Investment Pitches

Pitch Summary:
Other contributors included our long position in Glencore, which performed well in the first two months of the quarter alongside firm commodity prices and appreciated further in March following the closure of the Strait of Hormuz, as the company was seen as a likely beneficiary of higher energy and coal prices, as well as increased commodity price volatility through its trading business. We used this strength to reduce the position and reallocate capital elsewhere.

BSD Analysis:
Steyn Capital held a profitable long position in Glencore that benefited from multiple favorable dynamics during the quarter. The manager recognized Glencore's dual exposure to both commodity production and trading, positioning it to benefit from both firm commodity prices and increased volatility. The closure of the Strait of Hormuz created a supply shock that particularly benefited Glencore through higher energy and coal prices, while the company's substantial trading operations gained from increased market volatility. This demonstrates the manager's understanding of Glencore's unique business model that profits from both commodity exposure and market dislocations. The decision to reduce the position and reallocate capital shows disciplined profit-taking and active portfolio management. Glencore's diversified commodity portfolio and trading capabilities make it well-positioned to capitalize on geopolitical supply disruptions.

Pitch Summary:
The largest contributor to performance during the quarter was our high-conviction long position in AECI. The company reported strong earnings, with meaningful improvement in both operational and financial performance, as the business continues to dispose of non-core assets, reduce debt and improve cash flow generation.

BSD Analysis:
Steyn Capital maintains a high-conviction long position in AECI, driven by the company's strong operational turnaround and financial restructuring. The manager highlights meaningful improvements in both operational and financial performance as key drivers of the investment thesis. AECI's strategic focus on disposing of non-core assets demonstrates disciplined capital allocation, while debt reduction efforts are improving the company's financial flexibility. The emphasis on improved cash flow generation suggests the business is becoming more efficient and self-sustaining. This position was the largest contributor to quarterly performance, validating the manager's conviction in the turnaround story. The combination of operational improvements and balance sheet optimization positions AECI well for sustained performance in the specialty chemicals and mining services sectors.

Pitch Summary:
We have taken a holding in RBC Bearings, a high-return industrials business focused on mission-critical engineered components for aerospace, defence and industrial end-markets. The company targets demanding, high-margin niches where reliability and regulatory barriers create deep customer lock-in. Growth is supported by long aerospace and defence backlogs and US industrial reshoring, alongside a strong record of operational improvement and value-accretive acquisitions. Led by a technically minded, disciplined leadership team and underpinned by high returns on capital, we believe RBC is well placed to compound value over the long term.

BSD Analysis:
Baillie Gifford initiated a position in RBC Bearings, attracted to its high-return industrials business model focused on mission-critical engineered components. The company operates in demanding, high-margin niches within aerospace, defense, and industrial markets where reliability requirements and regulatory barriers create significant customer switching costs. This positioning generates deep customer lock-in and pricing power. Growth drivers include substantial aerospace and defense backlogs providing revenue visibility, plus the secular trend of US industrial reshoring. The company has demonstrated strong operational execution and a disciplined approach to value-accretive acquisitions. Management's technical expertise and capital allocation discipline underpin consistently high returns on capital. The fund views RBC as well-positioned to compound value over the long term given its niche market leadership, structural demand drivers, and proven execution track record.

Pitch Summary:
We have taken a holding in Axon. We believe it is building the leading public safety platform, with structural advantages and multiple growth curves that compound over the long term. Axon combines devices, software and data into an integrated system that becomes hard to displace once adopted, creating durable demand and a growing base of recurring revenue. Near term, the rollout of TASER 10 remains early, and the move toward higher-capacity devices supports a larger, more predictable consumables revenue stream. Additional growth is coming from drones, real-time crime centres and Al-enabled productivity tools, broadening its role from equipment supplier to systems provider. Led by mission-focused founder Rick Smith, the company is well placed to capture long-term demand for transparency, accountability and efficiency across public safety.

BSD Analysis:
Baillie Gifford initiated a position in Axon Enterprise, viewing it as the leading public safety platform with structural competitive advantages. The fund managers highlight Axon's integrated ecosystem of devices, software, and data that creates customer lock-in and recurring revenue streams. The TASER 10 rollout represents a near-term catalyst, while the shift toward higher-capacity devices should drive more predictable consumables revenue. The company is expanding beyond traditional equipment into comprehensive systems including drones, real-time crime centers, and AI-enabled tools. This evolution from equipment supplier to systems provider broadens Axon's addressable market and deepens customer relationships. Founder-led by Rick Smith, the company is positioned to benefit from secular trends toward transparency and accountability in public safety. The fund sees multiple growth vectors compounding over time, supported by the mission-critical nature of Axon's solutions.

