. Let’s now consider the hard surface floor industry in the US. What does that market structure look like and who have been the winners and losers in terms of market share over time? The US hard surface flooring industry is valued at about US$40 billion annually. The market has a mix of a few large, well-known retailers and thousands of smaller, independent stores. Although the market has been flat for the last three years, it should return to its structural GDP-plus growth. Hard floors are increasingly replacing carpet, evidenced by hard surface flooring’s market share expansion from 45% of the total flooring market a decade ago to around 60% today. We expect this trend to continue as older floors are replaced due to hard surface flooring’s long-term durability, ease of cleaning and aesthetic appeal. Breaking down the market share over time, it's clear who's winning and losing. As the only player that's consistently gaining market share, Floor & Decor is the standout winner. They’re the second largest player in the market. Home Depot, while still the biggest, has seen its share remain flat over the past five years. And Lowe’s has experienced a slight decline in its share. It is the thousands of smaller independent retailers that have felt the real pain. Unlike Floor & Decor, who have the scale to source direct from manufacturers, the independents typically buy inventory from distributors, which drives up their costs. They therefore can’t match Floor & Decor’s everyday low pricing strategy, and their product range is much smaller. Floor & Decor even offers the same design and installation services that helped independents compete with Home Depot and Lowe’s. As a result, the independents are steadily losing market share. We expect this trend to continue, and frankly, the longer the current market downturn lasts, the tougher it will be for these independents, which will only accelerate Floor & Decor’s market share gains. We wouldn't be surprised to see Floor & Decor overtake Home Depot in market share by 2030. 3. Looking inside the business itself, what are Floor & Decor’s competitive advantages and how are those evolving over time? Floor & Decor's competitive advantages are deeply rooted in its ‘flywheel’ business model, which continually reinforces the strength of the business over time: First, specialisation and economies of scale are key. Unlike general big-box retailers, such as Home Depot and Lowe’s, which dedicate a small fraction of their space to flooring, Floor & Decor specialises entirely in hard surface flooring. This gives them unmatched purchasing power with their over 240 global suppliers. As they grow and their market share increases, this scale advantage only gets stronger, and gives them even more bargaining power with manufacturers who rely on Floor & Decor as an increasingly important customer. Second, the customer value proposition and experience are central. Floor & Decor pass on those reduced costs to customers through consistently lower prices. When combined with an enormous selection (around 4,400 unique inventory pieces per store) and excellent in-store customer service, this drives adoption, trust and greater market share. Their ability to maintain and expand competitive price gaps is crucial. Finally, their store rollout strategy and the maturation of their store base are evolving advantages. With 254 stores and a long-term target of 500+ in the US, Floor & Decor have a substantial runway for growth. 4. What do the economics of each Floor & Decor store look like? And how are these combining with the company’s store roll out program to form the aggregated financial statements today? The economics of an individual Floor & Decor store follow a predictable trajectory: they start unprofitable and become increasingly profitable with age. In its first year, a new store typically operates at a negative profit margin because sales are low while fixed costs and initial setup expenditures are high. By year three, however, the store has typically ramped up and generates mid- to high-single-digit operating profit margins. By then, the store is generating 50% cash-on-cash returns from the initial outlay. Beyond that, as they fully mature, individual stores can achieve impressive operating profit margins in the mid- to high teens. Currently, almost half of their 254 stores are three years old or younger. This means a significant portion of their business is still marginally profitable at best, clouding the aggregate profitability. Floor & Decor’s 500+ store rollout program is a continuous growth engine. Despite the challenging market, they're still opening another 20 new stores this year. And these stores are truly enormous – the newly opened warehouse serving NYC spans 1.2 hectares. Although the ongoing rollout masks the underlying profitability of the mature store base, it will shine through over the coming years as stores mature and the market rebounds. 5. How is the company managing the current tariff situation in the US? The US import tariffs are affecting the entire industry; however, Floor & Decor’s structural advantages allow them to manage the changing situation more effectively than smaller competitors. Their scale and direct purchasing relationships with over 240 suppliers across 26 countries gives them leverage and flexibility to mitigate increased costs. Since the 2018 tariffs, Floor & Decor has shifted sourcing from China, dropping from 50% to under 5% of sales by the end of this year. The US is now their largest supplier and, remarkably, gross margins increased throughout this transition. Smaller independents rely on distributors to source product, who hold the bargaining power to pass on tariff costs to retailers, adding to their already higher cost base. Interestingly, as tariffs are forcing competitors to raise prices, Floor & Decor has flexibility to expand the price difference between their products and competitors’, a key feature of their flywheel model. This builds trust with customers and could accelerate their market share gains. So, while tariffs present a challenge for the industry, they actually reinforce Floor & Decor's competitive position. 6. Why do you think the company is undervalued – and therefore an attractive investment opportunity today? Recent conditions have masked the strength of Floor & Decor’s flywheel business model and underlying earnings power, creating a highly attractive investment opportunity. Putting everything together, here's what it means for the company’s financial future: Revenue: Currently US$4.5 billion, revenue is poised for significant growth from new store openings, the maturation of its large cohort of young locations, and an eventual market rebound. Profit Margins: The 6–7% operating margin is temporarily depressed by market weakness and the costs of the maturing store base. However, gross margins have risen throughout this period, proving strong cost management. As conditions improve, we expect operating margins could double. Overall Earnings Power: Current profitability is not indicative of the business’ true potential. The underlying tailwinds discussed could drive Floor & Decor to US$1 billion in annual operating profit by 2030. Given Floor & Decor’s market cap is just US$8 billion today, we have a significant margin of safety in a high quality, growing business and expect to realise a home run investment over the long term. :contentReference[oaicite:0]{index=0}

