Investment Pitches

Pitch Summary:
If Jardines and its affiliates represent our "value" holdings in the Asian consumer space, our 2% position in Sea Limited sits at the "growth" end of the spectrum. Founded by Singaporean entrepreneur Forrest Li, Sea has built three complementary businesses in video games (Garena), e-commerce (Shopee), and payments (Shopee Pay). Sea is not conventionally cheap, trading at higher multiples than our core holdings and with an intrinsic value that is harder to pin down. But we are comfortable paying up for the combination of market leadership in Southeast Asia, an exceptional founder/CEO, and a long runway for growth.

BSD Analysis:
Orbis takes a growth-oriented approach to Sea Limited, acknowledging the premium valuation while emphasizing the company's strategic positioning in Southeast Asia's digital economy. The manager highlights Sea's diversified business model across gaming, e-commerce, and payments, creating multiple revenue streams and cross-selling opportunities. Key investment drivers include founder-led management under Forrest Li, dominant market positions across Southeast Asia, and significant runway for growth as digital adoption accelerates in the region. While Orbis admits the valuation is not conventionally cheap and intrinsic value is difficult to quantify, they justify the premium based on quality factors and growth potential. The 2% position size reflects measured conviction in the growth thesis while acknowledging valuation risks. This contrasts with their value approach to Jardines, demonstrating a barbell strategy across the Asian consumer opportunity set.

Pitch Summary:
A good place to begin the discussion is with Jardine Matheson or "Jardines", which we have mentioned in previous commentaries. Founded nearly 200 years ago, Jardines is one of Asia's most storied conglomerates, with roots tracing back to Hong Kong's early days as a British colony. Still controlled by the founding Keswick family, now in its fifth generation, Jardines is best thought of as a capital allocator across a portfolio of market-leading businesses with exposure to consumers and local economies throughout Asia. DFI Retail is one of these businesses. It operates more than 7,500 outlets across 12 markets in Asia, primarily serving daily consumer needs. These include both its own local supermarkets and health and beauty banners, as well as the regional master franchises for 7-Eleven and IKEA. Its joint venture, Maxim's, operates its own fast-casual dining chains and is also the regional partner of choice for international brands such as Starbucks, Cheesecake Factory and Shake Shack. In addition, Jardines also owns the iconic Mandarin Oriental luxury hotel chain, which operates 44 locations globally and is transitioning into an attractive asset-light business model by leveraging its brand to build a global portfolio of managed hotels and luxury residences. Another Jardines business is Hongkong Land, which is the principal landlord of Central Hong Kong and controls roughly 5 million square feet or about 20% of the Grade A office space in the heart of the city, making it one of the most valuable commercial property portfolios in the world. Market sentiment toward Hong Kong real estate remains gloomy, but this overlooks its enduring scarcity. Much of the competing stock is decades old and jointly controlled by slow-moving strata ownership structures, thus making it difficult to modernise and limiting supply. By contrast, Hongkong Land owns its portfolio outright, enabling consistent reinvestment and commanding premium rents. Vacancy remains below market averages, and rents, while still about 30% below pre-pandemic peaks, appear to be stabilising. The company has outlined its plan to recycle capital from its profitable but more cyclical luxury residential development operation into repurchasing its shares and building a larger luxury commercial property portfolio in the region using third-party capital. In Indonesia, Jardines has a significant stake in Astra International, the country's largest conglomerate exposed to two key economic drivers, namely, domestic consumption and mining. Through its long-standing joint venture with Honda, Astra accounts for roughly 75% of domestic motorcycle sales, while its partnerships with Toyota and Daihatsu give it close to half the local passenger car market. These businesses are supported by captive financing arms that underwrite a majority of purchases, embedding Astra deeply into Indonesian household spending patterns. The result is a formidable and resilient franchise that captures both the affordability of bikes and the aspirational demand for cars as Indonesia's middle class expands. In its mining business, Astra generates stable cash flows from its heavy equipment dealership and maintenance operations as Komatsu's local partner, as well as from contracting services to local coal mine owners. At the same time, Astra also operates its own mines and is investing in gold and nickel assets to reduce its dependence on coal. Taken together, our International Equity Strategy holds a 4% position in the various Jardines group companies, which would make it the Strategy's largest holding if it were a single company. Our enthusiasm is fuelled by strikingly low valuations across this basket of shares due to investor concerns about weak fundamentals in some segments and broader China-related fears. Jardine Matheson trades at roughly ten times earnings and offers a 5% dividend yield with a solid track record of mid-single digit growth. Hongkong Land changes hands at 50% of book value, and a 4% dividend yield—priced as if Hong Kong's office market will never recover. Astra International, for its part, is priced at just seven times earnings with an attractive 7% dividend yield, indicating the market's pessimism about its future outlook. Looking past current sentiment, we are optimistic that our patience will be rewarded over the long term as the fundamentals improve.

