Investment Pitches

Pitch Summary:
Booking is the largest online travel agency in the world. This is a network effect business model, where Booking acts as an aggregator of supply (independent hotels) on one side and demand (leisure travelers) on the other. This aggregation of fragmented supply and demand allows them to charge a healthy commission when a user books a room, which in turn allows them to outspend all other players on customer acquisition while still earning good returns. Booking is best-in-class at digital marketing, earning the highest returns on acquired traffic of all the online travel agencies. Booking has tremendous scale and an asset-light business model, generating very high returns on capital and free cash flow. Most of their revenue is generated from independent hotels that depend on Booking not just to deliver incremental guests, but also for cross-currency payments, merchandising, and customer service. Recently, shares have come under pressure over fears that AI will displace online travel agencies. We believe these concerns are overblown. AI is unlikely to recreate Booking's global network of hotels given the extreme fragmentation of supply and Booking's on-the-ground sales force. Booking's payments and customer service capabilities are also difficult to replicate, further protecting the business against new entrants. In our view, new AI tools are more likely to integrate Booking's existing inventory and capabilities into their models, rather than recreating these features themselves. If travel research shifts from traditional search to LLMs, Booking's historical expertise in digital marketing makes them well-positioned to win this traffic. Furthermore, AI should boost Booking's margins through efficiencies in customer service and marketing. At a mid-teens forward earnings multiple, we believe Booking shares are attractive on both a relative and absolute basis.

BSD Analysis:
FMI presents a strong bull case for Booking Holdings, emphasizing the company's dominant position as the world's largest online travel agency with powerful network effects. The manager highlights Booking's superior digital marketing capabilities and asset-light model that generates exceptional returns on capital and free cash flow. The thesis focuses on Booking's entrenched relationships with independent hotels, who rely on the platform for multiple services beyond bookings, including payments and customer service. FMI dismisses AI disruption concerns, arguing that Booking's global hotel network and on-ground sales force create insurmountable barriers for new entrants. The manager believes AI will actually benefit Booking through operational efficiencies and that the company's digital marketing expertise positions it well for evolving search behaviors. At a mid-teens forward P/E, FMI sees attractive valuation relative to the business quality and competitive moat.

Pitch Summary:
Huron is a leading consulting firm serving hospitals, health systems, and higher education institutions. Decades of successful engagements have earned the company deeply entrenched relationships within its core end markets. While these industries are not typically associated with rapid growth, Huron's value proposition is squarely aimed at helping organizations navigate an unrelenting stream of business model, regulatory, and technology challenges – pressures that have only intensified. Because these institutions tend to operate with lean internal resources, they consistently rely on outside expertise to work through complex issues, creating a durable and recurring source of demand for Huron's services. Management sees a substantial opportunity to deepen penetration within the existing customer base over the coming years, and the company's strategy of broadening its capabilities – both organically and through tuck-in acquisitions – should drive further wallet share gains. In aggregate, we believe Huron can grow its top line in the low double digits annually, comprised of mid-to-upper single-digit organic growth supplemented by a modest contribution from M&A. Combined with a commitment to margin expansion and a consistent track record of share repurchases, we see a credible path to low-to-mid teens earnings per share growth on an annualized basis. Concerns about AI disrupting the consulting model have pressured Huron's valuation and weighed on the shares. We believe this risk is largely misunderstood. Huron views AI as a revenue opportunity – one it is already pursuing by helping clients develop and implement AI roadmaps – while simultaneously leveraging the technology internally to reduce its own costs. Both efforts are underway. Further reinforcing the company's resilience, management noted that ~ 2/3rds of 2025 revenue was outcome-based, fixed-fee, or recurring in nature, and that its highly skilled consultants delivering mission-critical work for institutions facing disruption are considerably more insulated than other consulting models. At a low-teens forward earnings multiple, we believe the shares offer compelling value relative to the quality and durability of the underlying business.

BSD Analysis:
FMI presents a compelling bull case for Huron Consulting Group, emphasizing the firm's entrenched relationships in healthcare and higher education sectors. The manager highlights Huron's defensive positioning in industries that consistently require external expertise due to lean internal resources and ongoing regulatory/technology challenges. The thesis centers on sustainable double-digit revenue growth through organic expansion and strategic acquisitions, with management targeting low-to-mid teens EPS growth through margin expansion and share repurchases. FMI views AI disruption concerns as overblown, noting that Huron is actively monetizing AI as a revenue opportunity while using it internally for cost reduction. The manager emphasizes that two-thirds of 2025 revenue is recurring or outcome-based, providing revenue stability. At a low-teens forward P/E multiple, FMI sees significant valuation upside relative to the business quality and growth prospects.

