Investment Pitches

Pitch Summary:
Progressive (Financials, Insurance) has a high Corporate Resilience score and has a role to play in calculating the genuine cost of climate change and diversifying climate risk, as well as providing access to affordable insurance. The stock experienced a pullback during this period, driven by read-across from peers on weaker organic growth expectations in short term.

BSD Analysis:
The manager maintains a bullish view on Progressive despite recent weakness, highlighting the company's high Corporate Resilience score and strategic role in climate risk management. The fund values Progressive's ability to accurately price climate-related risks and provide affordable insurance access, aligning with sustainability and social impact objectives. The Q2 pullback was driven by peer-related concerns about near-term organic growth rather than company-specific fundamentals, suggesting temporary market sentiment issues. Progressive's expertise in risk assessment and pricing gives it competitive advantages in an environment of increasing climate volatility and extreme weather events. The company's technology-driven approach to insurance and telematics capabilities position it well for long-term market share gains. The manager's emphasis on climate risk diversification suggests Progressive benefits from the insurance industry's evolution toward more sophisticated risk modeling. The focus on affordable insurance access indicates the fund views Progressive as serving important social needs while generating attractive returns. The company's data analytics capabilities and customer-centric approach provide sustainable competitive moats in the property and casualty insurance market.

Pitch Summary:
Merck & Co (Health Care, Pharmaceuticals) has a high Corporate Resilience score, and is contributing to a more robust and sustainable health care system through its leading drug and vaccine discovery. The stock's weakness in Q2 was driven by a combination of concerns about its drug pipeline, particularly the competition from generic versions of Keytruda, and weaker market sentiment around Health Care stocks.

BSD Analysis:
The manager maintains a bullish stance on Merck despite Q2 weakness, emphasizing the company's high Corporate Resilience score and leadership in drug and vaccine discovery. The fund values Merck's contribution to healthcare system sustainability through innovative pharmaceutical development, aligning with the portfolio's ESG objectives. Near-term concerns center on pipeline uncertainty and the looming patent cliff for Keytruda, Merck's blockbuster cancer immunotherapy, which faces generic competition threats. Broader healthcare sector sentiment also weighed on performance, suggesting macro rather than company-specific headwinds. The manager's continued conviction implies confidence in Merck's ability to navigate the Keytruda transition through pipeline development and new drug launches. Merck's established vaccine franchise and oncology expertise provide defensive characteristics and growth opportunities beyond Keytruda. The emphasis on sustainable healthcare systems suggests the fund views Merck as a long-term beneficiary of global health trends and innovation needs. The company's research capabilities and diversified pharmaceutical portfolio position it to address evolving healthcare challenges.

Pitch Summary:
Eli Lilly and Co (Health Care, Pharmaceuticals) boasts an innovative drug portfolio that has the potential to transform the standard of care across several diseases. The stock was weaker in the quarter despite results that were in-line or better than expectations. Shares were under pressure after CVS' announcement that competitor Novo Nordisk's Wegovy will now be the preferred GLP-1 drug on their national formulary, which currently represents a mid-single digit percentage of Lilly's current Zepbound patients.

BSD Analysis:
The manager maintains a bullish long-term view on Eli Lilly despite near-term headwinds, emphasizing the company's innovative drug portfolio with transformative potential across multiple disease areas. While the stock underperformed in Q2, Lilly delivered results that met or exceeded expectations, suggesting fundamental strength beneath market volatility. The primary concern stems from CVS's formulary decision favoring Novo Nordisk's Wegovy over Lilly's Zepbound, though the manager notes this affects only a mid-single digit percentage of current patients. The fund appears confident in Lilly's competitive position in the GLP-1 obesity market, viewing the formulary setback as temporary rather than structurally damaging. Lilly's broader pharmaceutical pipeline and innovation capabilities provide multiple growth drivers beyond the GLP-1 franchise. The manager's continued conviction despite recent weakness suggests belief in the company's ability to compete effectively in the large and growing obesity treatment market. The emphasis on transformative potential across multiple diseases indicates a portfolio approach that reduces dependence on any single therapeutic area.