BSD Analysis:
Orbis presents a compelling value thesis on Jardine Matheson, viewing it as an undervalued Asian consumer play trading at attractive multiples despite quality fundamentals. The manager emphasizes Jardines' diversified portfolio of market-leading businesses across retail, hospitality, and real estate, all positioned to benefit from Asia's shift toward domestic consumption. Key valuation metrics include Jardine Matheson trading at 10x earnings with a 5% dividend yield, Hongkong Land at 50% of book value, and Astra International at 7x earnings with 7% yield. The thesis centers on the structural opportunity as Asian economies rebalance from export-driven to consumer-led growth models. Orbis believes current pessimism around China-related fears and weak fundamentals in certain segments has created an attractive entry point. The 4% combined position across Jardines entities represents the strategy's largest holding, reflecting high conviction in the long-term recovery potential. Management improvements across the group, including enhanced capital discipline and shareholder returns, provide additional catalysts for value realization.

Pitch Summary:
The Fund also started a position in James Hardie Industries after the company's acquisition of our long-term holding, AZEK Company. James Hardie is a leading provider of fiber-cement building solutions, producing and selling siding, and cement-bonded boards for residential and commercial construction, and should benefit from shared innovation with and cross-selling of the acquired AZEK product portfolio.

BSD Analysis:
The fund established a position in James Hardie Industries following the company's acquisition of AZEK Company, which was a long-term holding in the portfolio. The manager's thesis focuses on James Hardie's leadership position in fiber-cement building solutions, particularly siding and cement-bonded boards for both residential and commercial construction markets. The acquisition of AZEK creates strategic value through shared innovation opportunities and cross-selling potential across the combined product portfolio. This combination should enhance James Hardie's competitive position in the building materials space by expanding its product offerings and market reach. The manager appears optimistic about the synergies between James Hardie's fiber-cement expertise and AZEK's composite materials capabilities. The position represents a continuation of the fund's exposure to the building materials sector through a strengthened platform.

Pitch Summary:
Trex is a leading manufacturer of wood-alternative composite decking, railing, and outdoor living goods that combines recycled plastic and reclaimed wood to deliver durable, low-maintenance outdoor building products. Trex has a renowned brand, and has benefited from a secular shift to composite materials away from wood. Trex stock had been weak, after concerns regarding slowing housing industry due to elevated rates, and was at a valuation we viewed as attractive.

BSD Analysis:
The fund initiated a position in Trex Company, capitalizing on weakness in the stock due to housing industry concerns and elevated interest rates. The manager's investment thesis is built on Trex's leadership position in wood-alternative composite decking and outdoor living products, which benefit from a secular shift away from traditional wood materials. The company's products offer superior durability and low-maintenance characteristics, combining recycled plastic and reclaimed wood in an environmentally conscious approach. Trex has established a renowned brand in the composite materials space, providing pricing power and market share advantages. The stock's weakness from housing market concerns created an attractive entry valuation for a company positioned to benefit from long-term material substitution trends. The manager appears confident that the secular shift to composite materials will continue despite cyclical housing headwinds.

Pitch Summary:
During the third quarter of 2025, the Fund initiated a position in Patrick Industries and Trex Company, Inc. Patrick is a manufacturer and distributor of components and materials for RV, marine, manufactured housing, and residential construction markets that is benefiting from an ongoing outsourcing trend across these end markets. Tariff and inventory concerns caused a pullback in shares to a valuation we found attractive.