Pitch Summary:
IMCD is a leading global distributor of specialty chemicals and ingredients, operating across more than 60 countries. The business benefits from a resilient foundation, with approximately 55% of sales – and an even greater share of profits – derived from life science end markets, including pharmaceuticals, beauty and personal care, food and nutrition, and home care. Specialty chemical distributors like IMCD also bring meaningful value-added capabilities to both suppliers and customers, fostering deep, sticky relationships that support attractive margins and strong returns on invested capital. While the industry enjoyed a robust period of growth in the years immediately following COVID, more recent results have been weighed down by soft end-market demand and customer destocking. We view this slowdown as cyclical rather than structural, and expect the business to return to more consistent, above-average organic growth as conditions normalize. The long-term drivers remain firmly intact: rising consumption of specialty chemicals, ongoing product innovation, and increasing outsourcing to distributors. Larger players with meaningful scale advantages are also well positioned to reinvest in their offerings and capture share from smaller competitors. This dynamic should further enhance IMCD's organic growth profile coupled with their consistent and disciplined approach to bolt-on M&A provides an additional avenue for compounding growth. Taken together, we believe IMCD has a long and visible growth runway, with the potential to compound earnings per share at a double-digit rate over the coming years. At a mid-teens forward earnings multiple, the shares are trading meaningfully below the company's long-term historical valuation averages. We believe that the combination of strong earnings growth and multiple expansion sets up a compelling return profile for investors over the next several years.

BSD Analysis:
FMI presents a compelling bull case for IMCD, highlighting the company's leading position in specialty chemicals distribution across 60+ countries with defensive life sciences exposure comprising 55% of sales. The manager emphasizes IMCD's value-added capabilities that create sticky supplier and customer relationships, supporting attractive margins and strong ROIC. FMI views the recent slowdown from soft demand and destocking as cyclical rather than structural, expecting normalization to drive above-average organic growth. The investment thesis centers on intact long-term drivers including rising specialty chemical consumption, product innovation, and increased outsourcing to distributors. The manager highlights IMCD's scale advantages for market share gains and disciplined M&A approach as additional growth drivers. FMI projects double-digit EPS compounding potential with the stock trading at mid-teens forward P/E, meaningfully below historical averages, setting up attractive returns through both earnings growth and multiple expansion.

Pitch Summary:
Booking is the largest online travel agency in the world. This is a network effect business model, where Booking acts as an aggregator of supply (independent hotels) on one side and demand (leisure travelers) on the other. This aggregation of fragmented supply and demand allows them to charge a healthy commission when a user books a room, which in turn allows them to outspend all other players on customer acquisition while still earning good returns. Booking is best-in-class at digital marketing, earning the highest returns on acquired traffic of all the online travel agencies. Booking has tremendous scale and an asset-light business model, generating very high returns on capital and free cash flow. Most of their revenue is generated from independent hotels that depend on Booking not just to deliver incremental guests, but also for cross-currency payments, merchandising, and customer service. Recently, shares have come under pressure over fears that AI will displace online travel agencies. We believe these concerns are overblown. AI is unlikely to recreate Booking's global network of hotels given the extreme fragmentation of supply and Booking's on-the-ground sales force. Booking's payments and customer service capabilities are also difficult to replicate, further protecting the business against new entrants. In our view, new AI tools are more likely to integrate Booking's existing inventory and capabilities into their models, rather than recreating these features themselves. If travel research shifts from traditional search to LLMs, Booking's historical expertise in digital marketing makes them well-positioned to win this traffic. Furthermore, AI should boost Booking's margins through efficiencies in customer service and marketing. At a mid-teens forward earnings multiple, we believe Booking shares are attractive on both a relative and absolute basis.

BSD Analysis:
FMI presents a strong bull case for Booking Holdings, emphasizing the company's dominant position as the world's largest online travel agency with powerful network effects. The manager highlights Booking's two-sided marketplace model that aggregates fragmented hotel supply with traveler demand, enabling healthy commission rates and superior digital marketing ROI versus competitors. FMI emphasizes the asset-light, high-return business model generating strong free cash flow, with revenue diversification beyond room bookings into payments, merchandising, and customer service. The investment thesis directly addresses AI disruption fears, arguing that Booking's global hotel network, on-ground sales force, and payment/service capabilities create difficult-to-replicate moats. The manager views AI as more likely to integrate with rather than replace Booking's platform, while potentially boosting margins through operational efficiencies. FMI sees the mid-teens forward P/E as attractive given the business quality and defensive characteristics.

Pitch Summary:
Huron is a leading consulting firm serving hospitals, health systems, and higher education institutions. Decades of successful engagements have earned the company deeply entrenched relationships within its core end markets. While these industries are not typically associated with rapid growth, Huron's value proposition is squarely aimed at helping organizations navigate an unrelenting stream of business model, regulatory, and technology challenges – pressures that have only intensified. Because these institutions tend to operate with lean internal resources, they consistently rely on outside expertise to work through complex issues, creating a durable and recurring source of demand for Huron's services. Management sees a substantial opportunity to deepen penetration within the existing customer base over the coming years, and the company's strategy of broadening its capabilities – both organically and through tuck-in acquisitions – should drive further wallet share gains. In aggregate, we believe Huron can grow its top line in the low double digits annually, comprised of mid-to-upper single-digit organic growth supplemented by a modest contribution from M&A. Combined with a commitment to margin expansion and a consistent track record of share repurchases, we see a credible path to low-to-mid teens earnings per share growth on an annualized basis. Concerns about AI disrupting the consulting model have pressured Huron's valuation and weighed on the shares. We believe this risk is largely misunderstood. Huron views AI as a revenue opportunity – one it is already pursuing by helping clients develop and implement AI roadmaps – while simultaneously leveraging the technology internally to reduce its own costs. Both efforts are underway. Further reinforcing the company's resilience, management noted that ~ 2/3rds of 2025 revenue was outcome-based, fixed-fee, or recurring in nature, and that its highly skilled consultants delivering mission-critical work for institutions facing disruption are considerably more insulated than other consulting models. At a low-teens forward earnings multiple, we believe the shares offer compelling value relative to the quality and durability of the underlying business.

