Investment Pitches

Pitch Summary:
BKNG is an oligopolist which is the world's largest online travel agency (OTA). The company has a competitively advantaged business as a two-sided platform with strong network effects, long growth runways, and a low risk of disruption. It has an advantaged business model that relies on: steady GDP+ (4%–5% per annum) travel demand growth, continued rise in online booking penetration, a dominant and growing position in the attractive and fragmented European accommodation market (hotels and alternative accommodations), and a growing dominant position in Asia, growth in both sides of its network (travelers and accommodation partners) due to flywheel effects, and a capital deployment strategy that is focused on returning excess cash to shareholders, supplementing underlying earnings growth and bolstering total returns to shareholders via dividends and share buybacks. Booking Holdings is the world's leading online travel agency (OTA) for travelers and local partners (hotels, car rental companies, airlines, etc.) in more than 220 countries and territories. The company generates revenue primarily from transaction fees for bookings made through its various platforms. It dominates the attractive European hotel and alternative accommodations market and has a growing share of the Asian market. BKNG operates in the simple and understandable travel market and is expected to grow faster than the travel sector due to continued online penetration and continued share capture: Travel demand has typically grown at GDP+ (4–5%) and is expected to continue growing at similar rates with the worldwide rise of the middle-class consumer. Furthermore, online accommodation bookings continue to gain share at the expense of traditional bricks and mortar travel agencies, constituting 67% of accommodations/rooms booked in 2023 and estimated to be 68% in 2024. While this is unlikely to get to 100%, it will likely continue to rise in the foreseeable future with the rise of the middle class globally and their access to the digital economy. Finally, BKNG continues to gain share at the expense of competing online and offline travel agencies given its marketing spend, continuous investment in its technology platform, and its growing loyalty program which results in stickier customers who are likely to remain in its ecosystem. These factors ought to allow BKNG to sustainably grow Gross Booking Volumes and Revenues in the high-single-digits (HSD) for the foreseeable future. BKNG has a durable and growing competitive advantage versus its main and smaller rivals. BKNG is a "platform company" that has a double-sided network with critical mass on both sides and a self-reinforcing positive flywheel effect: Attracting Supply (Accommodations): the volume of travelers on Booking.com makes it an indispensable distribution channel for independent hoteliers and other property owners who would be unable to access a global audience on their own: Furthermore, BKNG's platform provides them with tools to manage their listings, monitor revenue, and gain insights from guest feedback. Attracting Demand (Travelers): As more properties join the platform, the selection/variety of accommodations increases, making BKNG the go-to platform for travelers seeking the widest selection of options and prices, reinforcing the value proposition for new and existing property partners. Lowering Customer Acquisition Costs (CAC): The network effect's key benefit is the ability to acquire and retain customers more efficiently. As the brand becomes more recognizable/trusted, a growing number of customers come to BKNG directly, through its app or website, rather than through paid search (Google paid search represented $3bn of BKNG's $7bn marketing spend in 2024): This higher direct-booking mix (mid 50% as of 2024 up from low 50% in 2019) reduces marketing spend as a percentage of gross bookings (4.4% in 2024 down from 5.15% in 2019). Cross-Selling/Ecosystem Lock-in ("Connected Trip" Strategy): Once a customer makes a hotel booking, BKNG can seamlessly offer flights, car rentals, and other services. This not only increases the lifetime value of the customer but also makes the ecosystem stickier, which is further reinforced via BKNG's Genius loyalty program: Genius loyalty program offers rewards such as pricing discounts, free upgrades, and priority customer service support to travelers, and enables suppliers who participate in the program to generate incremental demand, increasing customer lock-in. BKNG's scale has allowed it to gain share at the expense of both its direct rivals (Expedia and Airbnb) and smaller regional players: Geographic Dominance: BKNG is the dominant force globally, particularly in the attractive and fragmented European and Asian markets. It's the market leader in Europe, with some estimates putting market share around 35–40%. EXPE is the market leader in the less attractive US region, with an estimated share of 60–75% of gross bookings, where large hotel chains (with greater negotiating leverage and competing websites of their own) dominate, translating into lower profitability for EXPE. Accommodation Listings: BKNG has the largest and most diverse inventory, with over 28 million listings, (traditional hotels and over 6.6 million alternative accommodations). This makes its platform a true "one-stop shop" for any type of lodging. ABNB's inventory is focused almost exclusively on alternative accommodations, with approximately 7.7 million listings, reducing its attractiveness for travelers looking for widest selection. EXPE has a much less impressive 3 million accommodation listings across its various brands (Expedia, Hotels.com, Vrbo, etc.), reducing the attractiveness of its network. Marketing Spend and Strategy: BKNG is the highest spender in absolute terms, but its marketing efficiency is a key strength. In 2024, BKNG spent $7.3 billion on marketing (31% of revenues). Its scale allows it to generate better cost per click than competitors in paid search. Furthermore, its pivot in recent years to focus more on direct brand marketing to drive more consumers to its properties also improves its marketing efficiency. BKNG's capital deployment has amplified its superior financial performance over the past 10-years which we believe is sustainable going forward: BKNG has compounded revenues at 10.8% per annum over the past 10 years, despite the 50%+ drop in revenues in 2020 due to COVID: Management have set long-term forward targets of 8% growth per annum in Gross Bookings and Revenues which we believe is eminently reasonable/achievable given further penetration of online travel demand and the company's history of gaining share against its direct and smaller rivals. The company has compounded adjusted net income at 10.1% while delivering 15% EPS growth over the same period on the back of share buybacks: Management has reduced diluted share count by approximately 36% over the past 10-years. Management have set mid-teens EPS growth as their target for the foreseeable future: Given projected 7–9% topline growth going forward and a fixed cost base that accounts for a little over a third of operating costs, we believe the company can deliver low teens net income growth given the embedded operating leverage. We see the bridge to mid-teens EPS growth coming from share buybacks. BKNG is currently trading at 22.5X NTM P/E (in line with its 10-year historical range) and 1.02X NTM relative P/E to the S&P 500, a slight discount to its historical range. We believe a market multiple is attractive for a company projected to grow earnings at a mid-teens rate. Its FCF yield (5.0% on FY2025 estimates) plus our forecast FCF growth in low teens suggest an expected return of mid- to high-teens over the coming years.

