Investment Pitches

Pitch Summary:
Telus International is undervalued at the current acquisition offer of C$4.70 per share, given its robust digital services platform and strategic importance to its parent company, Telus Corp. The market has not fully recognized its potential, especially in AI and digital transformation, which could justify a higher valuation.

BSD Analysis:
Telus International's projected 2025 revenues of US$2.7 billion and adjusted EBITDA of US$400 million highlight its strong operational performance. The current acquisition offer values the company at 0.8 times revenue and 5.7 times EBITDA, which is below industry norms. Comparable transactions, such as TaskUs and Majorel, have been valued at significantly higher multiples. Telus International's strategic role in enabling AI solutions and digital transformation for Telus Corp. and third-party clients positions it for growth. The disparity in valuation compared to peers suggests potential for a revised bid, offering substantial upside for investors. Institutional pressure and shareholder advocacy could drive a higher offer, aligning the valuation with industry standards.

Pitch Summary:
Oracle's stock is poised for growth as the company experiences a significant acceleration in revenue, driven by its Oracle Cloud Infrastructure (OCI) segment. The firm is capitalizing on its position as a key cloud infrastructure provider for AI model training, which is expected to fuel further growth. Additionally, Oracle's successful transition of enterprise software customers to the cloud and the migration of its database clients present a multi-faceted growth opportunity.

BSD Analysis:
Oracle's strategic focus on cloud infrastructure and AI positions it well in a rapidly evolving tech landscape. The company's cloud services, particularly OCI, are gaining traction, contributing to a robust revenue growth trajectory. Oracle's ability to migrate its extensive database client base to the cloud represents a significant competitive advantage, potentially leading to increased market share. Despite the broader market's volatility, Oracle's strong fundamentals and strategic initiatives suggest a promising outlook. The company's valuation remains attractive relative to its growth prospects, with potential for further upside as cloud adoption accelerates. Investors should monitor Oracle's execution on its cloud strategy and any developments in AI-related services, which could further enhance its growth profile.

Pitch Summary:
Visa remains a strong buy due to its dominant position in the payment processing industry, robust financial performance, and strategic resilience against emerging threats like cryptocurrencies. Despite macroeconomic headwinds, Visa has demonstrated consistent earnings growth and maintained a solid balance sheet, making it a compelling long-term investment.

BSD Analysis:
Visa's recent earnings report showed a 10% EPS growth, with revenue increasing by over 9% year-over-year, surpassing Wall Street expectations. The company's ability to maintain a high free cash flow yield of 3.1% and a strong balance sheet underscores its financial health. Visa's forward P/E ratio of 30x, based on a projected EPS of $12.30, suggests that the stock is undervalued relative to its historical average, offering a potential upside to $369 per share. The company's strategic initiatives, including shareholder-friendly policies and a focus on cross-border transaction growth, position it well for future profitability. However, investors should remain vigilant about potential risks such as increased competition from cryptocurrencies, regulatory changes, and macroeconomic uncertainties that could impact consumer spending and transaction volumes.

Pitch Summary:
Charles Schwab Corporation demonstrated strong financial performance in Q2 2025, with significant improvements in operating margin and net interest margin. The company's ability to grow net revenue by 25% year-over-year while keeping expense growth to just 5% highlights its operational efficiency. The recent EPS revisions and the stock's breakout from a three-year consolidation phase suggest potential for further appreciation. Schwab's strategic move to offer cryptocurrency trading could also position it well for future growth.

BSD Analysis:
Schwab's robust financial results in Q2 2025, including a 56% increase in EPS, underscore its effective cost management and revenue growth strategies. The company's valuation remains attractive, trading at 21x and 18x expected EPS, which is considered cheap on a PE-to-growth basis. The decision to enter the cryptocurrency trading space aligns with broader industry trends and could attract a new segment of investors. Despite challenges from fluctuating interest rates, Schwab's strong asset gathering and improved net interest margin provide a solid foundation for future earnings growth. The market's positive reaction to the EPS revisions further supports the bullish outlook, with the stock's fair value now estimated at $135 by this analysis, and $105 by Morningstar. Schwab's long-term prospects appear promising, contingent on a stable yield curve environment.