BSD Analysis:
FMI presents a compelling bull case for Huron Consulting Group, emphasizing the firm's entrenched relationships in healthcare and higher education markets. The manager highlights Huron's defensive positioning, noting that these institutions consistently require external expertise due to lean internal resources and ongoing regulatory/technology challenges. FMI projects low double-digit revenue growth driven by mid-to-upper single-digit organic growth plus M&A contributions, translating to low-to-mid teens EPS growth through margin expansion and share repurchases. The investment thesis directly addresses AI disruption concerns, positioning Huron as benefiting from AI both as a revenue opportunity (helping clients implement AI strategies) and cost reduction tool. The manager emphasizes the recurring nature of two-thirds of 2025 revenue and the mission-critical nature of Huron's services as defensive moats. At a low-teens forward P/E multiple, FMI views the valuation as attractive relative to business quality and durability.

Pitch Summary:
IMCD is a leading global distributor of specialty chemicals and ingredients, operating across more than 60 countries. The business benefits from a resilient foundation, with approximately 55% of sales – and an even greater share of profits – derived from life science end markets, including pharmaceuticals, beauty and personal care, food and nutrition, and home care. Specialty chemical distributors like IMCD also bring meaningful value-added capabilities to both suppliers and customers, fostering deep, sticky relationships that support attractive margins and strong returns on invested capital. While the industry enjoyed a robust period of growth in the years immediately following COVID, more recent results have been weighed down by soft end-market demand and customer destocking. We view this slowdown as cyclical rather than structural, and expect the business to return to more consistent, above-average organic growth as conditions normalize. The long-term drivers remain firmly intact: rising consumption of specialty chemicals, ongoing product innovation, and increasing outsourcing to distributors. Larger players with meaningful scale advantages are also well positioned to reinvest in their offerings and capture share from smaller competitors. This dynamic should further enhance IMCD's organic growth profile coupled with their consistent and disciplined approach to bolt-on M&A provides an additional avenue for compounding growth. Taken together, we believe IMCD has a long and visible growth runway, with the potential to compound earnings per share at a double-digit rate over the coming years. At a mid-teens forward earnings multiple, the shares are trading meaningfully below the company's long-term historical valuation averages. We believe that the combination of strong earnings growth and multiple expansion sets up a compelling return profile for investors over the next several years.

BSD Analysis:
FMI presents a compelling bull case for IMCD, highlighting the company's leadership position in specialty chemical distribution across 60+ countries with defensive life sciences exposure comprising 55% of sales. The manager emphasizes IMCD's value-added capabilities that create sticky customer relationships, supporting attractive margins and strong ROIC. FMI views current weakness as cyclical destocking rather than structural decline, expecting normalization to drive above-average organic growth. The investment thesis centers on intact long-term drivers including rising specialty chemical consumption, product innovation, and increased outsourcing to distributors. The manager sees IMCD's scale advantages enabling market share gains from smaller competitors, while disciplined M&A provides additional growth avenues. FMI projects double-digit EPS compounding potential with shares trading at mid-teens forward P/E, meaningfully below historical averages, setting up attractive returns through earnings growth and multiple expansion.

Pitch Summary:
Booking is the largest online travel agency in the world. This is a network effect business model, where Booking acts as an aggregator of supply (independent hotels) on one side and demand (leisure travelers) on the other. This aggregation of fragmented supply and demand allows them to charge a healthy commission when a user books a room, which in turn allows them to outspend all other players on customer acquisition while still earning good returns. Booking is best-in-class at digital marketing, earning the highest returns on acquired traffic of all the online travel agencies. Booking has tremendous scale and an asset-light business model, generating very high returns on capital and free cash flow. Most of their revenue is generated from independent hotels that depend on Booking not just to deliver incremental guests, but also for cross-currency payments, merchandising, and customer service. Recently, shares have come under pressure over fears that AI will displace online travel agencies. We believe these concerns are overblown. AI is unlikely to recreate Booking's global network of hotels given the extreme fragmentation of supply and Booking's on-the-ground sales force. Booking's payments and customer service capabilities are also difficult to replicate, further protecting the business against new entrants. In our view, new AI tools are more likely to integrate Booking's existing inventory and capabilities into their models, rather than recreating these features themselves. If travel research shifts from traditional search to LLMs, Booking's historical expertise in digital marketing makes them well-positioned to win this traffic. Furthermore, AI should boost Booking's margins through efficiencies in customer service and marketing. At a mid-teens forward earnings multiple, we believe Booking shares are attractive on both a relative and absolute basis.

