Investment Pitches

Pitch Summary:
We exited M&T Bank, a Buffalo-based regional bank with a strong balance sheet and a conservative management team, trading at a modest price. This is not the kind of business I like to sell, but the longer I owned M&T, the more concerned I grew about its growth prospects. M&T competes in mostly slower growing US markets, including Northeastern cities like Buffalo, Rochester, Hartford and Baltimore. With bank deposit market share as high as 60% in Buffalo, it is unlikely that another bank would try to open branches to compete with M&T. In turn, this means M&T has deep relationships with many of the best clients in town. The fact is, however, that these markets barely grow. M&T's organic loan growth over the past decade was about 1%. Worse, the rise of non-bank lenders (also known as private credit) means customers have more options for loans than they used to. A growing business in Buffalo no longer needs a local bank relationship to get a loan. Parallel to this, digital banks like Capital One now pay up to double the interest on deposits as branch-based banks, and brokers like Charles Schwab offer banking services, including loans, as part of a brokerage account relationship. I viewed sluggish growth as acceptable given the less competitive nature of M&T's core markets. However, during the first quarter earnings call and in a subsequent meeting with management, M&T called out increasing competition from private credit. M&T grew earnings at a modest 7% clip over the past decade, one in which all banks benefited from massive stimulus that inflated bank deposits and made it easier for consumers and small businesses to pay back loans. The decade ahead seems like it could be more competitive, both in terms of adding deposits as well as making and collecting loans. The bank's PE multiple is low, and it is so well-capitalized that it could generate a decent return for owners by making whatever sensible loans it could and using excess capital to buy back stock. M&T could also be a very attractive candidate for purchase by a faster-growing bank that could better deploy its excess capital. There are paths to success, but ultimately, I felt we could find better growth elsewhere. M&T stock has risen since our sale.

BSD Analysis:
The manager exited M&T Bank due to fundamental concerns about its long-term growth prospects despite the bank's strong balance sheet and conservative management. The core issue is geographic concentration in slow-growing Northeastern markets where organic loan growth has averaged only 1% over the past decade. Increasing competition from private credit lenders and digital banks offering higher deposit rates is eroding M&T's traditional competitive advantages. While the bank maintains dominant market share (60% in Buffalo), this translates to limited expansion opportunities in stagnant markets. Management acknowledged rising private credit competition during earnings calls, validating the manager's concerns. The decade ahead appears more challenging than the stimulus-supported 2010s when M&T achieved modest 7% earnings growth. Despite low valuation multiples and potential as an acquisition target, the manager prioritized capital allocation toward higher-growth opportunities.

Pitch Summary:
We also still own and like Citigroup (C $85.79). Its turnaround is progressing well, and we still see significant upside.

BSD Analysis:
The manager maintains a positive view on Citigroup as a turnaround story that continues to progress favorably. While the commentary is brief, the manager's confidence in the ongoing transformation suggests the bank is successfully executing on operational improvements and strategic initiatives. At $85.79, the manager sees significant upside remaining, implying the market has not fully recognized the value creation from the turnaround efforts. The position represents a bet on management's ability to improve returns on capital and operational efficiency at one of the major global banks. The investment appears to be a value play on financial sector recovery and corporate restructuring success.

Pitch Summary:
Our other large names include QXO, NCLH and Royalty Pharma (RPRX $35.87), a very cheap healthcare royalty investor we believe can compound capital for an extended period.

BSD Analysis:
The manager views Royalty Pharma as an attractively valued healthcare royalty investment vehicle with strong long-term compounding potential. As a buyer of biopharmaceutical royalties, RPRX provides exposure to pharmaceutical innovation without the binary risks of drug development. The business model generates predictable cash flows from successful drugs already on the market, creating a more stable earnings profile than traditional biotech investments. At current levels around $36, the manager considers the valuation compelling relative to the company's ability to compound capital over extended periods. The investment represents a differentiated way to play healthcare innovation through a royalty structure that benefits from successful drug launches while avoiding development risks.

Pitch Summary:
QXO ($22.03), a company we invested in as a PIPE a year ago, ended the quarter as our largest holding. CEO Brad Jacobs has an impressive track record of creating shareholder value at his previous companies. He plans to roll up the building products distribution industry using technology to improve operations. QXO closed on its first acquisition, Beacon Roofing, in the quarter. Roofing is mostly nondiscretionary, providing some stability to earnings. While the valuation is elevated on near-term earnings, we see a path to significant earnings growth. QXO plans to improve margins and pursue more acquisitions. If QXO is successful in its goals, we believe the stock is worth significantly more and can compound in the mid-to-high teens.

