Investment Pitches

Pitch Summary:
Axogen, Inc. is a leader in the development of technologies focused on peripheral nerve regeneration and repair. The company's biologically active nerve graft platform reduces procedural risks by eliminating the need for secondary surgical sites. During the quarter, Axogen reported top-line growth of 17% and reaffirmed its full-year guidance for both revenue growth and gross margin. Despite this positive momentum, shares declined following a weaker-than-expected Q1 gross margin of 72%, which came in below the company's guided range of 73–75%. The shortfall was attributed to a one-time inventory adjustment and ongoing manufacturing transition. We believe the ramp-up of Axogen's new manufacturing facility positions the company for long-term margin expansion, with the potential to exceed 80% gross margins. Given our conviction in the operational improvement expected in the second half of the year, we added to our position during the period.

BSD Analysis:
The manager demonstrates strong conviction in Axogen despite temporary margin disappointment, adding to the position during the quarter's weakness. The investment thesis is built on the company's leadership position in peripheral nerve regeneration technology, which offers significant clinical advantages by eliminating secondary surgical sites and reducing procedural risks. With 17% top-line growth and reaffirmed full-year guidance, the fundamental business momentum remains intact. The 72% Q1 gross margin miss was attributed to one-time factors including inventory adjustments and manufacturing transitions, which the manager views as temporary headwinds. The key catalyst is the ramp-up of Axogen's new manufacturing facility, which is expected to drive substantial margin expansion potentially exceeding 80% gross margins long-term. This represents significant operating leverage given the company's specialized technology platform and limited competition in peripheral nerve repair. The manager's decision to increase the position size during weakness reflects confidence in the second-half operational improvements and the company's ability to execute on its margin expansion strategy.

Pitch Summary:
Ranpak Holdings Corp. is a manufacturer of paper-based protective packaging solutions. Among the many things we like about Ranpak is the sustainability of its products, which are environmentally friendly compared to plastic, foam, and other packaging materials. We also like its consumable business model and attractive unit economics. While underlying demand remained strong, the stock fell in the quarter when profitability was pressured by higher input and logistics costs due to unexpected volume spikes. We believe that these issues will prove to be short-lived resulting in improving margins over the course of the year. We trimmed the position during the period as the company's execution has been mixed; however, we still believe the secular shift from plastics to paper and the increasing adoption of labor-saving packaging automation technologies will provide long-term tailwinds.

BSD Analysis:
The manager maintains a bullish stance on Ranpak despite near-term execution challenges and margin pressure from higher input costs. The investment thesis centers on the company's sustainable competitive advantage in environmentally-friendly packaging solutions, which positions it well for the secular shift away from plastic materials. The consumable business model provides recurring revenue streams with attractive unit economics, creating predictable cash flows. While the fund trimmed the position due to mixed execution, the manager's conviction remains strong based on two key catalysts: the ongoing transition from plastic to paper packaging driven by environmental regulations and corporate sustainability initiatives, and the increasing adoption of automation technologies that reduce labor costs for customers. The temporary margin pressure from volume spikes and logistics costs is viewed as a short-term headwind that should resolve as the company optimizes operations. The long-term growth trajectory appears intact given favorable industry dynamics and Ranpak's market-leading position in sustainable packaging solutions.

Pitch Summary:
Raito Kogyo was the largest, albeit relatively modest, detractor, reducing performance by -23bps as its share price fell -1%. Raito Kogyo is a leading company in the specialist construction sector, with core operations in slope construction and ground improvement—together comprising over 70% of total sales orders. The company holds the largest market shares in these areas, with approximately 30% in slope construction and 20% in ground improvement. AVI's engagement with the company to date has focused on enhancing capital efficiency, corporate governance and shareholder communication. During the month, AVI continued to build its stake in Raito Kogyo across AVI funds (82% of shares in Raito Kogyo controlled by AVI are held in AJOT), as we seek to step up our influence with the company and use engagement to drive the necessary change to unlock value. The CEO of Raito Kogyo was one of eight AJOT portfolio companies that did not see their approval rating decline this year. Added to the portfolio in March 2024, Raito Kogyo accounted for 9.1% of AJOT's NAV at month-end as the third largest holding. We see significant upside to the current share price, and to month-end, our investment has returned an ROI of +24% for an IRR of +44% (in JPY).