BSD Analysis:
Floor & Decor is the category-killer of hard-surface flooring, combining warehouse scale, unbeatable assortment, and trade-focused service. It continues to take share from mom-and-pop flooring stores and big-box rivals who can’t match its SKU breadth or contractor appeal. Even during housing slowdowns, the company grows by opening new stores and deepening pro penetration. Margins are strong because the model is high-volume and low-frill with excellent inventory turns. The long-term shift from carpet to hard surfaces provides a secular tailwind. Macro volatility is the only real risk here. Floor & Decor remains one of the best run operators in home-improvement retail.

Pitch Summary:
The transition to a digital streaming model continues to accelerate throughout the media industry and the legacy players have been adjusting their strategy and investments to compete. Given its scale and success with a repositioning of its offerings, we believe portfolio holding Disney is an attractive risk/reward with potential to grow both in the US and abroad. The stock recently hit a new high as the market applauded their plan to launch the flagship ESPN streaming service by end of 2025 and we see further upside from here.

BSD Analysis:
Disney is a media empire titan whose stock is a high-stakes bet on the successful, multi-year turnaround led by CEO Bob Iger. The core thesis is the successful pivot to streaming profitability, with the Direct-to-Consumer (DTC) segment achieving a second consecutive quarterly profit in Q4 2024. This profit inflection, driven by cost-cutting, price hikes, and a crackdown on password-sharing, is the primary engine of future growth. However, the stock still faces the drag of its legacy media assets (linear networks), whose operating income collapsed 35%. Management expects double-digit adjusted EPS growth in fiscal 2026, signaling the turnaround is still taking time, but the colossal cash flow from Parks & Experiences and a $7 billion share buyback target provide a strong margin of safety.

Pitch Summary:
Conversely, power generator AES has been hampered by prospective changes to investment tax credits for renewable energy sources, as policy changes once again froze market participants. This is despite the company having a customer base that continues to place orders for renewable systems to power data centers, regardless of the tax situation. (Post-quarter note - on July 9th, AES was rumored to have also received interest from private equity and infrastructure funds and the stock gained on the possibility of a takeover.)