Pitch Summary:
Broadridge is a critical service provider to the financial services industry, with a near-monopoly position of circa 95% market share for proxy distribution and collection of voting results for U.S. stocks held through brokerages. This is the core business within the Investor Communications Segment (ICS), which Broadridge has complemented with data offerings for funds and asset managers, shareholder engagement services for corporate issuers, and digital and physical communications solutions. Broadridge's other segment, Global Technology and Operations (GTO), is built around core post-trade processing engines that handle $15 trillion of daily fixed income and equity trade volume for seven of the 10 largest global investment banks and 21 of the top 25 fixed income primary dealers. Under the leadership of CEO Tim Gokey, Broadridge has delivered consistent 10%+ annual EPS growth for the past decade. Broadridge's proxy business is driven by growth in total equity positions, as it earns revenue from every position in every account with more than five shares held. In addition to steady increases in investor participation, the transition from funds to separately managed accounts (SMAs) and direct indexing is a secular tailwind for sustained position growth. Broadridge has also introduced new products to address governance concerns that supplement position growth, such as pass-through voting and a new AI-driven policy engine offers an alternative to the controversial proxy advisors. In the GTO segment, Broadridge benefits from growing trading volumes with further opportunities as regulatory demands increase. Broadridge has also developed a leading tokenization product, with the company's Distributed Ledger Repo (DLR) solution already handling $400 billion per day of customer transactions. Broadridge is well positioned to sustain the company's consistent low-double-digit EPS growth in the years ahead.

BSD Analysis:
The manager initiated a new position in Broadridge, highlighting the company's near-monopoly proxy services business and consistent double-digit EPS growth track record under CEO Tim Gokey. The investment thesis is built on two complementary segments: Investor Communications with ~95% market share in proxy distribution, and Global Technology Operations handling $15 trillion daily trade volume for major investment banks. Key growth drivers include secular trends toward SMAs and direct indexing that increase equity positions (Broadridge's revenue base), plus new governance products like pass-through voting and AI-driven policy engines. The GTO segment benefits from rising trading volumes and regulatory complexity, while the innovative DLR tokenization solution already processes $400 billion daily. The manager views Broadridge as a critical financial infrastructure provider with durable competitive moats and multiple growth vectors supporting continued low-double-digit EPS growth. The position reflects confidence in the company's ability to maintain its dominant market positions while expanding into adjacent services.

Pitch Summary:
Hubbell manufactures electrical and electronic products for the utility, telecom, commercial, and industrial end markets. The Utility Solutions segment holds the #1 market share position in transmission and distribution products. For example, Hubbell has products that cover 85% of the content on a typical distribution pole, such as arrestors, insulators, and connectors. The Electrical Solutions segment serves more diversified end markets and includes products like wiring systems, enclosures, industrial fittings, resistors, and industrial controls. 90% of Hubbell's sales are to U.S. customers and are evenly split between new product sales and maintenance. Gerben Bakker became CEO in 2021 and has positioned the portfolio to end markets that grow at approximately twice the rate of GDP. Hubbell has a well-diversified portfolio of strong brands supported by secular trends such as grid hardening, aging infrastructure, electrification, industrial near shoring, and electrical load growth associated with data centers. Hubbell's organic growth of 4-6% is further enhanced by mergers and acquisitions (M&A), which accounted for 65% of capital allocation and delivered an average low-teens return on investment. Hubbell products are typically purchased by an engineer and are a small percentage of the overall project cost where there is a high cost of failure, creating a focus on quality and service. Further, its products are generally a fraction of the labor cost to install the products, which helps with pricing. Hubbell has worked with many of its customers for decades and is embedded in the purchasing process. Between organic growth, M&A, and operational efficiencies, there is a strong case for long-term double-digit earnings per share (EPS) growth.

BSD Analysis:
The manager initiated a new position in Hubbell, expressing bullish conviction on the electrical equipment manufacturer's market-leading positions and secular growth drivers. The investment thesis centers on Hubbell's #1 market share in transmission and distribution products, covering 85% of typical distribution pole content, and diversified electrical solutions across multiple end markets. CEO Gerben Bakker has strategically repositioned the portfolio toward end markets growing at 2x GDP since 2021. Key secular tailwinds include grid hardening, aging infrastructure replacement, electrification trends, industrial nearshoring, and data center electrical load growth. The business model benefits from mission-critical products with high switching costs, purchased by engineers where quality matters more than price. Strong customer relationships spanning decades create embedded purchasing advantages. The manager sees a compelling path to double-digit EPS growth through 4-6% organic growth, value-accretive M&A (65% of capital allocation generating low-teens ROI), and operational efficiencies.

