Investment Pitches

Pitch Summary:
Vidrala also weighed on portfolio performance, despite reporting resilient operational and financial results in a challenging macroeconomic environment and amid weaker-than-expected European consumption. Net sales reached €1,465.2 million, reflecting an organic decline of 5.4%. EBITDA totalled €441.0 million, with a margin of 30.1%, up 152 basis points year-over-year, supported by disciplined cost control, operational efficiency, and resilience to volume pressures. EBIT amounted to €305.7 million, while net profit reached €219.6 million, resulting in EPS of €6.24, down 6.8% YoY. Strong free cash flow of €200.1 million reduced net debt to €105.3 million (0.2x EBITDA), providing flexibility for strategic investments, selective M&A, and shareholder returns. Geographically, margins were robust across key regions: Southern Europe 32.4% (+240 bps YoY), UK & Ireland 23.5% (+40 bps YoY), Brazil 42.4% (+160 bps YoY), and Chile approximately 17% following the Cristalerías Toro acquisition. Volumes in Iberia were essentially flat (-0.1% FY, -4% Q4), while the UK & Ireland declined 5% FY (-7.9% Q4) and Brazil -0.8% FY (+5.3% Q4). Europe started 2026 seasonally weak, while South America remains seasonally strong, with positive volume trends anticipated. Management emphasised the group's resilience despite softer European demand. The UK restructuring program (€13.7 million) is expected to deliver €12 million in annual savings, while the Cristalerías Toro acquisition strengthens the South American platform, with EBITDA margins (~17%) projected to improve through cost optimisation. Natural gas exposure is largely hedged, and European glass capacity closures (~9-10%) provide a balanced supply-demand environment. Storm Christine in Portugal caused only minor operational disruptions, effectively mitigated by insurance. Management anticipates modest price moderation (~2%), CapEx of €170-180 million, positive volume trends, and continued focus on operational efficiency, selective M&A, and shareholder returns. The recent share price decline could be primarily attributed to a ~80% increase in natural gas prices; however, Vidrala is fully hedged for 2026, with around 80% of its exposure secured through 2027, significantly limiting near-term risk. Leadership confidence remains high. I spoke with Raul when he was CFO, he clearly knew his business, showed genuine passion for what he did, and stood out as a person. When he stepped into the CEO role, my first reaction was genuine happiness for him, a well-deserved milestone in his career. At the same time, it reinforced my confidence in the company's future: his transition has ensured continuity in financial discipline and operational oversight, underpinned by deep sector expertise and strong leadership. King of shareholder returns? Vidrala also returned capital to shareholders, repurchasing 57,070 shares under its Board-approved buyback program, spending approximately €4.22 million. The program has been expanded to allow repurchases of up to 2% of share capital (maximum 700,000 shares / €66 million) over 12 months. Objectives remain capital reduction and enhancement of shareholder returns through higher EPS. To date, 318,473 shares have been acquired, and insider buying activity further signals confidence in the company's long-term prospects.

BSD Analysis:
Vidrala demonstrates exceptional operational resilience despite challenging European market conditions, with EBITDA margins expanding 152 basis points to 30.1% through disciplined cost management. The company generated strong free cash flow of €200.1 million and maintains minimal leverage at 0.2x EBITDA, providing significant financial flexibility. Geographic diversification provides stability with robust margins across Southern Europe (32.4%), Brazil (42.4%), and UK & Ireland (23.5%). The recent share price decline appears driven by natural gas price volatility, but Vidrala is fully hedged for 2026 and 80% hedged through 2027, limiting near-term risk. European glass capacity closures of 9-10% should improve supply-demand dynamics, while the UK restructuring program will deliver €12 million in annual savings. Management's aggressive share buyback program (up to 2% of share capital) and insider buying activity signal strong confidence in long-term prospects. The CEO transition maintains operational continuity with proven leadership.

