Investment Pitches

Pitch Summary:
In December and into the first quarter, we bought a small position in TWFG, which essentially is a technology and business support platform for independent insurance agents. The position is small mainly because TWFG itself is small and illiquid, as founder CEO Richard F. "Gordy" Bunch owns about 60% of the stock. Bunch himself is a former insurance agent who saw an opportunity to create a platform where independent insurance agents selling personal lines (mostly auto and homeowners) could easily access quotes from dozens of insurers and receive back-office support, in exchange for 20% of their commissions. If the platform works well, the agent becomes more than 20% more productive while offering clients better coverage options. In personal lines insurance, large companies like Allstate and State Farm employ armies of so-called captive agents, who sell policies only for them. In my opinion, that model is no longer tenable for agents. For one, climate change has rocked the industry. Large insurers may no longer wish to write as many (or any) homeowners' policies in coastal states, or tornado-prone states, or wildfire zones. Non-renewing policies may be the right economic decision for the insurer, but it means agents lose their book of business, which they typically spend decades building. A better solution for an agent is to be independent and thus loyal to the client rather than to the carrier. Independent agents also have more control over their business when they wish to sell at retirement; they are not beholden to the goodwill of one insurer. As a client service issue, agents are better off showing multiple coverage options to clients, rather than offering one company's terms on a 'take it or leave it' basis. I believe Bunch has built a good platform for independent agents and can grow TWFG for years. Our basis is a bit over $29.

BSD Analysis:
The manager presents a compelling thesis for TWFG as a technology platform disrupting the traditional insurance agent model. The investment centers on founder-CEO Richard Bunch's vision to empower independent agents with multi-carrier access and back-office support for 20% of commissions, potentially making agents over 20% more productive. The manager identifies a structural shift away from captive agent models, driven by climate change forcing large insurers to exit certain geographic markets and leave captive agents stranded. Independent agents using TWFG's platform maintain client loyalty, business control, and retirement optionality while offering superior client service through multiple coverage options. The small position size reflects the company's illiquidity and Bunch's 60% ownership concentration. The manager's confidence in long-term growth potential is evident despite the modest initial allocation. The $29+ cost basis suggests the manager sees significant upside in this insurance technology play.

Pitch Summary:
We also added to our holding in the industry-leading operator of offshore support vessels (OSVs), Tidewater, given its combination of a significant discount to replacement cost and a net cash balance sheet.

BSD Analysis:
Tidewater represents Hosking Partners' preferred exposure to offshore support vessels as the industry-leading operator in this specialized maritime sector. The investment thesis centers on the company's significant discount to replacement cost, reflecting the market's undervaluation of the specialized vessel fleet required for offshore energy operations. Tidewater's net cash balance sheet provides exceptional financial flexibility and downside protection, particularly important in the cyclical offshore energy services industry. The combination of asset-based valuation support and strong balance sheet positioning creates an asymmetric risk-reward profile. As the industry leader, Tidewater benefits from scale advantages and operational expertise that are difficult for competitors to replicate. The offshore support vessel market has experienced significant consolidation and reduced capital investment, improving supply-demand dynamics. Tidewater's financial strength positions the company to potentially gain market share during industry stress while benefiting from any recovery in offshore drilling activity.

Pitch Summary:
One of the largest purchases during the quarter was Canadian upstream oil and gas company, International Petroleum Corporation, run by the Lundin Family, which has demonstrated excellent capital allocation since spinning out of Lundin Petroleum in 2017. It is pursuing a project which will expand production by 50% by 2028 whilst simultaneously shrinking the share count through aggressive buybacks.

BSD Analysis:
International Petroleum Corporation represents one of Hosking Partners' largest new positions, managed by the experienced Lundin Family with a proven track record of capital allocation excellence since the 2017 spinout from Lundin Petroleum. The company's dual strategy of aggressive growth and shareholder returns creates compelling value creation potential. Management is executing a major project that will expand production by 50% through 2028, providing significant organic growth in a capital-disciplined environment. Simultaneously, the company is pursuing aggressive share buybacks to reduce the share count, amplifying per-share value creation for remaining shareholders. This combination of production growth and share count reduction should drive substantial earnings per share expansion. The Lundin Family's operational expertise and shareholder-friendly capital allocation philosophy provides confidence in execution. The timing of this investment aligns with Hosking's view that energy sector supply dynamics have fundamentally improved compared to previous cycles.

Pitch Summary:
Impala is our largest platinum group metals (PGMs) miner, a thesis Django Davidson discussed in a Hosking Post last year. The company owns one of the industry's two major smelting assets and trades at approximately one third of its replacement cost.

