Investment Pitches

Pitch Summary:
DR returned 29% during Q2 and was our third largest contributor. The company executed two notable transactions during the quarter. First, they announced the sale of the South Carolina hospital for about $34 million CAD (all cash), resulting in an estimated 40% gain on the asset. Shortly thereafter, DR announced the acquisition of Bainbridge Surgery Center in Georgia for $26 million CAD inclusive of transaction costs, which has historically generated approximately $7 million USD in revenue and roughly a 35% EBITDA margin. These two deals, in addition to the company’s shift toward a more focused ownership model and stable performance at its remaining facilities, meaningfully strengthen the company’s financial position. As DR divests non-core assets and targets higher-quality facilities, I believe margins and cash flows should continue to improve, supporting rerating potential.

BSD Analysis:
Medical Facilities appears to be intelligently reallocating capital by divesting lower-return assets and acquiring high-margin surgical centers with strong historical performance. The Bainbridge acquisition offers attractive economics with a 35% EBITDA margin profile, and proceeds from the South Carolina sale improve liquidity. The company’s pivot toward a more focused, higher-quality asset base should lift blended margins and earnings stability. Valuation remains compelling relative to cash flow potential, though exposure to reimbursement risk and case mix should be monitored.

Pitch Summary:
KITS returned 52% during Q2 and was our second largest contributor. Encouragingly, customer LTV to CAC ratios remain above 3x and repeat purchases are continuing to grow. As the company’s refraction services begin to scale and higher-value customers begin to mix into the buyer cohort, this could result in increased customer frequency and improved unit economics. I believe that KITS offers a more convenient and cost-effective product compared to incumbents and will continue to take share in what remains a growing market. With shares continuing to trade at a discount to fundamentals, the return potential over the next 2-3 years remains outsized.

BSD Analysis:
Kits is scaling efficiently with strong customer retention metrics and improving unit economics as refraction services and proprietary frames expand margins. The vertically integrated model enables competitive pricing and faster delivery than incumbents, supporting share gains in a large, fragmented market. As CAC efficiency improves and repeat purchasing increases, operating leverage should boost profitability. Valuation appears discounted relative to growth potential, though competition and marketing efficiency remain areas to watch.

Pitch Summary:
SYZ returned 57% during Q2 and was our largest contributor for the second quarter in a row, contributing about 3.8% to overall returns. The company reported one of the strongest quarters in its history, with over 40% topline growth and EBITDA margins approaching 25%. Revenue quality remains strong, with recurring revenue now making up over 80% of the total, and leadership continues to execute at a high level. I believe we are still in the early innings of the company’s growth story as management continues to successfully integrate tuck-in acquisitions and cross-sell upgraded software products across the customer base. SYZ remains one of our highest conviction positions as the multiyear rollout of the new platform drives increasing demand, margin expansion, and high returns on capital.

BSD Analysis:
Sylogist continues to deliver breakout growth, with accelerating ARR penetration and strong operating leverage boosting margins. The company’s public-sector niche provides sticky customers and low churn, supporting durable cash flows. Management’s disciplined M&A integrations and product modernization strategy create a long runway for both organic and acquired growth. Valuation remains attractive relative to SaaS peers when adjusting for recurring revenue scale and improving profitability. Key risks include execution on platform upgrades, but momentum appears firmly positive.

Pitch Summary:
APG was our second largest position and ended Q2 as our third-largest contributor contributing about 2.7% to overall returns during the quarter. The company reported inline results with decent organic growth across all business lines, expanding margins, and management reiterating their organic growth targets for the remainder of the year. The steady drumbeat continues, which makes sense given the company’s business line stability and management’s intense focus on executing a multi-year value creation plan that should work for a long period of time. I continue to believe APG is a high-quality business trading at a reasonable price benefiting from positive secular tailwinds such as building automation, increasing regulations related to fire and life safety, and environmental concerns. Organic growth is accelerating and price-insensitive FCF yield targets provide plenty of room for share repurchases or improvements in the capital structure over the next several years as the company continues to execute on a strategy that is not reliant on M&A.