Pitch Summary:
Orsero, the largest detractor in the portfolio, reported FY results showing robust underlying performance despite market pressures. Net sales reached €1.70 billion, up 8.2% year-over-year, driven by Distribution (+8.3%) through higher volumes and a favourable price/mix across berries, fresh-cut produce, kiwi, and citrus. Shipping operations delivered strong results, achieving a load factor exceeding 90%, particularly in dry cargo. Adjusted EBITDA rose 3.8% to €86.9 million, with a margin of 5.1% (vs. 5.3% in FY'24), reflecting slight dilution from distribution growth and incremental operating costs. Net profit reached €30 million, an 8.3% increase. Capex totalled €21 million, supporting warehouse upgrades across Italy, France, Spain, and Portugal, ERP enhancements, and vessel dry-docking and upgrades (Cala Palma & Cala Pedra). The Group maintained a stable cost of debt (~72% fixed at 3.25%), generated €46.4 million in operating cash flow, and closed the year with a net financial position of €116.1 million. The guidance provided by the company for 2026 has been somewhat underwhelming. However, Orsero has a track record of revising its guidance upwards. For instance, in 2024 the company issued conservative guidance for 2025 (a recurring pattern), then progressively upgraded it throughout the year and ultimately exceeded expectations. Markets can sometimes react irrationally to initial guidance, and such moments can create attractive opportunities. What's ahead for Orsero in the short and mid-term? Orsero may face near-term pressures from rising shipping and logistics costs, alongside potential fertiliser shortages affecting next year's fruit and vegetable harvests. High capital expenditures in the coming years, combined with debt of €114 million and €66 million in IFRS16 lease liabilities, could constrain fleet renewal. The ageing fleet drives higher and more volatile chartering costs, which may compress margins. The recent three-year charter renewal for the fifth vessel, adding approximately €5.5 million in lease liabilities, illustrates this trend. After discussions with management, it appears that Orsero's vessels, currently 26 years old, can be extended for one additional dry-docking cycle until 2034, though at higher operating costs. Management is actively exploring scenarios to maintain strategic control over banana and pineapple logistics without depending on third-party shipping lines such as Maersk, HL, or CMA. Potential strategies include partnering with a reliable shipping operator to share asset costs while Orsero continues to operate services. Modern vessels offer improved fuel efficiency and overall performance, providing a path to maintain profitability. The objective is not to charter at market rates but to make a strategic investment with a trusted partner. Orsero's shipping operations remain attractive to other operators due to the strong underlying business and transport volumes. While final decisions are still in progress, management prioritises preserving logistical control and the goodwill built over the last 30 years. Any future ownership structure may involve a minority stake in an asset-owning entity rather than full vessel ownership, enabling Orsero to maintain operational control while limiting capital exposure.

BSD Analysis:
Orsero demonstrates solid operational performance despite being the portfolio's largest detractor, with net sales growing 8.2% to €1.70 billion and adjusted EBITDA increasing 3.8% to €86.9 million. The company maintains strong shipping utilization above 90% and generated robust operating cash flow of €46.4 million. Management has a consistent track record of conservative initial guidance followed by upward revisions throughout the year, suggesting current underwhelming 2026 guidance may present an opportunity. The key challenge involves an aging fleet (26 years old) requiring significant capital investment, with management exploring strategic partnerships to maintain operational control while limiting capital exposure. Rising shipping costs and potential fertilizer shortages pose near-term headwinds, but the company's strong market position in banana and pineapple logistics provides defensive characteristics. The strategic review of fleet ownership structure could unlock value while preserving the competitive moat built over 30 years.

Pitch Summary:
Not all investment mistakes are measured by losses or missed opportunities. Some result from holding positions longer than optimal, thereby limiting potential returns. A current example is Sprouts Farmers Market. During this period, the capital allocated here could have been deployed in other opportunities with higher upside potential, allowing the portfolio to capture greater growth. The principle of investing, buy low and sell high, is simple in theory, but execution is often challenging, especially when a stock consistently reaches new highs. Sprouts' fundamentals remained solid, and still are, yet its share price surged sharply, rising from $24 to over $170. In hindsight, the $170 valuation was excessive, trading above 35x earnings without clear justification. The prudent course would have been to reduce or exit the position, but I held on and experienced a significant decline. Now I find myself reflecting on why I did not sell sooner. As John Templeton observed, "Bull markets are born on pessimism, grow on scepticism, mature on optimism, and die on euphoria." This experience underscores the importance of taking profits during periods of euphoria, particularly when valuations are stretched. So what now? The new price target for Sprouts is $110, well below $170. There is nothing I can do to change the past. The mistake is made, and the lesson is to learn from it and avoid repeating it.