BSD Analysis:
The manager presents Booking Holdings as a compelling quality compounder on their shopping list, emphasizing its oligopolistic position as the world's largest online travel agency. The investment thesis centers on BKNG's two-sided platform with powerful network effects, where increased supply attracts more travelers and vice versa, creating a self-reinforcing flywheel. The company benefits from secular tailwinds including GDP+ travel demand growth (4-5% annually) and continued online penetration (67% in 2023, rising to 68% in 2024). BKNG's competitive advantages include the largest accommodation inventory (28 million listings), geographic dominance in attractive European and Asian markets (35-40% European market share), and superior marketing efficiency despite high absolute spend ($7.3 billion in 2024). The company has demonstrated strong historical performance with 10.8% revenue CAGR over 10 years and 15% EPS growth driven by aggressive share buybacks (36% share count reduction). Management targets mid-teens EPS growth going forward, supported by 7-9% topline growth and operating leverage. At 22.5x NTM P/E and 5.0% FCF yield, the manager views the valuation as attractive for a business projected to deliver mid-to-high teens returns.

Pitch Summary:
AutoZone is an oligopolist in the simple and understandable aftermarket automotive parts industry with high barriers to entry, predictable high free cash flow-generation, forecastable long-term growth, and operating in an industry characterized by rational competition. It has a consistent operating history of double-digit EPS growth with high returns on capital and a management team that is focused on maximizing shareholder value. When we bought AutoZone, the stock had a reasonable valuation, trading at a significant discount to the S&P 500.

