Investment Pitches

Pitch Summary:
AB Foods plans to spin off its Primark division from its food operations. Primark, which generates over half of the group's profit, is expected to unlock significant value through a sum-of-the-parts (SOTP) valuation. The separation is anticipated to highlight Primark's higher growth and profitability, which are currently obscured by the broader business structure.

BSD Analysis:
The spin-off of Primark is a strategic move to capitalize on its strong performance and growth potential. By separating from the food operations, Primark can be valued independently, potentially reducing the holding company discount that currently affects AB Foods' overall valuation. This move aligns with market trends where companies seek to unlock shareholder value through strategic separations. Investors may find this an attractive opportunity given the potential for re-rating and increased focus on Primark's retail strengths.

Pitch Summary:
Finally, we initiated a new investment in Zoom Video Communications (ZM). The portfolio remains fully invested with 20 positions. Zoom is the global leader in modern enterprise video communications. While the company became a household name during the pandemic, its success is built on a foundation of simplicity, performance, and the seamless integration of AI productivity tools. The current investment controversy surrounding Zoom centers on its ability to transition from a pandemic-era utility to a diversified enterprise collaboration platform. Investors worry about "bundling" from tech giants like Microsoft and Google, who offer communication tools within broader software ecosystems at no additional cost. Furthermore, there are widespread fears that AI generated "vibe-coding" could cheaply replace enterprise software. We believe these fears are overdone for several reasons. Most importantly, While Microsoft Teams has a massive footprint, Zoom continues to grow their revenues each year which we believe is mostly likely due to the simplicity and functionality of their user interface, which is an important factor for high-stakes external video events and sales calls where ease of entry for non-technical users is paramount. Additionally, we think "vibe-coded" software is a very low threat for Video Solutions like Zooms. It is technically challenging to replicate a secure video stream, let alone multiple streams. On the contrary, we think Zoom is an AI beneficiary. They are adding AI tools that will make their product stickier for clients including note taking and translating meeting conversations into assigned tasks and coordinated actions in third-party systems like Jira or Salesforce. Moreover, the primary culprit in helping companies generate their own code and software is Claude AI, which is owned by Anthropic. However, Zoom owns a significant stake in Anthropic and because of that stake has partnered with Zoom. In fact, a key component of our valuation that the market is largely ignoring is Zoom's strategic stake in Anthropic, a leading AI model developer. Recent analysis suggests this stake alone could be worth $10–$13 per share. This provides Zoom with both a financial cushion and a "front-row seat" to the latest advancements in Large Language Models (LLMs). Zoom's underlying business generates substantial free cashflow and the company has a balance sheet that is nearly unparalleled in the software space. As of the end of the fiscal year, the company held $7.8 billion in net cash and marketable securities that are approximately $26 per share. We estimate the normal earnings power of the underlying business at $4–$6 per share. Applying a 14-16x multiple to those earnings—appropriate for its profitability and growth profile—results in a business value of $56–$96 per share. When we aggregate the cash, the Anthropic stake, and the core business value, we arrive at an estimated intrinsic valuation range of $92–$135 per share. We were pleased to acquire our shares during the quarter for $89 per share, representing a significant discount to what we believe is a conservative appraisal of the business's assets and future earnings power.

BSD Analysis:
Pelican Bay initiated a new position in Zoom Video Communications at $89 per share, viewing it as significantly undervalued relative to their intrinsic value estimate of $92-$135 per share. The manager's thesis centers on Zoom's competitive moat in enterprise video communications, driven by superior user interface simplicity that remains critical for external-facing business interactions. They dismiss concerns about Microsoft Teams bundling, noting Zoom's continued revenue growth despite competitive pressure. The investment case is strengthened by Zoom's strategic stake in Anthropic (valued at $10-$13 per share) and exceptional balance sheet with $7.8 billion in net cash ($26 per share). The manager sees Zoom as an AI beneficiary rather than victim, with new AI-powered features enhancing product stickiness. They estimate core business earnings power at $4-$6 per share, applying a 14-16x multiple to reach $56-$96 per share in business value. The combination of cash, Anthropic stake, and core business value supports their bullish stance on this enterprise software leader.