Pitch Summary:
Nvidia (Information Technology, Semiconductors) has one of the highest Corporate Resilience scores in the US universe and is playing a critical role in the AI economy by providing material energy and resource efficiency. The stock hit an all-time high in the quarter despite facing sales restrictions in China. The company reported strong year-over-year growth driven by high chip demand. Nvidia's growth in AI infrastructure remains robust, with new opportunities in robotics and a strong ecosystem. Revenue is expected to remain solid due to ongoing supply constraints in graphics processing units (GPUs) and their increasing adoption by 'hyperscale' cloud service providers.

BSD Analysis:
The manager presents a strongly bullish case for NVIDIA, emphasizing the company's dominant position in the AI economy and exceptional Corporate Resilience score. Despite facing China sales restrictions, NVIDIA achieved all-time highs and delivered strong year-over-year growth, demonstrating the company's pricing power and market leadership in AI semiconductors. The fund highlights NVIDIA's critical role in providing energy and resource efficiency solutions, aligning with sustainability objectives while capitalizing on AI infrastructure demand. Supply constraints in GPUs continue to support pricing and revenue visibility, with hyperscale cloud providers driving increasing adoption. The manager sees expanding opportunities beyond traditional AI training into robotics and broader AI ecosystem applications, suggesting multiple growth vectors. NVIDIA's strong ecosystem and platform approach create competitive moats that extend beyond hardware into software and services. The combination of supply-constrained market dynamics, expanding addressable markets, and dominant market position creates a compelling long-term growth story despite geopolitical headwinds.

Pitch Summary:
Broadcom (Information Technology, Semiconductors) offers energy efficient data center compute solutions which, in addition to requiring less energy, facilitate broader economic participation by making connectivity more equitable. Stock returns in Q2 were driven by a combination of strong earnings, high demand for AI data centers, involvement in the custom application-specific integrated circuit (ASIC) chip market, and positive market sentiment.

BSD Analysis:
The manager maintains a bullish stance on Broadcom, highlighting the company's strategic positioning in energy-efficient data center solutions and AI infrastructure. Broadcom delivered strong Q2 performance driven by robust earnings and surging demand for AI data centers, demonstrating the company's ability to capitalize on the AI infrastructure boom. The fund emphasizes Broadcom's involvement in the custom ASIC chip market, which represents a high-margin, specialized segment serving hyperscale cloud providers and AI companies. The manager values the company's energy-efficient compute solutions, which align with sustainability themes while addressing the massive power requirements of modern data centers. Broadcom's technology enables broader economic participation through improved connectivity infrastructure, supporting the fund's social impact objectives. The combination of strong fundamental performance, exposure to secular AI trends, and alignment with sustainability goals creates a compelling investment thesis. The company's specialized semiconductor solutions are critical enablers of the AI economy, positioning Broadcom to benefit from continued infrastructure investment.

Pitch Summary:
Oracle (Information Technology, Systems Software), which is held due to its high Corporate Resilience score and exposure to the 'enhancing productivity' theme through software and resource efficiency and optimization, reported earnings and revenue growth exceeding analysts' expectations. Customer commitments are projected to double next year, contributing to a significant backlog in calendar year 2026. Additionally, the company announced plans to purchase US$40bn-worth of Nvidia chips for collaboration with OpenAI on US data center capacity.

BSD Analysis:
The manager presents a bullish case for Oracle based on strong fundamental performance and strategic positioning in AI infrastructure. The company exceeded earnings and revenue expectations while demonstrating robust forward momentum with customer commitments expected to double next year, creating a substantial 2026 backlog. Oracle's $40 billion commitment to purchase Nvidia chips for OpenAI collaboration signals aggressive investment in AI data center capacity, positioning the company at the center of the AI infrastructure buildout. The fund values Oracle's high Corporate Resilience score and alignment with productivity enhancement themes through software efficiency solutions. This substantial capital commitment to AI infrastructure suggests Oracle is making a strategic bet on capturing significant market share in the rapidly expanding AI economy. The combination of strong current fundamentals and forward-looking AI investments creates a compelling growth narrative. The manager's emphasis on Oracle's resource efficiency and optimization capabilities aligns with broader sustainability themes while capitalizing on secular AI trends.