BSD Analysis:
AVI maintains a bullish stance on Raito Kogyo despite modest short-term underperformance, viewing the specialist construction company as an attractive value unlock opportunity. The company holds dominant market positions with 30% share in slope construction and 20% in ground improvement, representing over 70% of total sales orders in highly specialized niches. AVI's engagement strategy focuses on enhancing capital efficiency, corporate governance, and shareholder communication to drive operational improvements. The fund has been systematically building its activist stake, with 82% of AVI's Raito Kogyo shares held in AJOT, positioning for increased influence over management decisions. Notably, the CEO maintained stable approval ratings while many other portfolio company executives saw declining support, suggesting receptiveness to shareholder input. Since adding the position in March 2024, the investment has generated solid returns of +24% ROI and +44% IRR in JPY terms despite recent price stagnation. As the third-largest holding at 9.1% of NAV, AVI sees significant upside potential through continued engagement to unlock value in this under-researched specialist construction leader.

Pitch Summary:
Kurabo Industries was the second largest contributor over the month, adding +41bps to performance as its share price rose by +5%. Kurabo Industries, established in 1988 as a textile manufacturer, has diversified its operations over the years to include chemicals, advanced technology, food and services, and real estate. Kurabo Industries has a history of stable revenues and has doubled its operating margin in recent years. Much of our engagement with the company has focused on encouraging management to direct resources towards the high-quality chemicals and advanced technology segments, and away from the unprofitable textiles business. Pleasingly, in March this year, the company announced plans in line with our recommendations, to close down its largest and most unprofitable textile factory, the Anjo Plant, by June 30, 2025. Having announced plans in May 2025 to implement several of AVI's suggestions into its medium-term plan, as noted in last month's newsletter, in June Kurabo announced the introduction of stock-based compensation plans for the company's directors. This positive step will help to ensure alignment of management actions with shareholders' best interests. At the 2025 AGM held in June, the CEO saw his approval rating decline by -13% relative to the prior year. Additionally, the company continued its 12-month buyback plan announced last November to buy back 7.3% of shares, with 48,700 shares repurchased in June and the plan now 63% complete. Kurabo Industries was added to the portfolio in January 2024 and is now the largest holding, accounting for 12.5% of AJOT's NAV, with the investment already generating a +70% ROI, for an IRR of +85% to month-end (in JPY).

BSD Analysis:
AVI presents a strong bull thesis for Kurabo Industries, a diversified Japanese manufacturer undergoing successful operational transformation under activist pressure. The company has evolved from its textile manufacturing origins into chemicals, advanced technology, food services, and real estate, with management doubling operating margins in recent years. AVI's constructive engagement strategy has yielded tangible results, with management implementing key recommendations including closure of the unprofitable Anjo textile plant and refocusing resources toward higher-quality chemicals and advanced technology segments. The recent introduction of stock-based compensation for directors represents a significant governance improvement that aligns management incentives with shareholder interests. The company's ongoing share buyback program to repurchase 7.3% of shares demonstrates commitment to capital efficiency, with the plan now 63% complete. Despite the CEO's declining approval rating, management continues to execute on AVI's strategic recommendations. As AJOT's largest holding at 12.5% of NAV, the position has delivered exceptional returns of +70% ROI and +85% IRR since initiation in January 2024.

Pitch Summary:
Broadmedia was the largest contributor over the month, adding +50bps to performance as its share price rose +9%. Broadmedia, mainly engaged in online education and IT service businesses, is a leading player in Japan, running online-learning secondary schools with the brand name "Renaissance High School Group," allowing students to learn at their own pace remotely and to focus on their learning interests. Broadmedia's unique education curriculum allows students to study e-sports, KPOP and programming, on top of the standard arts/science curriculum. In addition to operating online-schools, Broadmedia operates an IT service business, specifically for distributing Akamai Technologies' software and solutions to domestic clients. The online education business is the most profitable segment for the conglomerate, with studio contents and other smaller segments a drag on the bottom-line. During the month, AVI made two large ownership declarations, increasing our combined stake from c.25% to c.27% overall (86% of AVI's shares in Broadmedia are held in AJOT). While pressure increases from AVI, the CEO saw his approval rating decline from 81% in 2024 to 65% at the AGM this year. With AVI funds controlling the largest number of voting rights, AVI will continue to engage extensively, yet constructively, with management. Added to the portfolio in April 2024, Broadmedia accounted for 7.3% of AJOT's NAV at month-end as a top 10 holding. We see significant upside to the current share price and to month-end, our investment has generated an ROI of +19% for an IRR of +39% (in JPY).