Pitch Summary:
American International Group (AIG) is a leading commercial property-casualty insurer that has achieved improved underwriting margins and expense discipline through a multi-year turnaround. We own AIG for its strong underwriting results and attractive valuation. AIG underperformed in the first quarter, as shares fell on the announcement that CEO Peter Zaffino would step down mid-year with Aon executive Eric Andersen taking over. Eric Andersen officially joined the company on February 16 with no further senior leadership changes. Management reaffirmed Investor Day targets including low-to-mid teens premium growth in 2026.

BSD Analysis:
The manager maintains a bullish stance on AIG based on the company's successful multi-year turnaround and attractive valuation despite recent leadership transition concerns. The investment thesis centers on AIG's transformation into a disciplined commercial property-casualty insurer with improved underwriting margins and operational efficiency. The fund values AIG's strong underwriting results and believes the current valuation does not reflect the progress made in operational improvements. Recent CEO transition from Peter Zaffino to Eric Andersen created temporary market uncertainty, but management's reaffirmation of growth targets provides continuity. The new leadership's background at Aon brings relevant industry experience to continue the turnaround trajectory. Management's commitment to low-to-mid teens premium growth in 2026 demonstrates confidence in the business momentum. The manager views the leadership change as a temporary headwind that creates an attractive entry point for a fundamentally improved insurance franchise. AIG's focus on commercial lines provides exposure to improving pricing dynamics in property-casualty markets.

Pitch Summary:
Salesforce (CRM) is among the top five largest global software companies, with a broad portfolio that includes Sales, Service, Marketing & Commerce Clouds, Slack, MuleSoft, Tableau, and the Data & AI Cloud. Its products are deeply embedded across a large enterprise customer base, creating a long runway for growth through seat expansions, cross selling, and pricing, and supporting strong revenue growth for many years. Combined with sticky recurring revenue, high gross margins, and limited capital reinvestment needs, this creates a resilient business model with meaningful downside mitigation. Salesforce posted a good Q4 that matched growth expectations, however, market concerns that AI agents could displace traditional software have continued to pressure the stock, leaving the shares trading at an attractive valuation for an established franchise.

BSD Analysis:
The manager presents a bullish thesis on Salesforce based on its market-leading position in enterprise software and attractive valuation following AI-related market concerns. The investment rationale emphasizes Salesforce's comprehensive product portfolio spanning sales, service, marketing, and analytics platforms that are deeply embedded within large enterprise customers. The fund highlights multiple growth vectors including seat expansion, cross-selling opportunities, and pricing power that should drive sustained revenue growth. Management values the resilient business model characterized by sticky recurring revenue, high gross margins, and minimal capital requirements, providing strong downside protection. Recent quarterly results that met growth expectations demonstrate continued fundamental strength despite market headwinds. The manager believes AI displacement fears are overblown given Salesforce's deep customer integrations and mission-critical nature of CRM systems. Current valuation levels are viewed as attractive for a top-tier software franchise with durable competitive advantages. The company's scale and resources position it well to capitalize on AI trends rather than be disrupted by them.

Pitch Summary:
Workday (WDAY) is a leader in cloud application software for back-office business functions including human capital management, financials management, and ERP (enterprise resource planning). Workday's formidable competitive advantages lead to compelling unit economics (97% gross retention, 38% normal EBIT margin, low-teens subscription revenue growth) and its ERP software markets are both the largest and least cloud-penetrated in the application software universe. This provides Workday with a long runway to invest at high returns while trading at a valuation that is attractive for an established franchise. Workday posted a good Q4 that slightly beat expectations. However, continued market concerns that AI agents will displace traditional software have pressured the stock, despite switching costs and compliance risks making displacement scenarios unrealistic.

