Investment Pitches

Pitch Summary:
Alphabet is positioned as a stable compounder with asymmetric upside, driven by its AI integration through Gemini, expanding subscription base, and robust ad revenue. The company's disciplined capital expenditure in AI and a P/E ratio below its five-year average suggest potential for growth. As Gemini enhances enterprise productivity and user engagement, Alphabet is set to convert AI demand into a sustainable competitive advantage.

BSD Analysis:
Alphabet's strategic focus on AI, particularly through its Gemini 2.5 Pro, positions it ahead of competitors like GPT-4 and Claude with its multimodal capabilities. The company's AI-driven initiatives are supported by its vast search data and TPU chip leadership, creating a formidable moat. Financially, Alphabet's Q1 2025 results show a 10% growth in Google Services and a 28% increase in Cloud revenues, with operating margins improving significantly. The acquisition of cybersecurity firm Wiz for $32 billion underscores Alphabet's commitment to cloud security, enhancing its competitive edge against AWS and Azure. With a P/E ratio of ~20x, Alphabet trades at a premium due to its transition towards subscription-based revenues, mitigating risks of search revenue cannibalization. The company's robust earnings momentum and strategic investments in AI and cloud infrastructure suggest a controlled re-rating potential, offering investors a blend of stability and growth.

Pitch Summary:
Ulta Beauty is in the early stages of a turnaround with positive momentum, particularly under new leadership. The strategic acquisition of Space NK marks a significant step in international expansion, providing a foothold in the UK market and access to premium brands. However, challenges remain, including softness in the core makeup category, elevated inventory levels, and cautious FY25 guidance, which suggest a need for careful execution before the stock can be re-rated.

BSD Analysis:
Ulta Beauty's acquisition of Space NK is a strategic move that allows it to enter the UK market, one of the largest beauty markets globally, without the high costs of building a new business from scratch. This acquisition not only provides access to a network of 83 stores and premium brands but also appeals to younger consumers, a critical demographic for future growth. Despite these positives, Ulta faces headwinds such as a deceleration in comparable sales growth and inventory challenges that could pressure margins. The company's valuation has increased to 19.4x NTM PE, reflecting recent progress, but further upside depends on resolving these issues. Sustained improvement in the core makeup category and effective inventory management are crucial for future growth and stock re-rating.

Pitch Summary:
Broadcom is positioned to benefit from sustained investments in artificial intelligence infrastructure. The company's diversified portfolio, including semiconductor solutions and infrastructure software, supports its growth and resilience. Despite a high current stock price, Broadcom's strategic acquisitions and focus on AI-driven growth make it a compelling buy.

BSD Analysis:
Broadcom's recent performance has outpaced the S&P 500, with a 65% increase since August 2024, driven by its AI-related offerings. The company's semiconductor segment, particularly in AI networking, has shown robust growth, with a 46% year-over-year increase in AI semiconductor revenue and a 170% rise in AI networking revenue. Broadcom's infrastructure software segment, bolstered by the VMware acquisition, has improved profitability, with operating margins reaching 73%. This segment's revenue mix has increased significantly, enhancing overall business profitability. The company's strategic focus on AI and infrastructure solutions positions it well for future growth, supported by strong free cash flow projections and a disciplined capital management strategy, including debt reduction and shareholder returns. With a target price of $321.45, Broadcom offers a potential 19% upside, making it an attractive investment in the current market environment.

Pitch Summary:
Nelnet presents a compelling investment opportunity due to its diversified business model and strong presence in the education finance sector. The company has evolved from a student loan provider to a conglomerate with significant investments in venture capital and technology services. Despite the winding down of its FFELP loan portfolio, Nelnet's business services division continues to drive substantial income. The company's prudent capital allocation and focus on software solutions at the intersection of education and finance position it well for future growth.

BSD Analysis:
Nelnet's financial performance reflects a steady increase in stockholders' equity, aligning with the S&P 500 over the past five years. The company's diversified income streams, particularly from its business services division, mitigate risks associated with its declining FFELP portfolio. Insider ownership is notably high, with Executive Chairman Michael S. Dunlap controlling 80.6% of voting rights, ensuring alignment between management and shareholder interests. CEO Jeff Noordhoek's modest compensation and focus on customer experience and workplace culture further bolster confidence in management's stewardship. While the company's venture into non-core areas like solar construction poses a risk of 'diworsification,' its core focus on education finance remains robust. Investors should monitor future acquisitions and venture capital investments to ensure they complement Nelnet's primary business strengths.

Pitch Summary:
Duolingo, despite its impressive brand recognition and user engagement, faces significant challenges that undermine its high valuation. The company's reliance on short-term social media trends and its recent pivot to AI-generated content have led to user dissatisfaction, as evidenced by negative reviews and declining metrics. The high P/E ratio, coupled with these operational challenges, suggests that the current valuation is unsustainable without substantial improvements in product quality and user retention.

BSD Analysis:
Duolingo's gross profit margin of 72% and a 39% year-over-year revenue growth are commendable, yet the stock's P/E ratio of approximately 192 is significantly above the sector median of 19, indicating a potential overvaluation. The company's strategy to leverage AI for course creation has been met with criticism, as users report issues with content quality and grammar. This backlash, coupled with a 20%+ stock downturn, suggests that the market may already be pricing in these risks. Furthermore, Duolingo's reliance on its brand persona and social media presence raises concerns about the sustainability of its growth, especially as user engagement metrics show signs of decline. The upcoming earnings call will be crucial in assessing whether Duolingo can maintain its growth trajectory or if the recent negative sentiment will impact its financial performance. Institutional investors should closely monitor user metrics and guidance for Q3 2025 to evaluate the long-term viability of Duolingo's business model.