BSD Analysis:
AVI presents a compelling bull case for Broadmedia, a Japanese online education and IT services company that has delivered strong performance with a +9% share price increase in June. The manager highlights Broadmedia's leadership position in online secondary education through its Renaissance High School Group brand, which offers innovative curriculum including e-sports, KPOP, and programming alongside traditional subjects. The online education segment represents the most profitable part of the business, while other segments drag on profitability. AVI has significantly increased its activist stake to 27% combined ownership, positioning itself as the largest shareholder with substantial influence over management decisions. The declining CEO approval rating from 81% to 65% suggests growing shareholder pressure for change, which AVI plans to leverage through constructive engagement. Since adding the position in April 2024, the investment has generated impressive returns of +19% ROI and +39% IRR in JPY terms. The manager expresses confidence in significant further upside potential from current levels.

Pitch Summary:
During the quarter, we initiated a position in Oshkosh, a leading manufacturer of aerial work platforms (AWP), vocational vehicles, wheeled military vehicles, and post office vehicles. The company is materially underearning in its AWP and defense segments but should benefit as the AWP replacement cycle materializes and as its postal delivery truck contract ramps up.

BSD Analysis:
Pzena initiated a new position in Oshkosh based on a cyclical recovery thesis across multiple business segments. The manager identifies the company as 'materially underearning' in both aerial work platforms and defense, suggesting significant operating leverage potential. The investment case centers on two key catalysts: an anticipated AWP replacement cycle that should drive demand recovery, and the ramp-up of postal delivery truck contracts providing revenue visibility. This appears to be a classic value play on an industrial company positioned at the trough of its cycle. The diversified end-market exposure across construction equipment, defense, and postal services provides multiple avenues for earnings recovery. Pzena's timing suggests they believe current valuations fail to reflect the normalized earning power once these cyclical headwinds reverse.

Pitch Summary:
Lastly, U.S. direct-to-consumer pool and spa care services company, Leslie's Inc. (LESL) continued to weigh on performance over the period. The company has had a slow start to the year as adverse weather conditions resulted in softer top-line results. As the company heads into the summer pool season, the new executive leadership team is re-evaluating pricing, optimizing inventory and implementing customer loyalty programs. Although investors remain on the sidelines, these initiatives should yield efficiency improvements. While we have been deeply disappointed with this investment, we are optimistic the new efforts will positively impact the business and position the company for future success. In our view, Leslie's current valuation reflects extreme pessimism, which is unwarranted given the company's loyal client base, vertically integrated supply chain, scale advantage and seamless customer experience.

BSD Analysis:
Despite significant disappointment with Leslie's performance, Ariel maintains a contrarian bull stance based on valuation and fundamental strengths. The company faced headwinds from adverse weather conditions that impacted the start of the pool season, resulting in softer revenue results. However, new executive leadership is implementing strategic initiatives including pricing optimization, inventory management, and customer loyalty programs that should drive efficiency improvements. While acknowledging deep disappointment with the investment, Ariel believes the current valuation reflects excessive pessimism that doesn't account for the company's competitive advantages. These include a loyal customer base, vertically integrated supply chain, scale benefits, and superior customer experience. The fund appears to view this as a turnaround situation where operational improvements and seasonal recovery could drive significant value creation from current depressed levels.

Pitch Summary:
Leading manufacturer of consumer food products, J.M. Smucker Co. (SJM) also declined during the period. Quarterly earnings benefitted from the company's legacy businesses anchored by the Uncrustables brand and coffee portfolio, however continued challenges at Hostess weighed on results. Meanwhile, management delivered disappointing fiscal year 2026 guidance due to expected profit declines driven by inflation related to higher expected coffee costs, tariffs and continued weakness at Hostess. SJM remains focused on stabilizing revenue and management believes SKU and display rationalization alongside marketing investments will help. Longer-term, we continue to believe SJM's portfolio of iconic and emerging foods brands, coupled with its broad-based innovation and productivity agenda, supports an attractive total shareholder return opportunity.