Pitch Summary:
Altria faces significant challenges as it transitions from its traditional cigarette business to Next Generation Products (NGPs) like vapes and nicotine pouches. Despite its historical success and dependable dividends, the company struggles with declining cigarette volumes and has yet to demonstrate a successful pivot to NGPs. The company's recent missteps, such as the costly Juul investment and the halted NJOY product, highlight its difficulties in adapting to the evolving market landscape.

BSD Analysis:
Altria's reliance on its smokeable products, which accounted for 86% of its Q1 2025 revenues, underscores the urgency of its transition to NGPs. The company's strategic missteps, including the overvaluation of Juul and the NJOY patent issues, have hindered its progress. While Altria's dividend remains attractive, supported by potential asset sales and share repurchases, the company's total return prospects are at risk if it cannot successfully grow its NGP segment. Competitors like Philip Morris and British American Tobacco are advancing more effectively in this area, posing a threat to Altria's market position. Investors should monitor Altria's ability to innovate and capture market share in the NGP space, as this will be crucial for its long-term viability.

Pitch Summary:
Agree Realty Corporation (ADC) is strategically positioned as a leader in the net-lease real estate sector, with a focus on high-quality retail properties leased to investment-grade tenants. The company's growth model, which includes acquisitions, internal development, and a partner-funding platform, supports its premium valuation. ADC's robust balance sheet and capital markets strategy, including forward equity, enable it to capitalize on opportunities regardless of macroeconomic conditions. The company's portfolio, characterized by long lease terms and high occupancy rates, provides stable cash flows, supporting a favorable long-term outlook for capital appreciation and growing dividends.

BSD Analysis:
Agree Realty Corporation's strategic focus on investment-grade tenants and necessity-based retail industries positions it well against economic downturns and e-commerce pressures. The company's ground lease portfolio, accounting for 10.6% of annualized base rent, offers a low-risk, bond-like income stream, enhancing cash flow stability. ADC's disciplined acquisition strategy, with a focus on granular property purchases, mitigates single-asset concentration risk and supports portfolio diversification. The company's fortress balance sheet, with a low net debt to recurring EBITDA ratio of 3.4x and significant liquidity, provides a competitive edge in capital markets. ADC's consistent growth in AFFO and dividend payments, coupled with its strategic market positioning, underscores its potential for sustained investor returns. The company's ability to leverage its balance sheet during market dislocations could accelerate growth by acquiring premium assets from distressed sellers, further enhancing its market position.

Pitch Summary:
Boot Barn's stock has experienced a significant rally following a steep decline earlier in the year, presenting an opportunity for investors to sell at a high valuation. The company's ambitious expansion plans and the current popularity of western wear are positive, but the stock's high price-to-earnings ratio, potential tariff impacts, and competitive pressures from both physical and online retailers pose significant risks. Additionally, insider selling and macroeconomic concerns such as potential recession indicators suggest that the stock may face downward pressure.

BSD Analysis:
Boot Barn's current valuation, trading at over 27 times earnings, appears stretched given the projected earnings growth of around 15% annually. The company's debt levels, including capital leases and other liabilities, total approximately $887 million, which could strain the balance sheet as it pursues aggressive store expansion. Competition from established brands and online platforms like Amazon could compress margins, especially if tariffs force price increases. Insider selling, including significant transactions by the CEO and Chief Retail Officer, further signals potential overvaluation. Macro factors, such as a softening labor market and potential recession, could exacerbate these risks, making the current stock price unsustainable in the near term.

Pitch Summary:
Casella Waste Systems has carved out a niche in the Northeast U.S. by controlling key landfill assets in areas with limited capacity, granting it pricing power. The company has grown through strategic acquisitions, enhancing route density and operational efficiency. However, its current valuation at a forward P/E of 96x suggests that the market is pricing in high growth expectations, which may not be sustainable given its slimmer margins and higher debt levels compared to larger peers.

BSD Analysis:
Casella's strategy of focusing on the Northeast, where landfill space is scarce, has allowed it to maintain pricing power and grow through acquisitions. Despite its operational strengths, the company's valuation appears stretched, trading at a forward P/E of 96x, which is high compared to industry leaders like Waste Management and Republic Services. These larger firms offer more balanced risk-reward profiles with stronger balance sheets and consistent cash flows. Casella's debt levels are relatively high, and its free cash flow is more volatile, raising concerns about its ability to sustain growth. While the company's focus on operational improvements and acquisitions could drive future growth, any missteps in execution or integration could pressure its elevated valuation. Given these factors, a cautious approach is warranted, and a Hold rating is appropriate for long-term investors.