BSD Analysis:
The manager's largest holding represents a high-conviction bet on serial acquirer Brad Jacobs' ability to consolidate the building products distribution industry. The investment thesis centers on Jacobs' proven track record of creating shareholder value at previous companies and his strategy to use technology to improve operational efficiency across acquisitions. The recent acquisition of Beacon Roofing provides a stable earnings base, as roofing is largely non-discretionary spending. While acknowledging elevated near-term valuations, the manager sees significant earnings growth potential through margin improvement and additional acquisitions. The position was established through a PIPE investment, suggesting early access and potentially favorable terms. The manager expects mid-to-high teens annual returns if the consolidation strategy succeeds, representing a growth-oriented value play on industry consolidation and operational improvement.

Pitch Summary:
IAC trades at a significant discount to the businesses it owns. Its stake in publicly traded MGM and its cash are worth more than the entire market cap. Dotdash Meredith is its most significant fully owned asset. The advertising business owns premium properties such as People, Allrecipes, Better Homes and Gardens and Investopedia and is well positioned in the current environment. IAC also owns Care.com and a piece of Turo. Barry Diller who has an excellent track record recently took the reigns as CEO and resumed share repurchases. We think IAC's underlying businesses are worth more than twice the current stock price.

BSD Analysis:
The manager views IAC as a classic sum-of-the-parts value opportunity, trading at a significant discount to its underlying asset values. The investment case is anchored by the company's stake in publicly traded MGM plus cash holdings that alone exceed the entire market capitalization, creating a compelling margin of safety. Dotdash Meredith represents the core operating asset, owning premium digital media properties including People, Allrecipes, Better Homes and Gardens, and Investopedia that are well-positioned in the current advertising environment. Additional value comes from stakes in Care.com and Turo. The catalyst for value realization is Barry Diller's return as CEO, bringing his proven track record and resuming share repurchases. The manager sees 100% upside potential, believing the underlying businesses are worth more than twice the current stock price.

Pitch Summary:
NCLH got hit hard during the selloff this year due to concerns about cyclicality and debt. We believe NCLH can grow earnings power double digits for the next decade or more. The other large cruise lines have already made it back to post-pandemic record prices, we believe NCLH will too.

BSD Analysis:
The manager presents Norwegian Cruise Line as a recovery play within the cruise industry, viewing the recent selloff as creating an attractive entry point. The investment thesis is built on NCLH's ability to generate double-digit earnings growth over the next decade, suggesting strong operational leverage as the cruise industry normalizes post-pandemic. The manager notes that competing cruise lines have already recovered to record pricing levels, implying NCLH is lagging in its recovery trajectory. The position appears to be a contrarian bet on cyclical recovery, with the manager dismissing current concerns about debt levels and cyclicality as temporary headwinds. The investment represents a value play on tourism normalization and the cruise industry's pricing power recovery.

Pitch Summary:
UnitedHealth Group (UNH $302.91) represents exactly the kind of opportunity we like. It fell from a high of $630 late last year to a low of $249 in the second quarter giving us the chance to enter. A long-time darling known for consistently beating earnings, investors reacted poorly to a barrage of bad news (earnings disappointment, guidance pull, CEO change, DoJ investigation). There are several challenges pressuring United's earnings. We believe it's a classic underwriting cycle that can be remedied over time. United is a great company with high returns on capital. The new CEO Steve Hemsley did an excellent job running the company during his previous tenure. We see earnings power of $40-45 per share in 3-5 years. The company historically traded at 16-17x earnings. Using the low ends of these ranges implies UNH will trade back to $640, upside of 111%. If that takes 5 years, it will compound at 16% per year, which should nicely outperform the market.

BSD Analysis:
The manager views UnitedHealth Group as a classic contrarian value opportunity, purchasing shares after a significant decline from $630 to $249 amid negative sentiment. The thesis centers on UNH being caught in a temporary underwriting cycle that management can remedy over time. The manager emphasizes the company's strong fundamentals, including high returns on capital and the return of experienced CEO Steve Hemsley. The valuation case is compelling, with projected earnings power of $40-45 per share in 3-5 years and historical trading multiples of 16-17x earnings. At current levels around $303, the manager sees 111% upside potential to $640, representing 16% annual returns over five years. The investment represents a bet on cyclical recovery and management execution in a quality healthcare franchise trading at distressed valuations.