BSD Analysis:
FMI presents a strong bull case for Booking Holdings, emphasizing the company's dominant position as the world's largest online travel agency with powerful network effects. The manager highlights Booking's ability to aggregate fragmented hotel supply and traveler demand, enabling superior customer acquisition economics and best-in-class digital marketing returns. FMI views the asset-light model as generating exceptional returns on capital and free cash flow, with revenue diversification beyond booking commissions into payments and customer service. The investment thesis directly addresses AI disruption concerns, arguing that Booking's global hotel network, on-ground sales force, and payment capabilities create insurmountable barriers for new entrants. The manager believes AI will more likely integrate with Booking's existing platform rather than replace it, while potentially improving margins through operational efficiencies. At a mid-teens forward P/E, FMI sees attractive valuation for this high-quality network effect business.

Pitch Summary:
Huron is a leading consulting firm serving hospitals, health systems, and higher education institutions. Decades of successful engagements have earned the company deeply entrenched relationships within its core end markets. While these industries are not typically associated with rapid growth, Huron's value proposition is squarely aimed at helping organizations navigate an unrelenting stream of business model, regulatory, and technology challenges – pressures that have only intensified. Because these institutions tend to operate with lean internal resources, they consistently rely on outside expertise to work through complex issues, creating a durable and recurring source of demand for Huron's services. Management sees a substantial opportunity to deepen penetration within the existing customer base over the coming years, and the company's strategy of broadening its capabilities – both organically and through tuck-in acquisitions – should drive further wallet share gains. In aggregate, we believe Huron can grow its top line in the low double digits annually, comprised of mid-to-upper single-digit organic growth supplemented by a modest contribution from M&A. Combined with a commitment to margin expansion and a consistent track record of share repurchases, we see a credible path to low-to-mid teens earnings per share growth on an annualized basis. Concerns about AI disrupting the consulting model have pressured Huron's valuation and weighed on the shares. We believe this risk is largely misunderstood. Huron views AI as a revenue opportunity – one it is already pursuing by helping clients develop and implement AI roadmaps – while simultaneously leveraging the technology internally to reduce its own costs. Both efforts are underway. Further reinforcing the company's resilience, management noted that ~ 2/3rds of 2025 revenue was outcome-based, fixed-fee, or recurring in nature, and that its highly skilled consultants delivering mission-critical work for institutions facing disruption are considerably more insulated than other consulting models. At a low-teens forward earnings multiple, we believe the shares offer compelling value relative to the quality and durability of the underlying business.

BSD Analysis:
FMI presents a compelling bull case for Huron Consulting Group, emphasizing the firm's entrenched relationships in healthcare and higher education markets. The manager highlights Huron's defensive positioning in sectors that consistently require external expertise due to lean internal resources and ongoing regulatory/technology challenges. FMI projects low double-digit revenue growth driven by mid-to-upper single-digit organic growth plus M&A contributions, translating to low-to-mid teens EPS growth through margin expansion and share buybacks. The investment thesis centers on AI concerns being overblown, with management viewing AI as a revenue opportunity rather than a threat. The manager notes that two-thirds of 2025 revenue is outcome-based, fixed-fee, or recurring, providing revenue stability. At a low-teens forward P/E multiple, FMI sees compelling value in this quality consulting franchise with durable competitive advantages.

Pitch Summary:
AT&T's Series A preferred shares, trading under the ticker T.PR.A, offer a 5% preferred dividend yield. With a current yield of approximately 6.18%, these shares provide a markup of 225 basis points over the 5-year US Treasury rate. The low-single-digit preferred dividend payout ratio enhances the risk/reward profile of this investment. Despite the company's massive investment plans, the low payout ratio ensures the preferred dividends are well-protected. The preferred shares are a compelling option for income-focused investors seeking stable returns.

BSD Analysis:
AT&T's financial health is robust, with strong cash flows fully covering all dividends and preferred dividends. The company's 2025 financial results show a net profit of nearly $22 billion and an EPS exceeding $3/share, indicating solid profitability. The preferred dividends require only about $150 million annually, representing less than 1% of net income, ensuring excellent coverage. While AT&T's net debt may increase due to its investment spree, the preferred dividends remain secure, making the preferred shares an attractive investment for those prioritizing income stability.

Pitch Summary:
CF Industries Holdings Inc. was a standout contributor to the SMID Moat Index in March 2026, with shares surging approximately 30%. The company benefits from supply disruptions caused by geopolitical tensions, which have driven fertilizer prices higher. Morningstar raised its fair value estimate for CF to $135 per share, citing expectations of sustained elevated nitrogen prices. CF Industries holds a narrow moat rating due to its cost-advantaged position, with over 90% of its nitrogen production using low-cost North American natural gas.