BSD Analysis:
Despite near-term headwinds, Ariel maintains a constructive long-term view on J.M. Smucker based on its strong brand portfolio and operational initiatives. The company's legacy businesses, particularly Uncrustables and the coffee portfolio, continue to perform well and demonstrate the strength of its core franchises. However, challenges at the Hostess acquisition and disappointing fiscal 2026 guidance due to coffee cost inflation and tariff impacts have pressured results. Management's focus on revenue stabilization through SKU rationalization, display optimization, and increased marketing investments should help improve performance. The fund believes Smucker's portfolio of iconic and emerging food brands, combined with its innovation and productivity initiatives, creates an attractive long-term total return opportunity. This suggests Ariel views current challenges as temporary while the underlying business fundamentals remain sound.

Pitch Summary:
By comparison, oil services company, Core Laboratories, Inc. (CLB) traded lower in the quarter on mixed earnings results. Although increased demand for diagnostic services in U.S. onshore and offshore markets aided the Production Enhancement segment, this growth was neutralized by weaker-than-expected Reservoir Description performance due to seasonality, geopolitical tensions, tariff concerns and commodity price volatility. Importantly, management noted tariffs should not have a significant impact on the business given its service-related revenue. CLB's product sales are also primarily manufactured and consumed domestically. Looking ahead, the company continues to project international growth from projects in the Middle East, Asia Pacific and West Africa and remains laser focused on generating positive free cash flow, reducing debt and improving its return on invested capital.

BSD Analysis:
Ariel presents a balanced view of Core Laboratories following mixed quarterly results that highlight both opportunities and challenges. While the Production Enhancement segment benefited from increased demand for diagnostic services in U.S. markets, this was offset by weaker Reservoir Description performance due to multiple headwinds including seasonality and geopolitical tensions. Management's guidance that tariffs should have minimal impact due to the service-oriented revenue model and domestic manufacturing provides some reassurance. The company's international growth pipeline in the Middle East, Asia Pacific, and West Africa offers expansion potential. Management's focus on free cash flow generation, debt reduction, and improving return on invested capital demonstrates disciplined capital allocation. The mixed results reflect the cyclical nature of oil services while the international opportunities and operational improvements suggest potential for recovery.

Pitch Summary:
Additionally, leading global financial franchise Northern Trust Corporation (NTRS) advanced in the quarter following strong quarterly earnings results and rumors of a potential merger with Bank of New York Mellon. In our view, NTRS remains a trusted name offering diversified products in a favorable industry with high barriers to entry. We believe Northern's 135-year track record highlights its stability and strength in navigating macroeconomic volatility with a conservative, operating approach.

BSD Analysis:
Ariel presents a quality-focused bull case for Northern Trust based on its established market position and defensive characteristics. The company delivered strong quarterly earnings and benefited from merger speculation with Bank of New York Mellon, highlighting its strategic value. Northern Trust operates in an attractive industry with high barriers to entry and offers diversified financial products to institutional and high-net-worth clients. The company's 135-year operating history demonstrates its ability to navigate various market cycles with a conservative approach. Ariel values the stability and defensive qualities of this trusted financial franchise. The fund appears to view NTRS as a high-quality holding that can perform well across different market environments while providing steady returns.

Pitch Summary:
Shares of global leader in for-profit education, Adtalem Global Education (ATGE), also jumped following a top- and bottom-line quarterly earnings beat driven by accelerating new student enrollment growth and a subsequent raise to fiscal year 2025 guidance. Revenue per student and margins at Chamberlain and Walden also came in significantly better than expected. Meanwhile, we remain encouraged by management's solid execution of remediation initiatives at the medical and veterinary schools, where revenue growth outperformed and total enrollment trends are improving. Although regulatory uncertainty within the U.S education landscape remains, we view ATGE as well insulated, if not a beneficiary of potentially less onerous government scrutiny. Longer term, we believe ATGE's strong fundamentals, quality programs, free cash flow generation and sturdy balance sheet are attractive. As the number one grantor of nursing degrees in the U.S. and the largest producer of African American MDs, PhDs and nurses in the country, we remain confident ATGE will benefit from the healthcare worker shortage in the U.S.