Pitch Summary:
Ford Motor Company presents a complex investment case. While the company benefits from a low valuation and strategic improvements in production, its heavy investment in electric vehicles (EVs) remains a financial burden. The company's focus on high-margin trucks and luxury vehicles like Lincoln is promising, but the cyclical nature of the automotive industry and economic uncertainties pose significant risks. Given these factors, Ford is best rated as a Hold.

BSD Analysis:
Ford's valuation is attractive, with a P/E ratio significantly below the sector median, suggesting potential undervaluation. However, its high EV/EBITDA ratio reflects substantial debt and low margins, indicating financial strain. The company's strategic shift towards trucks and SUVs, which offer higher margins, aligns with current market trends and consumer preferences. Yet, Ford's ability to scale its EV production remains uncertain, especially as sales growth decelerates. The company's substantial debt, largely tied to its financing arm, adds another layer of complexity, though it provides higher interest income. Dividend yields are appealing, but the volatility in distributions and the lack of a robust share buyback program may deter some investors. Overall, Ford's future performance hinges on its ability to balance traditional automotive strengths with the demands of the evolving EV market.

Pitch Summary:
Micron Technology has demonstrated strong financial performance with a significant beat on both revenue and earnings, driven by robust demand and pricing for its memory chips. The company's outlook remains positive, particularly due to the surging demand for AI-related products, which is expected to continue driving growth.

BSD Analysis:
Micron's strong performance is largely attributed to the increasing demand for memory chips used in AI applications, which have seen a resurgence. Despite challenges in the consumer segment, particularly in traditional memory markets like PCs and smartphones, Micron's strategic focus on AI positions it well for future growth. The company's bullish guidance reflects confidence in sustained pricing power and demand. Investors should note that while the broader semiconductor industry faces cyclical risks, Micron's alignment with AI trends offers a compelling growth narrative. Additionally, the company's financial health, evidenced by its earnings beat, suggests resilience against macroeconomic headwinds.

Pitch Summary:
There is a +20-page writeup for those interested in the details and thesis, but the crux of the situation was that Google had been put on trial for being accused of operating as a de facto monopoly in the digital advertising industry for quite some time. Which was found to be true by a jury trial in April of this year. As it pertains to New West, the knock-on implications of this ruling are what's interesting. You have a few companies, namely Magnite (MGNI) and PubMatic (PUBM), that have been forced to operate and grow in the shadow of Google's ad tech dominance. If Google is required to cease its monopolistic behavior and cede market share to them, given their already established (albeit small) market positions these companies will be able to convert that additional revenue at a higher rate than the revenue it took them to get them to where they are now. Said simply, a very high proportion of each new revenue dollar will find its way to the EBITDA or Operating Income line. And given their relatively small market share, any boost is a material shift in the company's economic value creation ability. Read that as "multibagger." I began reading the court documents back in Q4 of 2023, and I was far too early in my positioning. Using the historical mean turnaround time for the Eastern District of Virginia, the so-called "Rocket Docket," I had pegged the decision to September of 2024. Unfortunately, we didn't get the decision that year and New West burned about 60 basis points of capital on January 2025 out of the money calls that expired worthless. It was an intriguing setup at the time. Since so few people were looking at it, the option pricing for the beneficiary companies was at levels that would've returned +110x should a negative Google outcome push the two companies back towards their all-time highs a few years prior. An extreme but non-zero probability outcome given the damning evidence against Google contained in the case. How few people were looking at it? Well, at the time I finished putting on our call positions in early 2024, New West had been the buyer for +90% of all the out of the money strikes I selected. But, as I mentioned, it was far too early and a rescheduling of the trial pushed the ruling outside of the option window. Best laid plans and all that. Second, the tech sector in particular got hit hardest with the Nasdaq briefly flirting with bear market territory. Amidst this, our target beneficiary companies got pushed to very cheap levels. Around 2x or less on revenue, and less than 5x on cash flow. This drastically shifted the risk/reward as the price was objectively cheap regardless of the anti-trust trail outcome.

BSD Analysis:
The manager identifies PubMatic as a key beneficiary of Google's antitrust ruling alongside Magnite, positioning both companies to capture market share in digital advertising. The investment thesis centers on PubMatic's ability to convert incremental revenue at high margins due to existing infrastructure, creating significant operating leverage as Google is forced to reduce monopolistic practices. The manager's deep research approach, analyzing court documents since Q4 2023, demonstrates conviction despite early timing challenges that resulted in expired calls. The valuation opportunity emerged when tech sector weakness pushed PUBM to attractive levels of 2x revenue and sub-5x cash flow multiples. The manager's assessment of limited market attention, evidenced by New West being 90% of out-of-the-money option volume, suggests an under-followed special situation. The 110x potential return scenario based on historical highs reflects the asymmetric risk-reward profile available in this structural shift. While specific performance metrics for PUBM aren't detailed like MGNI, the same fundamental thesis of high incremental margins and multibagger potential applies to this digital advertising infrastructure play.