BSD Analysis:
APi’s execution remains strong, with consistent organic growth, margin expansion and a long pathway for value creation supported by regulatory tailwinds in fire and life safety. The company’s recurring service revenues and diversified customer base underpin steady free cash flow, enabling ongoing deleveraging and potential buybacks. Valuation remains appealing given mid-teens earnings growth potential and robust secular demand. Risks relate to cyclical construction activity, but APi’s service-heavy mix reduces volatility relative to peers.

Pitch Summary:
Natural Resource Partners (NRP) was our largest position and ended Q2 as our second largest contributor. Increased coal demand means increased contract volumes and contract rates across its primary assets. We remain optimistic about the go-forward potential for the business and are excited by management’s deleveraging goals, liability-reduction actions, and commitment to retiring legacy obligations. Importantly, when thinking about supply and demand imbalances, it’s somewhat irrelevant to discuss the potential for new coal supply additions given the lack of capital available to operators, as well as a structural decline in capital allocated to the industry. This backdrop puts many of NRP’s expensive and uneconomical assets that normally carry little value as sitting in the money as a result of price inflation.

BSD Analysis:
NRP continues to benefit from structurally tight coal markets, where limited new capital investment constrains supply while demand remains resilient in both thermal and metallurgical markets. The partnership’s royalty model provides high-margin cash flows, which management is directing toward debt reduction and liability cleanup, strengthening equity value. With coal price volatility still elevated, NRP’s low operating cost exposure and conservative balance sheet offer downside protection. Longer-term risks include eventual demand normalization and environmental regulation, but for now cash generation remains robust.

Pitch Summary:
Ferguson – Slow and Steady Wins the Race. Not every investment in the Partners Fund is about change. Sometimes, the investment thesis lies in the power of continuity – in accepted realities that have proven themselves over the years. One example is Ferguson. As by far the largest distributor of plumbing and water infrastructure supplies in the USA, the company boasts a structurally stable business model and excellent profitability that has endured for decades. Despite artificial intelligence, one truth will always hold: when there’s a water leak or the air conditioning fails, repairs still need to happen quickly. The U.S. housing stock is, on average, old and in need of renovation, while new construction lags behind actual demand, providing Ferguson’s service business with long-term tailwinds. At the same time, Ferguson leverages its scale to invest more heavily than competitors in digitalisation, supply chain efficiency, and service quality. This is neither spectacular nor exciting, and it’s a bit of a reporting challenge, as the company continues to make steady progress without major upheavals. Since the Partners Fund’s initial investment over three years ago, the company has continued to evolve steadily – with a pleasing performance. Precisely these “boring” investments should be a deliberate component of the fund. After all, the goal is not to invest in particularly clever or spectacular ways but to achieve the highest possible return over the long term with manageable entrepreneurial risk. However, such companies are rarely available at a bargain price. In Ferguson's case, an opportunity arose during the re-listing of its stock from the UK to the USA, accompanied by a temporary valuation dip during the COVID-19 crisis. I aim to include such stable, widely accepted realities more purposefully in the portfolio going forward—and then hold them for the long term.

BSD Analysis:
Ferguson remains one of the best-run distributors in North America — a scale-driven, logistics-obsessed machine that turns plumbing, HVAC, and construction supplies into a high-return, cash-generating empire. Its end markets may be soft in the short term, but Ferguson’s pricing power, supplier relationships, and service moat mean it outperforms peers whether the cycle is good or bad. The company continues taking share from fragmented independents, and its technology and fulfillment network give it a competitive edge that’s widening, not shrinking. Free cash flow remains strong, the balance sheet is disciplined, and buybacks continue to enhance per-share growth. The market often treats Ferguson like a boring distributor, but it’s really a scaled infrastructure platform leveraged to multi-year growth in residential, commercial, and repair-and-remodel activity. When construction activity stabilizes, Ferguson’s operating leverage will show up fast.