BSD Analysis:
The manager maintains a bullish stance on Workday despite recent AI-related market concerns, emphasizing the company's dominant position in cloud-based enterprise software and attractive valuation. The investment thesis highlights Workday's exceptional unit economics with 97% gross retention rates and 38% EBIT margins, demonstrating strong customer loyalty and pricing power. The fund views Workday's focus on the largest and least cloud-penetrated ERP markets as providing a substantial growth runway with high returns on invested capital. Management believes market fears about AI displacement are overblown given the high switching costs and compliance requirements inherent in enterprise back-office systems. Recent quarterly results that beat expectations reinforce the fundamental strength of the business model. The manager sees current valuation levels as attractive for an established franchise with durable competitive advantages. Workday's deep integration into mission-critical business processes creates significant barriers to customer defection.

Pitch Summary:
FedEx (FDX) is one of the largest providers of parcel delivery and freight services globally, whose shares trade below intrinsic value due to transitory headwinds – including unfavorable mix shift and integration challenges – that we expect to resolve as integration improves and new leadership drives cost discipline and shareholder returns. Q1 performance was strong, driven by a well-received Investor Day where management outlined a path to strong earnings growth, margin expansion, and improved free cash flow generation. Our long-term thesis remains intact as FedEx continues to make meaningful progress on its key initiatives.

BSD Analysis:
The manager presents a bullish turnaround thesis on FedEx, viewing current headwinds as temporary obstacles that mask the company's underlying value. The investment rationale centers on FedEx trading below intrinsic value due to transitory challenges including unfavorable service mix shifts and integration difficulties from recent acquisitions. The fund believes new leadership will drive operational improvements through enhanced cost discipline and more effective capital allocation. Management's recent Investor Day presentation reinforced the thesis by outlining specific pathways to earnings growth, margin expansion, and improved free cash flow generation. The manager emphasizes FedEx's dominant market position in global parcel delivery and freight services as a durable competitive advantage. Recent strong quarterly performance and management's strategic roadmap provide validation of the turnaround potential. The fund views current valuation levels as attractive given FedEx's market leadership and the expected resolution of temporary operational challenges.

Pitch Summary:
Ovintiv (OVV) is an independent E&P with leading positions in the Permian and Montney basins that trades at a discount despite high-quality, long-life unconventional assets. We own Ovintiv for exposure to an energy market generating significant free cash flow, with assets positioned favorably on the global cost curve. Ovintiv outperformed in the first quarter as oil prices surged following the Strait of Hormuz closure, with Brent crude peaking near $127. The company's Permian and Montney assets benefited from the geopolitical risk premium, while its disciplined capital allocation and shareholder return framework resonated with investors seeking cash flow generation.

BSD Analysis:
The manager maintains a bullish stance on Ovintiv based on its premium asset quality and attractive valuation relative to its cash flow generation potential. The investment thesis emphasizes Ovintiv's leading positions in two of North America's most prolific unconventional basins - the Permian and Montney - which provide long-life, high-quality reserves. The fund values Ovintiv's favorable position on the global cost curve, suggesting the company can generate strong returns even in lower commodity price environments. Management's disciplined capital allocation approach and commitment to shareholder returns through dividends and buybacks enhances the investment appeal. Recent geopolitical events that drove oil prices higher validated the energy exposure thesis. The manager views the current valuation as disconnected from the underlying asset quality and cash flow generation capabilities. Ovintiv's unconventional resource base provides decades of drilling inventory with predictable, repeatable development.

Pitch Summary:
APA (APA) is an independent E&P operating in the Midland and Delaware basins of the Permian and onshore Egypt, with exploration potential in Suriname, that trades at a discount despite lucrative natural gas financial contracts. We own APA for exposure to an energy market generating significant free cash flow in a perennially undersupplied environment. APA outperformed in the first quarter as oil prices surged following the Strait of Hormuz closure and the US-Israel conflict with Iran, with Brent crude peaking near $127. The company's natural gas financial contracts—which capture differentials between Waha, the Houston Ship Channel, Henry Hub, and global LNG—became significantly more valuable as supply disruptions drove wider basis differentials.