Pitch Summary:
There is a +20-page writeup for those interested in the details and thesis, but the crux of the situation was that Google had been put on trial for being accused of operating as a de facto monopoly in the digital advertising industry for quite some time. Which was found to be true by a jury trial in April of this year. As it pertains to New West, the knock-on implications of this ruling are what's interesting. You have a few companies, namely Magnite (MGNI) and PubMatic (PUBM), that have been forced to operate and grow in the shadow of Google's ad tech dominance. If Google is required to cease its monopolistic behavior and cede market share to them, given their already established (albeit small) market positions these companies will be able to convert that additional revenue at a higher rate than the revenue it took them to get them to where they are now. Said simply, a very high proportion of each new revenue dollar will find its way to the EBITDA or Operating Income line. And given their relatively small market share, any boost is a material shift in the company's economic value creation ability. Read that as "multibagger." I began reading the court documents back in Q4 of 2023, and I was far too early in my positioning. Using the historical mean turnaround time for the Eastern District of Virginia, the so-called "Rocket Docket," I had pegged the decision to September of 2024. Unfortunately, we didn't get the decision that year and New West burned about 60 basis points of capital on January 2025 out of the money calls that expired worthless. It was an intriguing setup at the time. Since so few people were looking at it, the option pricing for the beneficiary companies was at levels that would've returned +110x should a negative Google outcome push the two companies back towards their all-time highs a few years prior. An extreme but non-zero probability outcome given the damning evidence against Google contained in the case. How few people were looking at it? Well, at the time I finished putting on our call positions in early 2024, New West had been the buyer for +90% of all the out of the money strikes I selected. But, as I mentioned, it was far too early and a rescheduling of the trial pushed the ruling outside of the option window. Best laid plans and all that. Second, the tech sector in particular got hit hardest with the Nasdaq briefly flirting with bear market territory. Amidst this, our target beneficiary companies got pushed to very cheap levels. Around 2x or less on revenue, and less than 5x on cash flow. This drastically shifted the risk/reward as the price was objectively cheap regardless of the anti-trust trail outcome. This was done specifically on MGNI, when the stock was under $12 per share. At close of Q2 2025, the stock was trading at $24 per share, the puts had expired worthless (more than paying back our cost for the calls), and the remaining call position had increased 7x from our purchase price. A success to say the least. So far. However, even though the stock has doubled we are just now starting to see the Market catch up with analyst re-ratings and write ups exploring their marginal EBITDA conversion potential just starting to appear. Having already paid for the cost of the position, I am happy to see if the full thesis is realized with the remaining stake that will be left behind after the Partnership's wind down.

BSD Analysis:
The manager presents a compelling special situations thesis centered on Google's antitrust ruling creating a structural opportunity for Magnite. The core investment rationale hinges on Google being forced to cede digital advertising market share to smaller players like MGNI, which would benefit from high incremental margins on new revenue due to their established infrastructure. The manager demonstrates deep research conviction, having analyzed court documents since Q4 2023, though admits to being early with initial positioning that resulted in expired worthless calls. The valuation entry point was attractive at 2x revenue and sub-5x cash flow when purchased under $12 per share. The position sizing at 2.8% reflects high conviction balanced with defined risk through a collar strategy combining long-dated calls with short-term puts. The 7x return on calls and stock doubling to $24 validates the thesis execution, though the manager notes analyst coverage is just beginning to recognize the EBITDA conversion potential. The multibagger potential remains intact as the structural shift in digital advertising market share plays out over time.