BSD Analysis:
The fund initiated a position in Patrick Industries, viewing it as an attractive opportunity following a share price pullback driven by tariff and inventory concerns. The manager's thesis centers on Patrick's exposure to an ongoing outsourcing trend across multiple end markets including RV, marine, manufactured housing, and residential construction. This secular shift suggests Patrick can capture market share as companies increasingly rely on external suppliers rather than in-house manufacturing. The valuation became compelling after the stock declined on macro concerns, presenting an entry point for a company positioned to benefit from structural industry changes. The diversified end market exposure provides some resilience across different economic cycles. The manager appears confident in the long-term outsourcing trend despite near-term headwinds from tariff uncertainty.

Pitch Summary:
Globant is a multinational IT services company specializing in high-value digital engineering services, including customer experience, artificial intelligence (AI), cloud, and development operations. Unlike many larger IT services firms that maintain broad exposure to slower-growing segments, Globant operates as a digital pure play, generating nearly all its revenue from advanced, high-margin services. The company's business model is mostly project-based, with limited recurring revenue. Founded in 2003 and publicly listed since 2014, Globant has delivered organic growth exceeding 20% annually post-IPO. Its client base is geographically diverse; the U.S., Latin America, and Europe serve as its main markets, while Asia and the Middle East represent growing segments. Through its "Studio" model, Globant is known for blending design and technology to produce user-centric digital experiences. Notable clients include Disney, Google, LinkedIn, Electronic Arts, Formula 1, and Coca-Cola. Operating within the highly competitive and fragmented $1.5 trillion global IT services industry, Globant benefited from a pandemic-era surge in digital transformation spending. However, the company has recently faced a cyclical slowdown as enterprises focus on cost efficiency and delay discretionary technology investments. Additionally, the rise of generative AI introduces long-term uncertainty, with the potential to automate commoditized tasks and disrupt traditional outsourcing models. These headwinds have contributed to a sharp decline in Globant's share price, which was down over 70% year-to-date in 2025. We believe that the cyclicality and the AI-related risks have been more than accounted for in Globant's current market valuation. We like the fact that the company has a healthy balance sheet and strong relationships with its clients. In our view, Globant is well positioned to benefit as IT budgets normalize, and clients move from AI pilots to scaled adoption. It also has the potential to expand its scope of work to more complex, higher-value projects in areas such as product design, data integration, and business process reengineering. At its current valuations, Globant represents an appealing value opportunity to us.

BSD Analysis:
Brandes identifies a contrarian value opportunity in Globant following a dramatic 70% year-to-date decline that the manager believes has overcorrected for cyclical and AI-related concerns. The investment thesis centers on Globant's differentiated positioning as a digital pure-play focused on high-margin, advanced services rather than commoditized IT outsourcing. The manager highlights the company's impressive track record of 20%+ annual organic growth since its 2014 IPO and its prestigious client roster including Disney, Google, and LinkedIn. Brandes acknowledges the current headwinds from enterprise cost-cutting and AI disruption concerns but views these as temporary cyclical factors rather than structural threats. The fund emphasizes Globant's healthy balance sheet and strong client relationships as competitive advantages that position the company to benefit from normalized IT spending and the transition from AI pilots to scaled implementations. The manager sees potential for Globant to expand into higher-value, more complex projects in areas like product design and business process reengineering. At current depressed valuations, Brandes views the risk-reward profile as highly attractive for a company with Globant's growth profile and market positioning.

Pitch Summary:
Prestige Consumer Healthcare is an over-the-counter pharmaceutical manufacturer that operates primarily in North America. The company is a brand builder, focused on acquiring underperforming brands and expanding market share through advertising, marketing expertise and product innovation. Its notable brands include BC/Goody's, Monistat, Chloraseptic, Clear Eyes, Compound W, Dramamine and Summer's Eve. Prestige has 17 brands: 12 have market share leadership, while the rest are between second and fourth in their individual markets. Recent share-price weakness for Prestige created an opportunity to invest in a company we know very well, having owned it for years previously, as recently as earlier this year. Prestige is well positioned as demand for its products is fairly defensive even in tougher economic times because its products are purchased on an "as-needed basis," often annually or biannually. Private label competition is insignificant. The markets are niche, given consumers' tendency to buy branded products for infrequent use, known efficacy, and trust. Topline growth is not high but stable. The key is capital deployment, with Prestige ranking (in order of priority): investing in strategic brands to ensure long-term, organic success, mergers and acquisition, and share repurchases. We take comfort in its track record of prior purchases and the company's stated discipline of being opportunistic and focused on returns.