Pitch Summary:
Founded in 2009 and headquartered in San Francisco, California, Uber is a global technology platform that facilitates the movement of people, goods and services across a wide range of markets. What began as a simple ride-hailing app has evolved into a multi-segment leader operating in more than 70 countries, connecting millions of consumers, drivers, couriers and merchants worldwide. Uber's operations are organized into three primary business segments: Mobility, which includes ridesharing, car rentals and other personal transportation services (~45% of revenue); Delivery, which spans food, grocery, convenience and retail delivery through the Uber Eats platform (~50%); and Freight, its digital brokerage and logistics arm (~5%). These segments are built on a shared platform supported by real-time matching technology, global app penetration, strong network effects and one of the most recognized consumer brands globally—reflected in the familiar phrase, "I'll call an Uber." Some of the quality characteristics we have identified for Uber include: Global scale and platform efficiency, underpinned by strong brand recognition and an asset-light, supply-led model that enables rapid expansion, high operating leverage and efficient capital deployment; Integrated, cross-segment ecosystem, where offerings like Uber One memberships drive customer activity and loyalty (i.e., the majority of gross delivery bookings come from members); and Market leadership across core categories, including approximately 70% market share in U.S. ridesharing, a strong #2 position in U.S. delivery, and leading positions in key international delivery markets, such as the U.K., France and Australia. Uber has scaled to sustainably FREE cash flow with continued progress on margin expansion driven by scale and disciplined cost control. Based on our analysis, shares of the company currently trade at a greater than 10% normalized Cash Flow Return on Economic Value, reflecting what we believe is meaningful upside potential. Uber's strong balance sheet—with approximately $7 billion in cash—provides flexibility to reinvest in growth, pursue strategic initiatives or return capital to shareholders. Catalysts we have identified for Uber, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include: Increased profitability and stronger FREE cash flow generation as enhanced cross-promotion between Mobility and Delivery deepens user engagement and significantly lowers customer acquisition costs; Further partnerships—such as with taxi fleets, travel platforms and autonomous vehicle companies—should continue to expand Uber's reach and reduce supply costs; and Continued expansion in non-urban markets, with new features like Uber Reserve broadening addressable demand and improving service in suburban areas.

BSD Analysis:
The manager presents a comprehensive bull case for Uber as a diversified technology platform with multiple growth drivers. The company has successfully evolved from ride-hailing to a multi-segment ecosystem spanning mobility, delivery, and freight logistics across 70+ countries. Uber's asset-light model enables rapid scaling with high operating leverage, while network effects and brand recognition create competitive moats. The integrated platform benefits from cross-selling opportunities, with Uber One memberships driving loyalty and reducing customer acquisition costs. Market leadership positions including 70% U.S. rideshare market share provide pricing power and scale advantages. The transition to sustainable free cash flow generation demonstrates operational maturity, while the strong balance sheet with $7 billion cash provides strategic flexibility. Key catalysts include enhanced cross-segment synergies, strategic partnerships, and geographic expansion into suburban markets. The manager's valuation analysis suggests meaningful upside potential based on normalized cash flow returns.

Pitch Summary:
Alcon, a global leader in eye care, was one of the largest detractors during the quarter. Aside from its earnings report, there was little material news, and we did not view anything in the report as affecting the company's long-term fundamentals. While quarterly updates can influence sentiment, our focus remains on the strength and quality of the business. Alcon operates in a resilient, oligopolistic industry with high barriers to entry and recurring revenue streams tied to its large installed base of cataract surgery systems. It also continues to innovate across product categories, including its premium intraocular lens portfolio (e.g., PanOptix, Vivity), ultra-premium daily contact lenses (e.g., Dailies Total1) and over-the-counter products, such as Systane for dry eyes. Since its spinoff from Novartis in 2019, the company has also demonstrated greater agility in R&D, commercial execution and capital allocation—catalysts we previously identified. More broadly, we believe Alcon's ability to strengthen its partnerships with eye care professionals and broaden access to underutilized premium technologies makes the company uniquely positioned to benefit from an aging population, increased access to eye care in emerging markets, and rising awareness and diagnosis of chronic dry eye conditions.