Pitch Summary:
SoftwareOne is a leading global software reseller and cloud solutions provider. The group serves more than two hundred thousand public sector and private sector clients across more than seventy countries, and provides services across the full IT lifecycle – advisory and design, sourcing and procurement, implementation and integration, and management and optimization. SoftwareOne has distribution relationships with more than 7,500 software and cloud vendors, including many of the world's largest business-critical software publishers like Microsoft, Adobe, Oracle, and ServiceNow, and cloud hyperscalers such as Microsoft Azure, Amazon Web Services (AWS), and Google Cloud Platform (GCP). Originally established in Zurich, Switzerland, in 2000 as Softwarepipeline – a pioneer in software asset management – SoftwareOne has grown to achieve annual gross billings in excess of CHF 25 billion and stands as Microsoft's largest channel partner. Over the last decade, SoftwareOne has tripled its revenue per share and increased profits per share fivefold, with its founding partners—Daniel von Stockar, Patrick Winter †, René Gilli, and Beat Curti—continuing to hold over twenty percent of the company's outstanding common stock. SoftwareOne occupies a unique and advantaged position in the landscape as they are: (i) global, (ii) customer-facing, (iii) asset-light, and (iv) earn significant recurring revenue from software and cloud-infrastructure reselling margins. The group's strategic decision long ago to focus on software licensing and related services meant that it was able to expand globally without the need for an accompanying capital-intensive hardware distribution network. As a result, unlike a VAR with a regional focus, SoftwareOne can offer a multinational client procurement coverage for their entire global software estate. And, critically, as public clouds continue to gain share, SoftwareOne has benefited from exposure to infrastructure spend through reselling margins on client cloud consumption—without the drag of a legacy hardware distribution business, which faces structural headwinds from the decline in on-premise infrastructure. On October 31st 2024, SoftwareOne's share price fell more than forty percent in a single day as the company announced headwinds related to being caught unprepared for upcoming Microsoft incentive changes, compounded by a mismanaged rollout of its new go-to-market sales motion. The company revised EBITDA guidance down by fifteen percent, or CHF 40 million, and the shares lost CHF 860 million in market capitalization. At the same time, SoftwareOne replaced its then-CEO, who had only been hired eighteen months earlier. While the market reaction to the day's events was acute, the reality is that the drama at SoftwareOne had started years prior. In 2018, SoftwareOne's inspirational co-founder and CEO, Patrick Winter, tragically passed away. Winter was the lifeblood of the company culture, beloved by employees, and had built the business from a startup to a global organization serving almost forty thousand corporates. Indeed, in the decade prior to his passing, SoftwareOne grew its revenue by twenty-nine percent per annum and increased EBITDA by thirty-four-fold. It was a shocking end to an era for SoftwareOne, and the leadership deficit came at a particularly critical moment as the company was preparing to go public and was in the midst of completing its acquisition of Comparex, its largest transaction ever. The company ultimately ended up promoting its COO, Dieter Schlosser, who oversaw the public listing in 2019 and navigated the business through the global pandemic. Unfortunately, with several years of results post-2020, it became clear that management was not delivering on the company's lofty expectations. This coincided with SoftwareOne having a board that had transitioned to a majority of independent directors, and only one remaining founder, Daniel von Stockar, serving as chairman. In a radical move around the end of 2022, the independent board requested that Daniel von Stockar step down from his role as chairman and they initiated a search for a new CEO. The board elected to hire a non-Swiss external candidate that was a first time CEO with no Microsoft experience. Even worse, the new CEO, with support of the independent board, began pushing longtime SoftwareOne executives out of the business. Recall that the three surviving founders – Daniel von Stockar, René Gilli, and Beat Curti – own a significant amount of stock, at the time approximately twenty-nine percent of the company, while the remaining board member ownership rounded to zero. Rightfully upset at seeing an independent board with no skin in the game actively dismantle the ethos of the business, the founding group did not sit idle. Less than two months after the new CEO officially started, in June 2023, the founding shareholders teamed up with Bain Capital to make a take-private offer for the business at CHF 18.5 per share. The offer valued the business at approximately 12x EBITDA, and was a thirty percent premium to recent trading prices and more than an eighty percent premium to the lows of the prior year. The board quickly rejected the offer as materially undervaluing the business. Over the course of the next six months, the consortium between Bain and the founders made several additional offers as high as CHF 20.5 per share. All offers were rejected by the board without being put to a shareholder vote, citing an insufficiently low valuation. In February 2024, after Bain's final offer was rejected by the board, the founding shareholders called for an extraordinary general meeting to replace the board in its entirety. In April 2024, the founding shareholders succeeded in regaining control of the company. Unfortunately, by this time the damage had been done, and even more damage was in motion. SoftwareOne had a thirty year track record of managing Microsoft incentive changes by investing significant time in the relationship and proactively communicating to ensure that the company's priorities were aligned. This ball was dropped by the incumbent leadership that was more focused on corporate processes and not focused enough on customer and vendor needs. At the same time, the new go-to-market sales motion was already being rolled out in Q2, and in some markets – such as North America – rushed implementation led to serious customer disruptions. For example, ninety percent of customers in North America had their account manager change as part of the rollout. This brings us back to the day of the October announcement where the founders and board took decisive action to set the company back on track. Raphael Erb, who had started at SoftwareOne as a nineteen year old and had been at the business for more than twenty-five years, was announced as the new CEO. Erb was most recently the President of the Asia Pacific region, which was the fastest growing market under his leadership and has continued to post strong double-digit results into 2025. In the weeks that followed, new heads of the DACH and rEMEA markets were appointed, and Oliver Berchtold was elevated to President of Software and Cloud – all SoftwareOne veterans. In total, executives which had an average tenure at SoftwareOne of just over two years were replaced by internal leaders with an average tenure at SoftwareOne of almost seventeen years. In addition, Erb announced a plan to return the organization to its entrepreneurial decentralized roots by eliminating layers of management, and pushing strategic responsibility and P&L accountability back onto the group's more than sixty country organizations. This was seen as essential to restore speed and agility to the business, and was expected to remove CHF 50 million of costs by Q2 2025. By Q1 2025, SoftwareOne announced that it had achieved a run-rate cost saving of CHF 88 million. Finally, less than two months after taking the reins as CEO, SoftwareOne announced that it would be merging with Crayon Group. On December 19th 2024, SoftwareOne announced its intention to merge with Crayon Group, a Nordic software and cloud solutions provider that is the fifth largest Microsoft channel partner. The strategic logic of combining the two companies is clear, as they share an asset light business model with go-to-market motions that emphasize software asset management and value-added services. Moreover, the geographic footprints and customer segments of the two are highly complementary, with Crayon having a strong presence in the Nordics and serving largely SME clients, while SoftwareOne has a strong presence in the DACH region and serves many large enterprise clients. In total, the combined business will serve more than two