Pitch Summary:
The JP Morgan Equity Premium Exchange Traded Fund (JEPI) has been downgraded from a hold to a sell due to its consistent underperformance relative to the S&P 500 and other covered-call funds like GPIX and SPYI. JEPI's rigid strategy of selling equity-linked notes limits its ability to capture market upside, leaving it vulnerable during market sell-offs. In contrast, GPIX and SPYI employ more flexible options strategies that have yielded better returns.

BSD Analysis:
JEPI's strategy involves selling out-of-the-money call options, which has allowed it to meet its income target of 8%. However, this approach has not capitalized on market rallies, resulting in underperformance compared to peers. The fund's expense ratio is 0.35%, with a trailing yield of 8.32%, and it manages $41.14 billion in assets. JEPI's sector allocation is diversified, but its strategy lacks the flexibility seen in GPIX and SPYI, which adjust their options strategies based on market conditions. While JEPI has been a reliable income source, its inability to adapt to market dynamics suggests that newer funds with more sophisticated strategies may offer better returns. Investors should consider these factors when evaluating JEPI against its peers.

Pitch Summary:
Veritone, Inc. has recently experienced a stock price rebound, but underlying business fundamentals remain weak. Despite announcing new deals and a financing arrangement, the company continues to face declining annual recurring revenue and customer numbers. The recent positive news, including a federal contract and a boost in its data refinery product pipeline, does not offset the ongoing challenges in sustaining growth and improving financial stability.

BSD Analysis:
Veritone's financial health is precarious, with a significant cash burn of $17 million in Q1 and only $16.1 million in cash reserves against a debt of $118.5 million. The company's recent $10 million equity financing is insufficient to address its liquidity issues without a substantial turnaround in revenue retention. Despite a promising pipeline in the digital evidence management market, Veritone's reduced revenue guidance for the year raises doubts about its growth prospects. The stock's current valuation at a 2.3x EV/FY25 revenue multiple might seem attractive for a high-growth SaaS firm, but Veritone's execution history suggests otherwise. Investors should be cautious, as the company's recent rally may not be sustainable given its operational and financial hurdles.

Pitch Summary:
SL Green Realty Corp. has been facing significant challenges due to the broader difficulties in the office real estate sector, particularly in New York City. Despite these challenges, the company reported better-than-expected financial results in the second quarter, driven by gains in its debt and preferred equity portfolio. The company has also increased its FFO guidance, although this is not due to improvements in its core business. The office sector remains under pressure, but improving capital market conditions and a gradual return to office work provide some support. However, the company's high leverage and political risks in NYC pose ongoing concerns.

BSD Analysis:
SL Green's financial performance in Q2 2024 was bolstered by a significant gain from its 5th Avenue mortgage, which was marked to market at a lower value. This highlights the company's ability to navigate a challenging environment through strategic financial management. The office sector's recovery is slow, with remote work trends still impacting demand, but the gradual return to office work is a positive sign. SL Green's long-term leases provide some stability, but the company's high leverage, particularly in its joint ventures, limits financial flexibility. The political landscape in NYC adds another layer of uncertainty, although the potential impact of new policies may be overstated due to checks and balances in the political system. Overall, while SL Green offers a solid dividend yield, its growth prospects are limited, and the stock is fairly valued at current levels, making it a hold for investors seeking income rather than capital appreciation.

Pitch Summary:
Zeo Energy Corp. is positioned for a strong second half of 2025 due to a surge in installations driven by expiring federal incentives. However, the outlook for 2026 is less optimistic as these incentives phase out, potentially reducing demand. The company has shown resilience through strategic acquisitions, such as Heliogen, but faces challenges from potential interest rate hikes and reduced incentives. Despite these headwinds, Zeo's ability to navigate industry challenges and its strategic positioning in the solar energy sector warrant a Hold rating.

BSD Analysis:
Zeo Energy Corp. has demonstrated a strategic approach to growth through acquisitions, notably the purchase of Heliogen, which could enhance its capabilities in energy storage solutions. The company's financials indicate a need for careful liquidity management, especially as it anticipates a slowdown in 2026 due to the expiration of key federal incentives. The solar industry is sensitive to interest rate fluctuations, and any increase could deter potential customers from investing in capital-intensive solar systems. Zeo's market position could allow it to capitalize on smaller competitors' struggles, potentially acquiring them at favorable prices. However, the company's future performance will heavily depend on its ability to adapt to changing economic conditions and maintain operational efficiencies. The current valuation suggests the stock is undervalued, but the anticipated challenges in 2026 justify a conservative target price and a Hold recommendation.