BSD Analysis:
The manager acknowledges a significant investment mistake with Sprouts Farmers Market, holding the position too long despite excessive valuation. The stock surged from $24 to over $170, trading above 35x earnings without justification, representing a classic euphoria-driven bubble. The manager failed to take profits at peak valuations and subsequently experienced a substantial decline. The new target price of $110 represents a 35% discount from the peak, suggesting the stock remains overvalued even after the correction. This case study highlights the importance of disciplined profit-taking during periods of irrational exuberance. The manager's candid admission of the mistake and commitment to learning demonstrates intellectual honesty. The position appears to be held for potential recovery rather than conviction in current valuation.

Pitch Summary:
Finally, Enviri (NVRI) continues to progress toward the sale of its Clean Earth segment, which we expect will return a substantial portion of our invested capital in cash. We believe the remaining business will be well-positioned post-transaction and will provide additional updates in future letters.

BSD Analysis:
Kingdom Capital views Enviri Corporation as a sum-of-the-parts opportunity centered on the pending sale of the Clean Earth segment. The anticipated divestiture is expected to return a substantial portion of invested capital in cash, providing immediate liquidity and return of capital to shareholders. This represents a classic special situation where corporate actions unlock value through business separation and asset monetization. The manager believes the remaining business will be well-positioned following the transaction, suggesting the core operations have standalone value beyond the Clean Earth disposal proceeds. The environmental services sector has seen increased M&A activity as companies focus on core competencies and divest non-strategic assets. The cash proceeds from the sale could be used for debt reduction, shareholder returns, or reinvestment in the remaining business. The timeline appears to be progressing as expected with management providing regular updates on the transaction process.

Pitch Summary:
Magnera (MAGN) has retraced gains following its late-2025 rally, with market concerns focused on rising commodity costs. However, management has reiterated guidance and emphasized hedging strategies that mitigate input cost risk. While near-term performance has been frustrating, our fundamental view remains unchanged. I spent over an hour walking through our thesis on the Value Cville podcast back in January:

BSD Analysis:
Kingdom Capital maintains conviction in Magnera Corporation despite recent share price weakness following the late-2025 rally. The market appears concerned about rising commodity input costs impacting margins, but management has provided reassurance through reiterated guidance and emphasis on hedging strategies to mitigate cost pressures. The manager's fundamental thesis remains intact despite frustrating near-term performance, suggesting confidence in the long-term value proposition. The detailed discussion on the Value Cville podcast indicates significant research and conviction behind the position. The specialty chemicals sector can be cyclical and commodity-sensitive, but effective hedging strategies can provide earnings stability. Management's guidance reaffirmation suggests operational performance remains on track despite input cost headwinds. The current weakness may represent an attractive entry point for patient investors who share the manager's fundamental view.

Pitch Summary:
We remain constructive on United Natural Foods (UNFI), following its December investor day. The stock has rebounded nearly 50% from recent lows, supported by improving sentiment and early signs of shareholder-friendly capital allocation, including share repurchases. The company continues to trade at an attractive free cash flow yield (>10%), with multiple levers for earnings growth, including margin expansion and declining interest expense.

BSD Analysis:
Kingdom Capital maintains a constructive view on United Natural Foods following the company's December investor day presentation. The stock has demonstrated strong momentum with a nearly 50% rebound from recent lows, suggesting improving market sentiment around the turnaround story. Management appears to be implementing shareholder-friendly capital allocation policies including share repurchases, which should benefit remaining shareholders. The valuation remains attractive with a free cash flow yield exceeding 10%, providing a compelling risk-adjusted return profile. The investment thesis is supported by multiple operational levers for earnings growth including margin expansion opportunities and declining interest expense as debt is reduced. The natural and organic food distribution market positioning provides defensive characteristics during economic uncertainty. The combination of improving fundamentals, attractive valuation, and shareholder-friendly management creates a compelling value proposition.