Pitch Summary:
A counterexample to Moltiply – and one of the most disappointing investments of the Partners Fund to date – is Naked Wines. The basic idea was simple and compelling: a digital direct-to-consumer wine sales model with a loyal customer base, a long-established business model in the UK, and a solid recipe for conquering the vast and still inefficient U.S. market. The goal was clear: capitalise on change, bypass inefficient distribution structures, and smartly scale customer preferences and subscriptions. For a long time, the puck seemed to be heading in the right direction—toward digitalisation, community-building, and margin expansion. What seemed so plausible in theory – and initially also in practice – was ultimately overtaken by reality, especially during COVID-19. The pandemic-driven online boom initially boosted the numbers, but even more so, it stoked ambitions and overconfidence. Naked Wines expanded aggressively into the U.S., built a giant inventory base, massively ramped up marketing expenses, and progressively lost control over complexity, costs, and customer selection. In hindsight, this wasn’t a case of change failing to materialise – it was a case of far too much change, too quickly, and seemingly without a compass. Today, however, a glimmer of hope is emerging on the horizon. With the new management under Rodrigo Maza, an experienced leader with a healthy focus, costs are being cut, inventory levels normalising, and significant capital is being freed up. Many operational indicators, most recently reported during a Capital Markets Day in March 2025, are pointing in the right direction. While it is still far too early to speak of a successful investment even remotely, it is no longer too early for justified hope for better times ahead.

BSD Analysis:
Naked Wines has been in the penalty box after years of overexpansion and chaotic customer acquisition spending, but the business is finally behaving like a rational e-commerce operator. The shift toward profitability over growth is paying off: churn is stabilizing, marketing ROI is improving, and the company is focusing on high-value subscribers rather than vanity metrics. Naked still has a differentiated model — funding independent winemakers upfront in exchange for exclusive supply — and that vertical integration gives it unique gross margin potential if execution stays disciplined. Inventory cleanup and cash-flow stabilization suggest the worst is behind them, and any recovery in discretionary spend could provide real upside. The stock trades like a failing subscription business, but the unit economics say otherwise. If management avoids past mistakes, Naked could stage a recovery far more dramatic than its current valuation implies.

Pitch Summary:
Fiserv is a payments and financial technology leader serving banks, merchants, and consumers globally. The market has fixated on Clover’s GPV growth, but management emphasizes revenue and value-added services as more relevant KPIs. Clover has become the leading SMB operating system by leveraging Fiserv’s distribution network, and penetration remains under 3% in the U.S. and negligible internationally. The platform is expanding vertically (hospitality, healthcare) and horizontally (ADP payroll integration, CashFlow Central). Recent revenue growth has outpaced GPV, with VAS penetration climbing to 24% and guidance for $3.5bn revenue in 2025. Stock declines have followed perceived Clover slowdowns, but management insists long-term growth remains intact. Buybacks add torque, with ~$7.2bn planned in 2025 (~130% of FCF). Valuation is at decade-high FCF yields, setting up for multiple expansion if guidance is met. Risks include litigation over Payeezy/Clover migration and hitting ambitious Clover revenue targets. Overall, the risk/reward appears compelling with potential 30% IRR.

BSD Analysis:
Variant view: market too focused on Clover GPV; broader business mix and buybacks underpin upside.

Pitch Summary:
Align Technology is the global leader in clear aligners, best known for Invisalign. The company has faced a post-Covid slowdown, but demand is stabilizing with improving teen case growth and Google Trends data. Invisalign has strong competitive moats from brand, data scale, R&D spend, and clinical efficiency. Dentists and patients prefer Invisalign for aesthetics, convenience, and process speed, positioning it as the default choice in clear aligners. TAM is large and growing, with significant long-term adoption potential in both teens and adults. Case growth appears to be reaccelerating, and Align’s dominance is unlikely to erode materially. Financial scenarios suggest significant upside: a base case to $276/share, bull to $509, and bear to $171. With a current price near $204, risk/reward skews positively. Near-term catalysts include faster-than-consensus case growth. Risks include competitive pricing, macro weakness, and slower TAM penetration.

BSD Analysis:
High-quality compounder with cult-stock potential; near-term reacceleration supports entry point.