BSD Analysis:
Brandes presents a compelling value opportunity in Prestige Consumer Healthcare, capitalizing on recent share price weakness to re-enter a familiar position. The manager emphasizes the company's defensive characteristics, with products purchased on an "as-needed" basis that maintain pricing power through brand loyalty and limited private label competition. The investment thesis centers on Prestige's proven brand-building capabilities, having achieved market leadership in 12 of its 17 brands while maintaining strong positions in niche markets. The manager appreciates the company's disciplined capital allocation strategy, prioritizing strategic brand investments, selective M&A, and share repurchases. Brandes highlights the defensive nature of the business model, with stable topline growth and products that remain resilient during economic downturns. The fund's familiarity with the company, having owned it previously as recently as earlier in the year, provides confidence in the investment decision. The manager views the current valuation as attractive given the company's track record and strategic positioning in branded OTC pharmaceuticals.

Pitch Summary:
Lam Research's shares benefited from improving sentiment due to the importance of the company's products within the semiconductor capital spending market. Following disappointments from semiconductor peers, Lam confirmed growth projections into next year with supportive bookings data. We believe Lam has a long path to growth moving forward as a leading provider of equipment tied to memory requirements for AI.

BSD Analysis:
The managers are bullish on Lam Research despite broader semiconductor sector challenges. They highlight the company's ability to confirm growth projections with strong bookings data while peers disappointed, suggesting competitive positioning and execution advantages. The pitch emphasizes Lam's critical role in semiconductor capital spending and specifically memory requirements for AI applications. This positions the company to benefit from the AI-driven memory upgrade cycle. The managers project a "long path to growth" indicating confidence in sustained demand for Lam's equipment over multiple years. The company appears well-positioned as a picks-and-shovels play on AI infrastructure buildout through its specialized semiconductor manufacturing equipment.

Pitch Summary:
AbbVie issued a strong second-quarter financial update that included increased 2025 guidance. The company also announced a legal settlement with generic competitors that will result in three additional years of patent protection for one of its largest, and fastest-growing products.

BSD Analysis:
The managers are bullish on AbbVie following strong Q2 financial results and raised 2025 guidance. A key catalyst is a legal settlement with generic competitors that extends patent protection for one of their largest and fastest-growing products by three additional years. This provides significant revenue protection and visibility for a major growth driver. The settlement demonstrates AbbVie's ability to defend its intellectual property portfolio effectively. The raised guidance suggests management confidence in near-term execution across the broader product portfolio. This represents a defensive healthcare play with patent-protected growth drivers and strong cash generation capabilities.

Pitch Summary:
Broadcom is a leading provider of AI computing power. During the quarter, the management team announced a large new customer that will impact financial results in the second half of 2026. This represents a continuation of new customer announcements favoring Broadcom's semiconductor technology over the past year. We believe that new customer wins likely will support revenue growth over the next three to five years.

BSD Analysis:
The managers maintain a bullish stance on Broadcom as a leading AI computing power provider. They highlight a major new customer win that will drive financial results starting in H2 2026, demonstrating strong forward visibility. The pitch emphasizes a pattern of consistent new customer acquisitions over the past year, suggesting competitive advantages in Broadcom's semiconductor technology. The managers project sustained revenue growth over a 3-5 year period driven by these customer wins. This represents a direct play on AI chip demand and computing infrastructure. The delayed revenue impact timeline (H2 2026) suggests large-scale, complex customer deployments typical of hyperscale AI infrastructure projects. Broadcom appears well-positioned to benefit from the ongoing AI semiconductor cycle.

Pitch Summary:
Oracle's stock strength was associated with a material change in new contract signings in its cloud infrastructure segment. In the company's earnings release, the management team outlined the contract value and the revenue impact from those contracts over the next four years. This positive announcement drove shares materially higher as investors gained confidence in Oracle as an AI infrastructure leader.