Pitch Summary:
Guidewire declined -25.6% during the quarter, ending with a weight of 4.2%. Guidewire is the leading provider of core systems software to the property and casualty (P&C) insurance industry. The decline in the share price was driven by concern that AI could potentially disintermediate existing software companies, driving increased competition as software code is commoditized. While we recognize the disruptive force of AI for many companies, we believe that some incumbents are well positioned to benefit from AI innovation through lower costs, more rapid new product development, and accelerating revenues driven by faster client adoption and expanded addressable markets. Guidewire is particularly well positioned in this regard as the core system of record with deep vertical expertise serving the insurance industry, supported by a scaled distribution and partner ecosystem. Guidewire's fundamental performance supports this view as it has continued to exceed expectations. Guidewire reported another strong quarter with annual recurring revenue (ARR), revenue, and operating income all above guidance and expectations. ARR growth was 21% over last year in constant currency, sustaining the record-high growth rate from last quarter. Subscription revenue growth of 38% delivered 92% incremental margins as Guidewire continues to demonstrate excellent cost efficiency. Full-year guidance was raised across the board. Management reiterated that AI is driving customers to speed up the pace of cloud deployments on Guidewire with longer terms and larger deals.

BSD Analysis:
Despite a -25.6% quarterly decline, the manager maintains a bullish stance on Guidewire, viewing the sell-off as an AI disruption overreaction. The investment thesis centers on Guidewire's dominant position as the core system of record for P&C insurance with deep vertical expertise and scaled distribution. While acknowledging AI disruption risks, the manager believes incumbents like Guidewire are positioned to benefit through lower costs, faster product development, and expanded addressable markets. Strong fundamentals support this view: ARR growth of 21% in constant currency, subscription revenue growth of 38% with 92% incremental margins, and raised full-year guidance across all metrics. Critically, management reports AI is actually accelerating customer cloud deployments with longer terms and larger deals, contradicting disintermediation fears. The 4.2% portfolio weight reflects conviction that Guidewire's entrenched position and AI-enabled growth will overcome near-term sentiment challenges.

Pitch Summary:
ICON declined -39.3% during the quarter, and we exited after initially trimming the position last quarter and again earlier in the year. ICON is a global contract research organization (CRO) that provides outsourced services to the pharmaceutical, biotechnology, and medical device industries. Outsourced drug development end markets have continued to be pressured throughout 2025 and into 2026, and this was compounded in the quarter by concerns over AI disintermediation allowing ICON customers to develop drugs more efficiently with significantly less labor. Lastly, ICON had to postpone its fourth quarter results announcement, pending a restatement of prior years' revenue recognition. While the impact was limited in scope to not more than 2% of revenues and there was no indication of willful misstatement, this created sufficient uncertainty for us to complete our exit.

BSD Analysis:
The manager adopted a bearish stance and completely exited ICON following a -39.3% quarterly decline, after previously trimming the position multiple times. The investment thesis deteriorated due to persistent pressure in outsourced drug development markets throughout 2025-2026. A key concern is AI disintermediation risk, where pharmaceutical clients may develop drugs more efficiently with reduced labor needs, potentially displacing CRO services. The final catalyst for the exit was ICON's postponement of Q4 results due to revenue recognition restatements affecting up to 2% of revenues. While management indicated no willful misstatement, the accounting uncertainty combined with structural headwinds from AI disruption and weak end markets created too much risk. The complete exit reflects the manager's view that ICON faces both cyclical and structural challenges that make it unsuitable for the portfolio.

Pitch Summary:
Entegris returned 39.3% during the quarter, ending with a weight of 5.0%. Entegris is a key supplier to the semiconductor industry of essential filtration products, materials, and related delivery equipment that enable the high-precision fabrication of semiconductor chips. Entegris reported fourth quarter 2025 results and provided forward guidance above expectations across all major categories. After three challenging years of a mainstream semiconductor downturn that pressured margins, gross margin troughed in the third quarter and revenue growth is poised to reaccelerate in 2026. The new CEO David Reeder has taken quick action to improve the cost structure, exiting one production facility in the fourth quarter with plans to exit at least one more in the first half of 2026. Management was deliberately conservative on full-year guidance, but Entegris should benefit from a recovery in both semiconductor industry wafer volumes and new fabrication construction, while further gaining share from new chip production nodes across both logic and memory.

BSD Analysis:
The manager expresses strong conviction in Entegris following a 39.3% quarterly return, viewing the company as emerging from a three-year semiconductor downturn. The investment thesis is built on Entegris's critical role as a supplier of filtration products and materials essential for semiconductor fabrication. Key positives include Q4 2025 results and guidance exceeding expectations across all categories, with gross margins having troughed in Q3. New CEO David Reeder is aggressively restructuring costs by closing production facilities. The manager sees multiple catalysts ahead: semiconductor wafer volume recovery, new fab construction, and market share gains from advanced chip production nodes in both logic and memory. Conservative management guidance suggests potential for upside surprises as the semiconductor cycle recovers. The 5.0% portfolio weight reflects meaningful conviction in the turnaround story.

