Investment Pitches

BSD Analysis:
The manager executed a contrarian purchase of CrowdStrike during the July cyber outage crisis, viewing the market panic as a buying opportunity for a market-leading cybersecurity company. The investment thesis emphasizes CrowdStrike's strong competitive moat through high customer retention rates and its position as a crucial cybersecurity provider. Key fundamentals supporting the thesis include a clear path to margin expansion and significant operating leverage as the platform scales. The manager notes that the July cyber incident has been largely forgotten by the market, suggesting the temporary crisis created an attractive entry point. While acknowledging the expensive valuation, the thesis is predicated on heavy future growth prospects that should justify current multiples. This represents a quality growth play on a dominant cybersecurity platform where temporary operational issues created a strategic buying opportunity. The investment aligns with the Heartwood strategy of buying market leaders during periods of temporary distress.

BSD Analysis:
The manager identifies a valuation disconnect in Electronic Arts, trading at 33x earnings due to heavy R&D spending but only 20x free cash flow, suggesting the market is undervaluing long-term investments. The thesis centers on EA's strategic positioning for the AI-driven future of gaming through above-peer R&D investment levels. Despite recent setbacks including the Dragon Age game disappointment and softening video game trends in Q1, the manager emphasizes EA's strong licensing power as a durable competitive advantage. The investment case anticipates potential catalyst from activist investor involvement that could drive improved capital allocation, clearer communication, and enhanced user experience focus. This represents a value play on a quality gaming franchise with strong intellectual property, where current R&D investments are expected to drive future growth but are temporarily depressing near-term profitability metrics. The manager views the current valuation as attractive given EA's market position and potential for operational improvements.

Pitch Summary:
As we write this, President Trump just signed an executive order suggesting the use of coal to power the energy needs of data centers. Just today - uranium imports from China were also restricted. UEC stands alone as the only American uranium energy company that has the potential to be a leader in powering the nuclear energy needs of America. UEC currently trades as a proxy to Uranium's spot price, but once a clear use case becomes more evident, the market should appreciate the infrastructure and pipelines they have developed.

BSD Analysis:
The manager presents a timely thesis on Uranium Energy Corporation, positioning it as the primary beneficiary of recent policy developments favoring domestic uranium production. The investment case is built on UEC's unique position as the sole American uranium company with leadership potential in meeting domestic nuclear energy demand. Recent catalysts include President Trump's executive order promoting coal for data center power needs and restrictions on Chinese uranium imports, both supporting domestic uranium production. The manager notes that UEC currently trades as a commodity proxy to uranium spot prices, suggesting the market hasn't fully recognized the company's infrastructure and operational capabilities. The thesis anticipates a re-rating once the strategic value of domestic uranium production becomes more apparent to investors. This represents a thematic play on energy security and domestic resource development, with UEC positioned as the primary pure-play beneficiary of policy shifts toward American energy independence.

BSD Analysis:
The manager maintains conviction in Academy Sports despite tariff headwinds impacting the broader retail sector. The core thesis centers on the company's attractive valuation metrics, trading at just 6.3x TTM earnings and 6x forward earnings, suggesting significant upside potential if revenue growth materializes. The investment case acknowledges current challenges with same-store sales growth as the post-COVID sports and outdoors segment has normalized from its pandemic-era popularity. However, the manager emphasizes Academy's solvent balance sheet and active capital return program through share buybacks as defensive characteristics. The thesis appears to be a classic value play betting on operational leverage - any meaningful revenue growth could drive substantial multiple expansion given the compressed valuation. The tariff concerns are viewed as temporary headwinds rather than structural issues, with the manager positioning this as a contrarian bet on retail recovery.

Pitch Summary:
We have undoubtedly been wrong on Krispy Kreme. Since we started our position in March, the stock has gone down, vertically. And, on top of that, we initiated this in size. A pure double whammy to the downside, and the most significant negative impact on our performance. While the McDonald's rollout has been slower than expected, Krispy Kreme still has that deal in place, with a very strong national brand. The stock is caught up in recession fears, high debt and ozempic fears adding fuel to the fire. Short sellers have gotten particularly interested in this stock, and a cyber-attack that occurred in Q4 caused Krispy Kreme to miss its sales and profitability estimates, further sinking shares. We think that while these headwinds are real, the stock has been punished far too much. This is a kitchen sink. At face value, Krispy Kreme still has a balance sheet that is solvent, with a strong national brand, growing domestic and international presence, and a huge deal aligned up with McDonald's. They continue to see heavy brand engagement and deliver a superior product that consumers love. The stock currently trades at roughly 20x 2026 earnings estimates. While the story has soured since we purchased the stock, we believe it has corrected too far to the downside. We may exit the position at a loss in the future if 2025 does not bear fruit from the McDonald's partnership.

