Investment Pitches

Pitch Summary:
Short thesis: DSY still trades at a growth-adjusted premium despite slowing fundamentals and a tougher competitive landscape. Roughly 18% of revenue remains license-based, leaving results more cyclical than peers that are ~95%+ subscription. Subscription adoption (3DEXPERIENCE penetration 38%) is behind plan, suggesting a longer glide path and weaker near-term cash conversion. Core CAD/PLM faces intensifying competition (Siemens NX/Teamcenter, Autodesk Fusion 360, PTC Onshape/Creo) with notable design wins lost. SolidWorks mid-market growth is decelerating amid saturation and cloud-native alternatives. Auto (≈20% of revenue) looks saturated and cyclical, with tariff and macro headwinds, while defense’s small mix limits offset. Medidata/Life Sciences growth has slowed, raising risk to CMD’23 targets that imply a steep re-acceleration. Working-capital drag from the model shift keeps OpCF/EBIT conversion below history. On a PEG basis DSY screens expensive (~3.3x vs peers ~1.6x). Base case: multiple compression on reset expectations drives 25%+ downside to ~€25.

BSD Analysis:
Global leader in CAD/PLM and simulation (CATIA, ENOVIA, SolidWorks) plus Medidata in clinical trials; ~80% recurring software but with elevated license exposure vs peers. Set-up: Growth has moderated, subscription transition is slower than plan, and end-markets (auto/aero/industrial) are more cyclical under tariff uncertainty. Debates: Can 3DEXPERIENCE adoption inflect, can defense/aero offset auto weakness, and will Medidata re-accelerate to CMD targets? Valuation: Premium PEG and sub-par near-term FCF conversion leave little cushion; author triangulates ~€25 PT via higher FCF yield (4.5–5%) on ~2026 FCF and lower EV/EBIT(DA). Risks: Faster cloud adoption, big aero/defense wins, or a macro/trade thaw; also potential M&A optionality. Why now: Repeated subscription misses, rising competition, and a likely CMD reset create catalysts for estimate/multiple cuts.

Pitch Summary:
Allied Gold is a newly public, Africa-focused gold producer led by mining veteran Peter Marrone, aiming to double output from 350,000 to 800,000 ounces by 2027. The company operates two core low-cost mines—Sadiola in Mali and the Agbao/Bonikro complex in Côte d’Ivoire—both producing at all-in sustaining costs (AISC) of $1,000–$1,250/oz, with long mine lives and strong government alignment. A key upside driver is the Kurmuk project in Ethiopia, a 15-year, 93%-owned development asset expected to become the country’s largest gold mine with AISC near $950/oz. The market remains skeptical of Ethiopia’s mining jurisdiction, which allows Allied to trade at a deep discount (~0.4–0.5× NAV) versus peers. Marrone’s team, owning ~25% of shares, has executed two non-dilutive streaming deals totaling $225M and sold part of Sadiola to a UAE fund for $500M (half in cash upfront). The balance sheet is strong, with ~$325M cash, $100M debt, and an undrawn $100M revolver. Forced selling post-IPO and lack of institutional ownership depressed shares to 0.2× NAV—an unsustainable discount now easing as longer-term holders enter. At $4.90/share and <4× 2026 EBIT, Allied offers both growth and value with improving liquidity and visibility. As execution on Kurmuk and production scaling continue, shares could re-rate toward peer multiples of 0.8–1.0× NAV, implying ~100% upside.

BSD Analysis:
Mid-tier African gold producer operating low-cost open-pit mines in Mali and Côte d’Ivoire, with a large development pipeline in Ethiopia. Set-up: Post-IPO technical selling and jurisdictional skepticism have created a deep value entry point at ~0.4× NAV. Growth: Targeting a doubling of production to 800koz by 2027, with Kurmuk adding 300koz at sub-$1,000 AISC. Balance sheet: Net debt only ~$125M with strong liquidity and non-dilutive financing through streams and farm-outs. Management: Led by Peter Marrone (ex-Yamana) with 25% insider ownership ensuring alignment and disciplined capital allocation. Valuation: Trades at <4× 2026 EBIT and ~0.5× NAV versus peers at 0.9×, offering material rerating potential as execution and investor confidence improve.