BSD Analysis:
The manager initiated a position in AutoZone as a replacement for S&P Global, attracted by its oligopolistic position in the aftermarket automotive parts industry. The investment thesis centers on AutoZone's simple, understandable business model with high barriers to entry and rational competitive dynamics. The company demonstrates strong financial characteristics including predictable free cash flow generation, consistent double-digit EPS growth, and high returns on capital. Management's focus on shareholder value creation through disciplined capital allocation further supports the investment case. The manager found the valuation attractive at the time of purchase, with shares trading at a significant discount to the broader S&P 500. This represents a classic quality compounder investment, emphasizing predictable cash flows and sustainable competitive advantages in a stable end market.

Pitch Summary:
We sold our position in S&P Global (SPGI) and initiated a new position in AutoZone (AZO). We originally bought SPGI because, along with Moody's Corp., it was one of two market leaders in the credit ratings space in the US. It similarly had an oligopolistic position in the provision of equity market indices (alongside MSCI and Russell), owning the most recognized equity index brands with the S&P and Dow Jones franchise market positions. Both these core businesses play a crucial role in the functioning of the US and global capital markets. However, it was their $44bn acquisition of IHS Markit, which had data and research services for Oil and Gas, Financial Services, Health Care, Automotive, and other verticals which was a problem. The $44 billion acquisition of IHS Markit was the largest in SPGI's history. After a year of assessing the acquisition's underwhelming growth and returns, we decided to exit our position and redeploy the capital into AutoZone (AZO).

BSD Analysis:
The manager exited S&P Global due to concerns over the $44 billion IHS Markit acquisition, which represented the largest deal in SPGI's history. While acknowledging SPGI's oligopolistic positions in credit ratings (alongside Moody's) and equity indices (with the S&P and Dow Jones franchises), the manager became disillusioned with the acquisition's performance after a year of evaluation. The IHS Markit deal, which added data and research services across multiple verticals including Oil & Gas, Financial Services, Healthcare, and Automotive, failed to deliver expected growth and returns. This underperformance prompted the manager to redeploy capital into what they viewed as a simpler, more predictable business model. The exit reflects a disciplined approach to capital allocation, prioritizing businesses with clearer value creation paths over complex conglomerates with integration challenges.

BSD Analysis:
EQUAM participated in Rieter's highly dilutive capital increase to fund the acquisition of Barmag, Oerlikon's artificial textile fiber machinery division. The complex transaction involved a capital reduction followed by a two-tranche rights offering at CHF 3.43 and CHF 5.31 per share, raising CHF 477 million total. The fund executed an arbitrage strategy, exercising rights in tranche A at CHF 3.43 while simultaneously selling existing shares at CHF 6.52. Post-transaction, the combined Rieter-Barmag entity trades at 3.9x normalized EBITDA with a market capitalization of CHF 464 million. The leverage profile appears manageable at 3x current EBITDA and 2.1x normalized EBITDA, including acquisition debt. The manager views the dilutive structure as creating opportunity for participating shareholders while penalizing non-participants. This appears to be a value-oriented play on industrial consolidation in textile machinery, with the fund benefiting from both the arbitrage opportunity and the strategic combination's potential synergies.

Pitch Summary:
During the quarter, we began investing in Domino's Pizza, the British company that operates the brand in the United Kingdom and Ireland. Domino's does not manage restaurants directly, as it acts as a master franchisee. Its revenue comes from the sale of raw materials to franchisees and the collection of royalties for the use of the brand, so its asset structure is very light and its operating risk relatively low. Domino's has the largest number of franchised pizzerias in the United Kingdom, a total of 1,378, which, compared to the 381 of its nearest competitors, shows its high market share. It plans to open around 600 new franchises in towns with fewer than 10,000 citizens, where its franchisees achieve higher average sales than restaurants in large cities. It is also considering launching a new brand, drawing on its powerful network of franchisees. We have begun investing in Domino's, taking advantage of the weakness of its share price, which has fallen 43% so far this year. Although employment remains stable and retail sales are steady, consumer confidence in the United Kingdom is very low. The possible tax increase in the Labour government's next budget, which comes on top of previous increases, has led many consumers to reduce their spending. In this context, sales volume has fallen slightly, but Domino's has continued to increase its market share in the pizza delivery segment (+5.6 pp to 53.7% share). First-half results reflected weak consumption, with like-for-like sales falling 0.1% and EBITDA falling 7.4%, much less than the decline in the share price. The company has ex-IFRS16 debt of 2.3x and offers an equity free cash flow yield of 9%.