Pitch Summary:
On a far more positive note, Charter announced a ~$35 billion acquisition of Cox Communications (Cox) this past May. In short, we love the deal. At a time of near maximum pessimism around cable in general, CHTR is acquiring Cox at essentially no premium and the Cox family is rolling most of its equity into CHTR securities. Considering the tax benefits from the conversion of Cox partnership units (Liberty's DNA remains strong at CHTR) and using CHTR's sandbagged $500 million of targeted cost savings (take the over), CHTR is paying <6x EBITDA for Cox. For some perspective, this multiple is ~30% lower than what CHTR paid in its highly successful acquisition of Time Warner Cable back in 2016. Furthermore, the low purchase multiple does not consider the enormous revenue opportunity in mobile, as Cox only has ~200,000 mobile subscribers across its ~12 million footprint versus CHTR's 10.4 million subscribers across ~57 million passings. A final benefit of the deal is that it should expedite the closing of CHTR's acquisition of Liberty Broadband's CHTR shares, with the purchase of Liberty Broadband's CHTR shares and the Cox transaction expected to close in mid-2026. LBRDA recently spun off shares in GCI Communications, which we believe are materially undervalued and which we will discuss further in future letters.

BSD Analysis:
The manager expresses strong enthusiasm for Charter's $35 billion Cox Communications acquisition, viewing it as exceptionally well-timed and structured. The deal occurs during peak cable industry pessimism, allowing Charter to acquire Cox at essentially no premium with the Cox family rolling equity into Charter securities. At less than 6x EBITDA (including tax benefits and conservative $500 million cost synergies), the valuation represents a 30% discount to Charter's successful 2016 Time Warner Cable acquisition. The mobile opportunity appears particularly compelling, with Cox having only 200,000 mobile subscribers across 12 million homes versus Charter's 10.4 million mobile customers across 57 million passings, suggesting significant cross-selling potential. The transaction also accelerates the Liberty Broadband cleanup, with both deals expected to close mid-2026 rather than the original 2027 timeline. The manager views this as a classic contrarian investment, acquiring scale assets at attractive valuations during maximum industry pessimism, with multiple operational and strategic synergies to drive future value creation.

Pitch Summary:
We had meaningful company developments with two names – one very negative (Compass Diversified Holdings (CODI)) and one we believe to be highly positive (Charter's acquisition of Cox Communications). We will delve deeper into both situations in an appendix to this letter, but we will provide a high-level summary here. In early May, CODI announced that it would have to restate prior year financials because of material financial and accounting issues at high-end jeweler Lugano, CODI's largest portfolio company. Moti Ferder, the founder and CEO of Lugano, resigned without severance and CODI's stock materially declined following the disclosure. We will not have full details on what transpired at Lugano until CODI completes the financial restatements. That said, based on discussions with CODI and recently disclosed legal documents, we do know that there were widespread sales, inventory and receivable valuation issues at Lugano, stemming from unauthorized jewelry sales by Moti Ferder, who somehow managed to circumvent CODI's internal controls and fool CODI and its auditors. When the entire CODI situation unfolded, we asked ourselves the basic questions: "Was CODI's senior team involved and did Lugano issues impact other subsidiaries?" If we believed the answers to be "yes," we would have sold our entire CODI position. Based on CODI's history (we are not aware of any previous accounting issues or character questions of any senior team member) and based on the individual circumstances of Lugano's issues, we concluded that the answer was "no." Furthermore, Grant Thorton, CODI's auditor, had every incentive to demand a wider company investigation if there was any reason to believe there could be issues at other portfolio companies. And they did not do so. Having a view on these most important questions allowed us to then look at CODI's total value, assuming no/limited value for Lugano. Undoubtedly, the loss of Lugano meaningfully changed our estimate of intrinsic value from over $30 per share to ~$14-$16 per share. As CODI's stock dropped to $6-$7, the company's preferred shares also fell to $14-$16 and we immediately started purchasing the preferred shares. At these prices, we locked in 13-15 percent yields despite an estimated ~$1 billion+ of equity cushion in the event of liquidation. The preferred securities became even more attractive following covenant agreements with CODI's banks and a common stock dividend suspension, both of which are highly helpful from the preferreds' perspective. We will tax-loss sell shares of CODI as appropriate and we could eventually roll the preferred position into CODI equity, but we need to see CODI deleverage through organic growth and future subsidiary sales. We also would like to see the company publicly explain how one individual was able to outmaneuver internal controls, management and auditors. For now, however, we must acknowledge that CODI's standalone equity story has been muddled by the Lugano fiasco. And for now, we believe that the preferred shares still offer a more attractive risk/reward proposition.