BSD Analysis:
Impala Platinum represents Hosking Partners' largest exposure to platinum group metals mining, supported by a detailed investment thesis previously outlined by team member Django Davidson. The company's competitive advantage lies in owning one of only two major smelting assets in the platinum industry, creating significant barriers to entry and processing bottlenecks. Trading at approximately one-third of replacement cost provides substantial asset-based valuation support in a capital-intensive industry. The smelting infrastructure represents irreplaceable industrial assets that would require massive capital investment and years to replicate. This strategic asset ownership positions Impala as a critical link in the PGM supply chain with pricing power. The deep discount to replacement value suggests the market underappreciates both the strategic value and replacement cost of these specialized industrial assets. Supply constraints in PGMs combined with structural demand from automotive and industrial applications support the long-term investment case.

Pitch Summary:
Holding company Hikari Tsushin, our largest Japanese investment, has benefitted from Japanese equity market strength with its portfolio of 600 stakes in local small-to-micro-caps, which the company started buying in 2017 using cheap Yen-dominated debt.

BSD Analysis:
Hikari Tsushin represents Hosking Partners' largest Japanese investment, functioning as a holding company with exposure to 600 small-to-micro-cap Japanese equities. The company's investment strategy began in 2017, utilizing cheap yen-denominated debt to build this diversified portfolio during a period of Japanese market weakness. This timing has proven advantageous as the Japanese equity market has strengthened significantly. The holding company structure provides leveraged exposure to the Japanese small-cap recovery while benefiting from currency dynamics. Hikari Tsushin's portfolio construction aligns with Hosking's broader thesis on Japanese corporate governance reform and market revaluation. The company's debt-funded acquisition strategy during the market trough demonstrates opportunistic capital allocation. As Japanese equities continue their structural rerating, Hikari Tsushin offers concentrated exposure to this multi-year investment theme.

Pitch Summary:
We initiated our position in UK Defence company Babcock in 2023, as the shares traded below the replacement value of an irreplaceable asset base responsible for maintaining the UK's submarine and naval fleet. At the time, this intrinsic value was overshadowed by a turnaround and depressed demand. The turnaround is nearing completion, and demand has become a tailwind as Europe increases spending targets.

BSD Analysis:
Hosking Partners initiated a position in Babcock in 2023 when shares traded below replacement value of critical defense infrastructure assets. The fund identified an opportunity in the UK defense contractor's irreplaceable asset base that maintains Britain's submarine and naval fleet. While the company was undergoing a turnaround with depressed demand at the time of investment, management execution has progressed well with the turnaround nearing completion. The investment thesis has been strengthened by increased European defense spending following geopolitical tensions. The combination of asset-based valuation support, operational improvement, and favorable demand tailwinds creates a compelling risk-adjusted return profile. Babcock's strategic importance in UK national defense provides additional downside protection through its quasi-monopolistic position.

Pitch Summary:
The second investment we are going to talk about is TFI International. This is a business we first purchased in December 2023, and we subsequently sold our investment in February 2025 after they reported disappointing earnings. TransForce International (TFI) is a Montreal based transportation company focused on the truckload, less-than-truckload, and logistics business throughout North America. Despite the perceived cyclicality of the trucking business, there is a long-term underlying stability in the growing demand for trucking services. This demand has grown substantially over the past decade as e-commerce growth has propelled the demand for short term overnight delivery. The trucking industry has also experienced consolidation which means the dominant competitors have a growing favourable market position. TFI under the leadership of long time CEO Alain Bedard has demonstrated a strong track record of making acquisitions. During 2021 TFI made its largest acquisition ever, acquiring United Parcel Services Less-than-Truckload business in the U.S. The pandemic accelerated the demand for overnight trucking services as the government fiscal support led to a sustained period of excess consumer demand in the economy. The segment of the trucking industry that benefited the most is the Less-than-Truckload segment which focuses on smaller loads being shipped as part of a larger truck. This segment offers the best value for trucking customers as they do not need to purchase a full truckload of space. An important aspect of the trucking industry is that dominant positions in the industry accrue to the companies with the best scale and distribution network. There is a straightforward reason for this, and that is because when you have a better located network of trucking terminals it means you can both manage your costs and provide a better service for your customers. A superior network gives a trucking company greater pricing power, where it can raise its prices at a higher rate because customers have a strong demand for quality reliable service. The North American economy cannot function without the trucking industry. The ability to raise prices on customers both defends profitability and generates additional cash flows to be reinvested back into the network and terminals, which further reinforces the dominant position. It is an industry where the strong get stronger. TFI was a business that had all the favourable characteristics we look for in a business along with the ability to reinvest in the business and a demonstrated ability of achieving strong returns on their reinvestment. Although we have previously discussed our view that the economy was slowing in 2024, we felt there still existed an underlying stability to the trucking market dynamics. We purchased our initial investment in December 2023 at a price of $172. We owned the shares for 14 months and sold our investment in February 2025 for a price of $137 for a total return including dividends of -18%. What changed our mind about the business is that they reported first quarter 2025 earnings that were far below our expectations, specifically for their Less-Than-Truckload trucking segment in the United States. Although the trucking industry has been in a slowdown for the past few years, capacity in the market had held tight meaning that overall profitability was still okay. At the end of 2024 and into the new year, the Less-Than-Truckload business experienced a significant slowdown while at the same time the business faces rising costs. With this change of events, the business started to experience negative operating leverage which puts profits at risk for the next year or two. This scenario in a slowing economy made us uncomfortable because the underlying profitability of the business did not meet our expectations for stability. Upon recognizing this we made the decision to correct our investment by selling the shares.