BSD Analysis:
The manager demonstrates conviction in Alcon despite short-term stock underperformance, emphasizing the company's structural advantages over quarterly volatility. Alcon operates in an oligopolistic eye care market with high barriers to entry and recurring revenue from its installed base of surgical equipment. The company's innovation across premium product categories including intraocular lenses, contact lenses, and dry eye treatments positions it for sustainable growth. The 2019 spinoff from Novartis has unlocked operational agility in R&D and capital allocation, validating the manager's previous catalyst identification. Demographic tailwinds including aging populations and increased eye care access in emerging markets support long-term demand growth. The investment thesis centers on Alcon's market leadership, product innovation, and exposure to secular healthcare trends. Strong partnerships with eye care professionals provide distribution advantages and support premium product adoption.

Pitch Summary:
Amgen, the biopharmaceutical company, was one of the largest detractors for the quarter. While the company's branded drugs continued to advance (a previously identified catalyst), with cholesterol medicine Repatha, osteoporosis treatment Evenity and bone-strengthening drug Prolia all growing sales in the double digits, concerns surrounding potential tariff impacts, tax reform and pressure on drug prices weighed on shares. We believe it is too early to assess the full impact of these macro uncertainties and are confident in Amgen's demonstrated ability to adapt through evolving policy and pricing dynamics. The company reaffirmed its long-term commitment to domestic manufacturing and innovation through its upcoming $2 billion expansions in Ohio and North Carolina, building on more than $5 billion in U.S. operational investments since 2017. Furthermore, Amgen continued to advance its robust pipeline, as its 1L bemarituzumab (bema) phase 3 trial for gastric cancer met its primary endpoint, and MariTide, the company's weight-loss drug, demonstrated strong efficacy in phase 1 and 2 trials. MariTide, which could offer more convenient monthly dosing compared to daily or weekly regimens, showed promising early results, though tolerability will be an important focus heading into phase 3. Management noted that modified dose ramp-up strategies may help mitigate these effects. Despite near-term pressures, we remain encouraged by Amgen's continued market share gains across key therapies and the potential to enhance the company's competitiveness and resilience in a dynamic healthcare landscape.

BSD Analysis:
The manager maintains conviction in Amgen despite near-term headwinds from policy uncertainty and pricing pressures. The company's established drug portfolio shows strong momentum with Repatha, Evenity, and Prolia all delivering double-digit sales growth, validating the manager's previous catalyst identification. Amgen's $2 billion domestic manufacturing expansion demonstrates commitment to U.S. operations and potential insulation from trade policy risks. The robust pipeline offers significant upside potential, particularly with bemarituzumab meeting phase 3 endpoints for gastric cancer treatment. MariTide represents a potentially transformative opportunity in the weight-loss market with convenient monthly dosing versus competitors' more frequent regimens. While tolerability concerns exist, management's proactive approach to dosing strategies suggests confidence in addressing these challenges. The investment thesis centers on Amgen's ability to navigate policy headwinds while capitalizing on pipeline advancement and market share expansion.

Pitch Summary:
Microchip Technology, the microcontroller (MCU) and analog semiconductor producer, was a top contributor for the quarter. After several quarters of underperformance driven by prolonged customer destocking, the company's fundamentals began to improve meaningfully, as returning CEO Steve Sanghi's turnaround plan is underway. Bookings showed signs of stabilization, supported by more balanced inventories across customers and distribution channels, as well as indications of recovering end-market demand. Operational execution also improved under the renewed leadership, with early benefits emerging from cost-saving initiatives—such as the closure of its Arizona wafer fabrication facility—and tighter inventory management. Microchip's long-standing customer relationships and commitment to extended product lifecycles continue to support recurring revenue and reduce design-in risk. Combined with its consistent record of strong FREE cash flow generation and shareholder returns, this disciplined approach reinforces our conviction in the company's ability to manage through industry cycles. Longer term, we believe Microchip remains well-positioned to gain share in 16- and 32-bit MCUs and areas including IoT, 5G infrastructure, autonomous vehicles and data centers.