BSD Analysis:
Ariel maintains a strong bull thesis on Adtalem Global Education based on accelerating operational momentum and structural healthcare demand drivers. The company delivered impressive earnings beats with accelerating student enrollment growth and raised fiscal 2025 guidance, demonstrating execution strength. Revenue per student and margin improvements at key divisions Chamberlain and Walden exceeded expectations, while remediation efforts at medical and veterinary schools are showing positive results. The company's market-leading position as the top nursing degree grantor and largest producer of African American healthcare professionals positions it well to benefit from the ongoing healthcare worker shortage. Strong fundamentals including free cash flow generation and a solid balance sheet provide financial stability. Despite regulatory uncertainty in education, Ariel views ATGE as well-positioned and potentially benefiting from reduced government scrutiny.

Pitch Summary:
Live entertainment, media and technology company, Sphere Entertainment Co. (SPHR) advanced following a quarterly earnings beat driven by resilient consumer demand and lower than anticipated operating costs. We expect financial results will continue to ramp as Sphere debuts its next fully immersive experience, The Wizard of Oz, later this summer; scales its concert residencies; and reaches higher venue utilization across show types. Advertising, sponsorship and suite revenue should provide further upside. Meanwhile, expansion with additional spheres beyond Abu Dhabi remains a priority. Additionally, MSG Networks and its lenders worked out an agreement in the quarter, reducing the debt burden for the regional sports networks business going forward and removing an overhang on shares. In our view, the experiential immersive venue in Las Vegas and its franchise opportunities present a meaningfully underappreciated long-term opportunity.

BSD Analysis:
Ariel presents a compelling bull case for Sphere Entertainment based on strong operational momentum and expanding growth opportunities. The company delivered an earnings beat driven by resilient consumer demand and cost discipline, demonstrating the appeal of its immersive entertainment concept. The upcoming Wizard of Oz experience and scaling concert residencies should drive higher venue utilization and revenue growth. Multiple revenue streams including advertising, sponsorship, and suite sales provide additional upside potential. The debt reduction agreement for MSG Networks removes a key overhang and improves the financial profile. Management's expansion plans beyond Abu Dhabi highlight the franchise potential of the Sphere concept. The fund views the Las Vegas venue and its replication opportunities as significantly undervalued by the market.

BSD Analysis:
Sound Shore views Disney as an attractive risk/reward opportunity with potential for growth both domestically and internationally, particularly given the company's scale and successful repositioning of its offerings. The fund has resisted investing in statistically cheap legacy media stocks until industry winners become clearer, but believes Disney has emerged as a leader in the digital streaming transition. The stock recently hit new highs as the market responded positively to Disney's plan to launch the flagship ESPN streaming service by the end of 2025. Sound Shore sees further upside potential from current levels, indicating continued confidence in the company's strategic direction. Disney's ability to leverage its content library and brand strength across multiple platforms positions it well in the evolving media landscape. The company's theme parks and experiences division provides diversification and recurring revenue streams beyond the streaming business. Sound Shore's investment reflects their belief that Disney has successfully navigated the industry disruption and is positioned to benefit from the ongoing shift to digital consumption. Disney represents 2.64% of the portfolio, demonstrating meaningful conviction in this media transformation story.

BSD Analysis:
AES has been negatively impacted by prospective changes to investment tax credits for renewable energy sources, with policy uncertainty freezing market participants despite strong underlying demand. Sound Shore notes that AES continues to receive orders from customers for renewable systems to power data centers, regardless of the tax situation, indicating robust fundamental demand. The company is benefiting from the same data center buildout trend that has helped Flex, as these facilities require significant power generation capacity. Post-quarter developments include rumors of private equity and infrastructure fund interest in a potential takeover, which validates the underlying asset value. The disconnect between policy uncertainty and actual customer demand creates an opportunity for patient investors like Sound Shore. AES represents a play on the intersection of renewable energy infrastructure and data center power requirements. The fund's holding demonstrates conviction in the long-term structural demand for power generation despite near-term policy headwinds. AES represents 2.72% of the portfolio, indicating a meaningful position in this utility infrastructure play.