BSD Analysis:
The AES Corporation is a high-growth, high-yield utility compounder whose stock is a conviction bet on the multi-trillion-dollar global energy transition. The core moat is its massive 7.6 GW backlog of new renewables capacity and its industry-leading position in the deployment of energy storage. The company is aggressively transforming its portfolio to focus on sustainable, low-carbon energy solutions. This massive investment is translating directly to shareholder value, with a commitment to annual 7% to 9% growth in its dividend. AES is a high-quality, high-growth utility whose stability is secured by long-term contracts for its clean energy capacity.

Pitch Summary:
While the appetite for semiconductor chips is being fueled by excitement around the potential of artificial intelligence (AI) technology, it is clear that the world needs more data centers and electricity to power them (as we described in our fourth quarter 2024 letter). Outsource manufacturer and long-term holding FLEX benefited as a supplier to data centers. The stock was our best performer for the last three months and year-to-date.

BSD Analysis:
Flex is a high-quality industrial compounder that is successfully pivoting from a low-margin Electronics Manufacturing Services (EMS) model to an indispensable AI systems integrator. The core thesis is driven by its accelerating role in the AI data center buildout, where its data center segment is projected to grow 35% year-over-year. Flex's competitive moat is its differentiated strategy that extends beyond traditional EMS to include proprietary grid-to-chip power and cooling products, making it a one-stop-shop for hyperscalers. Channel checks indicate Flex may become a second source for next-generation Google TPUs, demonstrating its high-value technological positioning. The company still trades at a discount to AI-exposed peers, creating a clear arbitrage opportunity as the market recognizes the durability and expansion potential of its high-growth, high-margin data center business.

Pitch Summary:
Similarly, we added to Hologic, Inc., a medical technology supplier primarily focused on diagnostics and improving women's health. Rumors of a possible private equity buyout offer for the company surfaced in late May, which highlights the value within parts of the healthcare sector and Hologic's particularly compelling valuation around 14 times earnings.

BSD Analysis:
Hologic is a high-quality, focused MedTech specialist whose stock is a conviction bet on the non-cyclical, accelerating demand for women's health diagnostics. The core moat is its dominance in three high-margin segments: Diagnostics, Breast Health, and GYN Surgical. The company is driving superior growth through its Molecular Diagnostics and Breast Health divisions, which are fueled by the adoption of high-value assays and 3D Mammography systems. This focus on non-cyclical, high-value testing ensures consistent revenue growth and strong margins. Hologic is a high-quality compounder leveraging its market leadership to expand its installed base and drive recurring revenue from high-margin consumables.

Pitch Summary:
As always, when there is a macro-led market drop, as we saw in March/April, we often take advantage of price dislocation and add to positions where we have the highest conviction. For example, drug manufacturer Teva Pharmaceutical was a name we added to as the company continues to execute on its plan to accelerate growth, primarily through the success of its pipeline.

BSD Analysis:
Teva is a deep-value, high-stakes generic drug turnaround play whose stock is poised for a massive re-rating following the successful deleveraging of its balance sheet. The core thesis is driven by the successful resolution of massive U.S. litigation (opioids and price-fixing) and a disciplined focus on paying down its historic $34 billion debt load. The company's moat is its global dominance in generic pharmaceuticals and its specialty pipeline, including the migraine drug Ajovy. The stock is a high-conviction bet on the new management's ability to convert its clean balance sheet and market leadership into sustained Free Cash Flow and eventual dividend restoration.

Pitch Summary:
ENDI's operational performance continues to be exceptionally strong, particularly within its CrossingBridge subsidiary. As of June 30, CrossingBridge's Assets Under Management (AUM) surpassed $4 billion, a substantial increase from $3.4 billion at the start of the year. Earlier this year, ENDI sold 25% of CrossingBridge at a $104 million valuation. Consequently, you can think of ENDI’s share of that current AUM to be $3 billion (75% of $4 billion). ENDI also has approximately $52 million in cash and investments and carries $10 million of debt. Their current market cap is $85 million. At the current stock price of $16 per share, the market is valuing that $3 billion of growing AUM at $43 million. If we adjust for the partial subsidiary sale, the market is pricing the CrossingBridge asset significantly lower than what third-party investors paid earlier this year when AUM was 15% lower. The bottom line is that we continue to have a long way to go for ENDI to get to fair value.