Pitch Summary:
TBC Bank Group combines emerging market growth prospects with developed market corporate governance. They have a long runway for growth in their Uzbekistan subsidiary where their digital business expansion is showing extremely rapid user growth and earnings growth. Best of all, this investment opportunity is available at an attractive valuation. Since the beginning of 2018, there has been a strong pullback away from frontier market investments which is only now starting to reverse itself. Originally known as "Tbilisi Business Centre", TBC was founded in 1992 and received a banking and foreign transaction licenses the following year. In 2014, the company raised $239 million USD (400 million Georgian lari (GEL)) at its initial public offering at a market value of $640 million (1.13 billion GEL). By this point, TBC had already become the largest bank in Georgia by retail deposits. Vakhtang "Vakho" Butskhrikidze has successfully led TBC as CEO since 1995. The company has consistently had excellent ROEs averaging 22.4% over the past ten years. Their worst result was at the start of the pandemic in 2020 where they only achieved a ROE of 11.7%. However, these 10-year numbers have been greatly exceeded by their recent 3-year numbers as a digitalization push has led to a boom in efficiency and profitability for the company. Their average ROE for 2022-2024 is now 26.4%. The company has pursued a digital banking strategy and has reduced their number of physical branches while increasing their customer count and growing their depository business. In Q1 2025, they had a total of 124 branches, down from 160 in Q1 2022. Over the same time period, their customer deposits increased from 15.1 billion GEL to 22.5 billion and net loans increased from 18.3 billion GEL to 26.9 billion. Their digital strategy includes their digital super-app which includes 10 different online platforms comprising classifieds, real estate, automobile sales and driving services, and consumer goods and services. This provides cross-sell opportunities for TBC's financial services as well as providing data generation of great value to their other businesses. TBC, with roughly 40% market share within the Georgian financial industry, is the largest Georgian bank. It shares a duopoly dynamic with the Bank of Georgia that is only slightly smaller than TBC. This allows both companies to enjoy high ROEs in comparison to other emerging market banks. Furthermore, the small size of Georgia (around 4 million people) gives them a captive home market where it is difficult for new local competitors to gain sufficient scale to compete and is not as attractive for foreign banks to attempt to expand into the market. In 2017, President Shavkat Mirziyoyev of Uzbekistan began an ambitious liberalization of the country's economy, but especially of its banking sector. Uzbekistan is a much larger country than Georgia by both population (37.9 million people) and gross domestic production ($130 billion USD, 2025 IMF estimate). This gives it the largest population in Central Asia. The country still has a positive population growth rate and a young population with over 30% of the population below the age of 15. As a former Soviet republic, the country's banking sector was dominated by state-owned enterprises (SOEs). The opening of the market to foreign competition and new entrants through a rapid deregulation push led to a local credit boom in Uzbekistan for borrowers and a gold rush for foreign banks to secure market share. The legacy SOEs with their traditional brick-and-mortar branch model approach to banking were vulnerable to new entrants with a digital online-only model that could offer superior lending and deposit terms to customers and a better digital customer experience. The government of Uzbekistan has set a goal for 60% of bank assets within the country to be held by the private market by 2026. TBC Uzbekistan has excellent managers. One is Oliver Hughes who was previously the CEO at Tinkoff Bank (also a Blue Tower investment). Tinkoff built an excellent credit card business and digital online bank in Russia and was aiming towards rolling out an international expansion strategy before those plans were interrupted by the start of the Russia-Ukraine War in 2022. After Oleg Tinkov sold his stake in Tinkoff to Interros (leading eventually to the merger of Tinkoff with Rosbank) and the international operations of Tinkoff were impacted by sanctions, many executives of Tinkoff left the company. Now TBC is in a position to benefit from Oliver's talents and give him the opportunity for an encore performance in Uzbekistan as TBC's Chief International Growth Officer. Besides Hughes, there are several other accomplished executives from other emerging markets fintech companies who have joined on at TBC Uzbekistan. As of March 31st 2025, TBC Uzbekistan's unsecured consumer loan market share stood at 17.1% within the country giving room for future growth. Within the TBC Group, Uzbekistan accounts for 53% of unsecured consumer loans. In addition to their banking operations, the TBC Group also owns the Payme payments app and Payme Nasiya installment financing. TBC's Uzbekistan business already has 19.7 million unique customers in Uzbekistan as of the end of Q1 2025 despite only launching in 2020. That's approximately half the population of all of Uzbekistan despite being present in the country for less than 5 years! Many fintech startups in developed markets have years of losses while they are blitzscaling towards market dominance. TBC Uzbekistan, however, achieved this growth while maintaining highly profitable margins. The Georgia business currently represents the majority of the company's depository assets and profits, but the Uzbekistan business has more customers and we believe will eventually surpass TBC's home market business. The valuation of TBC Group is entirely out of line with its impressive business quality and growth rate. Its growth rate and return on equity are both far above industry averages for the banking industry. Despite this, it has a trailing PE ratio of 7.47 and a forward PE ratio of 5.73. By comparison, the forward PE ratio for the MSCI Europe Financials Index is 10.17.