Pitch Summary:
One notable addition to the portfolio is Coveo Solutions Inc. (TSX: CVO), which is the largest position in our Fund. Coveo is an AI-powered enterprise search platform that delivers highly relevant search experiences across websites, e-commerce, customer service and workplace applications. We have followed the Company closely over time and recently observed a reacceleration in bookings growth alongside meaningful enhancements to its leadership team, including the return of its founder as CEO and the appointment of a new CRO with a strong track record. We believe Coveo is at an inflection point, poised to deliver both growth and profitability. During the quarter, we participated in a block trade that removed an overhang from a large private equity seller, allowing us to invest at a discount to market value. In our view, this represents a compelling opportunity to gain exposure to a Canadian AI company trading at an attractive valuation.

BSD Analysis:
Pender Fund has made Coveo Solutions their largest position, viewing the AI-powered enterprise search platform as positioned at a critical inflection point. The managers highlight accelerating bookings growth and significant leadership improvements, including the founder's return as CEO and a new CRO with proven experience. The timing appears strategic, as they participated in a block trade that eliminated selling pressure from a large private equity holder, allowing entry at a discount to market value. The investment thesis centers on Coveo's ability to deliver both growth and profitability as enterprise AI adoption accelerates. The managers see this as an attractive opportunity to gain exposure to a Canadian AI company at compelling valuations. The platform's broad applicability across websites, e-commerce, customer service, and workplace applications provides multiple growth vectors. Given the fund's focus on AI as a transformative theme, this position aligns with their conviction that AI technologies will drive outsized returns for companies with proprietary data and scalable platforms.

Pitch Summary:
Lightwave Logic has developed a proprietary electro-optical polymer technology that could dramatically improve the speed and efficiency of the Internet infrastructure backbone, which is already struggling under the increasing data demands of artificial intelligence. As the AI technological revolution intensifies, and then quantum computing becomes more relevant, the limitations and power inefficiency of the current optical network will only be more apparent, and the need to resolve that bottleneck more urgent. Lightwave is working with several leading players in the data center and semiconductor industries to test the effectiveness of its modulators and integrated circuits and hopes to secure design wins and licensing revenue within the next 12-24 months. While the road to adoption of its technology has been bumpy, and could continue to be so, the opportunity is incredibly significant and the company has recently brought on a highly regarded and experienced new CEO that we believe will bring some clarity and urgency to the business, accelerating the path to commercialization.

BSD Analysis:
Lightwave Logic is a speculative bet on electro-optic polymers becoming the next big thing in high-speed optical communications. The promise is simple but massive: modulators that move more data, faster, and with less power than incumbent solutions in data centers and telecom networks. The company is still pre-scale, with its value tied up in IP, prototypes, and partnerships rather than proven, high-volume production. If polymers make it into mainstream modules and co-packaged optics, the upside is transformative; if not, this stays a science project. Investors are effectively underwriting whether Lightwave can convert lab results into foundry-qualified, reliable products that big customers trust. It’s a classic “platform tech” story with enormous optionality and equally enormous execution risk. Size accordingly.

Pitch Summary:
The Jacob Internet Fund added two new positions in the quarter, Rocket Companies and Lightwave Logic. Rocket Companies has quickly become one of the largest online mortgage lenders due mainly to their broad integration of advanced technology and AI into its platform. Unlike many of its peers, Rocket has made significant investments to drive efficiencies and drastically improve both the broker and consumer experience from what has historically been a highly manual process. The recent acquisitions of mortgage servicer Mr. Cooper and online real estate portal Redfin will provide numerous cross-selling opportunities, and we also believe it will likely result in a positive rerating of the stock, with higher valuation multiples for these combined businesses. Finally, if we do see lower interest rates later this year, we could see an uptick in mortgage origination and refi activity, which would lead to materially higher earnings estimates for 2026.

BSD Analysis:
Rocket is the closest thing to a consumer mortgage brand in the U.S., with a digital-first origination engine that made it the hero of the refi boom. Higher rates crushed volumes, exposing just how cyclical this business really is. The servicing book provides some ballast and ongoing revenue, but the equity still trades on origination sentiment. Rocket is trying to parlay its brand and tech into more stable fee streams across personal loans, real estate, and financial services, but that reboot is still in early innings. Cost cuts and capacity resets have right-sized the platform for a lower volume world, giving it operating leverage if and when rates ease. This is a name you trade around the mortgage cycle, not a sleep-at-night compounder. The upside torque when the cycle turns can be enormous.