Pitch Summary:
Metso Oyj, a Finland-based supplier of minerals, aggregates, and metals refining equipment, faces mounting headwinds to growth, profitability, and free cash flow. Following a post-COVID demand surge, the company has extended customer payment terms and overbuilt inventory, masking weakening underlying demand. Days sales outstanding (65) and days inventory outstanding (210) are both at multi-year highs, indicating unsustainable working capital use. Order backlog coverage has dropped to 59% of FY25 revenue versus 69% in FY21, suggesting downside risk to the consensus +6.8% YoY growth forecast. Record gross margins have been driven by temporary pricing power and overproduction, which are unlikely to persist as mining and aggregates markets normalize. A likely reversion to 27–32% gross margins could cut FY25 EBITA by ~10%. Free cash flow expectations (~€640M FY25) appear overly optimistic given past dividend overpayments and bloated working capital. New leadership (CEO and CFO replaced in late 2024–early 2025) could “kitchen sink” results, resetting earnings expectations lower. Trading at ~11× EV/EBITA, valuation leaves little margin for error; compression to 9× implies ~30% downside to €6.80/share. The setup favors short exposure into likely earnings downgrades and cash flow disappointment.

BSD Analysis:
Global provider of mining, aggregates, and refining equipment and consumables; ~75% of sales from mining customers. Set-up: Consensus expects a rebound in 2025 (+6.8% revenue), but leading indicators—declining backlog and stretched receivables—suggest growth has been pulled forward. Margins: Elevated by unsustainable pricing and fixed-cost absorption during inventory build; normalization should revert margins toward historical averages. Financial health: FCF overstated as dividends exceed cumulative cash generation; working capital reversal likely a near-term cash drag. Governance: CEO/CFO exits raise risk of “reset year” under new management, potentially revealing aggressive accounting or over-earning. Valuation: At 11× EV/EBITA, shares discount a cyclical upturn that is unlikely; fair value closer to 9× implies ~30% downside.

Pitch Summary:
Trex is the world's largest manufacturer of composite decking and railing. Historically, decking was made mostly of wood materials, but decking made from composite materials have steadily taken market share over the past two decades due to its superior durability and lower maintenance needs. Trex is by far the dominant brand in composites, and its scale has allowed it to build significant cost and distribution advantages. The company should benefit from the ongoing conversion of wood decks, as only around a quarter of decks today are composite. The management team is seasoned and well-regarded, and the company has a clean balance sheet, high returns on capital, and good free cash flow generation. The stock has traded down recently as the housing market remains stubbornly weak.

BSD Analysis:
Madison added Trex as a new position, capitalizing on weakness in housing-related stocks to acquire the dominant composite decking manufacturer at attractive levels. The investment thesis is built on the secular shift from traditional wood to composite materials, driven by superior durability and lower maintenance requirements. With only 25% of decks currently made from composite materials, Trex has a substantial addressable market for continued penetration. The company's market leadership position provides significant scale advantages in both cost structure and distribution reach. Madison emphasizes the quality of management and strong financial metrics, including high returns on capital and robust free cash flow generation. The recent stock weakness due to housing market headwinds presents what the fund views as a compelling entry opportunity for a high-quality business with long-term secular tailwinds.

Pitch Summary:
Kinsale is a fast-growing excess and surplus (E&S) insurance company. The company is managed by its founder and is run as a true owner-operator. Kinsale's proprietary technology systems produce tremendous efficiencies and give the company a low-cost advantage. The company's strong entrepreneurial culture and insistence on doing things in-house and their own way (as opposed to industry convention) results in superior underwriting performance. With only ~1-2% market share within the E&S industry today, the growth runway is long. The stock had underperformed due to a combination of slowing premium growth and concerns over the insurance industry pricing cycle, resulting in a reasonable valuation given the quality of the business and potential for long-term compounding.