BSD Analysis:
EQUAM initiated a position in Domino's Pizza Group during the quarter, capitalizing on a 43% share price decline driven by weak UK consumer sentiment and potential tax increases. The manager highlights Domino's asset-light business model as a master franchisee, generating revenue through raw material sales and royalties rather than direct restaurant operations. With 1,378 franchised locations versus competitors' 381, Domino's maintains dominant UK market share and plans 600 new franchises in smaller towns where unit economics are superior. Despite challenging conditions, the company gained 5.6 percentage points of market share to reach 53.7% in pizza delivery. The fundamental deterioration appears modest relative to the stock decline, with like-for-like sales down only 0.1% and EBITDA declining 7.4%. At 2.3x debt-to-EBITDA and 9% free cash flow yield, the valuation appears attractive for a market-leading franchise operation. The investment thesis centers on temporary consumer weakness creating an opportunity to own a dominant franchise platform at depressed valuations.

Pitch Summary:
Medtronic is a leading medical device company developing therapeutic devices for chronic diseases. It is an innovative organization, often reaching market first with differentiated technology across pacemakers, heart valves, insulin pumps and surgical tools. New CEO Geoff Martha has refocused the company after years of depressed returns following the expensive Covidien acquisition, bringing fresh leadership and concentrating R&D on highest-growth areas like renal denervation for hypertension and pulsed field ablation for atrial fibrillation. The planned spin-off of the diabetes business fits with management's effort to focus on highest-margin growth drivers where Medtronic has core competencies. Through disciplined capital allocation and operating efficiencies, Medtronic should leverage 5-6% organic growth into high single or low double-digit earnings growth. With an earnings yield of 5%, the shares appear undervalued.

BSD Analysis:
The manager presents Medtronic as a turnaround story under new leadership with compelling valuation. CEO Geoff Martha's strategic refocus addresses previous value destruction from the Covidien acquisition, concentrating resources on high-growth, high-margin opportunities. The emphasis on renal denervation and pulsed field ablation represents cutting-edge therapeutic areas with significant market potential. The planned diabetes business spin-off should unlock value by allowing focused execution on core competencies. The company's innovation track record in reaching market first with differentiated technology provides competitive advantages in medical devices. The financial framework of leveraging 5-6% organic growth into high single or low double-digit earnings growth demonstrates operational leverage potential. At a 5% earnings yield, the valuation appears attractive for a leading medical device company undergoing strategic transformation. The combination of portfolio optimization, R&D focus, and disciplined capital allocation suggests meaningful value creation opportunity.

Pitch Summary:
H World Group, China's largest private hotel operator with over 12,000 hotels and one million rooms, operates a pioneering "manachised" model that delivers exceptional unit economics. Under this structure, H World retains operational control by appointing each hotel's general manager, while franchisees carry operating costs and property owners fund development. This model generates 22% operating margins for H World, with franchisees having three- to five-year payback periods and the lowest development and operating costs per room in the market. The company's competitive moat comes from supply chain scale, a loyalty program generating 60% direct bookings and proprietary technology that enables self-service hotels to operate with minimal staff. H World targets two million rooms in the medium term, representing low-teens annual growth as China's branded hotel penetration increases from 40% toward the 70% seen in developed markets. The company is capturing share from inefficient state-owned chains and repositioning toward higher-margin midscale and upscale segments to meet demand from China's emerging middle class. The valuation is striking: the stock trades near 2020 levels, while revenue and operating earnings have doubled. H World generates over $1 billion in EBITDA, comparable to Hyatt and InterContinental, yet carries an enterprise value below $12 billion versus $19-23 billion for those peers.