BSD Analysis:
Avenue Investment Management's TFI International position represents a classic value trap scenario where initial thesis strengths were overwhelmed by deteriorating fundamentals. The fund initially viewed TFI favorably due to its dominant network position, acquisition track record under CEO Alain Bedard, and the secular growth in e-commerce-driven logistics demand. The 2021 UPS LTL acquisition positioned TFI as a major player in the attractive less-than-truckload segment, which offers superior economics through load consolidation. However, the investment thesis unraveled when Q1 2025 results revealed significant margin compression in the core LTL business, with rising costs coinciding with volume declines. The negative operating leverage scenario created a profit squeeze that violated Avenue's stability criteria, particularly concerning given the economic slowdown backdrop. Avenue's disciplined approach led to a swift exit at $137 versus the $172 entry price, accepting an 18% loss rather than hoping for a cyclical recovery. This case study illustrates the importance of maintaining strict quality standards and cutting losses when fundamental deterioration threatens long-term profitability expectations.

Pitch Summary:
The first business to highlight in this category of quality companies is called BJ's Wholesale Club. Here is a description of the business from the company website: BJ's Wholesale Club (NYSE: BJ) ("BJ's") is a leading operator of membership warehouse clubs focused on delivering significant value to our members and serving a shared purpose: "We take care of the families who depend on us." The company offers up to 25% savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors. BJ's provides a wide assortment of fresh foods, produce, a full-service deli, fresh bakery, household essentials and gas. In addition, BJ's offers the latest technology, home decor, small appliances, apparel, seasonal items and more. Headquartered in Marlborough, Massachusetts, the company pioneered the warehouse club model in New England in 1984 and has grown its footprint to large-format, high volume warehouse clubs spanning 21 states. In its core New England market, the company operates more than three times the number of clubs compared to the next largest warehouse club competitor. We purchased our initial investment in July 2023 at a price of roughly $67 per share. At the time the company earned profits per share of $3.80 over the previous twelve months, which means we purchased our investment at approximately 17 times earnings. This was a valuation we deemed to be a fair price given the underlying quality characteristics of the business. During the spring of 2023 the share price had declined because of concerns about a U.S. consumer recession. The company also had a challenging few quarters with regards to their merchandising initiatives and the product selection in their general merchandise section of their stores. For those familiar with Costco Wholesale – BJ's Wholesale operates a very similar business. The general merchandise is in the centre of the store and is an important contributor to both store traffic and business profitability. We liked the business because it had returns on capital of above 30%, and the capital investment needed to maintain the stores was small relative to their overall profitability. We also believed that consumers would continue to be cost conscious and value oriented, and the Club Wholesale business in the United States and Canada provides an excellent value for consumers in an inflation plagued era. To shop at BJ's Wholesale, members pay an annual fee of between $60-$100 per year, and in general, prices are around 25% lower than you would see at the grocery store or other retailers. In short, this business thrives on providing high quality value to its loyal and repeat customer base. The business originated in Massachusetts but has since grown to 21 different states. Membership retention is over 90% per year. Everywhere we looked this business exemplified both quality and stability. BJ's Wholesale also fits into the rare category of business that, in addition to the above stable qualities, can also reinvest in their business at high rates of return. The company has grown its store base over the past several years as demand for their service has grown. They now have 254 club locations, and 190 gas stations located up and down the eastern seaboard. They plan to continue expanding in the years to come because of the growing market opportunity. Their capital spending has been funded with internally generated cash flow, making these growth investments highly attractive on a per share basis. In 2024 the company also announced a $1-billion share buyback program. In addition to reinvesting in their business it means that excess profits will return to shareholders through share buybacks.

BSD Analysis:
Avenue Investment Management presents a compelling bull case for BJ's Wholesale Club, emphasizing the company's exceptional financial metrics and defensive business model. The fund purchased shares at $67 in July 2023, representing a reasonable 17x P/E multiple based on $3.80 in trailing earnings per share. BJ's demonstrates remarkable capital efficiency with returns on capital exceeding 30%, while requiring minimal maintenance capex relative to profitability. The membership warehouse model provides predictable revenue streams with annual fees of $60-$100 and impressive 90%+ retention rates, offering customers 25% savings versus traditional retailers. Management's disciplined capital allocation approach combines organic growth through new store expansion (254 clubs, 190 gas stations) with shareholder returns via a $1 billion buyback program. The company's dominant market position in New England, operating 3x more locations than competitors, creates significant competitive moats. Avenue views BJ's as a rare combination of stability and growth, capable of reinvesting at high returns while benefiting from secular trends toward value-conscious shopping in an inflationary environment.