BSD Analysis:
CF Industries' strong performance amid geopolitical tensions underscores its strategic advantages in the fertilizer market. The company's cost-advantaged production using low-cost natural gas positions it well against global competitors. As geopolitical disruptions continue to impact supply chains, CF Industries is likely to maintain its pricing power and profitability. The narrow moat rating reflects its competitive cost structure, making it a compelling investment in the materials sector.

Pitch Summary:
Fortinet Inc. was a leading contributor to the Moat Index performance in March 2026, posting gains despite a broader technology sector decline. The company's platform-based cybersecurity solutions held up well amid market volatility. Fortinet's competitive position is underpinned by customer switching costs and a reinforcing network effect from its expansive installed base. Morningstar assigns a wide moat rating to Fortinet, and the company trades meaningfully below Morningstar’s fair value estimates.

BSD Analysis:
Fortinet's resilience during a challenging market period highlights its strong competitive advantages. The company's ability to maintain performance amid geopolitical tensions and AI-related cybersecurity concerns underscores its robust business model. As AI tools evolve, Fortinet is well-positioned to capitalize on increased demand for cybersecurity solutions. The company's wide moat rating reflects its durable competitive advantages, making it an attractive investment in the technology sector.

Pitch Summary:
CrowdStrike Holdings, Inc. is currently facing challenges due to the emergence of advanced AI models like Anthropic's Claude Mythos, which could potentially disrupt traditional cybersecurity methods. Despite initial optimism about its partnership with Anthropic, the market has grown wary of AI's potential to replace existing cybersecurity technologies. The company's valuation remains high, trading at 16x FY27 revenue targets and nearly 80x EPS targets, despite a projected revenue growth rate of only 20%. This overvaluation, combined with the AI threat, suggests limited upside potential for the stock.

BSD Analysis:
CrowdStrike's recent $500 million increase in its share buyback program, bringing the total authorization to $1.5 billion, indicates confidence in its long-term prospects. However, the company's current valuation does not adequately account for the risks posed by AI advancements. While AI could boost short-term cybersecurity spending, the long-term implications of AI models finding vulnerabilities in code could undermine traditional cybersecurity solutions. The market's skepticism is reflected in the stock's recent decline, and unless CrowdStrike can demonstrate significant growth or innovation, its current price may not be sustainable.

Pitch Summary:
Finally, a brief note on a recent development involving Rivian (NSQ: RIVN) and Uber (NYQ: UBER). Uber recently agreed to invest $1.25 billion in Rivian through 2031 in exchange for 10,000 robotaxis using Rivian's R2 model. We view this deal as reinforcing the idea that Rivian's platform has multiple potential pathways to monetization over time, particularly as autonomous and mobility ecosystems continue to evolve. While there is still significant execution ahead, developments like this highlight the optionality inherent in Rivian's business and the range of outcomes that could emerge over the next several years.

BSD Analysis:
The manager views Rivian's recent $1.25 billion partnership with Uber as validation of the company's platform versatility and multiple monetization pathways. The deal involves 10,000 robotaxis using Rivian's R2 model through 2031, positioning the company at the intersection of electric vehicles and autonomous mobility. The manager emphasizes the optionality inherent in Rivian's business model, suggesting multiple potential value creation scenarios as autonomous and mobility ecosystems mature. While acknowledging execution risks remain significant, the partnership demonstrates external validation of Rivian's technology platform. The manager appears bullish on the company's long-term prospects, viewing current developments as expanding the range of positive outcomes. The investment thesis centers on Rivian's ability to capitalize on the convergence of electrification and autonomous driving trends. This partnership provides both capital and strategic validation for Rivian's broader platform ambitions beyond traditional vehicle manufacturing.

Pitch Summary:
We added two new companies to the portfolio, Petróleo Brasileiro, better known as Petrobras, (PBR) and SM Energy (SM). Although we have invested in other types of energy sector companies in the past, this is the first time that Blue Tower has invested in oil and gas exploration and production stocks. We typically do not invest in these commodity stocks as we prefer to invest in companies with strong barriers to entry, higher earnings quality, and lower maintenance capital expenditure requirements. Given the idiosyncratic strengths of these two companies and current prices, we believe they are attractive opportunities and also help balance out the risk exposures in the rest of the Global Value portfolio. Many investors appear to be suffering from an assumption that commodity markets will quickly revert to pre-conflict conditions. This bias represents the kind of mispricing that shrewd and fundamentals-focused investors serve to correct.

BSD Analysis:
Blue Tower initiated a position in Petrobras, marking the fund's first investment in oil and gas exploration and production stocks. The manager acknowledges this represents a departure from their typical investment criteria of seeking companies with strong barriers to entry and higher earnings quality. The investment thesis centers on capitalizing on market mispricing driven by the Persian Gulf conflict, which has disrupted approximately 20% of global oil supplies. The manager believes many investors are incorrectly assuming commodity markets will quickly normalize, creating an opportunity for fundamentals-focused investors. Petrobras benefits from being geographically isolated from Middle East supply disruptions while possessing what the manager describes as "idiosyncratic strengths." The position serves a dual purpose of providing attractive returns and portfolio risk balancing during the current energy crisis. The investment reflects a tactical shift to benefit from sustained higher oil prices that the manager expects will persist longer than consensus estimates.