BSD Analysis:
Madison initiated a position in Kinsale Capital Group, viewing it as an attractive entry point into a high-quality specialty insurer. The fund highlights Kinsale's founder-led management structure and proprietary technology platform as key competitive advantages that drive operational efficiency and superior underwriting results. With only 1-2% market share in the excess and surplus insurance market, the company has significant runway for organic growth. The investment thesis centers on Kinsale's entrepreneurial culture and in-house approach, which differentiates it from traditional industry practices. Recent underperformance due to slowing premium growth and industry cycle concerns has created what Madison views as a compelling valuation opportunity. The fund sees potential for long-term compounding given the business quality and growth prospects.

Pitch Summary:
This quarter we want to highlight Honeywell (HON) as a high-quality relative yield investment in the Industrial sector. HON is a premier industrial company with leading positions in Aerospace (40% of revenues), Industrial Automation (26%), Building Automation (17%) and Safety and Productivity Solutions (17%). A common theme across these end markets is that HON embeds its products into the operations of its customers, which generates long-term recurring revenue from aftermarket products/services. We believe HON has a sustainable competitive advantage due to its scale, high customer switching costs, intangible assets, and long history of innovation. Many HON products are a low percentage of its customers' total costs, and these products get designed into products and operations, which provide a long-term source of consistent revenue. HON recently announced plans to break the company into three separate entities by the end of 2026, which we believe will create shareholder value. The three stand-alone companies will be Honeywell Aerospace, Honeywell Automation, and Advanced Materials. These businesses are likely to have better focus, different levels of capital intensity, and different growth profiles as stand-alone entities. Activist investor Elliott Management also owns a $5 billion stake, which is the largest activist investment the firm has made in its history. Valuation appears attractive at 18x forward expected earnings, which is a less than market multiple. The fund originally purchased HON in September 2020 during the Covid pandemic when air travel was largely offline, which negatively impacted its flagship aerospace business. We added to the position in June 2024 as its relative yield hit the highest level since the global financial crisis in 2009, and it is now the seventh largest position in the 40-stock portfolio. HON has an A-rated balance sheet by Standard & Poor's and has raised its dividend an average of 5% over the past five years. We expect continued dividend increases going forward.

BSD Analysis:
Madison presents a compelling bull case for Honeywell as a high-quality relative yield play in the industrial sector. The managers highlight HON's diversified business model across aerospace, automation, and safety solutions, with embedded products generating recurring aftermarket revenue streams. The investment thesis centers on sustainable competitive advantages including scale, customer switching costs, and innovation capabilities that create pricing power and revenue visibility. A key catalyst is the planned breakup into three standalone entities by 2026, which should unlock value through improved focus and operational efficiency. The presence of Elliott Management as the largest activist stake in the firm's history adds credibility to the value creation potential. At 18x forward earnings, the valuation appears reasonable relative to the market, especially given the company's A-rated balance sheet and consistent 5% annual dividend growth track record. Madison's opportunistic buying during COVID-19 disruption and subsequent additions during relative yield peaks demonstrates disciplined value investing execution.

Pitch Summary:
Analog Devices is a global semiconductor leader dedicated to solving customers' most complex engineering challenges. The company delivers innovations that connect technology to human breakthroughs and play a critical role at the intersection of the physical and digital worlds by providing the building blocks to sense, measure, interpret, connect and power. Analog designs, manufactures, tests and markets a broad portfolio of solutions. These solutions include integrated circuits, software and subsystems that leverage high-performance analog, mixed-signal and digital signal processing technologies. Its comprehensive product portfolio, deep domain expertise and advanced manufacturing span high-performance precision and high-speed mixed-signal, power management and processing technologies, including data converters, amplifiers, power management, radio frequency, integrated circuits, edge processors and other sensors. The company's customers include original equipment manufacturers and customers that build electronic subsystems for integration into larger systems. We see the company's analog products providing exposure to high-growth trends, including automotive electrification and driver assistance systems, factory intelligence and automation, the Intelligent Edge, Internet of Things device proliferation and sustainable energy. We expect the company to return excess free cash flow, benefiting shareholders.