BSD Analysis:
The manager adopts a measured approach to CODI following the Lugano accounting scandal, pivoting from common equity to preferred shares while maintaining exposure to the underlying portfolio value. The Lugano situation involved widespread financial misstatements by founder Moti Ferder, who circumvented internal controls through unauthorized jewelry sales and customer co-investment schemes. After determining that CODI's senior management was not involved and other subsidiaries were unaffected, the manager reduced intrinsic value estimates from $30+ to $14-16 per share. Rather than exit entirely, they strategically shifted to preferred shares at $14-16, locking in 13-15% yields with over $1 billion equity cushion protection. The preferred position became more attractive following bank covenant agreements and common dividend suspension. While acknowledging the equity story is compromised, the manager views the preferreds as offering superior risk-adjusted returns, with potential to eventually rotate back to common shares once deleveraging progresses and management provides adequate explanation of control failures.

Pitch Summary:
We have talked extensively about Irish bank PTSB in prior letters. While shares have significantly advanced in the first half of 2025, we believe that the bank trades far below intrinsic value. Investors continue to await the density review, and a favorable outcome here can deliver a substantial amount of excess capital that could be used for dividends and (preferably) buybacks. In mid-July, NatWest announced its exit from the bank, selling its final ~11.7% stake. This sale should help to increase PTSB's stock liquidity. NatWest's sale occurred during PTSB's "quiet period" and therefore the government did not join the sale (the government still owns ~57% of PTSB). While we would have preferred a concomitant government sale with the NatWest exit, we also believe that government sales will happen in due course. The government completely exited its position in AIB in June of this year (the government exited Bank of Ireland in September 2022) and can now turn its full attention towards its last remaining bank stake. We expect further sales over the coming year, and the combination of improving earnings, capital relief and enhanced stock liquidity should all help close the current valuation gap.

BSD Analysis:
The manager maintains a bullish view on PTSB despite significant share price appreciation, arguing the stock remains undervalued relative to intrinsic value. The investment thesis centers on multiple catalysts that should unlock shareholder value over the coming year. A pending density review could deliver substantial excess capital for dividends and share buybacks, providing direct returns to shareholders. NatWest's complete exit removes a major overhang and should improve stock liquidity, while the Irish government's 57% stake represents the next major catalyst. With successful exits from AIB and Bank of Ireland completed, the government can focus on monetizing its final banking investment. The manager expects continued government stake sales, which combined with improving operational performance and potential capital relief, should close the current valuation discount. The combination of operational improvements, enhanced liquidity, and government privatization creates multiple paths to value realization.