BSD Analysis:
The manager acknowledges a significant mistake with Krispy Kreme, describing it as the "most significant negative impact" on performance after initiating a large position that subsequently declined sharply. The investment thesis rests on the McDonald's partnership deal, though rollout has been slower than expected. Multiple headwinds are pressuring the stock including recession fears, high debt levels, GLP-1 weight loss drug concerns, short seller interest, and a Q4 cyber-attack that caused earnings misses. Despite these challenges, the manager believes the 20x 2026 earnings multiple represents oversold conditions for a company with a strong national brand and growing international presence. The "kitchen sink" characterization suggests all negative factors have been priced in. However, the manager's willingness to potentially exit at a loss if the McDonald's partnership doesn't deliver in 2025 indicates diminished conviction and a more defensive stance on this contrarian bet.

Pitch Summary:
We significantly increased our investment in Upstart, our largest holding, this quarter, following an exceptionally strong Q4 earnings report. In fact, we boosted our position by 12.67%, a significant size increase considering it was already our biggest position. Let us be clear, our conviction in Upstart is unwavering. While shares have fallen roughly ~60% since February, our conviction has only grown. We took advantage of the market's pessimism and significantly added to our stake both in Q1, and in the start of Q2. Upstart reported $219 million in Q4 revenue, smashing its own $180 million guidance, topping Wall Street's $182 million estimate, and exceeding our internal forecast of $200 million. More importantly, Q4 solidified that the Upstart comeback story we've been sharing with you all is in full force. Upstart is executing at a high level against an unfavorable macro backdrop while the market continues to underestimate the strength of its recovery. This only ends one way. Upstart guided for $200 million in Q1 revenue and $1 billion for full-year 2025, both far ahead of consensus but in line with our expectations. Importantly, this guidance assumes no additional rate cuts and a flat UMI (Upstart Macro Index). With the recent macro developments surrounding tariffs, rate cuts are all but certain this year. The question then becomes the performance of Upstart's loans and UMI, which remain unknowns. We feel confident, much more than the market, that Upstart's latest AI model enhancements, including m18 and m19, set the company up well to execute in this newly unfavorable environment. This parallels nothing similar to 2022, which Upstart CFO Sanjay Datta called "a nuclear winter" for credit. Shortly after earnings, our founder Henry interviewed Upstart CFO Sanjay Datta for the second time in less than a year. In that conversation, Sanjay reaffirmed many of the core beliefs that underpin our thesis: Upstart is operating with a lean cost structure, its operating leverage is far greater than analysts appreciate, and that the business is structurally stronger than it has ever been. Upstart's capital base is now significantly more durable than in prior years. Over 50% of funding now comes from long-term, committed capital. This is a major shift from the "at-will" capital structure that contributed to its drawdown in 2022. Additionally, Upstart continues to deepen its network of risk-sharing partnerships, which offer significant net interest income upside and attracted $1.3 billion in new commitments during Q4 alone. Upstart is also expanding horizontally. Small Dollar Loans now represent over 13% of new borrowers and continue to post strong credit performance. HELOC originations have surpassed 1,000 loans with zero defaults, are live in 36 states, and are positioning Upstart to eventually enter the purchase mortgage market, which has a massive long-term TAM. Auto, while still early, is expected to become a meaningful contributor to the P&L by 2026. Analyst upgrades followed quickly, with price targets from Piper Sandler, Citi, Mizuho, and others now clustering north of $100. But we believe the re-rating has only just begun. Upstart remains one of the most misunderstood growth companies in the market, and our belief in its long-term potential is stronger than ever.

BSD Analysis:
The manager presents an extremely bullish thesis on Upstart, viewing the 60% decline as a buying opportunity rather than a fundamental concern. The investment case centers on Upstart's AI-powered lending platform showing strong operational momentum with Q4 revenue of $219 million beating guidance and estimates. Key structural improvements include a more durable capital base with over 50% from committed sources versus the previous "at-will" structure that caused issues in 2022. The manager emphasizes horizontal expansion opportunities including Small Dollar Loans (13% of new borrowers), HELOC products with zero defaults across 1,000+ loans, and future auto lending contributions expected by 2026. Enhanced AI models m18 and m19 are positioned to handle the current macro environment better than the 2022 credit crisis. With analyst price targets clustering above $100 and the manager's conviction only strengthening during the selloff, this represents a high-conviction contrarian bet on a misunderstood fintech recovery story.