Pitch Summary:
We continue to hold a large position in Net Lease Office Properties (NLOP) as the company monetizes its remaining suburban office assets. While the sale price of its largest asset (KBR) was below expectations, we believe the remaining portfolio still offers over 20% of remaining upside, with resolution likely by year-end. Notably, cumulative dividends received have already exceeded our initial cost basis.

BSD Analysis:
Kingdom Capital maintains a large position in Net Lease Office Properties as a liquidation play, with the company actively monetizing its suburban office asset portfolio. Despite the disappointing sale price of the KBR asset falling below expectations, the manager remains constructive on the remaining portfolio value. The investment thesis appears to be a sum-of-the-parts play with over 20% upside potential from asset sales expected by year-end. The position has already generated positive returns through dividends, with cumulative distributions exceeding the original cost basis, providing downside protection. This represents a classic special situation where patient capital can benefit from asset monetization at attractive valuations. The timeline for resolution appears relatively short with completion expected within the current year. The suburban office focus may benefit from different market dynamics compared to urban office properties.

Pitch Summary:
A notable addition this quarter is Alliance Entertainment (AENT), where we built a significant position following a post-earnings dislocation. Alliance distributes physical media (DVDs, vinyl, and CDs) to over 35,000 retail locations and fulfills online orders for major retailers. While traditional physical media consumption has declined, the category has evolved toward collectibles, supporting renewed growth in select segments. Key elements of our thesis include: Strong insider alignment, with over 90% ownership by insiders and employees; Estimated run-rate EBITDA of ~$60 million, implying ~6x EV/EBITDA with growth potential; Exclusive distribution agreement with Paramount, which has significantly boosted earnings in the past year. I am optimistic Paramount's recent buyout offer for Warner Brothers (WBD) will result in Alliance securing an even larger catalogue, which could push EBITDA closer to $100m run-rate. They are also ramping an exclusive distribution agreement with Amazon/MGM beginning in January 2026. Benefits from record-breaking Mach releases from Harry Styles, BTS, and Bruno Mars. Styles sold more Vinyl in the first week than any male artist since at least 1991. Capital structure reminiscent of our former holding Abacus Global (ABX), which had significant capital locked up in their SPAC warrants. Alliance has over $110m of capital accessible if their stock trades above $11.50 between now and February 2028, which would turbocharge their ability to grow via acquisition in their niche, and put their balance sheet in a net cash position. Elevated short interest and high borrow costs (50--75%), which we view as unsustainable over time

BSD Analysis:
Kingdom Capital initiated a significant position in Alliance Entertainment following a post-earnings dislocation, viewing it as an attractive special situation play. The manager's thesis centers on the company's dominant position in physical media distribution with over 90% insider ownership providing strong alignment. At an estimated 6x EV/EBITDA multiple on ~$60 million run-rate EBITDA, the valuation appears compelling with multiple growth catalysts. The exclusive distribution agreements with Paramount and Amazon/MGM provide meaningful earnings visibility and potential upside. The capital structure offers additional optionality with $110 million accessible if shares trade above $11.50 through February 2028, which could fund acquisitions and create a net cash position. High short interest and elevated borrow costs suggest potential for a squeeze as fundamentals improve. The vinyl resurgence driven by artists like Harry Styles supports the collectibles thesis and category growth.

Pitch Summary:
Tantalus is bringing intelligence to the electrical grid with data and analytics where there wasn't before. They are a provider of smart grid solutions to public power and electric cooperative utilities. The company's hardware devices, software applications, and related services automate, monitor, and control power flow, consumption, and quality to improve grid reliability. Before coming public Tantalus had 18 consecutive quarters of profitability. They went public in 2021 in order to raise the capital needed to invest in the TruSense Gateway. They invested over $10M into the product and expensed it all, making the company look like they were losing money up front but are now scaling the final product and profits are inflecting higher. The chart below illustrates their commercialization progress. Utilities typically trial the TruSense Gateway for 12-18 months before committing to a purchase order. Tantalus hasn't had a single trial user not convert to orders and revenue growth is now ramping as more and more users convert. These utilities need to optimize power distribution. Tantalus's product enables the utility to communicate with and analyze data between the substation, the meter, smart home appliances, or energy sources. Based on the data the utility can accurately load forecast, manage load/throttle load, and have much more granular insight into each specific house.