Pitch Summary:
Darling returned 71.8% during the quarter, ending with a weight of 5.4% after trimming the position on strength. Darling is the global leader in rendering animal byproducts and used cooking oil into fats and proteins for a variety of end uses, including animal feed, specialty health products, and renewable diesel. Darling reported better than expected fourth quarter 2025 results, supported by strong pricing and demand in the feed and food ingredients segments. Increased energy prices also benefitted the renewable diesel segment, a joint venture with the refiner Valero called Diamond Green Diesel. This segment was further supported by the announcement of much increased mandatory minimums for renewable fuels by the White House and Environmental Protection Agency. These new renewable volume obligations should drive strong demand alongside higher prices and margins through the rest of 2026.

BSD Analysis:
The manager maintains a bullish stance on Darling Ingredients following exceptional Q1 performance of 71.8%, though they trimmed the position on strength. The investment thesis centers on Darling's market-leading position in rendering animal byproducts and used cooking oil into value-added products across multiple end markets. Strong Q4 2025 results were driven by robust pricing and demand in feed and food ingredients segments, while the renewable diesel joint venture with Valero benefited from higher energy prices. The key catalyst is new EPA renewable volume obligations that should sustain strong demand, pricing, and margins throughout 2026. The manager views Darling as well-positioned to capitalize on both traditional rendering markets and the growing renewable fuels mandate. The position represents 5.4% of the portfolio after trimming, indicating continued conviction despite the strong run-up.

Pitch Summary:
In 1759, a 34-year-old Arthur Guinness walked into the disused St James's Gate brewery in Dublin and signed a lease. Not for ten years, or even for a hundred. But rather for nine thousand years, at an annual rent of £45. It was either an act of extraordinary foresight or extraordinary recklessness. Two and a half centuries later, Guinness remains one of the world's most recognised brands and the brewery at St James's Gate is still in operation. Arthur Guinness, it seems, knew what he was doing.

This same long-term conviction runs through Diageo, the company that today owns Guinness. Since its formation in 1997 through the merger of Guinness plc and Grand Metropolitan, Diageo has become the world's leading premium spirits business. Its portfolio reads like the back bar of every great establishment: Johnnie Walker, Smirnoff, Tanqueray, Don Julio, Crown Royal, Baileys, and of course, Guinness. Thirteen of its brands each generate more than a billion dollars in annual revenue. The company operates in nearly 180 countries, employs 29,000 people across 110 manufacturing sites, and generates revenues in excess of $20bn.

Diageo holds the number one position globally in whisk(e)y, tequila, vodka, gin, liqueurs and non-alcoholic spirits. In terms of retail sales value, its market share is more than 1.4x that of its nearest international competitor. It is the dominant force in a large global industry.

And yet, Diageo's share price has declined more than 65% since its early 2022 peak and trades at levels last seen in 2012. Over a period where the S&P 500 has surged to new highs, Diageo shareholders have endured a drawdown typically reserved for businesses in significant distress.

The headwinds, however, are real. The US market, which accounts for roughly 40% of group revenues, has faced mounting consumer caution as higher interest rates and persistent inflation have squeezed discretionary spending. The growing prevalence of GLP-1 medications—and early evidence that some users naturally moderate their alcohol consumption—has also weighed on investor sentiment across the sector. It is however worth noting that Diageo's expanding non-alcoholic portfolio, led by Guinness 0.0, positions it better than most peers should these consumption trends prove durable.

The company's interim results for 2026 laid these headwinds bare: North American organic sales fell 6.8%, with US tequila sales down 23% as competition intensified in a softening category. As the price-tier chart below illustrates, Diageo's US portfolio is heavily skewed towards the premium end—53% of its tequila sales sit at $50+ per unit versus just 25% for the market. In a strong consumer environment that skew is a margin advantage. In the current climate, however, it means there is little in the portfolio to capture trade-down demand, amplifying the impact on earnings. Management has acknowledged this, signalling a pivot towards broader price-packs and smaller formats—an attempt to bridge these gaps without compromising the company's core premium brand exposure.

Beyond the US, China—once a key growth driver—has been weighed down by economic uncertainty and policy-driven curbs on extravagant entertainment spending, with sales plunging 42% in the first half. US tariffs have added a further layer of risk. Diageo estimates an annualised $200m hit to operating profit based on levies of 10% on UK imports and 15% on European imports, with only around half expected to be mitigated through supply chain adjustments. Any removal of USMCA exemptions for Mexican and Canadian spirits—which represent nearly half of Diageo's US import base, including Don Julio and Crown Royal—would materially increase that figure.