Pitch Summary:
Reddit is Heartwood's newest, and smallest, position. We anticipate growing this position in size over the coming quarters and years as the story parallels pretty closely to what we see in Grindr in the Jonagold portfolio. Reddit holds incredibly unique and structured user-generated data, which will be extremely valuable in the AI era. Additionally, their user base spends a ton of time on the app. It is far easier to monetize users if you have users! Reddit has spent decades acquiring a user base and is just at the beginning of their monetization journey. More people visit Reddit every day than they do Netflix. Their balance sheet is clean, but stock-based compensation and dilution are significant. We wrote a little more about Reddit here and expect to share more on our thesis shortly.

BSD Analysis:
The manager initiates a small position in Reddit with plans to scale significantly, drawing parallels to their successful Grindr investment in the Jonagold portfolio. The core thesis centers on Reddit's unique structured user-generated data becoming extremely valuable in the AI era, combined with high user engagement and time spent on platform. The manager emphasizes Reddit's decades-long user base development creating a strong foundation for monetization, noting daily visitors exceed Netflix's user base. While acknowledging a clean balance sheet, the manager flags concerns about stock-based compensation and dilution as potential headwinds. The investment represents an early-stage bet on social media monetization and AI data value, with the expectation that Reddit's unique community-driven content will drive significant revenue growth as monetization strategies mature.

Pitch Summary:
Robotaxis are dominating the narrative in the ride-sharing world. Lyft however stands out as a brand experiencing a significant turnaround that is extremely underappreciated. We have written relatively extensively on Lyft and encourage you to read that article here.

BSD Analysis:
The manager positions Lyft as an underappreciated turnaround story in the ride-sharing sector, contrasting it with the robotaxi narrative dominating industry discussions. While the pitch lacks detailed fundamental analysis in this excerpt, the manager indicates extensive prior research and writing on the company, suggesting a deep conviction position. The thesis appears to center on Lyft executing a significant operational turnaround that the market has not yet recognized, potentially creating value as investors focus on autonomous vehicle competitors. The investment represents a contrarian bet on traditional ride-sharing recovery while competitors pursue expensive robotaxi technology. However, the brief nature of this commentary limits insight into specific turnaround catalysts or financial metrics supporting the bull case.

Pitch Summary:
We purchased CrowdStrike during the July cyber outage dip. This was one of those rare moments where the market panicked on a market leader. CrowdStrike fits Heartwood's strategy well. They have strong customer retention, a clear moat, a path to margin expansion and operating leverage as they grow their platform. As one of the most crucial cyber security providers out there, their recent failure has largely been forgotten. CRWD trades expensive, but future growth prospects are heavy.

BSD Analysis:
The manager opportunistically purchased CrowdStrike during the July cyber outage selloff, viewing it as market panic on a market-leading cybersecurity provider. The investment thesis emphasizes CrowdStrike's strong competitive position with high customer retention, clear competitive moats, and significant operating leverage potential as the platform scales. Despite acknowledging the stock trades at expensive valuations, the manager believes the July incident has been largely forgotten by the market and doesn't impair the long-term growth trajectory. The position represents a contrarian bet on a cybersecurity leader during a temporary crisis, with the expectation that strong fundamentals and growth prospects will drive future outperformance. The thesis relies on CrowdStrike's critical role in enterprise security and ability to expand margins through platform growth.

Pitch Summary:
EA trades at a 33x earnings multiple due to heavy R&D spend, yet it trades below 20x free cash flow. This is a disconnect between near-term profitability and long-term value creation. Electronic Arts has consistently invested more in R&D than its peers, positioning itself to lead in the AI-driven future of gaming. While their new game Dragon Age was by all means a "flop" and video game trends softened into the Q1, EA's position is still extremely strong with their licensing power. It is only a matter of time before an activist stake could help close this valuation gap by pushing for clearer capital allocation, improved communication and a stronger focus on user experience.