Pitch Summary:
CoStar is the dominant data/marketplace platform in commercial real estate, with a sticky, mission-critical product suite (CoStar Suite, LoopNet, Apartments.com) that historically grows HSD/LDD with 80%+ gross margins and ~40%+ EBITDA margins. The stock de-rated after management plowed CRE profits into launching Homes.com, compressing consolidated margins to ~9% in 2024 and spooking investors with execution hiccups and core distraction. Today, the core ex-Homes still merits a premium multiple akin to info services comps (Gartner, Experian, MSCI, REA), while the market ascribes a large negative value to Homes.com. Activists Third Point and D.E. Shaw have taken stakes and secured board seats plus a Capital Allocation Committee, creating near-term governance pressure to curb loss-making spend. This sets up a heads-I-win: either Homes.com spend is trimmed and consolidated margins/FCF snap back, or KPIs inflect and the residential asset earns positive SOTP value. Near-term, sales focus has been re-aligned (dedicated Homes sales; legacy reps refocused), positioning core growth to re-accelerate in H2’25. A re-rate of the core to its historical ~30x EBITDA, while valuing Homes.com at modestly negative, supports ~30% upside. Further upside exists if residential gains traction or activists push for buybacks/M&A discipline.

BSD Analysis:
CoStar is the system of record for CRE data/listings and a leading multi-family marketplace; it’s extending into U.S. residential via Homes.com. Set-up: Heavy Homes.com investment cratered reported margins and the stock; core remains high-quality with pricing power and retention. Debate: Market prices Homes.com as a ~$10B drag; bears doubt execution and fear prolonged cash burn plus core distraction. Differentiator: Activist involvement (Third Point, D.E. Shaw) plus a Capital Allocation Committee raises the odds of disciplined spend, unlocking a quick multiple re-rate even without Homes success. Valuation: SOTP—core at ~30x 2025E adj. EBITDA yields ~$104/sh; assigning $(2)/sh to Homes (12 months more burn) gives ~$102/sh (~30% upside). Risks: Prolonged residential losses, macro CRE softness, slower-than-hoped core re-acceleration; mitigated by activist pressure, strong balance sheet, and durable core unit economics.

Pitch Summary:
Salem Media Group (SALM) is a post-recapitalization deep-value play with meme-stock optionality tied to its alignment with the Trump media ecosystem. The conservative Christian broadcaster eliminated nearly all of its high-yield debt in a December 2024 refinancing, reducing interest expense from ~$14M to ~$3.5M annually. The restructuring involved a discounted note repurchase, convertible preferred issuance, and the planned $90M sale of seven radio stations to Educational Media Foundation (EMF). The resulting balance sheet boasts tangible equity of ~$150M—or $5.53/share pre-dilution—against a $1.00 share price, implying a large discount to book. Even after full conversion of preferreds, tangible book remains ~$2.20/share, more than 100% upside. The company’s $11M 2024 EBITDA and positive cash flow profile differentiate it from speculative peers. April 2025’s partnership with MxM News (co-founded by Donald Trump Jr. and Lara Trump) provides marketing visibility and retail sentiment potential reminiscent of Newsmax’s explosive rally. The stock’s tiny float (~27M shares) enhances volatility and meme potential as conservative investors rally around the Trump-affiliated brand. Tangible assets (licenses, property, and receivables) and real operations underpin speculative upside scenarios. At $1, investors gain asset-backed downside protection with asymmetric optionality for a multi-bagger rerate if sentiment shifts.

BSD Analysis:
Salem operates faith-based and conservative talk radio, podcasts, and digital networks targeting politically active audiences. Thesis: Following a transformative 2024 recap, SALM trades far below tangible book despite positive EBITDA and dramatically lower leverage. Balance Sheet: Legacy $160M notes repurchased at a steep discount; total liabilities now ~$234M vs. $385M tangible assets. Valuation: Even after preferred conversion, tangible book is ~$2.20/share—double the current price—with additional upside from the $90M station sale. Strategic Catalyst: Partnership with Trump-linked MxM News embeds the brand in the conservative media zeitgeist, creating both operational and meme-driven upside. Optionality: Low float, real cash flow, and strong retail sentiment make SALM a rare blend of deep value and viral potential. Risks: Dilution from convertible preferreds, volatility, and uncertain long-term audience monetization—but downside cushioned by tangible equity and assets.

Pitch Summary:
Kadant has rerated from ~mid-teens P/E pre-COVID to ~32x ’25 EPS while benefiting from a pulp/paper capex boom that is now fading. End-market data point to excess containerboard capacity and negative demand growth, pressuring both capex orders and “non-discretionary” consumables as mills stretch replacement cycles. Book-to-bill has been <1 for ~2 years and management itself guides the earliest recovery to 2H’25, with FY25 revenue/EPS below Street. Mix has shifted toward lower-margin Material Handling, while Voith/Valmet are pushing harder into aftermarket, tightening pricing and share. SG&A operating leverage should unwind as volumes normalize, compressing margins from peak. Despite investor-day targets, KAI still derives ~65% from pulp/paper/wood, making the “diversification” narrative premature. The stock trades at ~22–23x TEV/’25–’26 EBIT vs. a cyclical, structurally pressured backdrop—leaving little room for multiple or estimate upside. Insider selling (CFO trimmed ~42%) and weakening bookings/revenue corroborate a late-cycle setup. We see downside to ~$212 (~33%) on 22.5x our below-consensus ’26 EPS ($9.41). Risk/reward skews short as expectations and valuation remain peak-like into slowing fundamentals.