BSD Analysis:
Aristotle Atlantic initiated a position in Analog Devices, viewing the semiconductor company as well-positioned to capitalize on multiple secular growth trends. The manager highlights ADI's comprehensive product portfolio spanning high-performance analog, mixed-signal, and digital signal processing technologies, which positions the company at the intersection of physical and digital worlds. The investment thesis centers on ADI's exposure to high-growth end markets including automotive electrification, driver assistance systems, factory automation, IoT device proliferation, and sustainable energy infrastructure. The manager appreciates the company's diversified customer base of OEMs and subsystem builders, which provides stability across economic cycles. ADI's strong free cash flow generation and shareholder-friendly capital allocation policy through excess cash returns further supports the bullish stance. The timing of this purchase during a semiconductor downturn suggests the manager sees attractive entry valuation for a quality franchise with secular tailwinds.

Pitch Summary:
Additionally, we purchased Schlumberger NV (SLB), the largest oilfield services company in the world by revenue. SLB provides equipment, services and digital tools to help oil and gas producers operate more efficiently, including reservoir characterization, rig and well construction and production enhancement. We believe the company's scale and technical expertise are key differentiators. Weak near-term demand, an oil glut, falling commodity prices and concerns about future spending amid a global shift to renewable energies presented an attractive entry point. We believe there are tailwinds supporting rising demand over the medium-term, as national oil companies invest in long-cycle projects to grow capacity and address the natural decline of production. Additionally, we expect SLB will continue to evolve their capabilities to help clients with rising energy needs going forward.

BSD Analysis:
Ariel initiated a position in Schlumberger, viewing current energy sector weakness as an attractive entry opportunity for the world's largest oilfield services company. The fund acknowledges near-term headwinds including weak demand, oil oversupply, falling commodity prices, and concerns about the renewable energy transition, but sees these as creating an attractive valuation entry point. Ariel's investment thesis centers on SLB's competitive advantages including unmatched scale and technical expertise that differentiate it from competitors. The fund identifies medium-term tailwinds from national oil companies investing in long-cycle projects to grow capacity and offset natural production decline. Additionally, Ariel expects SLB to continue evolving its capabilities to serve clients' rising energy needs, potentially including energy transition services. The combination of market-leading position, technical capabilities, and attractive valuation following sector weakness supports the fund's bullish long-term outlook despite near-term challenges.

Pitch Summary:
We initiated two positions in the leisure and travel industry, cruise ship operator, Norwegian Cruise Line Holdings Ltd. (NCLH) and global health and wellness provider onboard cruise ships and destination resorts, OneSpaWorld Holdings Ltd. (OSW). Shares of both companies traded meaningfully lower on investor concerns around a deterioration in consumer sentiment and related softening in discretionary spend due to the economic slowdown. A potential new tax on cruise lines also weighed on NCLH's shares. In our view, these risks are currently priced in and present an attractive entry point. Notably, consumer demand and booking trends remain strong and both companies continue to deliver robust earnings growth. OSW's management continues to work to strengthen its balance sheet by paying down debt and returning capital to shareholders through buybacks and dividends.