BSD Analysis:
The manager presents Tantalus as a smart grid infrastructure play capitalizing on utilities' need for grid intelligence and optimization. The company demonstrated strong fundamentals with 18 consecutive profitable quarters before going public in 2021 to fund TruSense Gateway development. After investing over $10M in R&D (expensed upfront), Tantalus is now scaling commercialization with profits inflecting higher as the product gains market traction. The company boasts a perfect trial-to-conversion rate, with utilities typically conducting 12-18 month trials before purchase commitments, indicating strong product-market fit. TruSense Gateway enables comprehensive grid communication and analytics from substations to individual homes, providing utilities with granular load forecasting and management capabilities. The investment thesis centers on the critical need for grid modernization and the company's proven technology solution addressing power distribution optimization. Revenue growth is accelerating as more trial users convert to paying customers, validating the long development and commercialization cycle.

Pitch Summary:
VitalHub is our only software investment at the moment. There's more nuance in the software landscape than just AI as an existential risk. Not all software companies are created equally, but they are all being treated the same right now. This dislocation creates an opportunity. The amount of support, integration, management of the modules/solutions and relationships is the moat. Some software has a lot of this, and some doesn't. The hard part of software was never writing the code. It was figuring out what the problem was and what the workflow needs to be and having access to the data needed to solve it. Government healthcare funding for digital tools, like the ones VitalHub offers, is growing in order to drive efficiency given the rising demand and lack of capacity in hospitals and doctors offices. Doctors and nurses aren't vibe coding products. Hospitals aren't willing to take this risk. The "price" of a product in the RFP process isn't the number one priority. Cyber security, workflow efficacy, and reliability are priorities that are much more important in this highly regulated industry. We can look at each of VitalHub's products and see how defensible and how well they are doing in the market. VitalHub completed most of their recent M&A integration in H2/25. EBITDA should grow ~35% in 2026 with close to 100% free cash flow conversion. We would urge investors to listen to the replay of the conference call. Specifically, management speaks to the rule of 40 and how growth in ARR plus profit margins get them above 40%. They also speak to how private equity is pulling back on competing on acquisitions and M&A activity is ramping up post integration efforts. VHI has $120M in cash on hand and will add another ~$35M from cashflow in 2026.

BSD Analysis:
The manager views VitalHub as a differentiated healthcare software play that benefits from market indiscrimination toward all software companies amid AI concerns. VitalHub's competitive moat stems from deep integration, workflow expertise, and data access rather than just code, making it defensible against AI disruption. The company benefits from growing government healthcare funding for digital efficiency tools, with hospitals prioritizing cybersecurity, workflow efficacy, and reliability over price in procurement decisions. Following M&A integration completion in H2 2025, VitalHub projects 35% EBITDA growth in 2026 with nearly 100% free cash flow conversion, achieving the "Rule of 40" through combined ARR growth and margin expansion. The company maintains a strong balance sheet with $120M cash plus expected $35M annual cash generation, positioning it well for continued acquisitions as private equity competition diminishes. Management's focus on the Rule of 40 metric and acquisition opportunities suggests a disciplined growth strategy in the fragmented healthcare software market.

Pitch Summary:
Enterprise was facing 3 headwinds in 2025 that have turned into tailwinds in 2026. The LNG Canada was delayed in 2025, and it took a while to reach full utilization, which only happened in March 2026. The price of natural gas in Canada was weak in 2025 (even went negative) but has since rebounded. One of their largest clients was undergoing a large asset sale and stopped activity during due diligence but that client has since returned to the market in full form in 2026. 2024-2025 was a time of growth capex investment for Enterprise and now they will see those investments pay off and cashflow should inflect higher. They now have the assets in place to do $55-$60M in yearly revenue. That being said, they're adding more turbines based on client demand and will finish the year with a higher revenue potential. The timing of Enterprise's capex investments is well timed as 2025-2026 is just the start of the inflection higher for Canada's natural gas market.