BSD Analysis:
Global supplier of flow control, material handling, and industrial processing equipment/consumables with ~50% revenue tied to pulp & paper and ~25% to housing. Setup: Shares tripled since 2020 on cycle tailwinds and multiple expansion; now at ~31–32x P/E and ~16x EBITDA with bookings soft and guides light. Drivers: Excess capacity and lower operating rates curb both equipment and consumables; mills extend wear parts; OEMs intensify aftermarket competition; mix shifts to structurally lower margins. Numbers: Management’s 5-yr plan implies aggressive back-end growth (>16% CAGR ’26–’28) after already missing early targets; book-to-bill 50% from peak. Valuation: Peak multiple on peak-ish earnings for a cyclical, negative-organic profile; our $212 PT uses 22.5x $9.41 ’26 EPS (16% below Street). Risks: Faster non-paper diversification, stronger capex snapback, or M&A upside; but current expectations already embed a benign outlook.

Pitch Summary:
Liberty Broadband (LBRD) represents a low-risk merger arbitrage setup following Charter Communications’ (CHTR) agreement to acquire LBRD for 0.236 shares of CHTR plus a spinoff of GCI equity. The transaction is fully approved, with a long-dated close of June 30, 2027 (or earlier), creating a 2.2-year “carry trade” yielding ~9–10% IRR with investment-grade risk. GCI—an Alaskan broadband and wireless operator—will be spun out to LBRD holders and conservatively valued at ~$7.50 per LBRD share (6x EBITDA less debt). At current prices (~$80 LBRD vs. ~$82 implied Charter value), investors can buy LBRD and short CHTR at the 0.236 exchange ratio, creating a small net cash inflow while earning the rebate yield on the short. The arbitrage’s risk-adjusted profile is compelling because the deal is essentially locked in and uncorrelated to macro conditions. Upside exists if the deal spread compresses as duration shortens (potential IRR 11–12% by late 2025). GCI’s cash generation and Charter’s stable credit backdrop further cushion downside. The key sensitivity is to interest rates, as a lower Fed Funds rate reduces the short rebate yield. Mark-to-market volatility could arise if Charter stock moves sharply, but ultimate deal execution risk is negligible. For arb funds or levered portfolios, the structure offers balance sheet efficiency and low correlation alpha.

BSD Analysis:
LBRD holds Charter Communications equity and GCI (Alaska broadband). Charter is acquiring LBRD for stock plus a GCI spinoff. Trade Structure: Buy LBRD, short 0.236 CHTR per share; GCI spin adds ~$7.50/share in value and yield from short rebate adds ~4% annually. Valuation: GCI valued conservatively at 6x EBITDA, implying $1.1B equity value. Risk: Primarily duration, interest-rate sensitivity, and mark-to-market exposure if Charter stock swings; deal break seen as highly improbable given approvals. Catalyst: GCI spin within 12 months and eventual deal close by mid-2027; spread compression likely as timeline shortens. Return: ~9.5% “buy and hold” IRR, potentially 11%+ if arbitrage spread tightens. Why it works: Too long-dated for most arb funds today, leaving an attractive spread for patient capital.

Pitch Summary:
Tigers Polymer Corporation is an undervalued opportunity in the polymer manufacturing sector, trading at a low multiple of 8.4x projected FY2025 earnings. The company's net current asset value plus investment securities significantly exceed its market capitalization, highlighting its deep value status. With a consistent track record of profitability and strategic U.S. manufacturing operations, Tigers Polymer is well-positioned to benefit from current tariff dynamics. The 5% dividend yield further enhances its appeal as a value investment.

BSD Analysis:
Tigers Polymer's valuation metrics, such as a P/E ratio of 7.5 and a dividend yield of 5%, underscore its attractiveness as a value play. Despite a downward revision in FY2025 earnings forecasts, the company remains profitable and offers a compelling risk-reward profile given its strong balance sheet and asset backing. The high customer concentration, particularly with Honda Motor Co, poses a risk, but the company's long-standing profitability and strategic U.S. presence mitigate some concerns. The presence of a poison pill and shareholder alignment with management may limit activist opportunities, suggesting that an eventual management buyout could be a plausible exit strategy. Investors should consider the potential for earnings normalization post-COVID and the impact of tariff policies on U.S. manufacturing operations.