Investors have not been forgiving. The share price decline has pushed Diageo's valuation to levels that appear to assume permanent impairment—its PE ratio is currently 11x (on what we would consider to be depressed earnings) against a long-term average in excess of 20x. Our view on Diageo is very different to the market.

In January 2026, Sir Dave Lewis took the helm as CEO. Investors in UK consumer staples will know the name. Lewis is the man who turned around Tesco. When he arrived at the beleaguered British supermarket in 2014, it was engulfed in an accounting scandal, haemorrhaging market share, and drowning in debt. Over six years, he cut costs, reduced debt by over £5bn, rebuilt trust, and restored the company to health. He brings 27 years at Unilever before that, with deep experience in supply chains and emerging markets.

His early actions at Diageo have been characteristically pragmatic. The interim dividend was halved—a clear signal that balance sheet integrity takes priority over short-term optics. A $2bn productivity programme is underway, targeting $625m in efficiencies from the 'Accelerate' initiative alone. This is a CEO who has done this before and knows the playbook.

While the market's reaction to the dividend cut was predictably negative, we believe this is precisely the kind of decisive, long-term thinking that creates value. A company with Diageo's cash-generative capacity can afford to prioritise its balance sheet for a period and emerge stronger. Perhaps underappreciated too is that Diageo's inventory—over $10.5bn as of December 2025—is somewhat different to traditional inventory; a significant portion represents maturing Scotch whisky and aged spirits that typically appreciate in value over time.

Strategic transactions are also gathering pace. The disposal of the company's low-margin, capital intensive African beer operations to Asahi for approximately $2.3bn, simplifies its portfolio and directs proceeds to debt reduction. In addition, United Spirit Limited (USL), in which Diageo holds a 55.9% stake, has agreed to sell the Royal Challengers Bengaluru cricket franchise—inherited through a 2012 acquisition—to a consortium led by Blackstone and Aditya Birla for $1.78bn. It is expected that Diageo would receive its share of proceeds as a special dividend. With these actions, we believe Diageo has a credible path to its target of 2.5-3.0x net debt to adjusted EBITDA, down from 3.4x today.

The near-term challenges, while real, risk obscuring what Diageo actually is: one of the finest collections of consumer brands ever assembled.

Diageo's competitive moat is built on more than just marketing, it is built on time. Johnnie Walker was first blended in 1820. Guinness has been brewed since 1759. Tanqueray dates to 1830. These are not brands that can be easily replicated. Their value is rooted in centuries of heritage and on cultural rituals that are deeply embedded in how people socialise, celebrate, and unwind. A robot may one day pour your drink, but the liquid in the glass is likely to remain one of Diageo's many enduring brands.

The premiumisation trend is a powerful structural tailwind. Premium and super-premium spirits account for over 60% of Diageo's sales. Globally, super-premium spirits are growing 50% faster than other price tiers in the category. As incomes rise, particularly in emerging markets, consumers tend to trade up. They drink less, but they drink better. This is precisely the territory where Diageo's brands are strongest.

The demographic picture is equally compelling. By 2035, an estimated 600m new consumers will reach legal drinking age worldwide, the vast majority in markets like India, Africa, and Latin America where Diageo already has a significant presence. In India, per capita spirits consumption remains a fraction of Western levels. The runway is enormous.

And Diageo is not standing still. Guinness 0.0, the largest and fastest growing non-alcoholic beer now accounts for 12% of total Great Britain Guinness brand sales, and Diageo's non-alcoholic spirit business is four times larger than its nearest competitor. These are not just defensive moves. They are category-expanding innovations that cater to new consumers and new occasions. For the patient investor, this combination of irreplaceable heritage and forward-thinking innovation is a compelling proposition.

Diageo also has a significant asset that is easy to overlook. The company holds a 34% stake in Moët Hennessy, the wines and spirits division of LVMH. This is not a minor investment. Moët Hennessy is one of the crown jewels of the luxury goods world, home to Hennessy cognac, Dom Pérignon, Moët & Chandon, and Veuve Clicquot. We believe that it is likely to command a premium multiple to the rest of Diageo.

Why does Diageo belong in our AI-Proof bucket? We view Diageo as a business that is structurally insulated from technological disruption. Drinking is not a problem to be optimised. It is a ritual. The experience of a Guinness in your favourite local pub, a Don Julio margarita on a warm evening, or a glass of Johnnie Walker Blue shared to mark an occasion remains a fundamentally human, social, physical experience. These moments are rooted in ingrained behaviours that AI disruption is unlikely to displace.

Rather than a threat, we believe that AI may serve as a meaningful tailwind for Diageo. In a recent earnings call, the new CEO indicated that 60% of Diageo orders are still entered manually. Supply chain optimisation, demand forecasting, personalised consumer engagement—these are areas where technology enhances the business without threatening the product. Diageo is already investing in data analytics and digital route-to-market capabilities.