BSD Analysis:
Flex was Sound Shore's best performing holding for both the quarter and year-to-date, benefiting from its exposure to the data center buildout driven by artificial intelligence demand. As an outsource manufacturer and long-term holding, Flex is well-positioned as a supplier to data centers, which are experiencing unprecedented demand due to AI infrastructure requirements. The company is capitalizing on the secular trend of increased data center construction and the corresponding need for more electricity to power these facilities. Sound Shore's thesis centers on the structural growth in data center demand as AI applications require massive computing power and storage capacity. Flex's manufacturing capabilities and supply chain expertise make it an essential partner for companies building out AI infrastructure. The fund's long-term holding period demonstrates confidence in Flex's ability to execute and benefit from this multi-year trend. This positioning aligns with Sound Shore's strategy of identifying companies with internally driven earnings growth that can compound over time. Flex represents 2.85% of the portfolio, reflecting a meaningful allocation to this technology infrastructure play.

BSD Analysis:
Sound Shore added to their Hologic position during the quarter, taking advantage of healthcare sector weakness to increase exposure to this medical technology supplier focused on diagnostics and women's health. The managers highlight Hologic's compelling valuation at approximately 14 times earnings, which they view as attractive for a company in the medical technology space. The emergence of private equity buyout rumors in late May validates their thesis about the underlying value in parts of the healthcare sector. This potential takeout interest demonstrates that sophisticated investors recognize the quality and value proposition of Hologic's business model. The company's focus on women's health diagnostics provides a defensive growth profile with recurring revenue characteristics. Sound Shore's decision to add during market weakness reflects their contrarian approach and conviction in the company's fundamentals. Hologic represents 3.00% of the portfolio, indicating a meaningful allocation to this healthcare technology play.

Pitch Summary:
For example, drug manufacturer Teva Pharmaceutical was a name we added to as the company continues to execute on its plan to accelerate growth, primarily through the success of its pipeline.

BSD Analysis:
Sound Shore Management increased their position in Teva Pharmaceutical during the second quarter, viewing the healthcare selloff as an opportunity to add to high-conviction names. The fund managers are bullish on Teva's execution of its growth acceleration plan, particularly highlighting the success of the company's drug pipeline. This represents a contrarian play in the healthcare sector, which has been under pressure due to regulatory uncertainty around Medicaid reimbursement, pharmaceutical pricing, and tariffs. The managers appear confident in Teva's ability to drive growth through its pipeline despite the macro headwinds facing the pharmaceutical industry. Their decision to add to the position during market weakness demonstrates conviction in the company's fundamental prospects. The fund's approach aligns with their strategy of taking advantage of price dislocations in names where they have the highest conviction. Teva represents 3.13% of the portfolio as of quarter-end, indicating a meaningful position size.

Pitch Summary:
One of the most negatively impacted industries during the pandemic was travel as most countries enacted some kind of restrictions during that time. The industry has also been one of the slowest to recover from the pandemic, but we are finally seeing it return to more normal levels. In the US, the Transportation Security Administration (TSA) is setting records. On June 22, TSA screened nearly 3.1 million individuals, the most ever in the single day. So far seven of the top ten business travel days in TSA history have occurred over the last two months. The recovery has also been evident globally. We are participating in this trend through Booking Holdings whose revenues and earnings have exceeded pre-pandemic highs. They aggressively adapt to changing technologies such as AI to streamline the booking process and provide more value to their users. Looking forward, the World Travel & Tourism Council estimates that global travel will contribute an all-time high of $11.7 trillion to the world economy in 2025, which would be around $164 billion above the 2019 peak.