BSD Analysis:
ENDI trades at a deep discount to the implied valuation of its asset-management subsidiary CrossingBridge, whose AUM growth and external valuation provide strong anchors for intrinsic value. Even applying discounted cash-flow or peer multiple frameworks, ENDI appears materially undervalued versus asset-light public managers. With meaningful cash, low debt, and continued AUM compounding, normalized earnings power is likely understated. Key catalysts include additional AUM inflows, further monetization of ownership stakes, and greater investor awareness of the valuation gap.

Pitch Summary:
Liquidia has navigated a complex landscape for years, marked by patent disputes and FDA approval delays for their flagship drug, Yutrepia. Today, everything is about Yutrepia’s product launch and their prospects to penetrate a previously monopolistic market. For Liquidia, that uncertainty has always been a buying opportunity. Shares are 200% higher today than our original purchase price more than three years ago. Yutrepia finally received FDA approval in late May and officially launched soon thereafter. Interestingly, despite this significant milestone, Liquidia's stock price experienced a dramatic but temporary dip, falling from over $19 in early June to $12.46 by the end of the second quarter. Initial reports for Yutrepia's June prescription numbers are exceptionally strong and well above expectations. While it's still early days, this robust start validates our confidence in Liquidia management's sales force and their go-to-market strategy. Competition fears increased after Insmed announced strong Phase 2 results for its PAH therapy, but analysts have questioned the trial design and patients’ baseline conditions. Even if Insmed succeeds, its product is years away from commercialization and Liquidia’s next-generation L606 is expected to be available sooner. We remain optimistic in the company and its leadership as Yutrepia’s rollout continues.

BSD Analysis:
Liquidia’s successful FDA approval and strong initial prescription figures reinforce its competitive position in the PAH market. Despite volatility from competing trial headlines, Liquidia’s near-term fundamentals appear strong, and its unhedged exposure to Yutrepia’s early traction provides meaningful upside optionality. The company trades at a high sales multiple typical of emerging biotech, but future revenue visibility improves materially with initial adoption trends. Legal overhang from United Therapeutics is diminishing and unlikely to affect commercialization. Key catalysts include continued prescription growth, payer coverage expansion, and clinical progress for L606.

Pitch Summary:
Celestica is an under-the-radar winner from the AI/data-center capex super-cycle, with a ~60–70% share in high-bandwidth enterprise network switches and deep relationships across hyperscalers (GOOG, AMZN, META) plus emerging AI inference customers (OpenAI, Groq). The company’s Connectivity & Cloud Solutions (CCS) segment—especially HPS (Hardware Platform Solutions)—has inflected from ~8% of revenue in 2019 to ~39% in Q1’25, expanding CCS adj. EBIT margins from ~2.5% to ~8%. Management and channel checks suggest accelerated transitions to 800G and 1.6T ethernet will sustain double-digit growth, with first 1.6T revenues expected late FY26 and design-wins at 2/3 hyperscalers. New inference verticals are additive: Groq projects could be ~$0.4–0.5B FY25 revenue, and OpenAI custom ASIC programs (3nm/1.5nm) are guided to contribute ~$1B annually as they ramp in H2’26/H2’27. The legacy Advanced Technology Solutions (ATS) industrials arm (~4.5% margin) masks the quality of CCS; a separation/divestiture could unlock a multiple re-rate to a pure-play AI/DC supplier. Author’s base case: total revenue grows ~12% CAGR to ~$15B by FY28, with CCS-HPS ~57% of mix and consolidated EBIT ~6.5% (~$1.1–1.15B). A sale of ATS at ~10× EBIT (~$1.2B) and valuing remaining CCS at ~34× forward on $0.95–1.0B segment EBIT implies C$300–320/sh (+35–40% upside from C$224). Supply-chain/tariff risks are mitigated by exemptions on key DC hardware and a flexible NA/Asia footprint; governance has cleaned up post-Onex exit with a single share class. Net: durable AI/DC exposure, rising mix/returns, and a clear SOTP unlock.