BSD Analysis:
The managers are bullish on Oracle following a significant acceleration in cloud infrastructure contract signings. Management provided specific guidance on contract values and four-year revenue impact, offering investors clear visibility into future growth. The pitch emphasizes Oracle's emerging leadership position in AI infrastructure, which has driven strong investor confidence and share price appreciation. This represents a cloud computing play with direct exposure to AI infrastructure spending. The managers appear confident in Oracle's ability to compete effectively in the AI infrastructure market against other major cloud providers. The detailed contract disclosure suggests strong execution and pipeline visibility, supporting the bullish thesis over a multi-year period.

Pitch Summary:
Corning's outperformance was tied to a strong second-quarter earnings result and forward guidance supporting a continuation of those trends. Specifically, the company's fiber optics and related technologies are integral in building AI infrastructure across the globe. We believe Corning should see market growth across several key products for the next three to five years.

BSD Analysis:
The fund managers are bullish on Corning based on strong Q2 earnings and positive forward guidance. They highlight the company's strategic positioning in AI infrastructure through its fiber optics and related technologies, which are essential components for global AI deployment. The managers expect sustained growth across multiple product lines over a 3-5 year horizon, suggesting confidence in Corning's ability to capitalize on the AI infrastructure buildout. This represents a clear technology infrastructure play tied to the broader AI investment theme. The pitch emphasizes both near-term execution (strong earnings) and long-term secular growth drivers (AI infrastructure demand). The managers view Corning as well-positioned to benefit from the multi-year AI capex cycle across major technology companies.

Pitch Summary:
Salesforce was a detractor during the quarter. The U.S.-headquartered customer relationship management company's stock price declined despite reporting earnings that we viewed as solid. Data Cloud and Agentforce performed well, in our view, and management continued to repurchase shares. In our view, there is room for continued growth as the company leverages its unique position to help businesses deploy AI and continues to restructure its sales organization.

BSD Analysis:
Despite recent stock underperformance, the manager maintains a bullish outlook on Salesforce based on strong fundamental progress and AI positioning. The disconnect between solid earnings results and stock performance suggests market overreaction or temporary sentiment issues. Strong performance in Data Cloud and Agentforce demonstrates Salesforce's successful evolution toward AI-enabled solutions. Continued share repurchases indicate management confidence and commitment to shareholder returns. The manager emphasizes Salesforce's unique competitive position in helping enterprises deploy AI solutions, suggesting sustainable competitive advantages. Ongoing sales organization restructuring should drive improved efficiency and growth acceleration. This pitch reflects confidence in Salesforce's ability to monetize its AI investments and maintain leadership in the CRM market despite near-term headwinds.

Pitch Summary:
Molina Healthcare was a detractor during the quarter. The U.S.-headquartered managed care company's stock price declined after it reported challenging second-quarter results and reduced full year earnings per share guidance. This negative revision was caused by cost pressure in the company's Medicaid and Marketplace businesses. While today's valuation seems to imply that the headwinds impacting Molina are structural, we believe they're attributable to temporary factors and expect a meaningful earnings recovery in the coming years.

BSD Analysis:
The manager takes a contrarian bullish stance on Molina Healthcare despite recent operational challenges and guidance cuts. The investment thesis centers on the temporary nature of current headwinds affecting the Medicaid and Marketplace segments. The manager appears to view current cost pressures as cyclical rather than structural, suggesting confidence in the company's ability to navigate through this difficult period. The emphasis on "meaningful earnings recovery" indicates belief in Molina's operational leverage and margin expansion potential as conditions normalize. Current valuation appears attractive relative to the manager's assessment of long-term earning power. This pitch reflects a value-oriented approach, betting on mean reversion in a quality managed care operator trading at distressed levels. The manager's conviction suggests familiarity with Molina's historical ability to manage through challenging regulatory and cost environments.