BSD Analysis:
The manager presents a turnaround story for Microchip Technology following a cyclical downturn. The return of CEO Steve Sanghi appears to be catalyzing operational improvements, with stabilizing bookings indicating the end of customer destocking cycles. Cost reduction initiatives including facility closures demonstrate management's focus on operational efficiency during the recovery phase. The manager emphasizes Microchip's competitive advantages including long-standing customer relationships and extended product lifecycles that create recurring revenue streams and reduce customer churn. Strong free cash flow generation and consistent shareholder returns highlight the company's capital discipline. The investment thesis focuses on market share gains in higher-growth segments including IoT, 5G infrastructure, autonomous vehicles, and data centers. The cyclical recovery combined with secular growth drivers positions Microchip for sustained outperformance.

Pitch Summary:
Microsoft, the global leader in software and enterprise services, was the top contributor for the quarter. The company delivered a strong quarterly update, with Azure revenue growing 35%—well ahead of expectations—driven by improved execution in core cloud services and sustained AI-related demand. Importantly, strength extended beyond AI, with renewed momentum in traditional enterprise cloud workloads, such as data platforms, infrastructure hosting and developer services. Profitability also impressed, with operating margins expanding to 46% supported by disciplined cost control. While near-term results were strong, our conviction remains grounded on Microsoft's enduring advantages: dominant positions in mission-critical software, high recurring revenue driven by a deep subscriber base, and the ability to reinvest at scale. One example is GitHub Copilot—a generative AI tool that helps developers write, review and debug code—which now has over 15 million users and is seeing increasing enterprise adoption. With widespread use of offerings like Copilot, Teams and LinkedIn, and underpinned by robust FREE cash flow supporting continued innovation, we believe Microsoft remains exceptionally well-positioned to compound value across cloud, productivity and AI-enabled workflows over the long term.

BSD Analysis:
The manager presents a compelling bull case for Microsoft based on strong operational execution and structural advantages. Azure's 35% revenue growth significantly exceeded expectations, demonstrating the company's ability to capitalize on both AI demand and traditional cloud workloads. The expansion of operating margins to 46% reflects disciplined cost management while scaling operations. The manager emphasizes Microsoft's durable competitive moats including dominant market positions in mission-critical software and high recurring revenue streams. GitHub Copilot's growth to 15 million users exemplifies successful AI monetization beyond core cloud services. The investment thesis centers on Microsoft's platform ecosystem spanning productivity, cloud infrastructure, and AI-enabled workflows. Strong free cash flow generation provides capital for continued innovation and market expansion.

Pitch Summary:
Cuckoo Holdings is a South Korea-based holding company that owns 100% of Cuckoo Electronics, a home appliance manufacturer, and 40.6% of Cuckoo Homesys, a home appliance rental business. The Koo family controls 64.9% of the company with Koo Bon-hak, the CEO of both Cuckoo Electronics and Homesys, holding a 45.1% stake. Cuckoo Electronics is a home appliance manufacturer specializing in Korean-style pressure rice cookers, which use higher cooking pressure than Japanese-style models, making them better suited to domestic preferences. Rice is central to Korean cuisine, consumed with nearly every meal. This makes rice cookers essential kitchen appliances. Cuckoo is the top selling brand in Korea for the last 17 years with roughly 70% market share and also has a growing presence in the US, China, Malaysia, Singapore and Indonesia. Over the last decade Cuckoo increased its top line by ~4% annually mainly due to price increases, international expansion and more recently with introduction of adjacent product categories like induction cooktop ranges and microwaves. Cuckoo has a developed omni-channel strategy with 37% of its sales generated online and a presence in all major retailers in Korea. Cuckoo Homesys pursues a South Korean appliance rental model in which subscribers sign multi-year contracts to rent mainly water and air purifiers and then provide the water filters and air filters but also massage chairs and other home appliances. The business model is characterized by low churn rates since customers are contractually bound to a device which requires the regular replacement of high-margin consumables. Cuckoo Homesys holds a 52% stake in Cuckoo International Bhd (5336 MK) the Malaysian subsidiary which is 30% of consolidated sales and recently had its IPO. Cuckoo is the number two player in Malaysia behind Coway's (021240 KS) 62% market share. Management are looking to increase market share at the expense of Coway. The IPO will support management's growth ambitions and financial restructuring while potentially unlocking value. Notably, Cuckoo Homesys trades at a 50% discount to its Malaysian subsidiary. We are attracted to the Electronics division because whilst the Korean domestic market remains stable at three million units per year, Cuckoo's focus on the premium category allows for price increases supported by quality and continued innovation. Koreans prefer domestic rice cookers tailored to local preferences which protect the domestic businesses from external threats. Domestically Cuckoo competes against Bubang (formerly known as Cuchen) which has roughly half the size of Cuckoo and a relatively poor operating history. Cuckoo and Bubang together represent 90% of the domestic market. The management only sees Zojirushi (7965 JT) as an external threat, but they believe the products are offered at high prices and lack key technological capabilities. Cuckoo is classified as a general holding company, a structure that doesn't have a great reputation in South Korea, mainly due to examples of poor corporate governance. These often have complicated structures and have shown poor capital allocation. Cuckoo, however, scores above average due to a long history of operating performance, cleaner structure and management commitment to a minimum dividend yield. Since transitioning to a holding company in 2018, Cuckoo Holdings has consistently boosted its dividend. The management targets to continue increasing the dividend which we support given the low payout ratio. Despite satisfactory performance since our investment, the shares continue to trade at <7x earnings excluding net cash and close to a negative enterprise value due to the 40.6% stake in Cuckoo Homesys. To put it differently, we believe that the operating business plus the Homesys stake plus the net cash positions should be valued at least over twice the current market capitalization.