BSD Analysis:
Blue Tower presents a compelling bull case for TBC Bank Group, emphasizing the combination of emerging market growth potential with developed market governance standards. The manager highlights TBC's exceptional profitability metrics, with ROE averaging 26.4% over 2022-2024, significantly outperforming banking industry norms. The investment thesis centers on TBC's dominant market position in Georgia (40% market share) and its rapid expansion in Uzbekistan, where the company has captured 19.7 million customers since launching in 2020. The Uzbekistan opportunity is particularly attractive given the country's banking sector liberalization, large population (37.9 million), and young demographics. TBC's digital banking strategy and fintech ecosystem provide competitive advantages and cross-selling opportunities. The valuation appears compelling with a trailing PE of 7.47 versus 10.17 for European financials, despite superior growth and profitability metrics. Management quality is enhanced by experienced executives from successful fintech companies like Tinkoff Bank.

Pitch Summary:
The author argues that Onity Group ($ONIT) is a mispriced turnaround and hidden-asset play following years of distress and a management reset that began in 2018. The business has returned to sustained profitability, and management expects to release a large deferred tax asset allowance this year, potentially lifting reported book value. ONIT trades at ~0.5–0.65× book value (depending on DTA treatment), a steep discount to peers such as PennyMac Financial Services, Rithm Capital, and Mr. Cooper Group, the latter of which is being acquired at a premium. The author acknowledges a size discount is warranted but views the gap as excessive given improved fundamentals. Sale rumors surfaced in April, and even a conservative takeout multiple could imply ~20% upside. Downside is framed as limited at current valuation levels.

BSD Analysis:
The mortgage servicing industry is structurally attractive for scaled operators, with recurring fee income, countercyclical dynamics, and meaningful operating leverage once fixed costs are covered. ONIT’s competitive position has improved materially post-turnaround, but it remains subscale versus peers, justifying some valuation discount. The deferred tax asset is a real but timing-dependent catalyst, contingent on sustained profitability and regulatory clarity around allowance release. Relative valuation is compelling, particularly against recent M&A benchmarks, suggesting public markets are slow to recognize balance-sheet normalization. The principal risks are interest-rate volatility, MSR valuation swings, and the durability of earnings through a full housing cycle. A sale is plausible given sector consolidation and ONIT’s discounted trading level, though not guaranteed. Absent a transaction, incremental multiple expansion hinges on consistent ROE delivery and capital returns. Overall, the setup offers asymmetric upside with asset-backed downside protection, but realization depends on execution and external catalysts rather than organic growth alone.

Actual Post Content:
$ONIT is a cheap loan servicing biz that went through the wringer between 2013 and 2017. A turnaround began in 2018 when new management came in through a merger. Today, it’s an interesting hidden asset play + rumors of a potential sale. Co trades meaningfully below peers. 1/ $ONIT finally seems to have turned a corner, profitable all of last year and YTD. It holds a large DTA that's been hidden due to significant allowance write-downs during unprofitable years. Mgmt expects to release some or all of that allowance this year. 2) $ONIT is by far the cheapest among peers, trading at 0.5x–0.65x BV depending on how you treat the DTA. Peers $PFSI, $RITM, and $COOP trade at 1.3x, 0.8x, and 2x BV, respectively. $COOP, in particular, is currently being bought out at a large premium. 3) All peers are larger, so some valuation discount for $ONIT is justified, but the gap is too wide. Also worth noting: $RITM, the lowest-valued peer, has other businesses besides loan servicing that weigh on its valuation, something to keep in mind. 4) In April, rumors surfaced that $ONIT is exploring a potential sale. Nothing official since, but the move seems logical given the market appears to be underappreciating the transformation since 2018. A buyout at just 0.8x BV ex-DTA would imply ~20% upside, likely conservative. 5) Downside seems well protected at the current valuation while waiting to see if anything gets announced in the coming months. Interesting setup here—curious to hear your thoughts.