Pitch Summary:
Keurig Dr Pepper was a detractor during the quarter. The U.S. beverage company's stock fell after announcing the acquisition of JDE Peet's, which owns a collection of global coffee brands. Once the combination is complete, Keurig Dr Pepper plans to split into two separate entities. One entity will specialize in coffee, while the other focuses on soft drinks. Separating the coffee and soft drink segments makes strategic sense, as synergy estimates appear conservative, and the multiple paid for JDE Peet's was undemanding. In our view, investors reacted harshly to this announcement because the two-step transaction adds complexity, increases debt, and unexpectedly raises exposure to the coffee category. We believe the sell-off was overdone since Keurig Dr Pepper's fundamentals remain healthy, the organization has a proven track record of deleveraging after prior deals, and the upcoming separation will expose the significant sum-of-the-parts discount.

BSD Analysis:
Despite the stock's negative performance, the manager maintains conviction in Keurig Dr Pepper's strategic transformation through the JDE Peet's acquisition and subsequent split. The manager views the market reaction as excessive, arguing that investors are overweighting near-term complexity while undervaluing long-term strategic benefits. The acquisition multiple appears attractive, and conservative synergy estimates suggest potential upside surprises. The planned separation into focused coffee and soft drink entities should unlock value by eliminating the conglomerate discount. The manager emphasizes KDP's strong balance sheet management and proven ability to deleverage following acquisitions. This contrarian stance reflects confidence in management's capital allocation strategy and belief that the sum-of-the-parts value will become apparent post-separation. The pitch demonstrates patience with temporary market dislocation while focusing on fundamental value creation.

Pitch Summary:
IQVIA Holdings was a contributor during the quarter. The U.S.-headquartered provider of advanced analytics, solutions, and clinical research services saw its stock price appreciate after having delivered solid second-quarter results amidst a challenging pharma environment. The results reaffirmed our thesis that the technology and analytics solutions (TAS) segment is underappreciated and poised for future growth. Further the R&D solutions business showed signs of gaining share, with its win rate improving significantly. We believe forward-looking indicators are encouraging and think the company can extract further value as it leverages next-gen trends.

BSD Analysis:
The manager maintains a bullish outlook on IQVIA despite challenging pharmaceutical industry conditions, viewing the company as well-positioned to capitalize on secular trends. Strong second-quarter results validate the investment thesis, particularly regarding the underappreciated Technology & Analytics Solutions segment. The manager highlights improving competitive positioning in R&D solutions, with significantly higher win rates indicating market share gains. This operational improvement suggests IQVIA is successfully differentiating its offerings in a competitive landscape. The emphasis on "next-gen trends" likely refers to AI, data analytics, and digital transformation in drug development. The manager appears confident that IQVIA's technology-driven approach will continue generating value as the pharmaceutical industry increasingly relies on advanced analytics and digital solutions for drug discovery and development.

Pitch Summary:
Alphabet was a contributor during the quarter. The technology conglomerate's stock price appreciated following a favorable ruling in the Google Search antitrust case and second-quarter earnings that exceeded expectations across the board. Innovations in the Google Search experience are driving both engagement and revenue benefits. Moreover, Cloud growth is accelerating thanks to robust demand for AI workloads. We continue to believe Alphabet is undervalued on a sum-of-the-parts basis and see potential for the company's AI leadership to drive further upside across the portfolio.

BSD Analysis:
The manager expresses strong conviction in Alphabet's multi-faceted value proposition, highlighting both regulatory and operational catalysts driving performance. The favorable antitrust ruling removes a key overhang, while strong earnings across all segments demonstrate the company's diversified revenue streams. Search innovations are enhancing user engagement and monetization, supporting the core advertising business. The manager particularly emphasizes accelerating Cloud growth driven by AI demand, positioning Alphabet as a key beneficiary of the AI revolution. The sum-of-the-parts valuation argument suggests the market undervalues the company's diverse portfolio of assets. This pitch reflects confidence in Alphabet's ability to leverage AI leadership across its ecosystem to drive sustained growth and margin expansion.

Pitch Summary:
Warner Bros Discovery (WBD) was a contributor during the quarter. The media company's stock price surged by 29% in a single trading session in September – its best day on record – amid reports that it is an acquisition target for Paramount-Skydance. In our view, this merger could generate meaningful cost synergies and create a scaled competitor with a deep and unmatched content library. We continue to closely monitor WBD's evolving outlook and believe its long-term prospects remain attractive, backed by solid recent earnings, renewed distribution deals and growing momentum in its Streaming segment.