BSD Analysis:
The manager identifies H World's "manachised" model as a differentiated approach delivering superior unit economics in China's hotel market. The 22% operating margins significantly exceed industry norms, while the three-to-five-year franchisee payback periods ensure sustainable growth. The competitive moat appears robust, combining supply chain scale, direct booking loyalty (60%), and proprietary technology for operational efficiency. The growth trajectory toward two million rooms represents substantial expansion opportunity as China's branded penetration increases from 40% to developed market levels of 70%. The repositioning toward higher-margin segments aligns with China's emerging middle class consumption trends. The valuation disconnect is compelling - trading near 2020 levels despite doubled revenue and earnings, with enterprise value at roughly half of comparable international peers despite similar EBITDA generation. This suggests significant multiple expansion potential as the market recognizes the business model's quality and growth prospects.

Pitch Summary:
BYD, the global leader in electric and hybrid vehicles, delivered 4.3 million units in 2024, not far from Tesla's 1.8 million and Toyota's 10 million, a remarkable acceleration from just 600,000 units in 2021. The company's competitive advantage stems from something rare in the automotive industry: deep vertical integration. While traditional manufacturers rely on fragmented supplier networks, BYD designs and manufactures key components in-house, from batteries to semiconductors. This isn't just about control; it's about fundamental cost advantage. As the world's largest mobile battery maker before entering autos, founder Wang Chuan-Fu envisioned EVs as "batteries on wheels" and built the company to exploit the structural simplicity of electric drivetrains, which require fewer than 50 components versus 1,200+ in internal combustion engines. The result is a 15-25% cost advantage over legacy automakers, allowing BYD to offer compelling value while maintaining margins not far from Toyota levels. The company commands 35% of China's EV market and 30% of its battery market, with successful expansion underway in South Asia and Latin America. Europe is next. The stock trades at over 7% normalized earnings yield despite double-digit growth potential, as the stock price consolidated while price competition temporarily pressures margins.

BSD Analysis:
The manager highlights BYD's exceptional vertical integration as a sustainable competitive advantage in the rapidly evolving EV market. The company's evolution from battery manufacturer to automotive leader demonstrates strategic foresight, with the "batteries on wheels" vision proving prescient. The 15-25% cost advantage over legacy automakers provides significant pricing flexibility and margin protection. BYD's scale achievements are impressive - 4.3 million units delivered in 2024 represents remarkable growth from 600,000 in 2021. Market leadership positions in both Chinese EVs (35%) and batteries (30%) create multiple revenue streams and operational synergies. International expansion into South Asia and Latin America, with Europe next, suggests significant growth runway beyond the domestic market. The 7% normalized earnings yield appears attractive given double-digit growth potential, with temporary margin pressure from price competition creating an opportunistic entry point.

Pitch Summary:
Alibaba is one of China's digital infrastructure backbones, a $150 billion revenue company that has evolved from Jack Ma's startup into the dominant force in Chinese e-commerce and cloud computing. The company commands 45% of China's e-commerce market through Taobao and Tmall, platforms that connect 10 million merchants with one billion customers. After years of competitive pressure from JD.com and Pinduoduo, Alibaba's market position has stabilized, and its scale enables high-margin operations while taking less from merchants than competitors. The regulatory environment has shifted dramatically since 2023, with Beijing moving from crackdown to active support, explicitly endorsing Alibaba's aggressive capital return plans of 117 billion CNY in 2025 backed by 500 billion CNY in net cash. What makes Alibaba particularly compelling is how its cloud business is accelerating. Holding an estimated 30% of China's cloud market, the company seamlessly integrates its Qwen LLM into the e-commerce ecosystem, attracting businesses to its cloud infrastructure while delivering practical AI applications. With 100,000 corporate clients already using Qwen, and China's cloud penetration still far below Western markets, the runway is substantial. The stock trades at an 8% earnings yield despite this combination of stable e-commerce cash generation and high-growth cloud potential.