In this respect, Diageo sits naturally alongside the other AI-Proof holdings held by the Fund. Physical products, enduring brands, and deeply ingrained human behaviours. These businesses are not immune to cyclical pressures, but we believe that they are structurally insulated from the existential threat that AI poses to so many industries.

At less than 12x forward earnings and an attractive dividend yield, Diageo trades at a meaningful discount to its historical averages. Notwithstanding the headwinds, we believe that Diageo could generate cumulative free cash flow exceeding $20bn over the next five years. Their brand portfolio is irreplaceable. The new CEO has a proven track record and we see multiple levers for value creation.

The market is pricing Diageo as though the current challenges are permanent. We believe they are cyclical. Arthur Guinness took a 9,000-year view. We don't need quite that long—but we are happy to be patient.

Diageo is one of the Fund's largest holdings and we believe, at current valuations, it offers an exceptionally attractive opportunity for long-term investors like ourselves.

BSD Analysis:
Contrarius presents a compelling contrarian case for Diageo, viewing the 65% share price decline since 2022 as a significant overreaction to cyclical headwinds. The fund manager emphasizes Diageo's irreplaceable brand portfolio built over centuries, with 13 brands generating over $1 billion annually and dominant market positions across key spirit categories. The appointment of Sir Dave Lewis as CEO in January 2026 is viewed as a major catalyst, given his successful turnaround of Tesco and deep consumer staples experience. The manager highlights Diageo's structural advantages including premiumization trends, demographic tailwinds from 600 million new consumers reaching drinking age by 2035, and the company's AI-proof nature rooted in human social rituals. At 11x forward earnings versus a historical average above 20x, the valuation appears deeply discounted. The fund sees multiple value creation levers including the $2 billion productivity program, strategic asset disposals worth over $4 billion, and debt reduction toward target levels. Despite near-term challenges in the US and China markets, Contrarius believes the market is pricing in permanent impairment when the issues are cyclical.

Pitch Summary:
Analog Devices pushed toward new all-time highs after solid earnings gave investors confidence that the analog cycle is now beyond its bottom. We believe the cycle is on track for an early recovery in 2026.

BSD Analysis:
The managers view Analog Devices as positioned at an inflection point in the analog semiconductor cycle. The company delivered solid earnings results that provided confidence the cyclical bottom has been reached. The managers project an early recovery in the analog cycle beginning in 2026, suggesting improving demand fundamentals ahead of consensus expectations. Analog Devices' stock performance toward new all-time highs reflects growing investor confidence in this cyclical recovery thesis. The company operates in a specialized segment of the semiconductor market with differentiated analog and mixed-signal technologies. This cyclical positioning offers attractive upside potential as the analog market recovers from recent weakness. The investment represents a tactical play on semiconductor cycle timing with strong fundamental execution.

Pitch Summary:
Williams shares benefitted from the conflict in the Middle East, which sent commodity prices of crude oil and natural gas to multi-year highs. We estimate that 10% to 15% of total supply could be removed from the global market for an extended period. Williams has limited commodity exposure, but the company should benefit from higher volumes moving through its vast pipeline system. The US natural gas market is incrementally viewed across the world as the most secure source. Williams is well placed to benefit from any improved volumes in the liquefied natural gas (LNG) export market.

BSD Analysis:
The managers highlight Williams' unique positioning as an energy infrastructure play with limited direct commodity exposure but significant volume leverage. The company operates a vast pipeline system that should see increased throughput as geopolitical tensions drive higher energy demand. Williams benefits from the US natural gas market being viewed as the world's most secure energy source, creating structural demand advantages. The company is strategically positioned to capitalize on growing LNG export volumes as global energy security concerns intensify. This represents a lower-risk energy exposure compared to commodity-sensitive producers, with predictable cash flows from pipeline operations. The investment thesis centers on volume growth rather than commodity price volatility. Williams offers attractive exposure to the energy security theme with more stable operational characteristics.

Pitch Summary:
Chevron shares contributed to the quarter's performance due to the war in the Middle East sending commodity prices of crude oil and natural gas, to multi-year highs. We estimate that 10% to 15% of total supply could be removed from the global market for an extended period. Chevron has significant exposure to spot commodity prices and is expected to benefit immediately from a higher price regime in its upstream energy segment. Also, the company is positioned to benefit from improved refining margins. Chevron shares reflect improved earnings and cash flow from this event.