BSD Analysis:
Palm Harbour Capital presents a compelling value thesis on Cuckoo Holdings, a Korean holding company with dominant market positions in rice cookers and appliance rentals. The manager highlights Cuckoo's 70% market share in Korean rice cookers, a defensible position given local preferences for Korean-style pressure cookers over Japanese alternatives. The company benefits from stable domestic demand of 3 million units annually while expanding internationally across Asia and the US. The rental business model through Cuckoo Homesys provides recurring revenue with low churn rates and high-margin consumables, creating predictable cash flows. The recent IPO of the Malaysian subsidiary at a premium to the parent company suggests significant value unlocking potential. Management's commitment to dividend growth and the company's clean corporate structure differentiate it from typical Korean holding companies. At less than 7x earnings excluding net cash and trading near negative enterprise value, the manager believes the sum-of-the-parts valuation supports at least 100% upside potential.

Pitch Summary:
Finally, we added Zimmer Biomet Holdings, Inc. (ZBH), maker of hips and knees. The company has struggled to maintain market share following its 2015 acquisition of Biomet, but we expect new product launches to deliver mid-single digit top-line growth over the next three-to-five years. In success ZBH should experience incremental revenue and earnings growth as well as margin expansion.

BSD Analysis:
Ariel initiated a position in Zimmer Biomet based on expectations of a turnaround driven by new product launches. The investment thesis acknowledges the company's historical market share struggles following the 2015 Biomet acquisition but focuses on future improvement potential. New product introductions are expected to drive mid-single digit revenue growth over the next three to five years, representing a recovery from recent performance. The manager expects successful product launches to generate incremental revenue and earnings growth while driving margin expansion. This suggests Zimmer Biomet's new products command premium pricing or improved manufacturing efficiency. Ariel appears to be making a contrarian bet on the company's ability to regain market position through innovation. The investment reflects confidence in management's product development strategy and execution capabilities in the orthopedic device market.

Pitch Summary:
We also bought Walt Disney Company (DIS), the storied entertainment conglomerate whose businesses span media networks, film studios, theme parks, cruise ships and consumer products. A recent pullback in the stock provided an attractive entry point. In our view, growth in Disney+ subscribers, higher average revenue per user (APRU), margin expansion in the streaming segment and greater license sales amid successful releases will result in substantial operating income growth, bolstering the company's overall margins and free cash flow generation.

BSD Analysis:
Ariel initiated a position in Disney following a stock pullback that created an attractive entry opportunity. The investment thesis is built on multiple drivers of operating income growth across Disney's diversified entertainment portfolio. Disney+ subscriber growth and increasing average revenue per user should drive streaming segment profitability as the platform matures. Margin expansion in streaming, combined with successful content releases driving license sales, creates multiple revenue streams. The manager expects these improvements to translate into substantial operating income growth and enhanced free cash flow generation. Disney's diversified business model spanning media networks, studios, theme parks, and consumer products provides multiple avenues for value creation. Ariel appears to be betting on Disney's ability to monetize its content library more effectively while achieving streaming profitability. The timing suggests confidence in Disney's strategic execution during a period of market skepticism.