BSD Analysis:
Ariel initiated a position in OneSpaWorld alongside Norwegian Cruise Line Holdings, viewing the travel and leisure sector weakness as an attractive entry opportunity. The fund acknowledges investor concerns about deteriorating consumer sentiment and potential softening in discretionary spending due to economic slowdown, but believes these risks are already reflected in current valuations. Ariel's investment thesis is supported by strong underlying fundamentals including robust consumer demand, strong booking trends, and continued earnings growth. The company's financial position is improving with management focused on balance sheet strengthening through debt reduction and capital returns via buybacks and dividends. As a provider of health and wellness services on cruise ships and destination resorts, OneSpaWorld benefits from the recovery in travel demand and the resilient spending patterns of cruise passengers. The fund appears confident that current market concerns are temporary and present an attractive entry point for a company with strong operational performance.

Pitch Summary:
Lastly, new holding, Norwegian Cruise Line Holdings Ltd. (NCLH) declined alongside the sector during the period, following investor concerns about a potential new tax on cruise lines. Although, we believe the risk of any potential exposure is currently priced in, we note cruise lines operate globally and determining taxable income on a jurisdiction basis can be extremely complex. Generally, operators benefit from exemptions under Section 883 of the IRS code and bilateral tax treaties that relieve them from paying corporate income tax on profits beyond the taxes already paid in their operating regions. The elimination of the carve-out would require a Congressional vote. Meanwhile, NCLH continues to deliver robust quarterly earnings, highlighted by strong consumer demand, healthy onboard spending, attractive pricing, solid cost containment and sustained progress on leverage reduction. Looking ahead, NCLH remains focused on right sizing its cost base and improving margins to further strengthen its foundation for sustainable and profitable growth. Notably, consumer demand and booking trends remain strong and both companies continue to deliver robust earnings growth. OSW's management continues to work to strengthen its balance sheet by paying down debt and returning capital to shareholders through buybacks and dividends.

BSD Analysis:
Ariel initiated a new position in Norwegian Cruise Line Holdings, viewing recent sector weakness as an attractive entry point. The fund acknowledges investor concerns about potential cruise line taxation but believes these risks are already reflected in current valuations. Ariel notes the complexity of implementing such taxes given cruise lines' global operations and existing tax treaty protections under Section 883 of the IRS code. The investment thesis is supported by NCLH's strong operational performance including robust quarterly earnings, strong consumer demand, healthy onboard spending, and attractive pricing power. Key financial improvements include solid cost containment and sustained progress on leverage reduction. Management's focus on right-sizing the cost base and improving margins should strengthen the foundation for sustainable growth. The combination of strong fundamentals, improving financial metrics, and attractive valuation following sector concerns supports Ariel's bullish outlook on this new holding.

Pitch Summary:
Leading provider of audio components and precision electrical devices, Knowles Corporation (KN), also traded lower following a quarterly earnings miss as slower than expected shipments of new specialty film products weighed on results. Meanwhile, demand from hearing aid companies for speakers/receivers is accelerating and management noted the industrial market appears to be stabilizing. Longer-term, we believe KN will benefit from a focus on niche and market leading positions in hearing health and precision devices, generating attractive revenue growth and free cash flows. At current levels, KN is trading at a meaningful discount to our estimate of private market value.

BSD Analysis:
Ariel maintains a bullish long-term view on Knowles despite recent earnings disappointment and share price weakness. The fund acknowledges near-term challenges from slower specialty film product shipments that impacted quarterly results. However, Ariel identifies positive trends including accelerating demand from hearing aid companies for speakers and receivers, and stabilization in the industrial market segment. The investment thesis centers on Knowles' strategic focus on niche, market-leading positions in hearing health and precision devices, which should drive attractive revenue growth and free cash flow generation over time. Ariel's conviction is reinforced by their valuation analysis showing the stock trading at a meaningful discount to estimated private market value. The fund appears to view current weakness as a buying opportunity for a company with strong competitive positions in specialized markets.

Pitch Summary:
Alternatively, manufacturer and developer of laboratory equipment and biological testing, Bio-Rad Laboratories Inc. (BIO), declined over the period after the National Institutes of Health (NIH) announced significant cuts to its internal funding structure. Management also issued disappointing guidance on continued softness in the biopharma and academic research segments as well as uncertainty in the funding environment. Despite the challenging backdrop, we believe the company offers a solid financial profile, including recurring revenue streams and rising operating profit margins.