Pitch Summary:
During the quarter, we made a new investment in an attractively priced building supplier. JELD-WEN (JELD) is a leading North American. and European manufacturer and distributor of interior and exterior doors and windows to new construction and remodeling sectors. JELD-WEN share price has been under significant pressure, 73% below its 52-week high as the company has experienced revenue and profit weakness. The company is undertaking a multi-year transformation bringing in automation and system enhancements to enhance their manufacturing and warehouse footprint. Since 2023, new senior management has removed $350M from their cost structure and management expects $100M/year in further productivity savings. As they rationalize their infrastructure over the next five years there is significant capital efficiency improvement potential. In addition, like our investments in Quad Graphics (QUAD) and United Natural Foods (UNFI), JELD-WEN owns real estate, which provides significant margin of safety for the transformation plan. While the company expects margins and profits at historical trough levels in the early part of 2025, a new cost reduction program should support margin and profit improvement later in the year. Near-term risk is a weaker housing and remodeling marketplace, causing greater near-term revenue weakness and a slower recovery in company margins. Long-term positive supply and demand dynamics (favorable demographics and limited supply) should shorten the current downturn. In addition, there was a recent market transaction that bolsters our view JELD-WEN's significant embedded value proposition. Owens Corning acquired Masonite International (interior/exterior doors) in May 2024 at 8.6x EV/EBITDA. JELD-WEN should be a beneficiary of any housing recovery with 25-30% incremental margins on a future volume improvement. Long-term upside potential from their transformation plan supports the goal of achieving double digit normalized EBITDA margins and could realistically support a share price multiples the current price level.

BSD Analysis:
Miller Value Partners initiated a new position in JELD-WEN, viewing the 73% decline from 52-week highs as creating an attractive entry point for this leading North American and European doors and windows manufacturer. The investment thesis centers on a multi-year transformation involving automation and system enhancements, with new management having already removed $350M in costs since 2023 and targeting an additional $100M annually in productivity savings. The firm highlights significant capital efficiency improvement potential over the next five years as infrastructure rationalization continues. Similar to other turnaround investments, JELD-WEN's real estate ownership provides downside protection during the transformation. While acknowledging near-term headwinds from weak housing and remodeling markets, the manager expects margin improvement in the second half of 2025 from new cost reduction programs. The Owens Corning acquisition of Masonite at 8.6x EV/EBITDA provides a valuation benchmark supporting embedded value. Long-term favorable demographics and limited supply should benefit the housing recovery, with JELD-WEN positioned for 25-30% incremental margins on volume improvements. The transformation plan targets double-digit normalized EBITDA margins, potentially supporting multiples of the current share price.

Pitch Summary:
Nabors recently completed the acquisition of Parker Drilling. The transaction is accretive to free cash flow per share. Parker provides Nabors greater access to the growing lateral drilling marketplace. In addition, the transaction will significantly increase Nabors Drilling Solution ("NDS") segment, which has market-leading technology and strong global growth opportunities. With very low capital intensity and high free cash flow conversion, Nabors NDS segment should support accelerating future free cash flow generation. While there is ongoing near-term risk on weaker than expected domestic and international drilling expenditures, we see these risks significantly discounted in the current share price. While there is also potential integration risk with doing an acquisition, the Parker Drilling transaction provides significant margin of safety in our opinion (attractive cost savings, balance sheet benefits, potential non-core asset sales and accelerating free cash flow generation). Nabors share price looks extremely attractive, below one times cash flow (approaching their Covid 2020 all-time lows). At a greater than 50% normalized free cash flow yield and EV/EBITDA (2025) below 3x, we see long-term upside potential multiples of the current share price.

BSD Analysis:
Miller Value Partners maintains a bullish view on Nabors Industries despite a 26% quarterly decline, viewing the recent Parker Drilling acquisition as strategically accretive to free cash flow per share. The transaction enhances Nabors' exposure to the growing lateral drilling market while significantly expanding their high-margin Nabors Drilling Solutions (NDS) segment, which features market-leading technology and global growth potential. The manager emphasizes NDS's attractive economics with low capital intensity and high free cash flow conversion, supporting accelerating cash generation. While acknowledging near-term risks from weaker drilling expenditures and potential integration challenges, the firm believes these concerns are heavily discounted in the current valuation. The stock trades at extremely attractive metrics - below 1x cash flow (near COVID 2020 lows), over 50% normalized free cash flow yield, and sub-3x EV/EBITDA for 2025. The Parker acquisition provides multiple value drivers including cost savings, balance sheet benefits, and potential non-core asset sales. The manager sees significant upside potential with the stock potentially trading at multiples of current levels.