Pitch Summary:
We added two new companies to the portfolio, Petróleo Brasileiro, better known as Petrobras, (PBR) and SM Energy (SM). Although we have invested in other types of energy sector companies in the past, this is the first time that Blue Tower has invested in oil and gas exploration and production stocks. We typically do not invest in these commodity stocks as we prefer to invest in companies with strong barriers to entry, higher earnings quality, and lower maintenance capital expenditure requirements. Given the idiosyncratic strengths of these two companies and current prices, we believe they are attractive opportunities and also help balance out the risk exposures in the rest of the Global Value portfolio. Many investors appear to be suffering from an assumption that commodity markets will quickly revert to pre-conflict conditions. This bias represents the kind of mispricing that shrewd and fundamentals-focused investors serve to correct.

BSD Analysis:
Blue Tower added SM Energy as their second new oil and gas exploration and production investment, representing a significant strategic shift for the fund. The manager explicitly notes this departure from their traditional investment approach of focusing on companies with strong competitive moats and superior earnings quality. The investment thesis is predicated on exploiting market mispricing caused by the Persian Gulf conflict, which has created the largest oil supply disruption in history according to the International Energy Agency. SM Energy, as a US-based producer, benefits from being outside the conflict zone while capitalizing on sustained higher oil prices. The manager believes the market is incorrectly pricing commodity disruptions as temporary, creating opportunities for patient, fundamentals-driven investors. The position provides portfolio diversification benefits while positioning the fund to benefit from what the manager expects will be a prolonged period of elevated energy prices. This tactical allocation reflects the manager's conviction that infrastructure damage in the Persian Gulf will take years to repair, supporting higher oil prices longer than consensus expectations.

Pitch Summary:
We added two new companies to the portfolio, Petróleo Brasileiro, better known as Petrobras, (PBR) and SM Energy (SM). Although we have invested in other types of energy sector companies in the past, this is the first time that Blue Tower has invested in oil and gas exploration and production stocks. We typically do not invest in these commodity stocks as we prefer to invest in companies with strong barriers to entry, higher earnings quality, and lower maintenance capital expenditure requirements. Given the idiosyncratic strengths of these two companies and current prices, we believe they are attractive opportunities and also help balance out the risk exposures in the rest of the Global Value portfolio. Many investors appear to be suffering from an assumption that commodity markets will quickly revert to pre-conflict conditions. This bias represents the kind of mispricing that shrewd and fundamentals-focused investors serve to correct.

BSD Analysis:
Blue Tower initiated a position in Petrobras, marking the fund's first investment in oil and gas exploration and production stocks. The manager acknowledges this represents a departure from their typical investment criteria of seeking companies with strong barriers to entry and higher earnings quality. The investment thesis centers on capitalizing on market mispricing driven by the Persian Gulf conflict, which has disrupted approximately 20% of global oil supplies. The manager believes many investors are incorrectly assuming commodity markets will quickly normalize, creating an opportunity for fundamentals-focused investors. Petrobras benefits from being geographically isolated from Middle East supply disruptions while possessing what the manager describes as "idiosyncratic strengths." The position serves a dual purpose of providing attractive returns and portfolio risk balancing during the current energy crisis. The investment reflects a tactical shift to benefit from sustained higher oil prices that the manager expects will persist longer than consensus estimates.