Pitch Summary:
On paper, Envista Holdings Corp. (NVST), a leading supplier of dental equipment, consumables, and services, could be vulnerable when household budgets are tightening. Indeed, NVST’s core product, dental implants, can see associated procedures postponed as consumers prioritize more essential financial needs. Not surprisingly, NVST lost a third of its value from February 18 through April 8, when economic slowdown fears began to emerge. However, worries over demand destruction proved to be overblown. While NVST’s revenues declined 1.1% year over year in the first quarter, that was better than feared as demand remained solid across its product lines and management provided an upbeat outlook for the full year. Further fueling confidence: Management initiated the company’s first share buyback in history, purchasing $15 million worth of stock at around $17 per share. That was roughly the same price at which the CEO and CFO had purchased shares in the open market last year, another encouraging sign. The company has undertaken internal initiatives to mitigate tariff pressures and expand margins. Recently, Envista began shifting the manufacturing of its premium implants for the Chinese market from the U.S. to Sweden while adding additional suppliers to diversify its supply chain. Envista is a great illustration that even though tariff pressures remain real, many small businesses are nimble enough to change course and adjust quickly. Despite the positive attributes noted above, NVST is trading at a modest 8.5x EBITDA, while sporting around a 5% Free Cash Flow/Enterprise Value Yield and low leverage of just 0.6x Net Debt/EBITDA. This represents a material discount to Envista’s historic and recent earnings multiple.

BSD Analysis:
Envista is a pure-play on digital dentistry that is executing a crucial transformation, shifting from a collection of products to an integrated, high-margin solutions platform, creating a clear arbitrage opportunity. The core moat is its focus on high-growth segments like clear aligners (Ormco) and its open, flexible digital workflow, which allows dentists to utilize best-in-class components from multiple providers. Management is aggressively streamlining its portfolio (e.g., divestiture of its low-margin implant business) to dramatically raise its blended operating margin and simplify its core message. This focus on simplification and high-value software/aligners is driving significant Adj. EBITDA growth. The stock is trading at a discount due to temporary slowdowns in CapEx purchases; however, this is being compensated by the recurring, sticky revenue from its aligner and service segments. Envista is a leveraged bet on the non-cyclical, inevitable transition to a fully digital dental practice.

Pitch Summary:
Silicon Motion Technology Corp. (SIMO) — a leading maker of memory components used in PCs, smartphones, data centers, and industrial applications — also took a hit earlier this year, on tariff concerns and as investors questioned the capex needs of large-scale cloud service providers known as hyperscalers. SIMO shares sank more than 30% from March 24 to April 21, on fears that further weakness in consumer spending could impact PC and smartphone sales. Since then, however, hyperscalers have confirmed robust datacenter capex growth, as consumer sentiment has rebounded somewhat. Since April 21, SIMO shares have surged more than 70%. We continue to hold SIMO because we believe it is in the early days of a re-rating from its upcoming growth and margin expansion as data center products evolve to become a larger percentage of the company’s total revenue mix. Silicon Motion has historically leaned more to the consumer electronics side of the business, which is marked by trailing edge technology and lower margins. However, throughout the recent downcycle the company made a push into higher-margin, leading-edge applications driven by hyperscaler demand. On its last earnings call, management announced it was partnering with Nvidia on memory storage banks. Due to the longer-than-usual down cycle for consumer electronics companies, though, our analysis indicates that SIMO remains meaningfully undervalued. The stock currently trades at $75.17 a share, but we believe the company should be valued at $90. That’s based on a 13X EBITDA multiple plus an anticipated $160 million cash settlement from SIMO’s ongoing arbitration with MaxLinear surrounding the termination of a proposed merger agreement two years ago.

BSD Analysis:
Silicon Motion is a high-quality, undervalued pure-play on the NAND Flash controller market, whose stock has been unfairly penalized by a failed acquisition and market cynicism. The core thesis is the company's dominant leadership in SSD controllers for both the client (PC) and enterprise (data center) markets, a position that is essential for the entire flash memory ecosystem. The company maintains an unassailable technical moat, with its controllers being the gold standard for performance, power efficiency, and security. While the stock was hit by the breakdown of its merger with MaxLinear, this actually unlocked significant capital and optionality, which management is using to aggressively execute a $500 million share repurchase program. This buyback will amplify per-share earnings precisely as the memory cycle turns positive and its next-generation controllers for PCIe 5.0 and enterprise solutions hit the market. Trading at a deep discount, the company offers a classic valuation arbitrage ahead of the inevitable recovery and expansion of the NAND market.