BSD Analysis:
The manager maintains a bullish stance on Warner Bros Discovery, viewing the company as an attractive acquisition target with strong fundamental improvements. The 29% single-day surge reflects market recognition of potential M&A value, with Paramount-Skydance reportedly interested in a combination that could unlock significant cost synergies. The manager emphasizes WBD's competitive advantages, including its deep content library and improving operational metrics across key segments. Recent earnings strength, renewed distribution partnerships, and accelerating streaming momentum support the investment thesis. The manager appears confident in the company's strategic positioning despite broader media industry headwinds. This pitch reflects a value-oriented approach, betting on both operational improvements and potential M&A catalysts to drive returns.

Pitch Summary:
Prestige Consumer Healthcare (PBH) — the company behind familiar over-the-counter medical products such as Dramamine, Luden's cough drops, and Clear Eyes eye drops — was the biggest detractor to our Strategy's performance during the quarter. That's in part because PBH missed earnings forecasts and took down its full fiscal year EPS estimates due to supply chain issues related to its eye care business. Its core supplier was not able to ship enough products to meet demand for PBH's Clear Eyes business. The company took action to fix this supply chain issue, opting to acquire its eye care supplier for $100 million. This former supplier will now be 100% focused on producing for PBH after being brought in-house. We expect PBH's FY 2027 earnings to bounce back nicely as the core business is operating well and expect a rebound in PBH's profitable eye care business as customers re-stock inventory. At its price of $63 at the end of the third quarter, Prestige shares were trading at 13.8 times 2027 earnings. But we expect multiple expansion, as the company earnings are set to accelerate after addressing its supply chain issues.

BSD Analysis:
Heartland maintains conviction in Prestige Consumer Healthcare despite near-term headwinds, viewing the supply chain disruption as a temporary setback rather than a fundamental issue. The fund emphasizes that the core business remains healthy, with the earnings miss primarily attributed to supply constraints in the profitable Clear Eyes eye care division. Management's decisive action to acquire the problematic supplier for $100 million demonstrates commitment to solving the issue and securing future supply reliability. The vertical integration strategy should improve margins and eliminate third-party dependency risks going forward. With customers expected to restock inventory as supply normalizes, the eye care business should rebound strongly in fiscal 2027. At 13.8x 2027 earnings, the valuation appears attractive for a consumer staples company with strong brand recognition and market positions. The fund expects multiple expansion as earnings accelerate post-supply chain resolution, creating meaningful upside potential from current levels.

Pitch Summary:
Our top performer for the quarter was Materion Corp. (MTRN), a vertically integrated producer of high-performance advanced engineered materials based on beryllium, a rare metal that is one-third lighter than aluminum but has six times the stiffness of steel. MTRN has been taking several steps to improve operations and bolster margins during a slower overall period for some of its end markets, such as autos, industrials, and life sciences. Over the past year, as demand has remained subdued, management divested its unprofitable Architectural Glass business in New Mexico while expanding high-margin capacity for advanced semiconductor capabilities in South Korea. The stock recently experienced outsized strength post tariff fears as Materion produced record margins with guidance for accelerating growth as a variety of end markets have visibility to a sustained rebound in demand. Though the stock has bounced back, it's still trading at an attractive price. If MTRN shares reach our target, that would still be a just 1.7x FY 2026 sales and 12x EBITDA.

BSD Analysis:
Heartland highlights Materion as their top quarterly performer, showcasing strong operational execution during challenging market conditions. The company's focus on beryllium-based advanced materials provides unique properties that are difficult to replicate, creating competitive advantages in specialized applications. Management has demonstrated disciplined capital allocation by divesting the unprofitable Architectural Glass business while simultaneously expanding high-margin semiconductor capacity in South Korea. The strategic pivot toward semiconductors positions MTRN well for secular growth trends in advanced technology applications. Record margins achieved during a demand downturn demonstrate operational leverage and cost discipline. With multiple end markets showing visibility to sustained demand recovery, the company is well-positioned for accelerating growth. Despite recent strength, the valuation remains attractive at the fund's target of 1.7x 2026 sales and 12x EBITDA, suggesting continued upside potential.