hundred thousand customers across more than seventy countries and will firmly be Microsoft's largest channel partner. However, the market did not respond favorably to the transaction. On headline figures, SoftwareOne offered CHF 1 billion for Crayon, which generated CHF 94 million in EBITDA in 2024. Viewed in isolation, the price seemed reasonable: Crayon grew EBITDA twenty-seven percent in 2024, expects twenty-percent-plus growth again in 2025, and, like SoftwareOne, converts a high percentage of EBITDA to free cash flow. However, SoftwareOne itself produced CHF 223 million of EBITDA in 2024 – even after a highly challenging year – and was valued at the same CHF 1 billion. In other words, SoftwareOne agreed to pay twice the multiple for Crayon in a deal financed half in stock. While SoftwareOne could have created more immediate shareholder value by buying back its own stock, I believe that the market underestimated this transaction at first blush. To start, Crayon's business deserves to trade at a premium as they have a long history of growing profits per share at thirty percent per annum, and their portfolio of clients is attractively situated with a high proportion already transacting through the Microsoft CSP program. Moreover, on the consulting and services side, Crayon has a particular expertise in AI where they have been building their solution practice for more than a decade. Second, SoftwareOne expects to realize CHF 80-100 million in cost synergies from the merger. In addition, the cash portion of the transaction – representing half of the total consideration – was financed through a credit facility carrying an interest rate of less than one percent (SARON + 0.85%). As a result, the deal is roughly EBITDA multiple neutral on a post-synergies basis and more than twenty percent accretive on a free cash flow per share basis. While integration always carries execution risk, both SoftwareOne and Crayon bring extensive transaction experience, having each completed more than a dozen acquisitions. For example, SoftwareOne acquired Comparex in 2019, which doubled the revenue and employee count of the business. In that transaction, the group expected to achieve CHF 40 million in cost synergies within a two year period, and ended up overdelivering on plan. In the Crayon merger, the synergies are expected to be achieved via several levers: consolidating current sub-scale geographies, integrating back and middle office functions, rationalizing management structure, and improving utilization in services delivery. What's more, even though these are expense reduction activities, there is reason to believe they will also drive business quality improvements. For example, SoftwareOne's North America business in particular has underperformed relative to its other regions. Meanwhile, Crayon has a very strong North America business, which is of similar scale. The merger will give SoftwareOne the opportunity to re-base around Crayon's strong local team, and unlock performance in the combined client portfolio. To wrap, it's also worth clarifying that the expected cost synergies from the merger are incremental to SoftwareOne's already executed CHF 88 million reduction program. Finally, while difficult to quantify, SoftwareOne expects to also achieve substantial revenue synergies from the merger. This will come from the ability to cross-sell an enhanced services portfolio, leverage Crayon's channel business in markets with strong SoftwareOne presence, and access larger accounts given combined capabilities. Using the Comparex transaction as a historical guide, this could result in a further CHF 50 million of EBITDA accretion from revenue synergies. Altogether, this transaction gives SoftwareOne a larger, more diversified, higher quality business, with the opportunity to grow profits per share by forty percent over the coming two years, before even considering the continued baseline growth of both businesses. SoftwareOne lost two-thirds of its total market capitalization in the last six months of 2024. While the guidance cut was a setback, the market was clearly voting that this situation would go from bad to worse. However, for those willing to turn the page, that narrative did not align with either the observable realities of the situation or the expectations of the new leadership team. The area most impacted by the Microsoft incentive changes was backend incentives for Level A and Level B enterprise agreements. In essence, Microsoft decided to lower all rebates on Level A, B, and C agreements down to match the Level D rebates, which were only fifty basis points. This change was significant, as EAs account for more than eighty percent of SoftwareOne's Microsoft gross billings, and would result in a roughly CHF 100 million headwind, offset in part by increasing incentives in the CSP program and for pre-sale and post-sale services. In total, SoftwareOne expected a mid-single digit negative impact on revenue growth in 2025. However, there are several important points to take note of. First, SoftwareOne's Microsoft gross billings were still growing high single digits and were expected to continue growing for the foreseeable future. In other words, there was nothing structurally wrong with their Microsoft practice. Second, with rebate rates now at fifty basis points across the board, it was SoftwareOne's strong belief that on an absolute basis, EA incentives would bottom out in 2025. This is critical, as it means that for a large portion of SoftwareOne's business – which had faced several years of incentive headwinds prior to the recent changes – revenue will now start to more closely align with the strong underlying growth in billings. Finally, even if that ends up not being the case, and Microsoft decides to lower backend incentives further, reductions from here become easier to offset as even large percentage changes in the rebate would be very small percentages of the total client contract. Recall that indirect agreements, where SoftwareOne sets client pricing and invoices clients directly, account for the vast majority of the group's Microsoft licensing revenue. In practice, SoftwareOne and Crayon run their businesses by building a certain amount of margin into the client contract, of which backend margin has historically been one source. In the absence of backend margin, which is something that affects the entire channel, SoftwareOne can offset in indirect agreements through a combination of frontend margin and bundled services. Altogether, on a standalone basis, SoftwareOne still expected to grow revenue by two to four percent in 2025, and expected to grow EBITDA at a mid-teens rate owing to the significant expected cost cuts. So, what is the business actually worth? One way to assess this is looking at comps, as there are several peers in the Microsoft ecosystem that are publicly traded. For example, Softcat Plc and Bytes Technology Group Plc, which trade on the London Stock Exchange, are both significant Microsoft channel partners and have a similar business mix to SoftwareOne. These companies trade at 17.7x and 13.1x EV/EBITDA respectively. In addition, earlier this year another significant Microsoft channel partner, Softchoice Corp, which traded on the Toronto Stock Exchange, was acquired by WWT for $1.3 billion – or 13x EV/EBITDA. While not perfect comps given their high exposure to hardware sales, we can also consider large scale VARs, like CDW Corp and Insight Enterprises, who trade at 12.8x and 9.2x EV/EBITDA respectively. Finally, recall that SoftwareOne itself rejected a takeover bid from Bain in 2023 for 12x EV/EBITDA, while prior transactions – including Crayon's 2021 acquisition of Rhipe Ltd at 15.6x and SoftwareOne's own acquisition of Crayon at 12.6x – further underscore the valuation multiples historically assigned to scaled Microsoft channel partners. Taken together, a return to anywhere near the zip code of peer multiples implies significant go-forward returns for SoftwareOne. For instance, the peer set multiple on SoftwareOne's expected 2027 EBITDA would imply a share price of CHF 26.9 per share, or more than a triple from the current trading price. Finally, consider the base case model below which implies a share price of CHF 22.88 per share, or approximately 190 percent upside to intrinsic value. While the future is certain to pencil out different in detail, I believe this model is conservative as it: (i) does not include any revenue synergies from the Crayon merger, (ii) implies a significantly slower growth rate of gross billings than recent history, and (iii) assumes that SoftwareOne uses its free cash flow to pay down very low cost debt instead of buying back stock or completing further acquisitions.