BSD Analysis:
The manager presents a compelling bull case for Alibaba centered on its dominant market position and AI-driven cloud acceleration. With 45% market share in Chinese e-commerce and stabilizing competitive dynamics, Alibaba has demonstrated pricing power and operational leverage. The regulatory shift from crackdown to support, evidenced by Beijing's endorsement of aggressive capital returns, removes a key overhang. The cloud business acceleration is particularly noteworthy, with Qwen LLM integration creating a virtuous cycle between e-commerce and cloud services. At 100,000 corporate clients and only 30% cloud market share in an underpenetrated market, the growth runway appears substantial. The 8% earnings yield valuation suggests significant upside potential given the combination of stable cash flows and high-growth cloud prospects. The manager's timing appears astute, capitalizing on regulatory clarity and early AI monetization.

Pitch Summary:
Kaiser Reef is reviewing strategic alternatives for its A1 Gold Mine, following its recent acquisition and production ramp-up at the Tasmanian Henty gold mine.

BSD Analysis:
Kaiser Reef's strategic review of its A1 Gold Mine comes after a significant production increase at its Tasmanian Henty gold mine. While the company is not within the analyst's expertise, the recent acquisition and production ramp-up suggest potential growth opportunities. However, the mining sector's inherent risks, such as fluctuating gold prices and operational challenges, should be considered. The company's future performance will depend on its ability to capitalize on these opportunities and manage sector-specific risks effectively.

Pitch Summary:
Danaher is a leading provider in life sciences and diagnostics, with recent tariff-related stock weakness creating an attractive entry point. Secular trends in biologics and personalized medicine support long-term growth.

BSD Analysis:
Danaher Corporation is positioned as a leader in the life sciences and diagnostics sectors. The recent tariff-related stock weakness offers an attractive entry point for investors. The company's focus on biologics, research and development, and personalized medicine aligns with long-term secular growth trends. These areas are expected to drive future growth and enhance the company's market position. Investors should consider Danaher's strategic initiatives and its ability to leverage these trends for sustained growth. Monitoring regulatory changes and market dynamics will be crucial for assessing the company's growth potential.

Pitch Summary:
Archrock, Inc. reported a strong second quarter with a significant increase in per-share earnings and dividends, yet the market has largely ignored these results. The stock is facing potential bear market conditions due to political uncertainties, such as trade wars and tariffs, which are affecting raw material costs like steel. The company is classified as a hold by the quant system, reflecting market expectations of future challenges despite current positive performance.

BSD Analysis:
Archrock's business is influenced by political and economic uncertainties, particularly regarding trade policies that impact raw material costs. The company's focus on midstream operations with long-term agreements should theoretically insulate it from economic downturns, but market sentiment often ties midstream performance to upstream cycles. The company's strategy shift and fleet transformation to larger horsepower motors reflect adaptation to industry changes, yet the stock's performance remains weak. Investors are advised to hold due to the balance of downside risks and upside potential, with better opportunities potentially available elsewhere. The company's conservative management and size provide some stability, but the unpredictable political landscape and market conditions warrant caution.

Pitch Summary:
Vertiv's shares fell due to concerns about AI infrastructure needs, but the selloff is seen as temporary, presenting a buying opportunity given AI-driven demand.

BSD Analysis:
Vertiv's focus on data center infrastructure aligns with growing demand for AI and cloud services. Despite recent concerns about lower-cost AI models impacting future infrastructure needs, the company's strong market position and product offerings support its growth potential. The temporary share price decline is viewed as an opportunity to invest in a company poised to benefit from long-term trends in data center expansion and AI adoption. Vertiv's ability to adapt to technological advancements and maintain competitive pricing is crucial for its continued success.