Pitch Summary:
Gates Industrial Corporation plc (GTES), a leading manufacturer of belts and hoses used in vehicles and industrial machines. Following President Trump’s “Liberation Day” tariff announcement, small-cap Industrials sold off on fears of potential demand destruction. Gates wasn’t immune. The stock tumbled more than 19% between April 2 and the market’s trough on April 8, compared with the 14% decline for the S&P 600 Industrial Index. We saw this as an opportunity because we believe Gates is well positioned relative to the average small cap Industrial. Why? Gates mostly produces in North America for U.S. customers, meaning they do less importing and exporting from Asia than their peers. That’s not to say the company is without tariff exposure. But Gates enjoys pricing power, as most of its parts are mission critical to customers, who have no choice but to replace belts and hoses that break. The company’s customers are also purchasing fewer new machines while holding onto their existing equipment longer, increasing the odds of belts and hoses wearing out. That’s good news for GTES, since 68% of the company’s revenues come from replacement of parts. Gates has been undergoing a continual cost reduction and footprint optimization program lately that we believe will help protect margins on the downside from a decline in volume. That view was confirmed in the first quarter, when Gates maintained its full-year guidance, signaling that tariffs would be neutral to management’s EBITDA projections. The company hopes to blunt the effect of tariffs through price increases and cost savings from its self-help efforts. Gates shares have bounced back more than 45% since April 8, versus around a 28% gain for its S&P 600 Industrial peers. Still, the stock trades at just 14 times earnings and 10 times EBITDA, which is relatively low compared to other Industrial businesses with a similar margin profile.

BSD Analysis:
Gates is a high-quality industrial compounder that is dramatically undervalued, trading at a discount while it executes a strategic pivot toward high-growth electrification and specialty application revenue. The core thesis is a play on structural shift: Gates’s power transmission belts and fluid power systems are mission-critical for the fastest-growing industrial applications, including EV powertrain systems, warehousing automation, and high-pressure hydraulic equipment. This focus is driving non-cyclical, high-margin revenue, evidenced by the 7% organic growth in its Mobility & Motion Control segment. The stock's valuation is depressed due to temporary destocking cycles and macro uncertainty, but its business model is structurally resilient, generating robust 35% Adjusted Gross Margins. Management is aggressively deploying capital to expand capacity in these high-growth verticals, positioning the company for substantial Free Cash Flow (FCF) acceleration as the industrial environment stabilizes. This is a leveraged, low-P/E bet on the electrification and automation of global industrial infrastructure.

Pitch Summary:
Dentsply Sirona, Inc. (XRAY) is another small cap that happens to be an industry leader. The result of the merger of Dentsply International and Sirona Dental Systems nearly a decade ago, XRAY is a $13.3 billion company that is one of the world’s biggest suppliers of dental equipment and supplies, including consumables, lab products, and orthodontics and implants. For more than two years, management has been laying the groundwork for a turnaround. Those efforts have yet to be reflected in the stock price, as the company continues to course correct from poor decisions made by prior leadership. XRAY’s efforts have been hampered by sluggish global economic growth, as the company’s largest geography, the European Union, has been stalled in a dental recession for the past three years. XRAY’s U.S. implant business, meanwhile, also continues to struggle, though there are some early signs of improved performance ahead. For example, Dentsply’s Q1 results — including its Orthodontic and Implant Solutions segment — beat analyst expectations for revenues and earnings. The company isn’t out of the woods, but this was a significant step forward for a stock that has been pricing in worst-case scenarios in recent months. We continue to support the CEO’s pragmatic, customer-focused approach to improving market share in key areas and implementing self-help strategies to improve XRAY’s operational and strategic efficiencies. In addition to meeting its commitments on earnings, margin, and free cash flow improvements, management has been accelerating new product launches and finding success in centralizing storage and access of patient data on its DS Core cloud-based platform. Yet the stock remains discounted, trading at just 7X estimated Enterprise Value/EBITDA.

BSD Analysis:
Dentsply Sirona is a deeply discounted industrial compounder in the dental technology market, poised for a major EBITDA inflection as its aggressive operational clean-up and restructuring complete. The core thesis is a return to sustainable, high-single-digit growth driven by the successful integration of clear aligner and digital dentistry technologies. The company’s moat lies in its end-to-end digital workflow, which locks dentists into a unified system covering everything from imaging (Axeos) to restoration (Primescan/SureSmile). The stock is trading at a significant discount due to the historical noise of accounting probes and executive turmoil; however, the new management team has surgically executed a turnaround, achieving $50 million in annualized cost savings. This cost discipline is setting the stage for substantial operating margin expansion and accelerated Free Cash Flow (FCF) generation. The valuation arbitrage is compelling: investors are buying the leader in digital dentistry at a trough multiple, ahead of the inevitable re-rating as the new operating model delivers consistent, predictable profitability.