BSD Analysis:
The manager presents a bullish thesis on APA Corporation based on its strategic positioning in high-quality oil and gas basins and attractive valuation relative to its cash flow generation capabilities. The investment rationale centers on APA's exposure to an undersupplied energy market and its unique natural gas financial contracts that provide additional value capture through basis differentials. The fund views APA as trading at a discount despite its lucrative contract structure and operations in premier basins including the Permian's Midland and Delaware formations. Recent geopolitical events validated the thesis as oil price volatility and supply disruptions enhanced the value of APA's natural gas contracts. The manager emphasizes the structural undersupply in global energy markets as a long-term tailwind. APA's diversified geographic footprint across the Permian, Egypt, and potential Suriname exploration provides multiple avenues for value creation.

Pitch Summary:
OMAB is one of three publicly traded airport operators in Mexico. They operate 13 international airports under long-dated concessions (50-year term into 2048). They make money from regulated air travel services (passenger charges, landing/parking, etc.) and higher-margin commercial activities (parking, food & beverage, retail, lounges, cargo/logistics). They are levered directly to passenger volumes and tariff settings. The network is heavily concentrated in Monterrey, Mexico which is over 40% of the total mix. Every 5 years, OMAB and the Mexican government negotiate via a Master Development Program (MDP) for the next 5-years. The MDP is a capex mandate to the operator. This requires them to expand terminals, improve runways/taxiways, and add equipment. Monterrey and the broader North/Central industrial corridor is where the bulk of near shoring appears to be happening. The core bet is that these regions will continue to share in manufacturing investment and supply chain reconfiguration, which may translate into durable business travel and cargo activity. We anticipate leisure travel will stay consistent. We expect Mexico's integration with the US to deepen further. AB Volvo increased its planned investment in a new Nuevo Leon truck plant to $1B with production scheduled to start in 2026. This is exactly the kind of capex cycle that is likely to support sustained corporate travel and air-cargo needs around Monterrey. OMAB also launched 13 new domestic and 5 new international routes. There was also notable growth in retail (+20%), restaurants (+22%) and VIP lounges (+30%) in 2025. The biggest regulatory overhang is now over with OMAB having entered into the new 2026-2030 MDP. Investors have been wary since the 2023 regulatory turbulence where the Mexican government forced a concession rate hike on operators from 5% to 9%. Fortunately, OMAB was able to offset the margin hit with continued traffic momentum. The stock trades for about 15X earnings and has a dividend yield of 3.8%

BSD Analysis:
Brasada Capital positions OMAB as a strategic play on the nearshoring trend and deepening US-Mexico economic integration. The fund emphasizes OMAB's concentrated exposure to Monterrey, which represents over 40% of operations and sits at the heart of Mexico's industrial corridor benefiting from supply chain reconfiguration. The investment thesis hinges on sustained business travel and cargo growth driven by manufacturing investment, exemplified by AB Volvo's $1B truck plant investment scheduled for 2026. OMAB operates under long-term concessions extending to 2048, providing revenue visibility through both regulated aeronautical services and higher-margin commercial activities. The company demonstrated operational momentum with 13 new domestic and 5 international routes, plus strong commercial revenue growth across retail (+20%), restaurants (+22%), and VIP lounges (+30%). Regulatory uncertainty has been resolved with the new 2026-2030 Master Development Program, removing a key overhang despite the previous concession rate increase from 5% to 9%. At 15x earnings with a 3.8% dividend yield, OMAB offers attractive valuation for exposure to Mexico's industrial transformation.