BSD Analysis:
Ariel maintains a contrarian bullish stance on Bio-Rad despite near-term headwinds from NIH funding cuts and softness in key end markets. The fund acknowledges the challenging environment with disappointing management guidance reflecting continued weakness in biopharma and academic research segments, along with broader funding uncertainty. However, Ariel's investment thesis focuses on Bio-Rad's solid underlying financial profile, particularly its recurring revenue streams that provide stability and predictability. The company's rising operating profit margins demonstrate operational efficiency and pricing power despite market challenges. Ariel appears to view the current weakness as temporary, betting on Bio-Rad's strong market position in life sciences tools and services. The fund likely sees the current valuation as attractive given the company's fundamental strengths and long-term growth prospects in the life sciences sector.

Pitch Summary:
Leading provider of automated security solutions ADT, Inc. (ADT) also traded higher on solid earnings results. Despite the challenging macro backdrop, the company is demonstrating pricing power, a historically low attrition rate and growing free cash flow generation. Notably, ADT continues to improve its balance sheet through significant debt reduction. Management expects to maintain this momentum into 2025 with strong cash flow growth as well as a new share repurchase plan. With ADT's industry-leading brand and national presence, coupled with its Google and State Farm strategic partnerships, the company is well-positioned to be a prime beneficiary of growing demand for smart home technologies, including fully monitored residential security.

BSD Analysis:
Ariel maintains a bullish view on ADT based on strong operational execution and strategic positioning in the growing smart home market. The company demonstrated resilience during challenging macro conditions with solid earnings, pricing power, and historically low customer attrition rates. Key financial metrics show improvement with growing free cash flow generation and significant debt reduction strengthening the balance sheet. Management's confidence is reflected in the new share repurchase plan and optimistic 2025 guidance for continued cash flow growth. Strategic partnerships with Google and State Farm enhance ADT's competitive moat and position the company to capitalize on secular growth in smart home technologies. The combination of strong fundamentals, strategic partnerships, and favorable industry trends supports Ariel's positive outlook on the security services leader.

Pitch Summary:
Shares of leading food equipment manufacturer Middleby Corporation (MIDD) increased following management's announcement that the company is conducting a strategic review of its business portfolio. The news came shortly after activist firm, Garden Investments, acquired a minority stake in the company to gain board representation. They are seeking a potential divestiture of the Food Processing and Residential businesses to unlock value in the Commercial Foodservice segment. While the shares have been under pressure given the challenging macro backdrop and related concerns around new restaurant openings, we view these headwinds as transient. Longer term, MIDD's differentiated brands and focus on innovation should enable the company to benefit from secular demand for more automation and efficiency in the food service industry.

BSD Analysis:
Ariel views Middleby as a compelling value unlock story driven by activist involvement and strategic portfolio review. Garden Investments' minority stake acquisition and board representation has catalyzed management's strategic review, potentially leading to divestitures of the Food Processing and Residential segments to focus on the higher-value Commercial Foodservice business. The fund acknowledges near-term headwinds from challenging macro conditions and concerns about new restaurant openings but considers these temporary obstacles. Ariel's long-term thesis centers on Middleby's differentiated brand portfolio and innovation capabilities positioning the company to capitalize on secular trends toward automation and efficiency in foodservice. The combination of activist pressure, strategic focus, and favorable industry dynamics supports the fund's bullish outlook despite current market pressures.

Pitch Summary:
Toy manufacturer Mattel, Inc. (MAT) advanced over the quarter, following strong earnings results highlighted by solid sales growth, margin expansion and robust free cash flow generation. Management also provided full year 2025 guidance ahead of Wall Street expectations. With buyback activity expected to accelerate and the company poised to grow market share in 2025, we believe shares remain undervalued at current levels. Attractive opportunities to exploit its intellectual property through future film and TV projects only heighten our conviction.