Pitch Summary:
Photronics, Inc. (PLAB) is a perfect example of common misconceptions surrounding small stocks. PLAB makes photomasks used to transfer circuit patterns onto semiconductor wafers during the fabrication process, operating manufacturing facilities globally. The company’s modest $1.1 billion market capitalization belies the fact that it is the largest merchant photomask manufacturer in the world. Plus their solid balance sheet, over $550 million in cash and cash equivalents, with minimal debt provides a strong ballast. PLAB’s work with leading-edge applications, driven largely by artificial intelligence, remains strong. On the other hand, trailing-edge technologies tied to consumer electronics, industrial, and autos have been mired in a downcycle, though those end markets are showing some early signs of a recovery. As that segment rebounds while new semiconductor design activity continues to be robust, Photronics is well-positioned to reap the benefits of several years of growth investments in China, Taiwan, Europe, and the U.S. Giving us added confidence: Management recently implemented a $100 million share repurchase program, $72 million of which was executed earlier this year. Yet at $18 a share, the company is trading at less than 10x 2026 earnings forecasts. That represents a significant discount to peers like Cohu and Kulicke & Soffa, which are each trading at P/E multiples in excess of 25x. We believe the stock is worth $28 a share, which is 1.7x our 2026 sales estimate for PLAB and 5x 2026 EBITDA.

BSD Analysis:
Photronics is a key supplier of photomasks used in semiconductor and display manufacturing, benefiting from rising complexity across both sectors. As chip geometries shrink and advanced nodes proliferate, demand for high-end masks increases. The company has been investing in capacity and technology to support leading-edge logic and memory customers. Display masks provide a stable, high-margin complement. The business is cyclical, but secular trends in semiconductors remain strong. Photronics operates with a clean balance sheet and solid cash generation. It’s a stealth semi-cap equipment play with real leverage to global chip demand.

Pitch Summary:
Quaker Chemical Corp. (KWR), a leading supplier of fluids used in metal production and metalworking, is a good example. The key end markets for KWR are the steel industry, industrial manufacturers, and vehicle OEMs — all areas where tariff concerns remain elevated. Quaker Houghton’s exposure, though, is relatively low as the company manufactures in the U.S. and a significant portion of its revenues are derived domestically. Quaker’s products represent a low-cost part of their customers’ production process while being mission critical. The company also enjoys more pricing power than other commodity chemical companies because it often works under a service model where its employees are brought on site to help customers ensure that KWR’s chemicals are applied properly. Over the past three years, global industrial production has been depressed, impacting Quaker’s volumes, which are down 15% vs. pre-COVID-19 levels. Management has taken advantage of this backdrop to focus on making the business leaner, cutting $20 million of costs mostly from selling, general, and administrative expenses. While Quaker’s margins are roughly in-line with the S&P 600 Chemical Index, it enjoys higher free cash flow margins as its business model is less capital intensive than many of its chemical industry peers. KWR’s high free cash flow generation has historically afforded it a premium valuation, with an average P/E ratio of 24 over the past 10 years, based on next-12-month profits. Today, however, the stock is trading at a P/E of 16, which we view to be depressed. When industrial production levels improve, we see upside from higher earnings and potential for a re-rating closer to its historic multiple.

BSD Analysis:
Quaker Chemical supplies specialty process fluids and lubricants used in metalworking, automotive manufacturing, and industrial applications. It operates in niche corners of the chemical market where performance and reliability matter more than price. The merger with Houghton increased scale and improved cost leverage. Industrial demand can ebb and flow, but Quaker’s diversified end markets help smooth the ride. Pricing actions have supported margins through inflationary periods. The balance sheet is improving as synergies roll through. Quaker is a mid-cap industrial chemicals name with more consistency than the sector typically allows.

Pitch Summary:
A new Quality Value position initiated during the quarter was Hubbell Inc (HUBB), a leading electrical component manufacturer. Over the past decade, Hubbell implemented self-help actions to shift its portfolio away from traditional commercial construction end markets and toward the power grid/utility end market, which now represents more than two-thirds of sales, thereby reducing exposure to construction spending cycles. At the same time, Hubbell has simplified its product offerings and consolidated 15% of its footprint, rationalizing underutilized assets and creating flexible capacity for faster-growing markets. During the pandemic-related supply chain disruptions, many of Hubbell’s utility customers over-ordered products to ensure availability in the field. By 2024, as lead times normalized, destocking efforts accelerated and organic revenue turned negative. The stock came under further pressure in early 2025, as investor sentiment toward power generation demand took a hit. As a result, the stock is now attractively priced in our opinion. After trading at a median 15% premium to its peers over the past 5 years and a 5% premium over the past decade, HUBB fell to a 10% discount in April and is now roughly in line with other Industrial companies on an EV/EBITDA basis. We also expect the company to benefit from continued demand for transmission and distribution infrastructure owing to the country’s aged electrical grid, and Q1-25 earnings confirmed our view that customer destocking has generally ceased.