BSD Analysis:
The managers view Chevron as a direct beneficiary of geopolitical supply disruptions in the Middle East. They estimate a significant 10-15% reduction in global oil and gas supply for an extended period, creating a favorable commodity price environment. Chevron's substantial exposure to spot commodity prices positions the company to capture immediate upside from higher energy prices in its upstream operations. The company also benefits from improved refining margins during periods of supply constraint. The managers expect this geopolitical event to drive meaningful improvements in both earnings and cash flow generation. This represents a cyclical opportunity with clear fundamental drivers supporting higher profitability. The investment thesis is grounded in supply-demand dynamics and Chevron's operational leverage to commodity prices.

Pitch Summary:
Corning's positive performance was tied to a strong second-quarter earnings result and forward guidance supporting a continuation of those trends. 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 express strong confidence in Corning's positioning within the AI infrastructure buildout theme. The company delivered solid second-quarter earnings with encouraging forward guidance, suggesting operational momentum. Corning's fiber optics and related technologies are positioned as critical components in the global AI infrastructure expansion. The managers project sustained market growth across multiple product lines over a 3-5 year horizon. This represents a compelling secular growth story tied to one of the market's most significant investment themes. The company appears well-positioned to capitalize on the massive capital expenditure cycle driving AI infrastructure development. The managers view this as a multi-year opportunity with strong fundamental support.

Pitch Summary:
River Financial Corp. (otc: RVRF) is based in Alabama. Most shares are locally owned and we purchased most of our position directly through the bank in October at just over $33 per share. We took out all the sellers. Shares can be challenging to buy through certain brokers. We could not buy in our Schwab account for some reason. River Financial has nearly $4 billion in assets and $300 million in equity. 2025 earnings per share were $5.43, but that doesn't show the true earnings level. In 2025 they sold some of their securities portfolio which incurred a loss of $10.1 million. Since reported pre-tax income was $54.6 million, earnings were reduced by roughly 20%. Excluding the loss, earnings would have been about $6.50 per share. We calculate adjusted Q4 at $1.71 per share, or $6.85 annualized. The share price has risen recently to $46.50 per share, or about 7 times earnings.

BSD Analysis:
River Financial represents a substantial community bank opportunity with the manager demonstrating conviction through direct share purchases from the bank. The $4 billion asset size with $300 million equity provides meaningful scale while maintaining community bank characteristics. The manager's detailed earnings analysis reveals the true profitability after adjusting for the one-time $10.1 million securities loss in 2025. Normalized earnings of $6.50 per share (versus reported $5.43) and Q4 run-rate of $6.85 annualized demonstrate strong underlying profitability. Even after recent price appreciation to $46.50, the bank trades at approximately 7x normalized earnings, remaining attractive for a profitable community bank of this size. The local ownership structure and direct purchase arrangement suggest limited liquidity but also potential for patient capital to be rewarded. The Alabama market provides stable economic fundamentals for community banking operations. The manager's willingness to 'take out all sellers' at $33 and maintain the position through appreciation to $46.50 indicates strong conviction in the long-term value proposition and potential for continued earnings growth.

Pitch Summary:
We profiled Skyline Bankshares (otc: SLBK) in our Q1 2025 letter. We built a position a year ago at under $13 per share and it closed Q1 at $21.75 per share. It still trades at just six times our estimate of cash earnings for 2026.

BSD Analysis:
Skyline Bankshares demonstrates the manager's successful community bank investment approach, generating strong returns while maintaining attractive valuations. The position, initiated at under $13 per share, has appreciated 67% to $21.75, validating the original investment thesis. Despite this significant price appreciation, the bank continues to trade at just 6x estimated 2026 cash earnings, suggesting the valuation remains reasonable relative to fundamentals. The manager's decision to profile the bank in the Q1 2025 letter and maintain the position through substantial gains indicates high conviction in the long-term value proposition. Community banks like Skyline typically benefit from local market knowledge, relationship banking advantages, and potential consolidation premiums. The continued attractive valuation multiple suggests further upside potential as earnings grow and the market recognizes the bank's value. The strong performance validates the manager's community banking expertise and stock selection capabilities within this specialized sector.

Pitch Summary:
In the last few months, we have built a position in Steele Bancorp (otc: STLE). Steele is the product of a merger of two rural Pennsylvania banks – Mifflinburg Bancorp and Northumberland Bancorp. Assets are $1.26 billion. Equity is $118 million. Steele has only reported two quarters of results since the merger, but the synergies are impressive. When we back out the bargain purchase gain adjustment in Q4 and the related merger expenses, the bank earned $1.54 per share using a 17% tax rate (their actual rate was far lower). In addition, intangible amortization was $0.20 per share, thus adjusted cash earnings were ~$1.74 per share, or $7 per share annualized. The bank trades at $36 or just five times its current cash earnings run rate. We expect earnings to continue to grow.