BSD Analysis:
The manager identifies a valuation disconnect at Electronic Arts, trading at 33x earnings due to heavy R&D investment but only 20x free cash flow, suggesting the market undervalues long-term value creation. The thesis centers on EA's superior R&D spending positioning the company to lead in AI-driven gaming innovation, despite recent disappointments like Dragon Age's poor performance and softening gaming trends. The manager emphasizes EA's strong licensing power as a competitive moat and expects potential activist intervention to unlock value through improved capital allocation and communication. The investment represents a contrarian bet on a gaming leader trading at a discount due to near-term execution issues, with significant upside if management optimizes operations or activists drive change.

Pitch Summary:
As we write this, President Trump just signed an executive order suggesting the use of coal to power the energy needs of data centers. Just today - uranium imports from China were also restricted. UEC stands alone as the only American uranium energy company that has the potential to be a leader in powering the nuclear energy needs of America. UEC currently trades as a proxy to Uranium's spot price, but once a clear use case becomes more evident, the market should appreciate the infrastructure and pipelines they have developed.

BSD Analysis:
The manager positions Uranium Energy Corporation as a strategic beneficiary of recent policy developments, including Trump's executive order on coal for data centers and restrictions on Chinese uranium imports. The thesis centers on UEC being the sole American uranium company positioned to lead in domestic nuclear energy supply, particularly as energy security becomes a national priority. Currently trading as a uranium spot price proxy, the manager expects a re-rating once the market recognizes UEC's developed infrastructure and pipeline capabilities. The investment represents a play on energy independence, nuclear power renaissance, and geopolitical tensions driving domestic uranium demand. The timing appears opportunistic given recent policy catalysts that could accelerate domestic uranium production and reduce Chinese dependence.

Pitch Summary:
ASO has been hit hard from the recent Trump tariffs, but what retailer hasn't? Undoubtedly, tariffs are bad for retailers and will hurt ASO's business. However, our original thesis is still intact and has always been the same. Academy is struggling to currently grow sales as the sports and outdoors segment has not been doing as well post COVID. In other words, that segment of the market was trendy. Academy now faces challenges in growing same store sales, but at the same time they have a solvent balance sheet, trading at TTM earnings of 6.3x and FWD earnings of 6x. Any revenue growth here has the potential to result in a huge re-rating. Academy continues to buy back stock and return capital to shareholders in the meantime.

BSD Analysis:
The manager maintains conviction in Academy Sports despite tariff headwinds and post-COVID normalization in the sports and outdoors segment. The core thesis centers on extreme valuation at 6.3x TTM earnings and 6x forward earnings, creating significant re-rating potential if revenue growth returns. The manager acknowledges current challenges including same-store sales growth difficulties as the sports/outdoors trend from COVID has normalized, and tariff pressures affecting all retailers. However, the investment case relies on a solvent balance sheet and active capital return through share buybacks while waiting for any revenue inflection. The thesis represents a deep value play on a cyclical retailer trading at distressed multiples, with substantial upside if the sports and outdoors market recovers or the company can drive organic growth.

Pitch Summary:
We have undoubtedly been wrong on Krispy Kreme. Since we started our position in March, the stock has gone down, vertically. And, on top of that, we initiated this in size. A pure double whammy to the downside, and the most significant negative impact on our performance. While the McDonald's rollout has been slower than expected, Krispy Kreme still has that deal in place, with a very strong national brand. The stock is caught up in recession fears, high debt and ozempic fears adding fuel to the fire. Short sellers have gotten particularly interested in this stock, and a cyber-attack that occurred in Q4 caused Krispy Kreme to miss its sales and profitability estimates, further sinking shares. We think that while these headwinds are real, the stock has been punished far too much. This is a kitchen sink. At face value, Krispy Kreme still has a balance sheet that is solvent, with a strong national brand, growing domestic and international presence, and a huge deal aligned up with McDonald's. They continue to see heavy brand engagement and deliver a superior product that consumers love. The stock currently trades at roughly 20x 2026 earnings estimates. While the story has soured since we purchased the stock, we believe it has corrected too far to the downside. We may exit the position at a loss in the future if 2025 does not bear fruit from the McDonald's partnership.