Pitch Summary:
Our two largest detractors during the quarter were Gannett (GCI) and Nabors Industries (NBR), with shares down 43% and 26%, respectively, during the quarter. Both companies' share prices are at deep discounts to our view of their long-term fundamental value, and we have recently increased position sizes in both holdings. Gannett has had ongoing success with its long-term transformation to a digital media company. Digital revenues (subscriptions, advertising, media services, partnerships, and e-commerce) are expected to become half of Gannett's revenue later this year as the company focuses on monetizing its 200M monthly audience reach. The secular headwinds of the traditional newspaper business remain as the most obvious near-term risk. While this portion of the business may continue to decline, Gannett has ongoing cost reduction opportunities to drive greater operating efficiencies. Gannett shares remains significantly mispriced in our opinion at only .17x revenue and >50% normalized free cash flow yield. New York Times (NYT), which went through a similar digital transformation ten years ago, has a much higher valuation level, with price to sales at 3x and Enterprise Value to EBITDA ("EV/EBITDA") greater than 15x. In addition, Gannett's anti-trust suit versus Google is very similar to the DOJ anti-trust suit against the company. Kellogg Hansen, a firm that specializes in anti-trust cases, with successful historical awards and appeals of more than $1B, is representing Gannett. The law firm agreed to success-based compensation for their services. Winning the anti-trust case would accelerate Gannett's transformation and accrue significant value to shareholders. We believe the current share price reflects limited value for the long-term prospects of the transformation plan and the significant chance of prevailing in the anti-trust case.

BSD Analysis:
Miller Value Partners views Gannett as deeply undervalued despite a 43% quarterly decline, increasing their position size based on the company's digital transformation progress. The manager highlights that digital revenues are expected to reach 50% of total revenue this year, leveraging Gannett's substantial 200M monthly audience reach. The firm acknowledges secular headwinds in traditional newspaper business but emphasizes ongoing cost reduction opportunities and operational efficiency improvements. The valuation appears compelling at only 0.17x revenue and over 50% normalized free cash flow yield, compared to New York Times trading at 3x price-to-sales and 15x+ EV/EBITDA after completing a similar transformation. A significant catalyst exists through Gannett's antitrust lawsuit against Google, represented by specialized firm Kellogg Hansen on a success-based compensation structure. The manager believes the current share price fails to reflect value from both the digital transformation and potential antitrust settlement. This represents a classic deep value opportunity with multiple paths to value realization.

Pitch Summary:
During the quarter, the strategy's largest positive contributor was Gray Media (GTN), with shares up +37%. Gray significantly lagged the strategy during the back half of 2024. While the company's political advertising led the overall market, it fell below market expectations. Gray continues to generate strong free cash flow and successfully paid down more than $500M of debt during the past year. While the company has significant debt leverage, Gray has a much smaller amount of debt maturities over the next two years. Marketplace expectations for Gray's future retransmission revenues remain very low providing a nice ongoing variant as management focuses on improving long-term retransmission agreements. Near-term risks include an advertising recession; auto advertising may be weaker over the coming months; however local advertising has so far remained resilient. Gray has the potential to deliver strong free cashflow next year and $2B+ over the coming 5 to 6 years. Ongoing debt reduction should accrue to the equity over time. We see long-term upside potential multiples of the current share price.

BSD Analysis:
Miller Value Partners maintains a bullish stance on Gray Media despite recent underperformance, highlighting the company's strong free cash flow generation and successful debt reduction of over $500M in the past year. The manager views current market expectations for retransmission revenues as overly pessimistic, creating an attractive variant perception opportunity. While acknowledging near-term headwinds from potential advertising recession and weaker auto advertising, the firm emphasizes Gray's resilient local advertising base. The investment thesis centers on the company's ability to generate $2B+ in free cash flow over the next 5-6 years, with ongoing debt reduction expected to benefit equity holders. The manager sees significant upside potential, suggesting the stock could trade at multiples of its current price. Key risks include advertising market weakness, though the firm believes these concerns are already reflected in the depressed valuation. The position benefited from a 37% quarterly gain, making it the strategy's largest positive contributor.

Pitch Summary:
As the leading graphics processing unit (GPU) chip manufacturer and the pioneer of accelerated computing, Nvidia has positioned itself as the key enabler of AI technology. We are two years into the AI revolution, and all of Nvidia's customers are still spending at breakneck speed in order to deploy large computing clusters for training large language models. In many cases, customer ambitions are to reach clusters of one million GPUs and beyond. Scaling up these large computing clusters allows for more powerful large language models to be trained, while also reducing the cost per unit of compute. As companies rapidly scale up their AI computing resources, Nvidia is poised to capture the lion's share of this opportunity, leveraging its dominant >80% market share in AI accelerators. Despite reporting record-breaking financial results, Nvidia's share price has been under pressure due to concerns over the durability of AI infrastructure spending and the increasing possibility of stricter export restrictions on Chinese customers. Headlines around Microsoft, one of Nvidia's major clients, stepping back from some data centre leases also raised questions about the long-term demand for AI chips. We believe that this was a result of Microsoft being unwilling to subsidise OpenAI's AI training, given that they do not recognise such revenue under the terms of their partnership. OpenAI was quick to find a new partner in Oracle, with whom they are building Stargate, the largest AI training cluster in the world that is set to cost $500 billion over 4 years. Contrary to market concerns, we see no indication that compute demand has peaked. In fact, Nvidia's CEO, Jensen Huang reiterated that models enhanced with reasoning capabilities require 100x more compute than the basic inferencing we saw in the first iteration of ChatGPT. On top of that, their next-generation chip, the Blackwell GPU, has become the fastest product ramp in the company's history given the step-function improvements in both performance and efficiency compared to its predecessors. Therefore, we believe Nvidia has a long runway of structural earnings growth ahead as they continue to pioneer the AI revolution.