Pitch Summary:
Postal Realty Trust is a small cap REIT that owns US Post Offices. They currently own just under 1,900 locations across the U.S. with an annualized base rent of $81M. The portfolio is a mix of 54% Flex locations (think large USPS stores), 23% Last-Mile (think tiny USPS stores in your neighborhood), and 23% Industrial (large USPS distribution/processing centers). They are the first and only public REIT focused on USPS leased properties. We believe this is a classic niche consolidation play. There are ~31K USPS facilities, of that ~23K are leased and ~8.5K owned by the USPS. PSTL is buying post offices from small private owners. The USPS is likely to be as safe and stable of a tenant base as you can have. The portfolio is 99.8% occupied with an average of 4-year lease terms and 3% rent escalators. The runway to buy more post offices appears to be vast and will feed their growth pipeline for years. USPS itself has undergone a structural turnaround with the goal to improve service reliability, stabilize their finances, and shift toward package logistics given the decline of letter-mail volume share decline vs. packaging. The USPS is in the process of opening 300 new sorting & distribution centers over the next few years to improve delivery operations. PSTL is a founder-led REIT that we believe holds genuine niche expertise. Founder and CEO Andrew Spodek has decades of experience. We think the stock is attractive as it's trading under 15x Funds From Operations and has a 5% dividend yield.

BSD Analysis:
Brasada Capital presents a compelling case for Postal Realty Trust as a specialized REIT with a unique and defensible market position. The fund highlights PSTL's monopolistic focus on USPS properties, owning nearly 1,900 locations with exceptional 99.8% occupancy and built-in 3% annual rent escalators. The investment thesis centers on a classic consolidation play within a fragmented market of 23,000 leased USPS facilities, providing substantial runway for accretive acquisitions from small private owners. The manager emphasizes the credit quality of having the USPS as a tenant, arguably one of the most stable counterparties available. PSTL benefits from structural tailwinds as the USPS undergoes modernization, shifting toward package logistics and expanding distribution infrastructure with 300 new sorting centers planned. The founder-led management team brings deep sector expertise, while the valuation appears attractive at under 15x FFO with a 5% dividend yield. This represents a defensive real estate play with growth potential through market consolidation and infrastructure modernization trends.

Pitch Summary:
Salesforce (CRM) is among the top five largest global software companies, with a broad portfolio that includes Sales, Service, Marketing & Commerce Clouds, Slack, MuleSoft, Tableau, and the Data & AI Cloud. Its products are deeply embedded across a large enterprise customer base, creating a long runway for growth through seat expansions, cross selling, and pricing, and supporting strong revenue growth for many years. Combined with sticky recurring revenue, high gross margins, and limited capital reinvestment needs, this creates a resilient business model with meaningful downside mitigation. Salesforce posted a good Q4 that matched growth expectations, however, market concerns that AI agents could displace traditional software have continued to pressure the stock, leaving the shares trading at an attractive valuation for an established franchise.

BSD Analysis:
The manager maintains a bullish stance on Salesforce despite AI-related market concerns, viewing the company as one of the top five largest global software companies with significant competitive advantages. The investment thesis centers on Salesforce's broad product portfolio including Sales, Service, Marketing & Commerce Clouds, plus acquired assets like Slack, MuleSoft, Tableau, and Data & AI Cloud. The fund emphasizes the company's deep enterprise customer embedment, which creates multiple growth avenues through seat expansions, cross-selling, and pricing optimization. The manager highlights Salesforce's resilient business model characteristics including sticky recurring revenue, high gross margins, and limited capital reinvestment requirements, providing meaningful downside protection. Recent Q4 results matched growth expectations, but continued AI displacement fears have pressured the stock, creating what the fund views as an attractive valuation opportunity for an established franchise with strong competitive moats and long-term growth prospects.

Pitch Summary:
WPP (WPP LN) was the world's largest ad agency holding company before its disastrous 2025 performance and the Omnicom-IPG merger, with operations across creative services (45%), media services (40%), and public relations. We own WPP for its attractive valuation and good balance sheet, believing the company can deliver positive returns as margins expand from 12.5% to normalized 16% levels. WPP shares fell to near their lowest level since 1998 as the company reported weak results driven by client assignment losses and reduced client spending. After issuing a weak sales outlook in early 2025 then cutting that outlook in Q2 and again in Q3, the company fired its CEO of 7-years with a new CEO who started in early September. Despite weak near-term outlook, WPP reported net new business wins in Q4 2025 with momentum continuing into early 2026. The company has a good balance sheet and is trading at a very low multiple of consensus earnings, which we believe are depressed.