Pitch Summary:
We purchased leading gaming operator in Italy, Lottomatica Group SpA. The company operates top brands such as GoldBet, Better, BetFlag, Lottomatica, and Planetwin365 and seeks to broaden its player base by scaling the business model via an omnichannel approach. With online migration gaining momentum, Lottomatica is growing its competitive advantage by building out its in-house tech stack and cross-brand AI platform. These initiatives are designed to improve operational efficiency, and customer engagement while supporting scalable growth. The recent award of a new Italian online gaming concession is expected to be a significant catalyst, enabling market consolidation and increasing market share. With Italy's online gaming penetration well below the average of comparable European markets (33% versus 60%), we believe Lottomatica is well positioned to capitalize on the sector's digital transformation and long-term growth potential.

BSD Analysis:
Ariel initiated a position in Lottomatica Group based on the company's leadership position in the Italian gaming market and significant digital transformation opportunity. The investment thesis centers on Italy's low online gaming penetration (33%) compared to European peers (60%), creating substantial runway for growth. Lottomatica's omnichannel strategy and in-house technology development, including AI platforms, should drive operational efficiency and customer engagement. The recent award of a new Italian online gaming concession represents a major catalyst that enables market consolidation and share gains. The company's portfolio of established brands provides cross-selling opportunities and customer acquisition advantages. Ariel views the combination of regulatory tailwinds, technology investments, and market structure changes as creating multiple value creation paths. The digital migration trend in gaming provides a secular growth driver that should support sustained revenue and margin expansion.

Pitch Summary:
We also added First Solar, Inc. (FSLR), a U.S.-based photovoltaic solar technology and manufacturing company. As the only US based solar module manufacturer of scale, we believe the company stands to benefit from growing AI power demands as well as "America First" energy policy tailwinds. As of today, FSLR is sold out through 2026. However, as the final Inflation Reduction Act rules become clearer, we believe FSLR's contract wins should accelerate, particularly as developers seek to secure as much capacity as possible to pre-qualify modules for subsidies before they expire.

BSD Analysis:
Ariel initiated a position in First Solar based on the company's unique positioning as the only large-scale U.S. solar module manufacturer. The investment thesis is driven by multiple tailwinds including growing AI power demands and "America First" energy policies that favor domestic manufacturing. First Solar's complete sell-out through 2026 demonstrates exceptional demand visibility and pricing power. The Inflation Reduction Act provides significant policy support, with developers rushing to secure capacity to qualify for subsidies before expiration. This creates a favorable supply-demand dynamic that should support both volume growth and margin expansion. The manager views First Solar as uniquely positioned to capitalize on the intersection of AI infrastructure buildout, energy security concerns, and domestic manufacturing incentives. The combination of policy tailwinds, capacity constraints, and secular growth drivers creates a compelling investment opportunity.

Pitch Summary:
We purchased Ebara Corporation, a Japan-based manufacturer of industrial and semiconductor-related equipment. We believe Ebara's Precision Machinery division is well positioned to benefit from a near-term recovery in memory wafer fab equipment (WFE) spending, particularly in NAND. Longer term, the adoption of hybrid bonding should increase demand for Ebara's chemical mechanical planarization (CMP) tools. Lastly, we favorably view the new management team's plan to narrow its margin gap with peers through operating leverage, expanding its service mix and optimizing its global footprint.

BSD Analysis:
Ariel initiated a position in Ebara Corporation based on cyclical recovery prospects and long-term secular growth drivers. The investment thesis centers on the Precision Machinery division's exposure to memory wafer fab equipment spending, particularly in NAND flash memory where recovery is expected. The adoption of hybrid bonding technology represents a significant long-term catalyst that should drive increased demand for Ebara's CMP tools. New management's strategic plan to close the margin gap with competitors through operational improvements provides additional upside potential. The strategy includes leveraging operating scale, expanding higher-margin services, and optimizing global operations. Ariel views the combination of cyclical recovery and structural improvements as creating multiple paths to value creation. The company appears well-positioned to benefit from both near-term semiconductor capex recovery and longer-term technology transitions in chip manufacturing.