Pitch Summary:
We discussed Metro Bank in more detail in our Q3 2023/2024 letters, and shares have risen materially since the bank's 2023 capital raise. That said, MTRO currently trades around tangible book value and shares are undervalued relative to the bank's high-teen return on equity (ROE) medium term targets (which would imply a forward price/earnings ratio of ~4x before capital returns if MTRO executes). More immediately, MTRO might have a significant catalyst, assuming it can escape the UK's Minimum Requirement for Own Funds and Eligible Liabilities (MREL) regulatory regime, which requires banks of a certain size to hold a specific amount of loss-absorbing capital and liabilities to ensure orderly resolution in case of failure. While this is a bit of a technical topic full of confusing acronyms, it has great significance for MTRO. As we were writing this letter, the Bank of England (BoE) announced a series of moves designed to bolster competition and growth in the UK financial service sector. One of these proposals was an increase in the MREL asset threshold from £15-25 billion in total assets to £25-40 billion. (MTRO had assets of ~£17 billion as of 03/31/25 and should be well below £25 billion over the next several years.) MTRO will likely not comment until the bank's half-year results call, but the consensus reading of the proposals suggests that MTRO will likely move from the MREL "bail-in" regime to a so-called transfer mechanism, whereby it will not be required to meet MREL above Minimum Capital Requirement (MCR). In English, this means that MTRO may no longer need its expensive senior bonds that are particularly burdensome for MTRO, given its smaller size and the fact that these bonds were issued under extreme distress. Should MTRO gain approval to exit the MREL bail-in regime, the bank would likely tender for its £525 million 12% senior bonds (~£63 million annualized interest cost). MTRO has previously estimated that an exit from MREL would increase projected ROEs by 500-700 basis points. There would be further savings when MTRO is ultimately able to refinance its £150 of 14% subordinated debt (April 2029 call date). MTRO's medium-term guidance assumes that all its high-cost debt remains outstanding (please see our Q2 2023 letter for more details). As we discussed in past letters, MTRO is still not widely covered, is illiquid (considering Jaime Gilinski's ~53% stake) and is nearly universally hated among investors and sell-side analysts for all the bank's past problems. While MTRO has certainly had its share of self-inflicted mistakes over time, there is more than a bit of irony in the fact that the BoE may now be saying that MTRO should not be subject to the very MREL rules that nearly caused the bank's downfall a couple of different times. Certainly, a recession in the UK would be bad for MTRO's commercial loan pivot, and we will continue to be conscious of position sizing, given the stock's appreciation. That said, we believe the bank has a solid organic story, could be an attractive takeover target and now looks like it will be meaningfully helped by regulatory relief.

BSD Analysis:
The manager presents a compelling turnaround story for Metro Bank, emphasizing significant regulatory catalyst potential despite past operational challenges. Trading near tangible book value, MTRO appears undervalued relative to management's high-teen ROE targets, which would imply a forward P/E of approximately 4x. The key catalyst involves potential escape from the UK's MREL regulatory regime following Bank of England proposals to raise asset thresholds from £15-25 billion to £25-40 billion. With MTRO's assets at ~£17 billion, regulatory relief could eliminate the need for expensive senior bonds, potentially saving £63 million annually and boosting ROEs by 500-700 basis points. The bank carries additional high-cost debt (14% subordinated bonds) that could be refinanced, further enhancing returns. Despite negative sentiment from past issues and limited analyst coverage, the manager views MTRO as an attractive contrarian play with solid organic growth prospects and potential takeover appeal, while acknowledging recession risks to the commercial lending pivot.

Pitch Summary:
While six months of data proves little, several of the overseas names detailed in previous letters -- including PTSB, Millicom (TIGO), Metro Bank (MTRO), Glenveagh (GLV) -- have performed well during the first part of 2025. TIGO announced a special dividend of $2.50 per share following the sale of its infrastructure assets (primarily cellular towers). This payment is in addition to the $3.00 annual dividend announced earlier this year. We remain hopeful that TIGO's proposed acquisition of Telefonica Colombia (and its government partner), as well as the acquisition of the 50% government stake in TIGO's own Colombian operations, will close sometime this year. Both deals would be meaningfully accretive to TIGO's free cash flow, and this series of deals would essentially create a near duopoly in a country with over 50 million people. TIGO continues to execute well, and the company has announced two other smaller deals (Uruguay and Ecuador) over the past 3 months. While shares have advanced, we still see considerable upside.

BSD Analysis:
The manager maintains a bullish stance on Millicom (TIGO) despite recent share price appreciation, highlighting strong execution and multiple value-creating catalysts. The company has returned significant capital to shareholders through a $2.50 special dividend from tower asset sales, supplementing the $3.00 annual dividend. The key investment thesis centers on pending Colombian acquisitions that would create a near-duopoly in a market of over 50 million people, with both deals expected to be meaningfully accretive to free cash flow. Management continues to demonstrate disciplined capital allocation through additional smaller acquisitions in Uruguay and Ecuador. The manager views the current valuation as attractive despite recent gains, suggesting the market hasn't fully recognized the strategic value of the Colombian consolidation opportunity. The combination of strong dividend yields, accretive M&A activity, and market consolidation positions TIGO for continued outperformance.