BSD Analysis:
The manager presents a contrarian bullish thesis on WPP, viewing the company's dramatic underperformance as creating an attractive turnaround opportunity at depressed valuations. The fund acknowledges WPP's challenging 2025 performance including client assignment losses, reduced spending, multiple outlook cuts, and CEO termination, which drove shares to near 1998 lows. However, the investment thesis centers on margin expansion potential from current 12.5% levels to normalized 16% margins, supported by a strong balance sheet and extremely low valuation multiples. The manager believes current consensus earnings estimates are depressed and do not reflect the company's recovery potential. Recent positive developments include net new business wins in Q4 2025 with momentum continuing into early 2026 under new leadership. The fund views WPP's diversified operations across creative services (45%), media services (40%), and public relations as providing multiple avenues for margin recovery and business stabilization.

Pitch Summary:
Workday (WDAY) is a leader in cloud application software for back-office business functions including human capital management, financials management, and ERP (enterprise resource planning). Workday's formidable competitive advantages lead to compelling unit economics (97% gross retention, 38% normal EBIT margin, low-teens subscription revenue growth) and its ERP software markets are both the largest and least cloud-penetrated in the application software universe. This provides Workday with a long runway to invest at high returns while trading at a valuation that is attractive for an established franchise. Workday posted a good Q4 that slightly beat expectations. However, continued market concerns that AI agents will displace traditional software have pressured the stock, despite switching costs and compliance risks making displacement scenarios unrealistic.

BSD Analysis:
The manager maintains a bullish stance on Workday despite recent AI-related market concerns, viewing the selloff as creating an attractive valuation opportunity. The investment thesis centers on Workday's leadership position in cloud-based back-office applications with formidable competitive advantages including 97% gross retention rates, 38% normalized EBIT margins, and low-teens subscription revenue growth. The fund particularly values Workday's exposure to ERP markets, which represent both the largest and least cloud-penetrated segments in application software, providing a long runway for high-return investments. The manager dismisses AI displacement concerns as unrealistic given high switching costs and compliance risks inherent in mission-critical back-office systems. Recent Q4 results slightly beat expectations, but continued market fears about AI agents have created what the fund views as an attractive entry point for an established franchise with strong competitive moats.

Pitch Summary:
Ericsson (ERIC) is one of the largest vendors of hardware and software for wireless networks outside China, serving edge radio, cloud software and services, and enterprise markets. Ericsson's earnings are below normal as demand for wireless equipment is low in Japan and India, management turns around its mismanaged Cloud Software & Services business, and the Enterprise business loses money even with gross margins above 50%. We own Ericsson for its attractive valuation even if competitors do not lose market share due to political or scale problems, with substantial additional upside if these possible outcomes occur. Ericsson outperformed in the first quarter following strong Q4 2025 earnings that beat estimates on 6% organic sales growth and the announcement of its first-ever share buyback of up to SEK 15 billion. The rally continued in March as AT&T announced over $250 billion in five-year US infrastructure spending, which benefits Ericsson as a major supplier.

BSD Analysis:
The manager presents a contrarian bullish thesis on Ericsson, viewing current earnings depression as temporary and creating an attractive entry valuation. The fund acknowledges near-term headwinds including weak wireless equipment demand in Japan and India, ongoing Cloud Software & Services turnaround efforts, and Enterprise segment losses despite 50%+ gross margins. However, the manager believes Ericsson's market position as one of the largest wireless network vendors outside China provides defensive value even without competitor market share losses. The investment thesis includes substantial additional upside potential if geopolitical factors or scale advantages cause competitors to lose market share. Recent positive catalysts include strong Q4 2025 results with 6% organic sales growth, the company's first-ever SEK 15 billion share buyback program, and AT&T's $250 billion five-year infrastructure spending announcement benefiting Ericsson as a major supplier.

Pitch Summary:
SLB (SLB) headquartered in Houston and Paris, is one of the world's leading diversified providers of oilfield services. SLB is an established franchise in oilfield services with world-leading technology, a growing software business, and outsized exposure to higher-margin and wider moat international, offshore, and software markets, in our opinion. SLB's valuation is attractive given its risk ratings. SLB reported a sequentially improving Q4 that featured organic revenue growth in all geographies and optimistic commentary on 2026/2027.