BSD Analysis:
The manager positions Booking Holdings as a key beneficiary of the travel industry's robust recovery from pandemic lows. The investment thesis is supported by strong operational data, including record TSA screening numbers with 3.1 million individuals processed on June 22, and seven of the top ten business travel days occurring in recent months. Booking Holdings has already surpassed pre-pandemic revenue and earnings levels, demonstrating operational leverage as travel volumes normalize. The company's competitive advantage lies in its aggressive adoption of AI technology to enhance the booking experience and provide superior user value. The macro tailwind is substantial, with the World Travel & Tourism Council projecting global travel to reach $11.7 trillion in 2025, representing $164 billion above 2019 peak levels. This appears to be a cyclical recovery play with secular growth drivers from technology adoption. The manager views this as a direct participation in the travel recovery theme with a market-leading platform positioned for continued growth.

Pitch Summary:
AI disruption has been a growing concern for many investors as they are uncertain of the long-term consequences of this technology. Alphabet has been at the front of AI disruption discussions. Some feared the impact of generative AI tools like ChatGPT on Google Search, but Alphabet has been proactive in defending their moat in search by releasing their own tools. Despite the rapid increase in generative AI use, Google Search still controls about 89.71% of the global search market. The biggest hurdle that AI companies like OpenAI face is that generative AI products are difficult to monetize and are not yet profitable, which gives Alphabet a distinct advantage in search right now. Another strength is Alphabet's content services like YouTube. According to Nielsen data, YouTube accounts for 12.5% of all US TV viewing time, higher than any other distributor, without needing to spend billions on creating content for their platform. Netflix is spending over $20 billion for their content this year. With Google and YouTube, Alphabet has the two most visited websites in the world; YouTube has over four times as many monthly visits as the next closest competitor. Alphabet's dominant market position is enhanced with a strong balance sheet currently consisting of over $95.148 billion in cash and marketable securities. Alphabet continues to execute, forecasting 2025 and 2026 earnings per share of $9.65 and $10.25, respectively. Additional uncertainty overhangs the stock from Judge Mehta's anticipated ruling on the "search monopoly" claim due in August. While he has not ruled out the possibility of significant remedies such as forcing a sale of Chrome, he has voiced skepticism over the effectiveness of structural breakups.

BSD Analysis:
The manager presents a compelling bull case for Alphabet centered on its defensive moat against AI disruption and dominant market positioning. Despite concerns about ChatGPT's impact, Google Search maintains an impressive 89.71% global market share, while competitors struggle with monetization challenges that give Alphabet a competitive advantage. The YouTube platform represents a particularly strong asset, capturing 12.5% of US TV viewing time without the massive content spending required by competitors like Netflix ($20+ billion annually). Alphabet's financial strength is evident with over $95 billion in cash and securities, supporting projected EPS growth from $9.65 in 2025 to $10.25 in 2026. The main risk factor is the pending antitrust ruling in August, though the judge has expressed skepticism about structural breakups. The investment thesis relies on Alphabet's ability to maintain search dominance while leveraging its content distribution advantages. This appears to be a core holding based on the manager's confidence in the company's execution and market position.

Pitch Summary:
Newmark Group (NMRK) is a top-tier commercial real estate (CRE) services firm offering a full suite of advisory solutions across investment sales, debt brokerage, leasing, property and facility management, mortgage servicing, and valuation. The company is a structurally improving commercial real estate services platform that is gaining market share in capital markets and mortgage servicing while shifting toward a more resilient, recurring revenue model. Despite muted industry volumes, the company continues to execute well, supported by strong free cash flow, low leverage, and a substantial repurchase authorization. The recent removal of an insider ownership overhang further enhances governance clarity and capital return visibility. With shares trading well below historical levels and peer valuations the market is over-discounting macro risks, creating an attractive entry point as volumes normalize and durable revenue streams compound.

BSD Analysis:
Schafer Cullen presents a compelling bull case for Newmark Group, emphasizing the company's structural improvements and market share gains in commercial real estate services. The manager highlights NMRK's transition toward a more resilient, recurring revenue model through mortgage servicing and property management, which should provide stability during cyclical downturns. The investment thesis centers on valuation dislocation, with shares trading below historical multiples and peer comparisons despite strong operational execution. Key fundamental strengths include robust free cash flow generation, conservative leverage profile, and significant capital return capacity through share repurchases. The removal of insider ownership overhang represents a governance catalyst that should improve capital allocation transparency. The manager views current macro concerns as overdone, positioning NMRK as an attractive entry point for normalized market conditions.