BSD Analysis:
Ariel maintains a bullish stance on Mattel following strong Q1 2025 earnings that exceeded expectations with solid sales growth, margin expansion, and robust free cash flow generation. The fund views the company as undervalued despite recent gains, citing management's optimistic 2025 guidance that surpassed Wall Street estimates. Key catalysts include accelerating share buyback activity and expected market share growth in 2025. The investment thesis is further strengthened by Mattel's intellectual property monetization opportunities through film and TV projects, which could provide additional revenue streams. The fund's conviction appears high given the combination of strong operational performance and strategic growth initiatives. At current levels, Ariel believes the market has not fully recognized the company's intrinsic value and growth potential.

Pitch Summary:
Lastly, global leader in enterprise software, Oracle Corporation (ORCL), traded lower alongside the broader technology sector due to macroeconomic uncertainty and in particular, the near-term prospects for artificial intelligence investment (AI) spending. As a result, ORCL reported weaker than expected quarterly earnings results. Nonetheless, management expects double-digit growth for fiscal 2026 and 2027, citing significant demand for its cloud and AI capabilities. This supports our view that ORCL's positioning as the leading provider of database software and cloud-based infrastructure is entrenched, making it a key beneficiary of global demand for generative AI development.

BSD Analysis:
Ariel maintains strong conviction in Oracle despite recent earnings disappointment and sector-wide AI spending concerns. The fund views the current weakness as temporary, driven by macroeconomic uncertainty rather than fundamental deterioration in Oracle's competitive position. Management's guidance for double-digit growth in fiscal 2026 and 2027 demonstrates confidence in the company's strategic positioning and market opportunity. Ariel emphasizes Oracle's "entrenched" position as the leading provider of database software and cloud infrastructure, suggesting strong competitive moats and customer loyalty. The fund sees Oracle as a key beneficiary of the generative AI development trend, positioning the company to capture significant value from the AI infrastructure buildout. Strong demand for Oracle's cloud and AI capabilities indicates successful product positioning in high-growth markets. Ariel appears confident that Oracle's database leadership and cloud infrastructure capabilities will drive sustained growth as AI adoption accelerates across enterprises globally.

Pitch Summary:
Manufacturer and developer of laboratory equipment and biological testing, Bio-Rad Laboratories Inc. (BIO), decreased over the period after the National Institutes of Health (NIH) announced significant cuts to its internal funding structure. Management also issued disappointing guidance on continued softness in the biopharma and academic research segments as well as uncertainty in the funding environment. Despite the challenging backdrop, we believe the company offers a solid financial profile, including recurring revenue streams and rising operating profit margins.

BSD Analysis:
Ariel maintains a constructive stance on Bio-Rad despite near-term headwinds from NIH funding cuts and sector softness. The fund acknowledges the challenging environment facing biopharma and academic research segments but focuses on the company's underlying financial strength. Ariel highlights BIO's solid financial profile, emphasizing the stability provided by recurring revenue streams that offer predictable cash flow generation. The fund notes rising operating profit margins, suggesting effective cost management and operational efficiency improvements despite revenue pressures. While management issued disappointing guidance reflecting funding uncertainty, Ariel appears to view current challenges as cyclical rather than structural. The company's position as a leading manufacturer of laboratory equipment and biological testing solutions provides exposure to long-term growth in life sciences research. Ariel likely sees the current valuation as attractive given the temporary nature of funding pressures and BIO's strong competitive positioning in essential research infrastructure.