BSD Analysis:
The manager maintains a bullish stance on SLB based on its dominant market position and attractive valuation relative to risk profile. The investment thesis centers on SLB's established franchise status in oilfield services with world-leading technology capabilities and a growing software business segment. The fund particularly values SLB's outsized exposure to higher-margin international and offshore markets, which provide wider competitive moats compared to onshore North American operations. The manager views the company's diversified geographic footprint and technology leadership as key competitive advantages. Recent Q4 results showed sequential improvement with organic revenue growth across all geographies, supporting management's optimistic outlook for 2026-2027. The fund believes SLB's current valuation is attractive given the company's risk profile and market-leading position in the oilfield services sector.

Pitch Summary:
APA (APA) is an independent E&P operating in the Midland and Delaware basins of the Permian and onshore Egypt, with exploration potential in Suriname, that trades at a discount despite lucrative natural gas financial contracts. We own APA for exposure to an energy market generating significant free cash flow in a perennially undersupplied environment. APA outperformed in the first quarter as oil prices surged following the Strait of Hormuz closure and the US-Israel conflict with Iran, with Brent crude peaking near $127. The company's natural gas financial contracts—which capture differentials between Waha, the Houston Ship Channel, Henry Hub, and global LNG—became significantly more valuable as supply disruptions drove wider basis differentials.

BSD Analysis:
The manager presents a bullish thesis on APA Corporation based on its attractive valuation relative to its natural gas financial contracts and exposure to an undersupplied energy market. The fund views APA as generating significant free cash flow in a structurally tight energy environment. The company's strategic natural gas financial contracts provide valuable exposure to basis differentials between key pricing hubs including Waha, Houston Ship Channel, Henry Hub, and global LNG markets. These contracts became particularly valuable during Q1 2026 as geopolitical supply disruptions widened basis differentials. The manager emphasizes APA's operations in high-quality Permian Basin acreage (Midland and Delaware basins) along with international exposure in Egypt and exploration upside in Suriname. The investment thesis centers on the company trading at a discount despite its lucrative contract portfolio and strong free cash flow generation capabilities.

Pitch Summary:
American International Group (AIG) is a leading commercial property-casualty insurer that has achieved improved underwriting margins and expense discipline through a multi-year turnaround. We own AIG for its strong underwriting results and attractive valuation. AIG underperformed in the first quarter, as shares fell on the announcement that CEO Peter Zaffino would step down mid-year with Aon executive Eric Andersen taking over. Eric Andersen officially joined the company on February 16 with no further senior leadership changes. Management reaffirmed Investor Day targets including low-to-mid teens premium growth in 2026.

BSD Analysis:
Hotchkis & Wiley maintains a bullish stance on AIG despite recent CEO transition concerns, viewing the insurance giant as an attractive value play following its successful multi-year turnaround. The fund's investment thesis emphasizes AIG's improved underwriting discipline and expense management, which have driven stronger margins and profitability. The manager appears confident in the company's operational progress and attractive valuation metrics relative to its improved fundamentals. While the CEO change from Peter Zaffino to Eric Andersen created near-term uncertainty, the fund takes comfort in management's reaffirmation of Investor Day targets, including low-to-mid teens premium growth for 2026. The smooth leadership transition with no additional senior management changes suggests operational continuity. At 3.4% of net assets, AIG represents a meaningful position reflecting the fund's conviction in the commercial P&C insurance recovery story and belief that current valuation levels offer attractive risk-adjusted returns.