Pitch Summary:
Futu, one of the companies in which we are invested, is both a beneficiary of Hong Kong's renewed strength in capital markets and a product of the city's new shape: more digital, more competitive and more cross-border than the old local economy. Futu is best known for Futubull and Moomoo, the brokerage apps that took Hong Kong by storm during the great COVID retail-trading boom of 2020 and 2021. It was built like a technology company to compete in financial services. Its founder, Leaf Li, was an early Tencent employee who grew frustrated by how slow, clumsy and unreliable local brokerage felt. So, he built his own software to do better. The original idea was simple: make brokerage feel fast and easy, like a consumer app; add a social layer to drive engagement; then iterate quickly and take share from sleepy incumbents. In 2023, in an earlier write-up, I framed Futu as the baby thrown out with the COVID bathwater. It continued to profit in the bear market. Management was showing savvy capital allocation, switching from customer acquisition to share buybacks. There were plans to grow overseas. The wrinkle was scrutiny from mainland regulators over allegations that Futu facilitated mainland Chinese investors in evading capital controls to withdraw funds for offshore investment. At a low-teens PE ratio, it was a risk I was happy to take. Three years later, Futu is a much bigger business: comparing 4Q22 to 4Q25, funded accounts increased from 1.5 million to 3.4 million, daily average client assets from HKD 418 billion to HKD 1,240 billion, total quarterly trading volume from HKD 1,090 billion to HKD 3,980 billion, and the margin financing book from HKD 27 billion to HKD 68 billion. Revenue and operating income grew commensurately, up roughly 2x and 3x, respectively, from full-year 2022 to 2025. Futu's fortunes are still tied to the market cycle, of course. But it has also become a much broader and more sophisticated financial platform than the market seems to acknowledge. It has scaled well beyond Hong Kong, brought U.S. settlement in-house, expanded its product suite, built a sizeable wealth-management business with HKD 180 billion in assets under management, and begun adding banking and crypto. More than half of funded accounts are now outside Hong Kong. The mainland regulatory issue was settled without grievous penalty. This is not the same company that came to market in 2019, nor whose shares crashed in 2021. Futu's target brokerage customer is the active, self-directed, increasingly affluent investor who values tools, data, options, execution quality and access to U.S. markets. Hong Kong may be Futu's home, but most trading volumes sit in the U.S., and U.S. equities and options drive the lion's share of its economics. Asian investors were long captive to their home markets. Now they want access to the same American growth stocks as their peers overseas. Futu is their gateway. Put simply, Futu is winning abroad for the same reason it won in Hong Kong: its product is better. It is exporting a mature U.S. stock-trading experience to attract users, then localising rapidly to compete domestically too. The social layer keeps users opening the app even when they are not trading, turning it into more of a daily habit than a simple transaction tool. In 2021, management said that the average user spent thirty minutes in the app on trading days. That supports engagement and creates a funnel of users who can later be converted into funded accounts. Futu now has beachheads in Singapore, Malaysia, Japan, Australia, Canada and America, which together comprised 55% of total funded accounts at the end of 2025. Singapore is the standout success. Management said it reached break-even in 2024, even after allocating head-office costs, and that its operating margins topped 60 per cent for a couple of consecutive months in 2025 and were still expanding. Elsewhere, Malaysia is growing fast from a small base; Japan crossed two million cumulative app downloads; and Moomoo was Australia's most downloaded trading app in 2025. Japan is the more interesting test because success there would say more about the product than simply winning Chinese-speaking users in nearby markets. Futu's size also gives it the resources to build a visible offline presence, reinforcing the consistently high App Store ratings its apps receive. This matters because financial products require a high degree of user trust, especially to overcome the inertia of opening a new account and transferring assets. In Hong Kong, Futu has opened offline stores and held workshops to reach older investors. In Japan and Malaysia, it has leaned on investment conferences and local celebrity endorsements. In America, it is sponsoring the New York Mets. There is still room to grow. Guidance is for another 800,000 net new funded accounts in 2026. That represents roughly a quarter of the current funded base, but only a modest portion of Futu's much larger user funnel, which now includes 29.2 million users and 5.95 million brokerage accounts. We do not need to believe in a miracle for management to get there. We only need to believe that the same machine which added more than 954,000 net new funded accounts in 2025 can build on its success. Management also plans to launch in at least one new market this year, though they have not yet announced where. Hong Kong can keep delivering too, despite Futu's already high market share. The revival of Hong Kong's capital markets is itself feeding Futu's funnel. And HKEX's reforms have helped as well. FINI removed the old incentive for retail investors to open accounts across multiple brokers to improve their chances of allocation in hot IPOs. That favoured the broker with the best overall product, user experience and margin financing. Futu was the standout beneficiary, and it claims to have accounted for 49% of all public (retail) IPO subscriptions made in Hong Kong in 2025. Low-price refreshment giant Mixue's IPO was a vivid example. It was five thousand times over-subscribed, drawing HKD 1.77 trillion of subscriptions. Futu alone accounted for a staggering HKD 1.06 trillion, or 59 per cent of the total. Even if the fees earned were low, it was a customer acquisition coup. Futu's corporate relationships form a second side to the platform, embedding it upstream in the machinery that feeds retail demand. It has long provided Employee Stock Option Programme ("ESOP") administration, trustee structures, investor relations and IPO distribution to mainland tech companies going public in Hong Kong. In 2025, it provided investment-banking services to more than half of the companies newly listed on Hong Kong's Main Board and ended the year with 600 IPO distribution and investor-relations clients. The more interesting question is what happens after Futu wins the account. The brokerage app is the wedge. The prize is larger balances, stronger retention and more monetisation per customer through wealth, cash management, banking and adjacent services. The opportunity is largest in Hong Kong, where the gap between account share and wallet share is especially wide: according to one sell-side analyst, Futu may have roughly 30% of client accounts but only 1-2% of AUM. Recent management commentary suggests net