BSD Analysis:
The manager presents a compelling turnaround thesis for SoftwareOne, a global software reseller trading at a significant discount following management upheaval and Microsoft incentive changes. The investment case centers on the return of founder leadership under new CEO Raphael Erb, who has already delivered CHF 88 million in cost savings ahead of schedule. The Crayon merger creates the world's largest Microsoft channel partner with substantial synergies (CHF 80-100 million in cost savings plus revenue upside), financed at attractive terms below 1% interest. Despite temporary headwinds from Microsoft's incentive restructuring, the underlying business fundamentals remain strong with high-single-digit gross billing growth and a defensible market position. The valuation appears deeply discounted at 6.5x EV/EBITDA versus peers trading at 13.4x, with the manager's base case model suggesting 190% upside to CHF 22.88 per share. The combination of operational improvements, merger synergies, and multiple expansion creates a compelling risk-adjusted return profile for patient investors willing to look through near-term execution challenges.

Pitch Summary:
The Fund's investment in coal-fired, independent power producer Hallador Energy (HNRG) drove another 2.38 percentage points of first half Fund gains as investor sentiment soared on the growing prospects for substantially increased electricity demand from the booming AI-data center industry and expectations increased for an administrative roll-back of burdensome Federal regulations. With a substantial amount of uncontracted electricity production capacity, Hallador appears particularly well positioned to lock in a longer-term power agreement at strong pricing, which could drive further equity gains.

BSD Analysis:
Hallador Energy contributed 2.38 percentage points to fund performance as investor sentiment improved dramatically around the coal-fired independent power producer's prospects in the evolving electricity market. The investment thesis centers on two key catalysts: surging electricity demand from the rapidly expanding AI and data center industry, and expectations for regulatory relief under the new administration that could reduce operational burdens on coal-fired generation. The company's strategic advantage lies in its substantial uncontracted electricity production capacity, which positions it to capitalize on tightening power markets by securing long-term power purchase agreements at attractive pricing. This contrarian investment in coal-fired generation appears well-timed as the AI revolution creates unprecedented electricity demand that may require all available generation sources, regardless of fuel type. The potential for regulatory rollbacks could further improve the company's competitive position and profitability. Hallador represents the type of special situation the fund seeks - an undervalued company with hard assets positioned to benefit from specific industry dynamics and policy changes.

Pitch Summary:
Most positively impacting Fund performance overall was Bank of Cyprus (BOCHGR-AT), which added 2.71 percentage points to Fund returns. Bank of Cyprus shares gained 55.4 percent as the company completed its listing on the Athens stock exchange, increasing its visibility with investors focused on the Greek banks. While Bank of Cyprus shares are up strongly, the company still trades at levels close to book value, undervaluing the company's strong franchise in Cyprus, where the bank maintains a dominant market position and earns excellent returns.

BSD Analysis:
Bank of Cyprus delivered the strongest individual contribution to fund performance with a 2.71 percentage point impact, driven by a 55.4% share price gain following the company's listing on the Athens Stock Exchange. The listing significantly increased the bank's visibility among investors focused on Greek banking stocks, creating a re-rating catalyst that the manager successfully captured. Despite the strong performance, the manager notes that shares still trade near book value, which appears to undervalue the bank's dominant franchise position in Cyprus and its ability to generate excellent returns in that market. The investment demonstrates the manager's ability to identify undervalued financial institutions with strong competitive positions that can benefit from improved market access and investor recognition. Bank of Cyprus represents the type of special situation the fund seeks - a well-positioned company trading at attractive valuations with specific catalysts that can drive re-rating. The bank's dominant market position in Cyprus provides defensive characteristics while the Athens listing creates growth opportunities through expanded investor base and potential for multiple expansion.

Pitch Summary:
Another Canadian heavy-oil player and top-five Fund holding, MEG Energy (MEG-CA), contributed an additional 1.20 percentage points to Fund returns in the first half as the company's shareholders received a hostile tender-offer from Strathcona, which appears to have put the company into play.

BSD Analysis:
MEG Energy represents another top-five holding in the fund's Canadian energy portfolio, contributing 1.20 percentage points to first-half returns following a hostile tender offer from Strathcona that has put the company "into play" as a potential acquisition target. As a Canadian heavy oil producer, MEG Energy benefits from the fund's strategic focus on Canadian energy names that typically offer cheaper valuations, lower decline curves, and longer reserve lives compared to US peers. The company operates in the oil sands sector using steam-assisted gravity drainage (SAGD) technology, which provides long-life, predictable production profiles that align with the fund's preference for sustainable cash flow generation. The hostile bid situation creates potential upside through either a successful acquisition at a premium or competitive bidding that drives up the share price. Given the fund's emphasis on well-capitalized energy companies with manageable debt levels, MEG Energy appears positioned to benefit from the manager's expectation that energy companies will continue reducing debt and engaging in accretive share repurchases at current modest valuations.

Pitch Summary:
Shares of Fund holding International Petroleum (IPCO-CA) alone contributed 2.32 percentage points to Fund returns as the top-five Fund holding continued to progress its Blackrod heavy oil expansion project in Canada, remaining on-time and on-budget through a critical period of construction.

BSD Analysis:
International Petroleum represents a top-five holding in the fund's energy-focused portfolio, contributing significantly to first-half performance with a 2.32 percentage point return contribution. The company is executing well on its Blackrod heavy oil expansion project in Canada, maintaining both schedule and budget discipline during a critical construction phase. As a Canadian heavy oil producer, International Petroleum benefits from the fund's strategy of focusing on Canadian energy names that typically trade at cheaper multiples with lower resource decline curves and substantially longer reserve lives compared to US counterparts. The successful execution of the Blackrod project demonstrates management's operational competence and should position the company for increased production and cash flow generation. Given the fund's emphasis on well-capitalized entities with manageable debt levels and competitive cash flow yields, International Petroleum appears to fit the manager's criteria for energy investments that can deliver strong returns while maintaining financial stability.