BSD Analysis:
Diligence: triangulate hyperscaler capex trajectories (’25–’28) vs HPS growth and track 800G/1.6T qualification/volume timing by customer; verify OpenAI/Groq program milestones and revenue recognition cadence. Monitor CCS margin progression (mix, NRE, yield) and any constraints (GPU/optics supply, optics thermal/cooling). For ATS, assess buyer appetite/valuation vs ~10× EBIT, stranded-cost plan, and use of proceeds. Key risks: hyperscaler capex pauses or mix shifts, inference program slips, tariff/GEOPOL shocks forcing footprint changes, customer concentration/ODM competition, and execution on a carve-out. Base case still supports high-teens EPS CAGR; SOTP adds upside optionality.

Pitch Summary:
WW has re-emerged from bankruptcy (May 2025) with ~$1.15B of debt eliminated and a refreshed plan to pivot from a legacy “behavioral” weight-management model to a hybrid platform that layers clinical/GLP-1 services onto a 62-year-old brand and ~3.3M subs. Pro forma capital structure is simpler: ~$465M senior secured notes due 2030 (10.25% coupon) with a cash sweep above $100M from 2026, and ~11M FD shares (~$407M market cap at $37). Management (CEO Tara Comonte) targets ~$100M run-rate cost removal (evenly COGS/G&A) largely actioned, cushioning Behavioral declines while Clinical scales. Clinical subscribers reached ~135k in Q1’25 (+56% y/y; +47% q/q), still only ~5% of total, suggesting long runway; Clinical mix already lifted ARPU and was ~16.5% of revenue in Q1’25. Partnerships with Eli Lilly (Zepbound) and Novo Nordisk (Wegovy at $299/mo to WW subs starting Jul 1) should accelerate Clinical adoption; board now includes Mike Mason (ex-Lilly obesity/diabetes head). The thesis argues WW trades at a steep discount to telehealth comps (HIMS/LFMD) despite higher brand trust, scale (~$700M revs), strong GMs (high-60s/low-70s), and rising FCF. On plan, 2026E EBITDA is ~$140M (EV/EBITDA ~5.4×) with levered FCF ≈$6.50/sh; 12-mo equity value seen at $60–$75. Behavioral headwinds persist but have stabilized the last two quarters on product/engagement work; Clinical revenue grew >50% y/y and should continue to mix-shift margins/FCF favorably. With leverage falling to ~2.3× 2026E EBITDA and targeted execution, upside of ~60–80% is posited from $37.

BSD Analysis:
Key underwriting questions: (1) Pace and unit economics of Clinical penetration (GLP-1 access, adherence, retention, and margin vs. legacy digital/workshops) against a still-declining Behavioral base; (2) Execution risk in integrating Clinical + Behavioral journeys (product, coaching, billing, care pathways) to sustain ARPU and lower CAC; (3) Payer/manufacturer dynamics (non-exclusive GLP-1 partnerships; risk of cheaper compounds; formulary/affordability) and competitive reaction from HIMS/LFMD/TDOC; (4) Balance-sheet discipline—10.25% notes and cash sweep require tight cash management during ramp; distressed holder overhang may pressure shares near term. Offsets include a credible cost-out already underway, brand trust/moat with older demographics, favorable mix shift (Clinical growing >50% y/y), and multiple re-rating potential from a low ~5–6× EBITDA base if plan EBITDA/FCF are met or exceeded.