URL: https://chatgpt.com/share/693445fe-7440-8008-ac59-4fc33e42d191

Pitch Summary:
PepsiCo was a modest detractor in Q2, as soft beverage volume and margin pressure led to a weaker-than-expected results. The company reported revenue of $17.9 billion, down 1.8% year-over-year, as FX headwinds and promotional activity in North America impacted performance. EPS also declined year-over-year, and guidance remained cautious given ongoing input cost inflation. Despite solid international performance, investor sentiment was dampened by concerns over slowing U.S. consumption and rising competitive intensity. Analysts revised margin expectations slightly lower for the back half of the year, and the stock trailed other staples during the quarter. We continue to view PepsiCo as a high-quality, defensive compounder with strong global brands and consistent cash generation. . With a growing dividend, geographic diversification, and strong balance sheet, we believe PepsiCo remains a great investment.

BSD Analysis:
PepsiCo is a high-quality, high-yield consumer staples giant whose stock is a conviction bet on innovation-led, portfolio-reshaping growth. The core moat is its massive scale and ownership of iconic beverage and convenient food brands, which allows it to maintain a defensive position. The key catalyst is a successful pivot to meet consumer trends: organic sales increased 2% year-over-year, marking the first instance of positive top-line growth in a year. The company is heavily investing in productivity-enhancing initiatives and expanding its $2 billion permissible snack portfolio. PepsiCo is a defensive investment, offering a 3.8% dividend yield and poised for 18% upside based on its strong, resilient market position.

Pitch Summary:
SBUX shares declined during Q2 following disappointing earnings in late April. Global same-store sales declined 4%, driven by a 6% drop in North America and flat results in international markets. Traffic trends turned negative, and operating margins compressed to 11.6%, down from 18% a year earlier. Management cited macro headwinds, competitive pressure, and weaker-than-expected loyalty engagement. The stock continued to slide through May and June as investors grew skeptical of the pace and effectiveness of turnaround efforts. Management acknowledged that customer traffic softness may take multiple quarters to resolve, and analysts lowered near-term earnings forecasts. Despite continued investment in digital and labor, visibility into a meaningful recovery remains limited. We continue to believe Starbucks is an incredibly valuable consumer franchise with strong brand equity and long-term pricing power. The company’s global scale, loyalty ecosystem, and real estate footprint provide strategic advantages. While near-term results remain challenged, we see significant upside once comps stabilize and customer engagement improves.

BSD Analysis:
Starbucks is a global lifestyle brand oligarch undergoing a high-stakes, "Back to Starbucks" turnaround. The core thesis is a conviction bet on the successful execution of this strategy to re-accelerate growth in core and international markets. The stock is overwhelmingly an institutional favorite (87.43% ownership), which provides a crucial floor for the price despite short-term operational hiccups. Q4 FY25 saw a return to positive global comparable store sales growth of 1%, marking the first positive growth in seven quarters. The presence of activist investors like Elliott Management adds pressure on management to deliver margin recovery and execute the turnaround, signaling professional money managers see underlying value despite the recent volatility.

Pitch Summary:
In Q2, Mounjaro sales rose sharply to $3.8 billion and Zepbound reached $2.3 billion in revenue. However, EPS came in below consensus due to lower pricing and temporary supply disruptions. The market reacted to news that certain payers were shifting GLP-1 drugs off preferred formularies (insurance companys’ lists of approved drugs), raising concerns about future prescription growth. While the underlying demand remains robust, competitive dynamics and manufacturing constraints led to investor caution. Volatility in the broader weight-loss drug space also contributed to relative weakness. Despite short-term pricing concerns, we believe Lilly is well positioned for multi-year growth. Its leadership in obesity and diabetes treatments, combined with a promising late-stage pipeline in Alzheimer’s, immunology, and oncology, offers significant upside.