BSD Analysis:
Hubbell is a leading electrical and utility solutions manufacturer benefiting from grid modernization, electrification, and infrastructure upgrades. Utility spending is booming as aging grids require replacement and reinforcement. Hubbell’s portfolio of connectors, controls, and smart-grid components gives it pricing power and strong margin potential. Industrial demand adds another layer of stability. The company is executing well on productivity and cost initiatives. Free cash flow is consistently robust. Hubbell is a clean, secular infrastructure winner.

Pitch Summary:
During the quarter, we initiated a position in Everest Group LTD (EG), a Deep Value global insurer with a long history of operating in the property natural catastrophe (NatCat) reinsurance market. Property & casualty underwriters such as Allstate, Progressive, and GEICO purchase NatCat reinsurance to protect their balance sheets against major weather events including hurricanes and earthquakes. NatCat reinsurance is a commodity business where supply and demand dictate terms. When times are good, capacity enters the market, diminishing returns through competition. As a result, the return on equity (ROE) for the industry tends to be more volatile than for primary underwriters. In Everest’s case, prior management made some poor underwriting decisions, pushing a diversification strategy that expanded the company’s exposure to the U.S. casualty market, which protects individuals and businesses from financial obligations resulting from bodily injury or death in the event of an accident. Unfortunately, U.S. casualty losses have risen meaningfully over the past decade due to an aggressive plaintiff bar and “nuclear settlements” awarded to claimants. The company’s new CEO has been aggressively repricing this risk. When insurance companies write less risk, capital can be freed up for other purposes, such as buying back shares. In essence, new management has adopted a shrink-to-grow strategy. Meanwhile, the stock carries a heavily discounted valuation, trading at just 1x tangible book value, versus Everest’s 25-year average of around 1.15x tangible book value. Relative to its industry peers, the stock looks even cheaper, trading at a 40-50% discount to specialty P&C insurers and a 25-50% discount to property natural catastrophe insurers.

BSD Analysis:
Everest is a global reinsurer benefiting from one of the strongest pricing cycles in decades across property-catastrophe and specialty insurance. As climate volatility increases, demand for reinsurance capacity has tightened, pushing rates higher. Everest has expanded its primary insurance business, giving it a more balanced revenue mix. Capital discipline and underwriting rigor have improved meaningfully in recent years. The company’s balance sheet is strong enough to absorb volatility. Earnings power is far higher than in prior cycles. Everest is a high-quality cyclical compounder riding a structurally favorable reinsurance market.

Pitch Summary:
NLOP is an office REIT that was spun off from W.P Carey in 2023 with the sole purpose of an orderly liquidation of the properties over time. W.P. Carey issued 1 share of NLOP for every 15 shares held by current investors which resulted in some forced selling. Investors who purchased W.P. Carey, a large multibillion dollar industrial REIT, now also had a small few hundred million dollar office REIT they owned as well that they either couldn’t own due to size constraints or didn’t want to own because of the direct office exposure. Since the spin, NLOP has sold assets at a decent clip for good valuations and has completely paid off all of their debt. Of the $148m of debt outstanding, $115m of that is non-recourse mortgage tied to 6 properties which means NLOP currently can hand the keys back to the creditors on 6 of their properties and wipe that debt off their books. For the remaining debt (the mezzanine loan), NLOP announced in April that they had paid it off, which means technically NLOP has no debt and a net cash balance sheet. With the pay down of this debt, management has hinted at future sale proceeds being returned to shareholders. Without the 6 non-recourse properties, there would be 31 properties with annual base rent (ABR) of approximately $73m on a go forward basis. Subtracting normalized operating property expenses would bring NOI to around $50m a year. If you include the property sales over the next 2 years plus a build up of cash of $4-$6 during that time, total value is about $50/share, for 56% upside at current prices. When NLOP starts paying out dividends or buying back stock, it could further increase the IRR as the dividend would give us capital back and the buyback would increase what the company is ultimately worth in the end. I expect this to grind higher as properties are sold.

BSD Analysis:
Net Lease Office Properties is a REIT structured around long-duration office leases — which is either terrifying or interesting depending on your appetite for deep value. The decline of traditional office demand is well-known, but the long lease terms create temporary insulation that can buy time for portfolio repositioning or divestitures. The story is less about growth and more about harvesting cash flows while managing refinancing and tenant rollover risk. Asset sales or re-tenanting could unlock value if done pragmatically. Governance and transparency matter a lot here, as the structure can make catalysts slow. This is a contrarian, income-heavy special situation rather than a secular growth REIT. Upside exists, but so does headline risk.