Pitch Summary:
We bought Spain-based global commercial bank Banco Bilbao Vizcaya Argentaria SA (BBVA) which operates the largest bank in Mexico and has leading franchises across South America and Turkey. We expect loan growth in Mexico to be driven by market share gains, low levels of leverage and the potential near shoring of US production. We also favor BBVA's exposure to Turkey and its attractive age demographics. Falling inflation and a reduction in the policy rate in the country should help revenues prosper. A potential merger between BBVA and Banco Sabadell would also unlock significant value via market share gains, cost synergies and scale in product offerings as well as technological investments. Even though BBVA offers a superior return-on-equity relative to peers, at current levels shares are trading at a meaningful discount.

BSD Analysis:
Ariel initiated a position in BBVA based on the bank's strong geographic positioning and multiple value creation catalysts. The investment thesis is anchored by BBVA's dominant market position in Mexico, where nearshoring trends and low leverage levels should drive loan growth. The bank's exposure to Turkey provides additional upside as falling inflation and policy rate cuts should boost revenues. BBVA's superior return-on-equity relative to peers indicates strong operational efficiency, yet the stock trades at a meaningful discount to intrinsic value. The potential merger with Banco Sabadell represents a significant catalyst that could unlock value through market share expansion, cost synergies, and technological scale. The manager views BBVA's diversified geographic exposure and demographic tailwinds as sustainable competitive advantages. The combination of attractive valuation, operational excellence, and multiple catalysts creates a compelling risk-adjusted return opportunity.

Pitch Summary:
We added AirTAC International Group, a Taiwan-based pneumatic equipment manufacturer. Pneumatic systems are an attractive power output and given Chinese stimulus, we expect growing demand from electronics, auto and battery, as well as general industrials to trend higher. Notably, AirTAC has been steadily gaining share in the region through its direct sales efforts, new SKU launches, lower prices and improving product quality. Taken together, we expect these competitive advantages will yield attractive long-term earnings growth.

BSD Analysis:
Ariel initiated a position in AirTAC International Group based on expected demand growth from Chinese economic stimulus and the company's competitive positioning. The investment thesis centers on pneumatic systems being an attractive power solution across multiple end markets including electronics, automotive, battery manufacturing, and general industrials. AirTAC has been systematically gaining market share through a multi-pronged strategy of direct sales expansion, new product launches, competitive pricing, and quality improvements. The manager expects Chinese stimulus measures to drive increased industrial activity, benefiting pneumatic equipment demand. AirTAC's regional market share gains demonstrate operational execution and competitive advantages that should translate to sustained earnings growth. The company appears well-positioned to capitalize on industrial automation trends and infrastructure investment in the region.

Pitch Summary:
Lastly, French pharmaceutical company, Sanofi underperformed during the period, primarily due to renewed concerns over potential U.S. tariffs on European pharmaceutical imports. While the company continues to demonstrate strength in its drug pipeline, mixed results from Phase 3 candidate Itepekimab in recent chronic obstructive pulmonary disease (COPD) clinical trials further weighed on shares. At its current valuation, we believe Sanofi's immunology pipeline is underappreciated and are awaiting clinical Phase 3 outcomes in Amlitelimab for atopic dermatitis. Additionally, we remain optimistic in the growth trajectory of Dupixent.

BSD Analysis:
Ariel maintains a bullish stance on Sanofi despite recent underperformance driven by tariff concerns and mixed clinical trial results. The manager believes the market is undervaluing Sanofi's robust immunology pipeline, particularly given the current attractive valuation. While Itepekimab showed mixed Phase 3 results in COPD trials, Ariel remains focused on the broader pipeline potential. The upcoming Phase 3 results for Amlitelimab in atopic dermatitis represent a key catalyst that could drive significant value creation. Dupixent continues to show strong growth trajectory, providing a stable revenue base. The manager views current headwinds from potential U.S. tariffs as temporary policy risks rather than fundamental business concerns. Ariel appears to be taking advantage of market pessimism to maintain exposure to what they view as an underappreciated pharmaceutical franchise with significant pipeline optionality.