BSD Analysis:
The manager presents a compelling turnaround story for Enterprise Group, highlighting the resolution of three major 2025 headwinds that have become 2026 tailwinds. LNG Canada's delayed ramp-up reached full utilization in March 2026, while Canadian natural gas prices recovered from negative territory, and a major client resumed full operations after completing asset sales. The company's strategic growth capex investments during 2024-2025 are now positioned to generate returns as market conditions improve. Enterprise currently has asset capacity for $55-60M in annual revenue and continues expanding turbine capacity based on client demand, suggesting higher revenue potential by year-end. The manager emphasizes the favorable timing of these investments, coinciding with the beginning of an upcycle in Canada's natural gas market. This cyclical recovery story combines operational leverage from past investments with improving commodity fundamentals and client activity levels.

BSD Analysis:
The manager sees significant upside in Blue Ant Media, targeting $20 per share versus the current $5.65 trading price, representing over 250% potential returns. The company benefits from limited analyst coverage and price discovery inefficiencies following an unusual public listing process, creating an information advantage for diligent investors. Blue Ant's content reaches over 100 countries across 300+ platforms with over one billion monthly global views, demonstrating substantial distribution scale. The company historically grew revenue 18% annually from 2020-2025 with 18% return on capital, positioning well for the projected 20%+ annual growth in global streaming markets. Following recent acquisitions and a $34.7M cash payout, Blue Ant maintains a net cash balance sheet while trading at only 2.5x earnings. The manager emphasizes the company's content library acquisition strategy and cash position as key value drivers. The investment thesis centers on the market's failure to recognize the earnings power of this newly public media company.

Pitch Summary:
Zedcor is a great example of the human emotion tied to investing. Last week the stock was down ~10% one day and we had many people reach out asking what was wrong with the company. For sure bad news would lead the stock to go lower, but there hasn't been any news at all. We've been monitoring their hiring trends and visiting locations and there is no sign of weakness. A majority of stocks have declined recently, as discussed above, but emotionally investors jump to the conclusion that something is wrong with the business based on the stock price. Zedcor raised $30M at $6.00/share in February. This is enough capital to build ~100 towers so reading between the lines, we expect they have a large order coming from someone like Amazon or Kroger, who they have been working on for a while, and needed the extra capacity. We are still very bullish on Zedcor as they still have a long runway for growth. They are currently doubling their salesforce this year and have the opportunity to 4x the number of regional hubs they have. A common pushback we hear is that the stock is expensive, but if you model out the financials instead of looking up the PE on Bloomberg or Yahoo Finance, you'll see it is on 10x 2027 cash earnings while growing revenues +90% and earnings +100%. We're planning a trip down to Houston soon to see the expanded manufacturing facility. The idiosyncratic element to Zedcor is that they depreciate towers much faster than they actually need maintenance capex, which is good for the business because it reduces taxes paid and leaves more cash for investment but makes it harder to calculate ROE. Adjusting for real asset value, Zedcor's ROE is actually around 28-30%, which makes sense based on the unit economics of an individual tower and factoring in utilization rates.

BSD Analysis:
The manager maintains a strong bullish stance on Zedcor despite recent stock volatility, emphasizing the disconnect between business fundamentals and share price performance. The company raised $30M at $6.00 per share in February, providing capital for approximately 100 new surveillance towers, suggesting potential large orders from major clients like Amazon or Kroger. Zedcor is aggressively expanding with plans to double its salesforce and potentially quadruple regional hubs, indicating significant growth runway ahead. Despite appearing expensive on traditional metrics, the manager argues the stock trades at only 10x 2027 cash earnings while projecting 90% revenue growth and 100% earnings growth. The company's accelerated tower depreciation creates tax advantages and higher cash generation than reported, resulting in an adjusted ROE of 28-30% based on real asset values. The manager's planned visit to Houston's expanded manufacturing facility demonstrates hands-on due diligence and confidence in the growth trajectory.