Pitch Summary:
One of the new investments we made this year is in Polaris (PII), a manufacturer of powersports vehicles, including: Side-by-sides, ATVs, snowmobiles (Off-Road Segment), motorcycles (On-Road Segment), and boats (Marine Segment). Side-by-sides—Rangers and Razors—look like mini-trucks and dune buggy type vehicles, respectively. For guys who invest in energy primarily and airlines secondarily, it may seem odd we've now invested in a consumer discretionary stock. The truth is we're closet generalist investors at heart and just love the expansive treasure hunt and ensuing poker game, which opportunities like this help satiate. But we're industry-focused practitioners, so any investment touching the outside edge of our circle of competence—which Polaris is—will be small, i.e., much less than a 10% position at our purchase price. To be clear I've done this in the fund before. Back in 2018, I invested in L Brands (Victoria's Secret). We previously owned it in the mutual fund I worked on at Janus and between my departure and the founding of this Partnership the stock proceeded to drop like a rock. I just couldn't help myself, so I bought a little. However, I quickly learned I really knew next to nothing about retail businesses and sold the stock at a small loss. That was this Partnership's last foray away from energy and airlines until now. But rest assured, Polaris is not Victoria's Secret. First off, Polaris is a manufacturer that sells through a large network of independently owned dealerships; it's not a retailer. Second, as guys who have been married a long-time, and who love to hunt big game in Colorado, we interact with Polaris products significantly more than VS products these days, sadly enough, so we have a much better handle on the brand. Lastly, I still own a small Polaris dealership in rural Wyoming, and through that experience I can attest to the fact that the core money making Polaris products in the Off-Road segment are essential to farmers, ranchers, and fellow outdoorsmen. Polaris is the brand and technology leader in the segment, and we think the ORV business alone is worth more than the entirety of all their businesses as currently valued by the market. However, despite the cyclical factors that are currently weighing on company fundamentals, in our opinion management's uninspiring capital allocation decisions over the past decade prevent full realization of intrinsic value, no matter the economic backdrop. Initially I thought we were getting the opportunity to buy a really good company at a bargain just due to normal cyclicality but magnified by tariff noise, and I thought shares were worth around $100 exiting the cyclical trough, but my perspective changed as I learned more. Subsequently, I think if a more thoughtful approach to capital allocation is implemented the stock could be worth up to $200 over the next few years. Therefore, the risk/reward appears favorable under either scenario based on the Partnership's $41 average purchase price. Shares currently trade at $47 but were below $31 in April; a 15-year low despite 17% fewer shares outstanding! Our goal here is to simply shed some light on what's gone wrong by stepping back and making big picture observations in the hope management considers an alternative path, or to inspire a better funded and more actively inclined investor to get involved and help press the case.

BSD Analysis:
Legacy Ridge Capital initiated a position in Polaris at an average price of $41, viewing it as a compelling value opportunity in the powersports manufacturing space. The manager's thesis centers on the belief that Polaris's core Off-Road Vehicle segment alone is worth more than the company's entire current market valuation. The fund sees significant upside potential, with a base case target of $100 and an optimistic scenario of $200 if management improves capital allocation. The investment represents a departure from the fund's typical energy and airline focus, but the manager has direct experience with Polaris products through outdoor activities and ownership of a Wyoming dealership. The key catalyst for value realization is improved capital allocation, as management has destroyed significant value over the past decade through poor acquisitions and procyclical share repurchases. The manager believes the Off-Road segment's market-leading position and essential nature to farmers and ranchers provides a durable competitive advantage. With shares trading near 15-year lows despite 17% fewer shares outstanding, the risk-reward profile appears attractive at current levels.

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 high-quality, high-margin commercial building products specialist whose stock is a conviction bet on the accelerating demand for energy-efficient and specialized ceiling systems. The core moat is its market leadership in mineral fiber, felt, and metal ceiling solutions, which are essential for acoustics, fire safety, and aesthetics. The company is innovating aggressively, particularly with its TEMPLOK Energy Saving Ceilings, which deliver 15% energy savings and appeal directly to ESG and cost-conscious commercial developers. Armstrong is a high-quality compounder leveraging its innovation and market position to capture increasing revenue from the non-cyclical commercial repair and renovation market.

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 is a deep-moat, high-margin specialty chemical pure-play whose stock is a conviction bet on its oligopolistic control of fuel and lubricant additives. The core thesis is driven by the company's proprietary technology and IP (under its Afton Chemical brand), which provides indispensable chemicals to improve efficiency and performance of oils and fuels. The company is strategically diversifying, with the acquisition of AMPAC expanding its footprint into specialty materials for space launch and military defense. This focus on innovation and diversification, combined with operational efficiencies and economies of scale, is driving strong profitability, with record net income in the first half of 2025.