Pitch Summary:
We shifted capital from liquidation of the G-Mining position into Equinox Gold (EQX-CA), increasing our holdings of this Americas-based gold producer. Equinox substantially lagged its peers this year as the company experienced challenges in bringing its flagship Greenstone newbuild mine into full production, leading to increased investor apprehension over the sizable debt-load assumed for the build. Investor sentiment was further impacted by the recent suspension of operations at the company's Los Filos mine in Mexico following an extended stand-off with an indigenous Ejido community resulting in a failed renewal of a surface rights land agreement on terms sufficiently remunerative for Equinox to continue to invest further in the mine. While any resolution with the Ejido community would certainly unlock an extensive and valuable resource at Los Filos and would be a big long-term positive for Equinox shares, the future of the Los Filos mine has been shrinking in importance for Equinox, particularly following mergers with Premier Gold Mines and more recently with Calibre Mining. These mergers brought Equinox both the Greenstone and Valentine mines, two sizable, cornerstone Canadian gold mining assets. We are particularly pleased that the Calibre acquisition also strengthened the operations management talent at Equinox. With the two Canadian mines ramping-up rapidly in 2025 amid excellent gold prices, we are optimistic that strong projected operating cash flow yields will soon be knocking debt levels down substantially. Furthermore, Equinox's highly economic mine expansion at Castle Mountain, which has been mired in an onerous Federal Permitting process, has recently become far more likely to get the green light as the new US Presidential administration has been fast-tracking previously delayed resource developments. With the stock currently trading inexpensively relative to our estimates of future free cashflow and at a substantial discount to most mid-tier Americas mining producers, we believe a re-rating over the next couple of years is a strong probability. The Fund's purchase of Equinox Mining was our largest purchase in the first half of 2025.

BSD Analysis:
The manager significantly increased the fund's position in Equinox Gold, making it the largest purchase of the first half, viewing the company as undervalued relative to peers due to temporary operational challenges. The investment thesis centers on the company's transformation through strategic acquisitions of Premier Gold Mines and Calibre Mining, which added the high-quality Greenstone and Valentine mines in Canada and strengthened operational management capabilities. While near-term challenges include production ramp-up issues at the flagship Greenstone mine and the suspension of Los Filos operations in Mexico due to community disputes, the manager believes these are temporary setbacks. The two Canadian mines are rapidly ramping production in a favorable gold price environment, which should generate strong cash flows to reduce the debt burden accumulated during construction. Additionally, the Castle Mountain expansion project appears more likely to receive regulatory approval under the new administration's resource-friendly policies. Trading at a discount to mid-tier Americas producers and below the manager's free cash flow estimates, Equinox appears positioned for a significant re-rating as operational issues resolve and cash generation accelerates.

Pitch Summary:
The most serious negative impact to the Fund in the first half has been tariff-related price declines in the Fund's position in Algoma Steel (ASTL-CA), which negatively impacted the Fund by 1.42 percentage points. Algoma, one of Canada's largest steel producers, has traditionally exported hot-rolled coil and plate into the United States. We bought Algoma, acquiring North American steelmaking capacity at levels far below replacement cost. The company has been in the process of upgrading its plant, transitioning from older blast furnace steel smelting to electric arc furnace "EAF" steelmaking. This conversion is expected to drop its cost of steel production and substantially increase operating flexibility. With the more flexible electric arc steelmakers typically sporting higher market valuations, and with the company shortly having substantial EAF steelmaking capacity at a cost per ton well below that of several recent US newbuilds, we have been holding the position pending a recovery with expectations of a substantial re-rate. However, after substantial US import tariffs imposed on Canadian steel, cash flow margins at Algoma have plunged deep into negative territory. Unfortunately for Algoma, steel prices on the Canadian side of the border also collapsed amid a flood of foreign steel into Canada from foreign steelmakers seeking replacement customers for lost US business. While the tariffs come at a difficult time for Algoma, causing significant cash burn just as the company's balance sheet risk hit peak levels after accumulating debt from its costly EAF conversion project, we are continuing to maintain our investment in anticipation of tariff relief, either through highly probable protective Canadian government action, or more hopefully from a free-trade agreement with the USA, which would be quite positive for the company's outlook. At mid-year, Algoma Steel comprised 2.17 percent of Fund assets.

BSD Analysis:
The manager maintains a contrarian position in Algoma Steel despite significant near-term headwinds from US tariffs on Canadian steel imports. The original investment thesis was based on acquiring North American steelmaking capacity at levels far below replacement cost, with the company undergoing a strategic transformation from blast furnace to electric arc furnace (EAF) technology. This conversion is expected to reduce production costs and increase operational flexibility, typically commanding higher market valuations. The manager believes the company will achieve substantial EAF capacity at costs well below recent US newbuilds, positioning it for a significant re-rating upon completion. However, US tariffs have created severe near-term challenges, pushing cash flow margins deeply negative and creating balance sheet stress during the capital-intensive EAF conversion. The manager is maintaining the position based on expectations of tariff relief through either Canadian government protective action or a potential US-Canada free trade agreement. This represents a classic value investment in distressed assets with strong long-term fundamentals but significant short-term execution risk.