Pitch Summary:
In contrast, supplier of residential thermal, comfort and security solutions, Resideo Technologies, Inc. (REZI), declined over the period. Despite strong quarterly earnings results, shares traded lower on management's relatively cautious market outlook, tariff concerns and higher for longer interest rates. Although 2025 guidance came in above expectations with broad-based growth across product categories and the integration of Snap One synergies running ahead of schedule, management did not disclose the potential impact tariffs could have on the business. That said, the company believes price increases, inventory positioning and running factories at different utilization rates can help mitigate near-term pressure. We believe REZI's earnings potential is underappreciated as the company is entering a new phase of sustainable growth driven by a secular preference for more connected smart home solutions and product innovation.

BSD Analysis:
Despite recent share price weakness, Ariel maintains a bullish outlook on Resideo, viewing the decline as a disconnect from strong fundamental performance. The fund highlights that REZI delivered strong quarterly earnings and above-expectations 2025 guidance with broad-based growth across product categories. The successful integration of Snap One synergies ahead of schedule demonstrates effective M&A execution and operational capabilities. Ariel believes the market is underappreciating REZI's earnings potential, suggesting the stock is undervalued relative to its growth prospects. The fund emphasizes secular tailwinds from increasing consumer preference for connected smart home solutions, positioning REZI to benefit from long-term technology adoption trends. Management's ability to implement pricing strategies, optimize inventory positioning, and adjust factory utilization rates shows operational flexibility to navigate near-term challenges. Ariel views the current period as a transition to sustainable growth driven by product innovation and market positioning in the expanding smart home ecosystem.

Pitch Summary:
Additionally, leading manufacturer of consumer food products, J.M. Smucker Co. (SJM) delivered solid returns over the period. While sales came in below expectations, a significant bottom-line beat and subsequent raise to its FY25 EPS outlook boosted shares. While Hostess remains under pressure, management reiterated its long-term sales target, with near-term focus on stabilizing revenue. The company is implementing a five-pillar plan to improve the brand with marketing investments. Looking ahead, we believe SJM's portfolio of iconic and emerging foods brands, coupled with its broad-based innovation and productivity agenda, supports an attractive total shareholder return opportunity.

BSD Analysis:
Ariel maintains a constructive view on J.M. Smucker despite mixed quarterly results, focusing on the company's earnings beat and raised guidance as positive indicators. The fund acknowledges near-term challenges with the Hostess brand but appears confident in management's strategic response through the five-pillar improvement plan. Ariel emphasizes SJM's portfolio strength, highlighting both "iconic and emerging" food brands that provide diversification and growth potential. The company's focus on innovation and productivity improvements suggests potential for margin expansion and operational efficiency gains. Management's reiteration of long-term sales targets demonstrates commitment to growth objectives despite current headwinds. The fund views the combination of brand strength, innovation capabilities, and productivity initiatives as drivers for attractive total shareholder returns. Ariel appears to see current challenges as temporary while the underlying business fundamentals remain solid.

Pitch Summary:
Shares of Chevron Corporation (CVX) also traded higher in the quarter, following news CVX acquired ~5% of Hess Corporation (HES) stock, reflecting confidence in the completion of its long-awaited acquisition. While an arbitration panel is due to consider the case in May, many signs are pointing to a successful merger which would strengthen CVX's long-term performance and enhance its portfolio by adding world-class assets. We remain confident in the firm's ability to remain a global leader in energy production.

BSD Analysis:
Ariel expresses strong confidence in Chevron's strategic positioning and acquisition capabilities. The fund views CVX's 5% stake acquisition in Hess Corporation as a signal of management's confidence in completing the larger merger transaction. The pending arbitration in May represents a near-term catalyst that could unlock significant value through portfolio enhancement. Ariel emphasizes that the Hess acquisition would add "world-class assets" to Chevron's portfolio, suggesting meaningful quality and scale improvements. The fund's conviction in CVX's ability to maintain global energy leadership indicates confidence in the company's competitive positioning and operational excellence. The successful completion of the Hess merger would likely strengthen Chevron's long-term cash flow generation and reserve base. Ariel appears to view this as a transformative transaction that reinforces Chevron's status as a premier integrated oil company.