BSD Analysis:
The manager acknowledges being "undoubtedly wrong" on Krispy Kreme, with the stock declining vertically since initiating a large position in March, becoming the most significant negative impact on performance. Multiple headwinds have pressured shares including slower-than-expected McDonald's rollout, recession fears, high debt concerns, GLP-1 weight loss drug impact, increased short interest, and a Q4 cyber-attack that caused earnings misses. Despite these challenges, the manager argues the stock has been oversold, trading at 20x 2026 earnings with a solvent balance sheet, strong national brand, and the McDonald's partnership still intact. The thesis relies on the McDonald's deal eventually bearing fruit in 2025, though the manager admits they may exit at a loss if the partnership fails to deliver. This represents a contrarian value play on an oversold consumer brand facing multiple temporary headwinds.

Pitch Summary:
We significantly increased our investment in Upstart, our largest holding, this quarter, following an exceptionally strong Q4 earnings report. In fact, we boosted our position by 12.67%, a significant size increase considering it was already our biggest position. Let us be clear, our conviction in Upstart is unwavering. While shares have fallen roughly ~60% since February, our conviction has only grown. We took advantage of the market's pessimism and significantly added to our stake both in Q1, and in the start of Q2. Upstart reported $219 million in Q4 revenue, smashing its own $180 million guidance, topping Wall Street's $182 million estimate, and exceeding our internal forecast of $200 million. More importantly, Q4 solidified that the Upstart comeback story we've been sharing with you all is in full force. Upstart is executing at a high level against an unfavorable macro backdrop while the market continues to underestimate the strength of its recovery. This only ends one way. Upstart guided for $200 million in Q1 revenue and $1 billion for full-year 2025, both far ahead of consensus but in line with our expectations. Importantly, this guidance assumes no additional rate cuts and a flat UMI (Upstart Macro Index). With the recent macro developments surrounding tariffs, rate cuts are all but certain this year. The question then becomes the performance of Upstart's loans and UMI, which remain unknowns. We feel confident, much more than the market, that Upstart's latest AI model enhancements, including m18 and m19, set the company up well to execute in this newly unfavorable environment. This parallels nothing similar to 2022, which Upstart CFO Sanjay Datta called "a nuclear winter" for credit. Shortly after earnings, our founder Henry interviewed Upstart CFO Sanjay Datta for the second time in less than a year. In that conversation, Sanjay reaffirmed many of the core beliefs that underpin our thesis: Upstart is operating with a lean cost structure, its operating leverage is far greater than analysts appreciate, and that the business is structurally stronger than it has ever been. Upstart's capital base is now significantly more durable than in prior years. Over 50% of funding now comes from long-term, committed capital. This is a major shift from the "at-will" capital structure that contributed to its drawdown in 2022. Additionally, Upstart continues to deepen its network of risk-sharing partnerships, which offer significant net interest income upside and attracted $1.3 billion in new commitments during Q4 alone. Upstart is also expanding horizontally. Small Dollar Loans now represent over 13% of new borrowers and continue to post strong credit performance. HELOC originations have surpassed 1,000 loans with zero defaults, are live in 36 states, and are positioning Upstart to eventually enter the purchase mortgage market, which has a massive long-term TAM. Auto, while still early, is expected to become a meaningful contributor to the P&L by 2026. Analyst upgrades followed quickly, with price targets from Piper Sandler, Citi, Mizuho, and others now clustering north of $100. But we believe the re-rating has only just begun. Upstart remains one of the most misunderstood growth companies in the market, and our belief in its long-term potential is stronger than ever.

BSD Analysis:
The manager maintains unwavering conviction in Upstart despite a 60% decline from February highs, significantly increasing the position by 12.67% during Q1. The bull thesis centers on Upstart's strong Q4 execution, beating revenue guidance by 22% at $219 million versus $180 million guidance, and providing robust 2025 guidance of $1 billion revenue. The manager emphasizes structural improvements including a more durable capital base with over 50% from long-term committed sources, enhanced AI models (m18 and m19), and expanding product offerings across Small Dollar Loans (13% of new borrowers), HELOC (1,000+ loans with zero defaults), and future auto lending. The thesis highlights significant operating leverage potential and horizontal expansion opportunities, with analyst price targets clustering above $100. The manager views current weakness as a buying opportunity in a misunderstood growth story with substantial long-term potential.

Pitch Summary:
Our one new position is wine and beer maker Constellation Brands (NYQQ: STZ). They will get caught up in the tariffs, but it's an extremely well-run company that sells a product that has historically been recession resistant. In other words, they produce a consumer staple that traditionally goes up in times of uncertainty. Interestingly, Berkshire Hathaway disclosed—after our own acquisition—that they had also purchased over $1B of stock in Constellation, which we regard as validation of our own evaluation of the position.