BSD Analysis:
Eli Lilly is a generational growth story in the pharmaceutical sector, utterly dominant in the multi-hundred-billion-dollar GLP-1 megatrend. The company's financial health is breathtaking, with full-year 2025 revenue guidance raised to a staggering range of $63.0 billion to $63.5 billion, after posting 54% year-over-year revenue growth in Q3 2025. Its margins are structurally superior, with a TTM Gross Profit Margin of 83.0%—significantly outpacing peers. This dual focus on high margins and a massive $27 billion commitment to new manufacturing plants is necessary to meet the extraordinary demand and secure future revenue. The high valuation is justified by its projected growth, making it a hallmark of a dominant growth company.

Pitch Summary:
AerCap Holdings (AER) – AER delivered strong performance this quarter, bolstered by solid Q1 2025 results and a favorable UK court ruling on $1B in insurance claims related to the Russia-Ukraine War. With the largest aircraft portfolio in a seller’s market, AerCap is well-positioned to grow book value per share through strategic asset sales and stock buybacks, capitalizing on robust market dynamics.

BSD Analysis:
AerCap is the undisputed, high-quality global aircraft leasing titan whose stock is a conviction bet on the long-term, structural growth of air travel and its massive scale advantage. The core moat is its massive, diversified fleet (>1,700 aircraft, engines, and helicopters) and its ability to secure superior financing. The company's financial discipline is exceptional: Q3 2025 delivered record financial results and a 8.0% annualized net spread. The stock is a high-quality compounder, leveraging its scale to manage risk and consistently generate high margins from its long-duration, non-cancellable lease contracts.

Pitch Summary:
Armstrong World Industries, Inc. (AWI) – AWI shares outperformed in the quarter due to beating expectations, driven by increased volumes from recent acquisitions and an increase in pricing. We continue to like AWI for its consistent execution, strong financials, leading market share and persistent moats through its exclusivity agreements and warranties.

BSD Analysis:
Armstrong World Industries is a building products company with a strong competitive position in commercial ceiling systems and architectural solutions. Its products benefit from specification-driven demand, where architects and contractors prioritize performance, acoustics, and aesthetics over price. The business has increasingly shifted toward higher-margin systems and services, improving earnings quality. Construction cycles introduce volatility, but renovation and retrofit activity provide some counterbalance to new-build swings. Armstrong’s brand and distribution network make it difficult for smaller players to displace once specified. The balance sheet is solid, supporting disciplined capital allocation and bolt-on growth. This is a cyclical industrial with a surprising amount of pricing power when markets tighten.

Pitch Summary:
NewMarket Corporation (NEU) – NEU outperformed this quarter, fueled by strong AMPAC revenue growth from better volume and product mix, despite weaker Petroleum Additives results. The planned capacity expansion for the AMPAC business signals robust demand for rocket additives in a stable, oligopolistic market. Management prioritizes debt reduction and shareholder returns through dividends and buybacks.

BSD Analysis:
NewMarket operates in a high-margin corner of specialty chemicals, supplying additives that materially improve engine performance and longevity. Its products represent a tiny fraction of customer cost but a large portion of value delivered, supporting durable pricing power. Long-standing customer relationships and deep formulation expertise create meaningful barriers to entry. Demand is tied to global vehicle fleets and industrial equipment, making it steadier than new vehicle sales cycles. Capital intensity is low, and free cash flow conversion is consistently strong. While energy transition narratives create uncertainty, internal combustion fleets will persist for decades, sustaining the additive market. NewMarket is a textbook example of a boring business with exceptional economics.