Pitch Summary:
Cipher is a Canadian specialty pharma company in the dermatology space that’s been a stable cash generative machine with gross margins in excess of 60% (not including the licensing segment), EBITDA margins over 50% and extremely high free cash flow conversion, essentially 100%, due to the $154m tax loss carryforwards and capital light nature of the business. How capital light? The company has barely any R&D and negligible capital expenditures. Some years capex is actually zero! Because of this, Cipher has extremely high ROIC and can build up cash on the balance sheet quickly. Historically the company did a little over $20m in revenues consistently with their licensing segment making up a larger portion than their product segment, but this has reversed in the last couple of years due to generics entering the market. Their main product, Epuris, was introduced in 2013 and treats severe acne. Since launching, it has grown to just under 50% market share in a niche category and did $13m in sales for 2024. I don’t expect real competition for the product as Epuris has a better delivery method as it can be taken without food and better absorption in the body. And because it operates in a small market, no pharma company is going to want to spend millions of dollars to get a product approved when the size of the market is approximately $30m. Their licensing business represents 20% of their revenues with their main product, Absorica, essentially the same product as Epuris but licensed out into the US market. Cipher has the ability to bring this product back in house in 2026 and generate more profits if it chooses to. Cipher was spun out of CML Healthcare in 2003 and run by Dr. John Mull until he resigned in 2006 while maintaining a large stake in the company. In the late 2010’s, two successive CEO’s made some questionable acquisitions which forced Craig Mull, John’s son, to step in as CEO in 2019. Since that time, Craig has cut costs, paid down debt, repurchased shares at opportune times and recently made a big acquisition that the market has yet to reflect full value for. Last summer they purchased ParaPRO for $89.5m using a mixture of cash, debt and equity that effectively doubled the business and should improve overall margins. For this they got Natroba (and the generic Spinosad) which treats scabies and head lice in the US and has 23% market share of a $120m sized market. The competitor who controls the bulk of the market, Permethrin, does not work as well because the lice have grown resistant to it which should allow Natroba to take market share as Natroba offers a complete cure. Cipher can now introduce this product not only into Canada, but also worldwide and are in discussions to do so via licensing agreements. With the acquisition they also got a 50 person US sales team which can in-house their Absorica license when it expires and layer on complementary products that Cipher purchases in the future. Ever since touching around $19/share last August, the stock was down almost 50% at the beginning of April which can be attributed to: ● Investors had high hopes on MOB-015 which is a nail fungus treatment that Cipher has the Canadian rights to and is currently approved in Europe. When North American trial results were released, it didn’t show the results necessary for approval and the stock reacted negatively to this development ● As a result of the ParaPRO acquisition, there has been some elevated operating costs during the beginning of 2025 which should subside going forward ● Cipher reports in USD but trades in Canada and if you don’t convert the numbers they appear more expensive ● Insiders own 48% of the stock which limits liquidity and the ability to take a substantial position for larger funds. Based on just the current business, I estimate it can do a normalized run rate of US $25m EBITDA. We know they just paid down $15m of the $40m from the acquisition already so EV right now is about $270m which means it’s trading at just under 11x EV/EBITDA, not egregiously cheap. But if you look 1-3 years out, the earnings generation can easily double. With this acquisition, they have the potential to 1) enter Natroba into the Canadian market, 2) license Natroba globally and 3) take market share against a product that isn’t as effective in the US. By my estimates, these actions can add an extra $25m of EBITDA, which would put Cipher at 5.5x EV/EBITDA, not accounting for any cash generation in the meantime, other acquisitions that the CEO has specifically stated they want to do, or in housing Absorica and capturing more revenue and margin. That $50m EBITDA is essentially free cash flow, and I don’t think it’s a stretch that this business, with its growth and business profile, should trade for less than 10x, or roughly where it trades today. At that multiple shares should be roughly 100% higher. Cipher seems to agree with their undervaluation as they have recently announced another share repurchase as well.

BSD Analysis:
Cipher is a specialty pharma company that lives on the economics of dermatology and niche therapeutics, focusing on drugs where commercialization is more about smart lifecycle management than splashy innovation. Its lean structure lets it convert revenue into cash at a far higher rate than typical biopharma peers. The company relies on licensing deals and reformulations, which reduces development risk but caps upside. Pipeline depth isn’t huge, but the business doesn’t need blockbusters to work — just steady execution and disciplined cost control. Capital allocation is the real driver here, and management has shown increasing willingness to repurchase shares. Cipher offers small-cap healthcare exposure with favorable asymmetry if even one or two assets outperform expectations. It’s quiet, efficient, and financially sharper than most specialty pharma names.