Pitch Summary:
Among these purchases, we acquired a stake in Footlocker (FL) aggregating to approximately one percent of Fund assets after tariff fears caused the company to plunge, with shares trading down to a significant discount to book value. While we have historically been cautious about investment in retailers, there were several aspects of Footlocker that we found attractive. The company had a highly recognizable brand name not reflected in the low valuation as well as an excellent balance sheet with very little debt. Furthermore, management was making significant progress transitioning the real-estate footprint away from lower quality malls. Nike, Footlocker's largest supplier, appeared to be shifting its focus back to selling its shoes through wholesalers after previous Nike management had implemented a direct-to-consumer shift with mediocre results. We realized shoe inventories comprised a significant portion of Footlocker's tangible book value, and we thought tariffs on future imports were likely to make any mark-downs on existing store inventories far less probable. Fortunately, shortly after our purchase, Dick's Sporting Goods stepped in with an announced agreement to purchase Footlocker shares at a substantial premium. With shares soaring to levels close to the offer price, we took the opportunity to exit our entire position for a quick, sizable gain. Footlocker added an estimated 1.03 percentage points to first-half Fund returns.

BSD Analysis:
The manager executed a successful opportunistic trade in Footlocker, capitalizing on tariff-induced market panic that drove shares to a significant discount to book value. The investment thesis centered on several compelling factors: a recognizable brand trading at depressed valuations, a strong balance sheet with minimal debt, and management's strategic transition away from lower-quality mall locations. The manager also identified a favorable shift in Nike's distribution strategy back toward wholesale channels, which would benefit Footlocker as Nike's largest retail partner. The tariff environment actually created a protective moat for existing inventory, as future import tariffs would reduce the likelihood of markdown pressure on current shoe stock. The investment paid off quickly when Dick's Sporting Goods announced an acquisition at a substantial premium, allowing the fund to exit with a 1.03 percentage point contribution to returns. This demonstrates the manager's ability to identify undervalued retail situations and capitalize on short-term market dislocations.

Pitch Summary:
NLOP boosted the portfolio by about 1.5% in Q2. The company recently sold their vacant Woodlands, TX property and appears close to selling their Google, JPM Dallas, and PPD buildings. Combined sales should generate more than $100M for shareholders. I expect NLOP will trade near a 20% aggregate cap rate after these sales complete, with many valuable properties left to sell. During Q2, we delivered a letter to the NLOP board sharing rationale for adopting a share repurchase program in lieu of dividends, if the stock trades at an observable discount to their assets' fair value. Regardless, we expect a buyback or dividend to catalyze more investors to calculate the fair value of these assets.

BSD Analysis:
The manager's NLOP thesis centers on asset monetization and capital allocation optimization in a liquidating REIT structure. Recent property sales including the Woodlands facility demonstrate management's ability to execute asset dispositions, with high-quality tenant properties (Google, JPM, PPD) nearing sale completion. The expected $100M+ in proceeds represents significant value relative to the company's market cap. The manager's 20% aggregate cap rate expectation suggests attractive valuation metrics as the portfolio concentrates on remaining quality assets. Active shareholder engagement through board correspondence shows the manager's commitment to value realization through optimal capital allocation. The proposed share repurchase program could create a catalyst for NAV recognition if the stock trades below asset values. The liquidation strategy should unlock embedded real estate value while providing cash returns to shareholders. This represents a classic asset play with multiple value realization catalysts.

Pitch Summary:
Magnera Corporation (MAGN) created roughly a 3% headwind to our aggregate Q2 returns. The company reduced production expectations during the quarter due to tariff uncertainty, but their market-leading position, termed-out debt, and continued insider buying remain unchanged. We successfully used put options to mitigate nearly half of MAGN's downside during the quarter, as discussed in our Q1 letter. We still believe MAGN trades at a trough multiple on trough earnings, with significant room to grow their earnings power.

BSD Analysis:
Despite MAGN's 3% negative contribution to Q2 returns, the manager maintains conviction based on the company's structural advantages and attractive valuation. The production reduction was driven by external tariff uncertainty rather than company-specific issues, suggesting temporary headwinds. The company's market-leading position provides competitive moats and pricing power once market conditions normalize. Termed-out debt structure reduces refinancing risk and provides financial flexibility during volatile periods. Continued insider buying signals management confidence in the business despite near-term challenges. The manager's successful use of put options to hedge downside demonstrates sophisticated risk management while maintaining upside exposure. The valuation appears compelling at trough multiples on depressed earnings, creating asymmetric risk-reward. Significant earnings power expansion potential exists as production normalizes and market conditions improve.

Pitch Summary:
In early June, United Natural Foods (UNFI) hit a significant speedbump when a cyber-attack shut down most company systems. The outage lasted approximately ten days, but the impact was contained, and systems have resumed activity. The stock remains depressed despite the company confirming their cyber insurance should effectively mitigate event costs. Furthermore, the company accelerated their long-term guidance, showing their business transformation is exceeding plan. We're perplexed that the stock remains at $22 despite the cleared air, after trading above $32 right before the event. This created another ~1% Q2 headwind, but we view the June earnings release and management commentary as the best evidence yet that their turnaround is gaining momentum, not losing it. UNFI will provide a financial update in July to further quantify the cyber attack's financial impact. We expect them to guide well above the $600M EBTIDA the street currently expects for FY26, while further reducing cyber-attack concerns.

BSD Analysis:
The manager views UNFI's cyber-attack as a temporary setback that created an attractive buying opportunity rather than a fundamental business impairment. The ten-day system outage was contained and cyber insurance should mitigate financial impact, suggesting limited long-term damage. More importantly, management accelerated long-term guidance, indicating the business transformation is ahead of schedule and exceeding expectations. The stock's decline from $32 to $22 appears overdone given the temporary nature of the cyber incident and strong underlying business momentum. The manager expects FY26 EBITDA guidance significantly above the Street's $600M estimate, suggesting meaningful earnings upside. The June earnings provided compelling evidence that the turnaround strategy is gaining traction. The upcoming July financial update should provide clarity on cyber costs and reinforce the bull thesis. This represents a classic temporary dislocation creating value for patient investors.