Pitch Summary:
On the other side of the care continuum lies Encompass Health, one of the largest U.S. operators of inpatient rehabilitation hospitals. These facilities play a pivotal role in the recovery process for seniors after events like strokes, hip fractures, and cardiac surgeries — conditions whose frequency grows with age. Unlike acute-care hospitals or long-term skilled nursing facilities, Encompass focuses on intensive post-acute rehab — a cost-effective, outcomes-oriented model that’s increasingly favored by insurers and policymakers. Their facilities combine physical therapy, nursing, and medical care in a setting optimized for recovery and return-to-home metrics. Why we like it: • Exposure to rising procedure volumes with lower policy volatility • Real-estate-backed business model with stable occupancy and low turnover • Predictable cash flows and secular demand from an aging population. Despite volatility in other corners of healthcare, Encompass continues to deliver solid fundamentals — a reminder that longevity investing isn’t just about breakthrough science, but also about reliable care infrastructure.

BSD Analysis:
Encompass Health is the dominant pure-play operator in inpatient rehabilitation, a niche of healthcare that benefits directly from aging demographics and higher survival rates from acute events. Its facilities sit in a sweet spot of the care continuum, offering better outcomes at lower cost than long hospital stays or skilled nursing alternatives. The reimbursement framework is complex, but Encompass has the scale, clinical data, and operational discipline to manage it better than smaller peers. Labor is the biggest swing factor, yet staffing trends have begun to normalize, supporting margin recovery. Referral relationships with hospitals and physicians create a durable pipeline of patient volume that’s hard to disrupt. Capital allocation has been disciplined, focusing on de novo expansion and tuck-in acquisitions with attractive returns. This is a healthcare services business with real structural tailwinds, often mispriced as a simple reimbursement-risk story rather than a long-term compounding platform.

Pitch Summary:
Intuitive Surgical continues to be a prime beneficiary of the shift toward minimally invasive care — a preference that’s particularly pronounced among aging patients and hospitals managing resource constraints. The company’s Da Vinci robotic surgery systems are now deployed across thousands of hospitals globally, and Q2 2025 marked a record-setting quarter: 110 new placements, up from 70 the previous quarter. What drives this growth? In short: real-world demand. Hospitals increasingly prefer robotic-assisted procedures for their shorter recovery times, reduced infection risks, and greater surgical precision — all critical factors in aging populations undergoing hernia repair, prostatectomy, or cardiac surgery. Why we like it: • High-margin, recurring revenue from service contracts and surgical instruments • Strong balance sheet with no debt and a long runway for global adoption • A “pick-and-shovel” approach to rising surgical volumes in aging populations. As AI spreads into physical healthcare applications, Intuitive is well positioned at the intersection of automation, medicine, and demographic necessity.

BSD Analysis:
Intuitive Surgical is the undisputed, monopolistic king of robotic surgery whose stock is a conviction bet on the long-term, non-cyclical adoption of its da Vinci system. The core moat is its classic "razor-and-blade" business model: the massive installed base of da Vinci systems (the "razor") drives a massive, recurring, and high-margin revenue stream from proprietary instruments and accessories (the "blades"). The company continues to widen its technological gap with the launch of the da Vinci 5, which features 10,000x the computing power of its predecessor. This is an indispensable MedTech compounder, leveraging three decades of experience and 14 million procedures performed to secure its long-term dominance.

Pitch Summary:
Biotech funding challenges and government funding pressure have negatively impacted companies supporting biopharmaceutical development like contract research organization (CRO) ICON. This has pushed out the timing of a CRO growth recovery, even after multiple quarters of spending rationalization among its customers. We exited ICON due to the lowering of our confidence in the timing of CRO business normalization.

BSD Analysis:
ICON plc (ICON) ICON is the unavoidable CRO consolidator, capitalizing on the multi-year secular trend of pharmaceutical R&D outsourcing that major biopharma companies cannot reverse. The company’s massive scale, solidified by its acquisition of PRA Health Sciences, creates a structural competitive advantage that few rivals can match, making it a critical bottleneck supplier to the global drug development pipeline. While near-term growth has been pressured by cautious biotech funding, ICON is insulated by its sticky, high-dollar strategic partnerships with the largest pharmaceutical firms. The continued robust trailing twelve-month book-to-bill ratio over 1.2x proves that industry demand remains structurally intact, with any temporary stock weakness serving as an attractive entry point for a defensive, high-free-cash-flow compounder. ICON offers exposure to the massive biopharma R&D boom without the binary drug-development risk.