BSD Analysis:
The manager initiates a bullish position in Constellation Brands, emphasizing its recession-resistant consumer staple characteristics during economic uncertainty. The investment thesis centers on alcoholic beverages' historical performance during economic stress, with products that traditionally increase in demand during uncertain times. While acknowledging potential tariff impacts, the manager highlights the company's exceptional operational management as a mitigating factor. The investment rationale gains validation from Berkshire Hathaway's subsequent $1+ billion investment, which the manager views as confirmation of their analysis. This represents a defensive consumer staples play, betting on recession-resistant demand patterns and quality management execution. The manager views alcoholic beverages as providing stability during economic volatility, with Constellation's market position offering competitive advantages. The Berkshire validation suggests institutional recognition of the company's quality and defensive characteristics during uncertain economic conditions.

Pitch Summary:
It may also be worth noting our small, pre-existing position with electric vehicle maker Rivian Automotive Inc. (NSQQ: RIVN), given Tesla's (NSQQ: TSLA) plummeting value. Rivian offers an ideal scenario in which all production is domestic. The owner, R.J. Scaringe, is a shrewd leader who thinks long-term, and the company offers an attractive balance sheet. They also have a partnership with Volkswagen to develop "next generation software-defined vehicle (SDV) platforms" to be used in vehicles made by both companies. Rivian is well positioned here, offering a good tech-stack built internally. In fact, they are almost as much of a 'car operating system' company as they are a traditional auto manufacturer. They are in a great spot to pick up some of the customers Tesla seems to be bleeding. Certainly, Rivian has a customer base fanatical about its product and willing to sing its praises. They are not making money quite yet, but their upcoming 2026 R2 car model shows real promise. In fact, we suspect it may turn out to be a gamechanger, debuting at nearly half the price (starting around $45,000) as Rivian's other, high-end models and competitive with Tesla's lower tier models.

BSD Analysis:
The manager presents a bullish thesis on Rivian, emphasizing its domestic production advantage amid tariff concerns and positioning as a Tesla alternative. The investment rationale highlights CEO R.J. Scaringe's long-term strategic thinking and the company's attractive balance sheet position. Key competitive advantages include internally developed technology stack and partnership with Volkswagen for software-defined vehicle platforms. The manager views Rivian as positioned to capture market share from Tesla, supported by a loyal customer base and upcoming product catalyst. The 2026 R2 model represents a significant opportunity, priced at $45,000 versus higher-end models, directly competing with Tesla's lower-tier offerings. The thesis emphasizes Rivian's dual identity as both automaker and car operating system company, suggesting higher-margin software revenue potential. While acknowledging current unprofitability, the manager sees the R2 launch as a potential game-changer for the company's financial trajectory.

Pitch Summary:
We are also holding onto a series of new oil and gas investments we discussed in our previous letter: Tidewater (NYQQ: TDW), Valaris (NYQQ: VAL), and Schlumberger NV (NYQQ: SLB). We see a capital cycle at in play with our new acquisitions positioned favorably compared to some of their chief competitors. Shell (NYSS: SHELL), for example, was a major threat in previous cycles but has since redirected capex that would have gone to offshore drilling into domestic production. Unfortunately, a lot of those domestic fields just aren't what they once were, leaving Shell looking like a depleting asset. Of our new acquisitions, two have gone through significant restructuring of their balance sheets, improving their competitive posture. They're in a typically deep downturn from a cyclical standpoint, but they are poised to do disproportionately well when the cycle returns.

BSD Analysis:
The manager presents a bullish cyclical thesis on SLB (formerly Schlumberger), positioning it within favorable capital cycle dynamics in oil and gas services. The investment rationale emphasizes competitive advantages as major competitors like Shell have redirected capital away from offshore drilling toward depleting domestic production assets. The manager highlights that SLB has undergone significant balance sheet restructuring, improving its competitive posture during the current cyclical downturn. The thesis suggests the company is well-positioned for disproportionate outperformance when the energy services cycle recovers. This represents a contrarian value play in a deeply cyclical, currently depressed sector. The manager views current weakness as creating attractive entry points for companies with improved capital structures and competitive positioning. The investment reflects confidence in eventual cyclical recovery and SLB's enhanced ability to capitalize on that recovery compared to previous cycles.