BSD Analysis:
Munro Partners maintains a bullish stance on NVIDIA despite recent market volatility, emphasizing the company's dominant position in AI infrastructure. The fund highlights NVIDIA's commanding 80%+ market share in AI accelerators and its role as the primary enabler of the AI revolution. While acknowledging near-term headwinds from concerns about AI spending sustainability and potential export restrictions, Munro dismisses these as temporary market overreactions. The manager points to continued hyperscaler capex growth, with combined spending from major cloud providers approaching $350 billion in 2025, up from $200 billion estimated a year prior. Key catalysts include the Blackwell GPU's record-breaking product ramp and Jensen Huang's assertion that reasoning-enhanced models require 100x more compute than basic inference. The Oracle-OpenAI Stargate partnership ($500 billion over four years) demonstrates sustained enterprise commitment to AI infrastructure. Munro views current weakness as a buying opportunity ahead of multi-year structural earnings growth.

Pitch Summary:
Rheinmetall is a global leader in defence technology, based in Düsseldorf, Germany. The company is a key supplier to governments and defence organisations worldwide, specialising in providing advanced systems and components for the military and automotive sectors. Rheinmetall's defence segment, which accounts for the majority of its revenue, develops cutting-edge products including artillery systems, armoured vehicles, and air defence solutions. Over the past quarter, we have seen the fundamental landscape for European defence spending improve significantly, driven by historic regulatory changes in Germany. In the wake of the German election and the US stepping away from its role in ensuring European security, the German parliament agreed in March to exempt defence spending exceeding 1% of GDP from the national debt brake. This decision is set to unleash a multi-decade investment cycle aimed at re-arming and re-industrialising Germany's military base. We expect defence spending as a percentage of GDP to climb from 2% to 3% by 2030, providing a strong growth backdrop for local defence equipment manufacturers such as Rheinmetall. Since the war between Russia and Ukraine, the company's orders from European nations have increased significantly, with Rheinmetall winning several multi-billion-Euro contracts in the most recent quarter, adding to its defence order backlog of almost €55 billion. We believe Rheinmetall's strategic focus on defence capacity expansion, combined with its strong financial performance and significant market opportunities, provides a robust foundation for long-term growth. As European defence spending continues to rise, we believe Rheinmetall is well-positioned to capture a significant portion of this market expansion, supporting a multi-year runway of earnings growth.

BSD Analysis:
Munro Partners presents a compelling bull case for Rheinmetall based on a structural shift in European defense spending dynamics. The fund highlights a critical regulatory change where Germany exempted defense spending above 1% of GDP from debt brake constraints, potentially unleashing decades of military reinvestment. The manager projects defense spending to increase from 2% to 3% of GDP by 2030, creating substantial tailwinds for defense contractors. Rheinmetall's €55 billion order backlog provides significant revenue visibility, while recent multi-billion Euro contract wins demonstrate strong competitive positioning. The Russia-Ukraine conflict has fundamentally altered European security priorities, driving sustained demand for advanced military systems. The company's dual focus on defense capacity expansion and strong financial performance positions it well to capitalize on this multi-year growth cycle. Munro's thesis centers on Rheinmetall capturing disproportionate market share as European nations prioritize defense modernization and self-reliance.

Pitch Summary:
We also started new positions in IDEXX Laboratories and Bio-Techne during the quarter. IDEXX is a global leader in point-of-care veterinary diagnostic testing, veterinary reference labs, and vet practice and animal hospital software. Bio-Techne is a leading supplier of proteins, antibodies, and other equipment and consumables to a wide swath of life sciences end markets. We believe both are excellent businesses with long-term tailwinds and stocks that often trade at aspirational levels. We were able to build positions at moderate discounts to our value estimates.

BSD Analysis:
Weitz established a new position in Bio-Techne, viewing the company as a leading supplier of critical life sciences research tools and consumables. The managers recognize Bio-Techne's strong market position across proteins, antibodies, and other essential equipment serving diverse life sciences end markets. This diversified exposure provides the company with multiple revenue streams and reduces dependence on any single research area or customer segment. The fund managers characterize Bio-Techne as an excellent business with long-term secular tailwinds, likely benefiting from continued growth in life sciences research, drug discovery, and biotechnology development. They note that the stock typically commands premium valuations due to its quality business model and growth characteristics. However, similar to IDEXX, they were able to initiate their position at moderate discounts to their value estimates, suggesting opportunistic timing. Bio-Techne's consumables-heavy business model provides recurring revenue characteristics and defensive qualities during economic uncertainty while maintaining exposure to innovation-driven growth in the life sciences sector.