Pitch Summary:
WPP (WPP LN) was the world's largest ad agency holding company before its disastrous 2025 performance and the Omnicom-IPG merger, with operations across creative services (45%), media services (40%), and public relations. We own WPP for its attractive valuation and good balance sheet, believing the company can deliver positive returns as margins expand from 12.5% to normalized 16% levels. WPP shares fell to near their lowest level since 1998 as the company reported weak results driven by client assignment losses and reduced client spending. After issuing a weak sales outlook in early 2025 then cutting that outlook in Q2 and again in Q3, the company fired its CEO of 7-years with a new CEO who started in early September. Despite weak near-term outlook, WPP reported net new business wins in Q4 2025 with momentum continuing into early 2026. The company has a good balance sheet and is trading at a very low multiple of consensus earnings, which we believe are depressed.

BSD Analysis:
Hotchkis & Wiley's investment in WPP represents a classic contrarian value play on a deeply distressed advertising giant trading near 26-year lows. The fund's bullish thesis centers on WPP's attractive valuation and strong balance sheet, with shares trading at depressed multiples of what the manager believes are temporarily suppressed earnings. The investment case relies on margin expansion from current 12.5% levels to normalized 16% as the new CEO implements operational improvements. Despite the challenging 2025 performance that included multiple guidance cuts and CEO termination, the fund sees encouraging signs in Q4 net new business wins and early 2026 momentum. The manager appears confident that current market pessimism is overdone and that WPP's diversified service offerings across creative, media, and PR provide a foundation for recovery. The position represents a bet on cyclical recovery in advertising spending and successful turnaround execution under new leadership.

Pitch Summary:
Workday (WDAY) is a leader in cloud application software for back-office business functions including human capital management, financials management, and ERP (enterprise resource planning). Workday's formidable competitive advantages lead to compelling unit economics (97% gross retention, 38% normal EBIT margin, low-teens subscription revenue growth) and its ERP software markets are both the largest and least cloud-penetrated in the application software universe. This provides Workday with a long runway to invest at high returns while trading at a valuation that is attractive for an established franchise. Workday posted a good Q4 that slightly beat expectations. However, continued market concerns that AI agents will displace traditional software have pressured the stock, despite switching costs and compliance risks making displacement scenarios unrealistic.

BSD Analysis:
Hotchkis & Wiley maintains strong conviction in Workday despite recent AI-related market concerns, viewing the selloff as an attractive entry opportunity. The fund's bullish thesis emphasizes Workday's dominant competitive position in cloud-based ERP and HCM software, supported by exceptional unit economics including 97% customer retention and 38% EBIT margins. The manager believes the ERP market represents the largest and least penetrated opportunity in enterprise software, providing Workday with a long growth runway. Recent AI fears are viewed as overblown given the mission-critical nature of Workday's applications, deep customer integrations, and high switching costs. The fund notes that consensus earnings estimates have actually moved higher, suggesting fundamental strength despite stock price weakness. At 4.0% of net assets as the portfolio's third-largest position, WDAY represents a high-conviction contrarian bet on enterprise software leadership.

Pitch Summary:
Crescent Energy (CRGY) is an independent E&P operating in the Permian, Eagle Ford and Uinta Basins. Following their merger with Vital Energy, which expanded their geography into the Permian Basin, the Company will be the tenth largest US independent E&P. We own Crescent for its low valuation relative to free cash flow generation (over $700 million annually), improved scale and public float. Crescent outperformed in the first quarter as oil prices surged following the Strait of Hormuz closure, with Brent crude peaking near $127. The company's Eagle Ford assets benefited from the geopolitical risk premium, while its natural gas hedge book protects cash flows.

BSD Analysis:
Hotchkis & Wiley's bullish thesis on Crescent Energy centers on the company's transformation into a top-tier independent E&P following its merger with Vital Energy. The fund views CRGY as significantly undervalued relative to its substantial free cash flow generation of over $700 million annually. The merger has enhanced the company's scale and geographic diversification across premier US shale basins, positioning it as the tenth largest US independent E&P. The investment case is strengthened by improved public float and enhanced trading liquidity post-merger. Crescent's Eagle Ford assets performed particularly well during the recent oil price surge, while the company's natural gas hedging strategy provides downside protection for cash flows. The fund appears confident in management's ability to generate strong returns through disciplined capital allocation and operational efficiency across the expanded asset base.