Pitch Summary:
We are also holding onto a series of new oil and gas investments we discussed in our previous letter: Tidewater (NYQQ: TDW), Valaris (NYQQ: VAL), and Schlumberger NV (NYQQ: SLB). We see a capital cycle at in play with our new acquisitions positioned favorably compared to some of their chief competitors. Shell (NYSS: SHELL), for example, was a major threat in previous cycles but has since redirected capex that would have gone to offshore drilling into domestic production. Unfortunately, a lot of those domestic fields just aren't what they once were, leaving Shell looking like a depleting asset. Of our new acquisitions, two have gone through significant restructuring of their balance sheets, improving their competitive posture. They're in a typically deep downturn from a cyclical standpoint, but they are poised to do disproportionately well when the cycle returns.

BSD Analysis:
The manager maintains a bullish cyclical position on Valaris, emphasizing capital cycle dynamics and competitive positioning in offshore drilling. The investment thesis highlights how major competitors like Shell have shifted capital allocation away from offshore drilling toward depleting domestic production assets. The manager notes Valaris has undergone significant balance sheet restructuring, improving its competitive posture during the current cyclical downturn. The rationale suggests the company is positioned for disproportionate outperformance when the offshore drilling cycle recovers. This represents a contrarian value investment in a deeply cyclical, currently out-of-favor sector. The manager views the current downturn as creating attractive entry points for companies with improved capital structures and competitive positioning. The investment reflects confidence in eventual cyclical recovery and Valaris's enhanced ability to capitalize on that recovery relative to previous cycles.

Pitch Summary:
We are also holding onto a series of new oil and gas investments we discussed in our previous letter: Tidewater (NYQQ: TDW), Valaris (NYQQ: VAL), and Schlumberger NV (NYQQ: SLB). We see a capital cycle at in play with our new acquisitions positioned favorably compared to some of their chief competitors. Shell (NYSS: SHELL), for example, was a major threat in previous cycles but has since redirected capex that would have gone to offshore drilling into domestic production. Unfortunately, a lot of those domestic fields just aren't what they once were, leaving Shell looking like a depleting asset. Of our new acquisitions, two have gone through significant restructuring of their balance sheets, improving their competitive posture. They're in a typically deep downturn from a cyclical standpoint, but they are poised to do disproportionately well when the cycle returns.

BSD Analysis:
The manager presents a bullish cyclical thesis on Tidewater, positioning it as a beneficiary of capital cycle dynamics in offshore drilling. The investment rationale centers on competitive positioning advantages as major competitors like Shell have redirected capital away from offshore drilling toward depleting domestic fields. The manager highlights Tidewater's balance sheet restructuring as improving its competitive posture during the current cyclical downturn. The thesis suggests the company is well-positioned for disproportionate outperformance when the offshore drilling cycle recovers. This represents a contrarian value play, betting on cyclical recovery in an out-of-favor sector. The manager views current weakness as creating attractive entry points for companies with improved capital structures. The investment reflects confidence in offshore drilling's eventual recovery and Tidewater's enhanced competitive position relative to historical cycles.

Pitch Summary:
First, we remain committed to our positions in Google/Alphabet (NSQQ: GOOGL) and Amazon (NSQQ: AMZN). Even before all the market madness, we already had an affinity for capital-light businesses, which are relatively less vulnerable to tariffs than the heavy industrial portions of the economy. While Amazon and Google will face secondary impacts (e.g., weakening consumer demand in a recessionary environment), they operate under models that can squeeze out efficiency and reward innovations that can help lower prices for consumers. Everyone will be impacted, but we are comfortable with where Amazon and Google remain within a long-term framework.

BSD Analysis:
The manager maintains a bullish position on Amazon, highlighting its capital-light business characteristics as protection against tariff-related economic disruption. The investment thesis emphasizes Amazon's ability to drive operational efficiency and innovation that benefits consumers through lower prices during economic stress. While recognizing potential headwinds from weakening consumer demand in a recessionary scenario, the manager expresses confidence in Amazon's long-term structural positioning. The rationale focuses on the company's scalable business model advantages over capital-intensive industries facing direct tariff impacts. The manager views Amazon's operational flexibility and efficiency capabilities as key differentiators during economic uncertainty. This represents a defensive technology play, betting on platform economics and operational excellence over cyclical exposure. The position reflects conviction in Amazon's ability to maintain competitive advantages and market share through economic downturns.