asset inflows are becoming more important, and this is already showing up in the numbers: Hong Kong and Singapore saw a larger contribution to net asset inflows from high-net-worth clients, while the U.S. recorded the fastest sequential increase in average client assets. Futu's Wealth Management business has grown almost sixty-fold since AUM was first disclosed in 2019. Futu's target wealth management customer is a self-directed investor with between USD 1-2 million in investible assets: too small for traditional wealth management but well suited to a platform built around efficient onboarding and service. While IPO distribution, ESOP administration and investor relations help acquire customers, wealth products, cash management and banking are meant to gather balances and make the account more useful between trades. Wealth management products can also be tailored for local markets. In Hong Kong, Futu has launched high-dividend ETFs and made structured products more accessible. In Singapore, it has added more domestic equity and short-duration fixed-income products. In Malaysia, it launched Shariah-compliant gold tracker funds. Derivatives can be offered to more sophisticated investors. Management says derivative take rates are 8 to 10 times those for cash equities and already account for over 30 per cent of trading commissions. Banking will help too, though it is still in development. In 2024, Futu bought a 40 per cent stake in Airstar, a Hong Kong digital bank, and increased its investment in 2025 to obtain control. The logic is clear enough: if clients can deposit, invest, and borrow within a single ecosystem, it will reduce friction and deepen the relationship. Crypto should play a similar role over time, especially as and when Futu's application in Hong Kong for a Virtual Asset Trading Platform licence is approved. This is a story of steady execution, which is why I appreciate management's tone so much. They sound like operators, not promoters. They talk about product, localisation, retention, client quality and payback, and they back that up with tempo. In 2024, management said Futu shipped 209 app and desktop iterations and 7,762 new features. In 2025, they highlighted localised launches such as Malaysian IPO financing and earnings calendars, Bursa derivatives, SGX futures, Japan options and market-specific wealth products. They have allocated capital well, selling stock into euphoria, buying it back in the bear market and now paying a first dividend. Customer acquisition should be viewed in the same way. It looks less like indiscriminate marketing than reinvestment into a machine that, so far, has generated exceptionally high returns. Management's own language reinforces the point. They talk about client quality, payback and efficient customer acquisition, not growth at any price. That said, none of this changes the fact that Futu remains a cyclical business. Interest income is sensitive to rates. Softer market turnover, lower fees or weaker client activity would all matter for earnings. The business is broader and the relationships may be getting stickier, but client activity will still swing with markets. Competition is also more serious than the old "disrupting sleepy incumbents" frame suggests. Interactive Brokers is not just cheap. It is a trust-and-compliance brand for serious users. Robinhood is not just gamified trading. It is a consumer product and a distribution machine. Ant, through its recently acquired Hong Kong broker, Bright Smart, could yet reshape local distribution economics. Futu may be able to occupy a valuable middle ground, with better tools than Robinhood and a more approachable product than IBKR, but that middle is not guaranteed. On the other hand, zero-commission competitors have already emerged in Asia without materially eroding Futu's share, suggesting competition has already moved beyond simple price. The mainland issue still needs to be acknowledged, though it should no longer dominate the analysis. The old bull-market dream of entering mainland China is almost certainly dead. Futu cannot market offshore accounts in China or receive assets directly from inside the mainland system. Those are meaningful constraints, but the company has successfully diversified around them. It is worth remembering that Futu's own Hong Kong homecoming listing was withdrawn the day before the CSRC announced its penalty in late 2022. A future homecoming would therefore amount to a meaningful all-clear. Back at ~11x forward earnings, Futu's stock reflects scepticism about cyclically high earnings. That is fair, as far as it goes. But structural growth will cushion the cycle when it turns, and management has already shown it can tune down customer-acquisition spending to protect margins, as it did in 2022 and 2023. The market also seems sensitive to quarter-to-quarter swings in customer acquisition. But new clients take time to fund and monetise, while existing clients continue to trade, deposit and generate revenue, even if one quarter's acquisition slows. As I've argued, management sees plenty of room for account growth and wallet-share gains. If Futu succeeds in capturing more wallet share, it may be able to capture more value from adjacent financial products too. The market still sees a cyclical broker. It may be underestimating a business becoming broader, stickier and more valuable per customer. That is the core of the thesis. It is measured, not heroic. Futu does not need to become everything to everyone. It only needs to become the preferred savings and investment account for a valuable niche. If it can keep growing accounts, deepen wallet share in the markets where it is already strong, and shift more of the mix toward better products and richer balances, today's price will probably look too low.

BSD Analysis:
The manager presents a compelling bull case for Futu as a digital brokerage platform that has successfully evolved beyond its COVID-era retail trading origins into a comprehensive financial services ecosystem. The investment thesis centers on Futu's ability to capture market share through superior product execution, expanding from 1.5 million to 3.4 million funded accounts while growing assets under management to HKD 1,240 billion. The company has demonstrated strong international expansion with 55% of accounts now outside Hong Kong, achieving profitability in Singapore with 60%+ operating margins. Management's disciplined approach to capital allocation, switching between growth investment and share buybacks based on market conditions, reflects operational sophistication. The platform benefits from Hong Kong's capital market revival and regulatory reforms that favor brokers with superior user experience and margin financing capabilities. However, the manager acknowledges meaningful risks including the business's cyclical nature, intensifying competition from established players like Interactive Brokers and Robinhood, and ongoing regulatory constraints in mainland China. At 11x forward earnings, the valuation reflects market skepticism about earnings sustainability, but the manager argues structural growth in accounts and wallet share should support premium valuations as Futu transitions from a cyclical broker to a stickier financial platform.