BSD Analysis:
Steele Bancorp represents an attractive community bank merger story with impressive early synergy realization. The combination of Mifflinburg Bancorp and Northumberland Bancorp has created a $1.26 billion asset bank with strong capital ratios (equity of $118 million). Despite only two quarters post-merger, the synergies are already materializing significantly. The manager's detailed earnings analysis shows adjusted cash earnings of $1.74 per share ($7 annualized) after backing out one-time items and intangible amortization. At the current $36 trading price, the bank trades at just 5x normalized cash earnings, representing compelling value for a profitable community bank. The rural Pennsylvania market provides stable deposit funding and lending opportunities with limited competition from larger institutions. Management's expectation for continued earnings growth suggests the merger synergies are still being realized and operational improvements are ongoing. The low valuation multiple provides significant upside potential as earnings normalize and grow, while also making the bank an attractive acquisition candidate for larger regional players seeking market expansion.

Pitch Summary:
we profiled ENDI in our 2024 first quarter letter. The share price declined during the first quarter from $16.75 per share to $15.00 per share. ENDI owns CrossingBridge Advisors, which manages fixed income mutual funds and a few managed accounts. Assets under management (AUM) for CrossingBridge grew over 19% in 2025 and 30% in 2024. While AUM was flat in Q4 and up modestly in Q1 of 2026, we think the current interest rate environment is fairly attractive for short term bonds versus money markets. ENDI has approximately 6.67 million shares outstanding, resulting in a market cap of ~$100 million. Cash and investments were $55 million as of December 2025, and the only debt was a $10 million note. Adjusted EBITDA for 2025 was $11 million. We expect them to introduce some additional products in the next year which should help AUM growth to continue. Our fair value estimate keeps rising as the company continues to execute, which is what you ideally want in all your equity investments. We look forward to what 2026 will bring.

BSD Analysis:
ENDI presents an attractive asset management play trading at reasonable valuations despite strong operational momentum. The company owns CrossingBridge Advisors, which has demonstrated impressive AUM growth of 19% in 2025 and 30% in 2024, indicating strong client demand and investment performance. With a $100 million market cap, $55 million in cash/investments, and only $10 million in debt, the balance sheet provides significant financial flexibility. The $11 million adjusted EBITDA on the current asset base suggests reasonable profitability, though the manager notes rising fair value estimates as execution continues. The current interest rate environment favors short-term bonds over money markets, potentially driving additional AUM growth for CrossingBridge's fixed income strategies. Management's plans to introduce additional products should provide further growth catalysts and AUM diversification. The Q1 price decline from $16.75 to $15.00 may represent a buying opportunity given the underlying business momentum. The manager's rising fair value estimates and positive execution commentary suggest continued confidence in the long-term value creation potential.

Pitch Summary:
the bid price for shares increased from $18.69 per share to $25.00 per share during the first quarter. As a reminder, the fund manager is CEO and a board member of Solitron. The fund owns 11% of Solitron's outstanding shares and the fund manager and his immediate family own 3%. In our 2025 year end letter we discussed the increasing backlog at Solitron. As a reminder Solitron has defense/aerospace exposure to increased production of HIMARS launchers, AMRAAM missiles, and Standard Missiles 2, 3 and 6. We noted that the increased backlog positions the company for increased revenue. On February 3, 2026, Solitron announced that it would be evaluating strategic alternatives after having received an unsolicited acquisition proposal that did not come to completion. We have also seen press reports of the President's defense reconciliation proposal which asks for $350 billion, including amounts for multi-year procurement for 12 critical munitions, three of which are AMRAAM and Standard Missiles 3 and 6. Even at a reduced figure, it could be significant. We have also seen independent national security analysts pointing out the potential growth in the space Solitron is in (link). Due to being an insider, we only restate what has been publicly released in our SEC filings or press releases, or what we have seen in the public sphere. We also do not provide any valuation estimates for Solitron.

BSD Analysis:
Solitron represents the fund's control position with the manager serving as CEO and board member, owning 11% through the fund plus 3% personally. The company operates in the high-growth defense electronics sector with direct exposure to critical munitions programs including HIMARS, AMRAAM, and Standard Missiles. The increasing backlog positions Solitron for revenue growth, supported by the President's $350 billion defense reconciliation proposal targeting multi-year procurement of critical munitions. The 34% price appreciation in Q1 (from $18.69 to $25.00) reflects growing recognition of the defense spending tailwinds. The February announcement of strategic alternatives evaluation, following an unsolicited acquisition proposal, suggests potential M&A catalysts ahead. Independent national security analysts have highlighted growth potential in Solitron's market segment, validating the secular defense spending thesis. The manager's insider position provides operational insight and influence over strategic direction while maintaining appropriate disclosure boundaries. This control position offers unique value creation opportunities through both organic growth and potential strategic transactions.