Pitch Summary:
As previously discussed, we sold our Constellation investment in 2025 at $3,250-$3,760/share. We made this decision due to three factors. 1. Mark Leonard stepped down from his position as CEO (this past Friday it was announced he stepped down from the board as well). 2. Constellation is now more difficult to model and therefore value. Historically, they acquired companies at ~0.8x sales, they would take those businesses' cashflows and buy more companies at ~0.8x sales. They proved to the market that they could scale this investment engine which allowed CSU's stock to trade at 4-6x sales. Obviously buying companies at 0.8x sales and being valued yourself at 4-6x sales gives each dollar deployed on acquisitions a massive multiplier effect. However now, they are expanding their capital deployment to include minority investments in public companies. They may make money on these investments, but they don't receive the cashflows and don't get the capital to feed the engine like they do when they control a business. 3. Constellation owns over 1,500 different vertical market software companies. This makes them diversified across industries, geographies, and customers. However, with so many companies it is hard to assess the impact of AI on each business. We still believe AI is a net benefit to many software companies that "own" the client and are knowledgeable and close to their client's workflows. But without being able to parse the 1,500 companies you have to assume some of those companies will be negatively impacted. Is it 5%, 10%, 20%? We can't answer that question, and if we can't answer that question, we can't realistically model the business, put a value on it, and have the conviction to invest.

BSD Analysis:
The manager exited Constellation Software at $3,250-$3,760 per share due to three fundamental concerns about the company's evolving strategy and valuation model. Mark Leonard's departure as CEO and subsequently from the board represents a significant leadership transition risk for the serial acquirer. The shift toward minority public company investments disrupts Constellation's historically successful acquisition engine, which generated substantial value by buying companies at 0.8x sales while trading at 4-6x sales multiples. This strategic pivot reduces cash flow generation and capital recycling efficiency that drove the company's compounding returns. Most critically, the manager cites the impossibility of assessing AI's impact across Constellation's 1,500+ vertical software companies, creating an unquantifiable risk that prevents proper valuation modeling. While acknowledging AI could benefit client-centric software businesses, the uncertainty across such a vast portfolio makes investment conviction impossible. The sale reflects concerns about reduced predictability and modeling complexity in a previously straightforward value creation model.

Pitch Summary:
We reduced our weighting in Propel from an 8% weighting at the end of October 2025 to 1.0% weighting in January. We significantly reduced this position based on how it would react in relation to GoEasy, but also due to how the US government shutdown would impact its business. Propel reported Q4 earnings on March 3, 2026, the stock declined ~12%. Most of the weakness in their quarter was due to the government shutdown plus them ramping lending in December 2025. With new loans they have to take loan loss provisions on day 1 but the loan revenue occurs over the life of the loan, so accelerating your loan growth makes the company appear less profitable in the short term. Propel only has 2% exposure to the Canadian market but the stock still has trades in a similar manner to GoEasy. If Q4 2025 did mark the bottom for provisions and performance should improve from here, then the stock is cheap and should do well from these levels. We are going to wait for confirmation before adding back to this investment.

BSD Analysis:
The manager significantly reduced Propel Holdings from 8% to 1% portfolio weighting due to concerns about correlation with GoEasy and potential impact from US government shutdowns. Despite limited 2% Canadian exposure, Propel trades similarly to GoEasy, creating unwanted sector concentration risk. Q4 2025 results showed weakness from government shutdown effects and accelerated lending growth, which creates temporary margin pressure due to upfront loan loss provisioning versus spread-out revenue recognition. The 12% stock decline following earnings reflects these near-term headwinds. However, the manager suggests the stock could be attractively valued if Q4 marked the trough for credit provisions and operational performance improves. The cautious stance reflects a wait-and-see approach, seeking confirmation of improving fundamentals before re-establishing a meaningful position. This demonstrates disciplined risk management in the consumer finance sector following the GoEasy experience.

Pitch Summary:
We sold our entire position in GoEasy in December 2025 at $123-124/share. This was after selling a majority of the position in August around $200-205/share then adding it back in November-December at $122-165/share. The danger about being vocal and open about what you own can be that you come to defend your positions, and you are less likely to change your opinion. You can become married to investments and dismiss opposing views. We first started investing in GoEasy at $27/share in 2017. Over the years the company executed well, even against heavy criticism at times. This past September there was a negative report published on GoEasy, that initially appeared like others that had been published in the past, and in our opinion lacked hard evidence, but we were wrong. That report made us dig in deeper and with the help of AI, we found legal filings against GoEasy's subsidiary Lendcare. They had violated consumer protection laws in Alberta and were ordered to cease engaging in direct sales practices. These findings made us sell our position the next day.

BSD Analysis:
The manager completely exited GoEasy after discovering regulatory violations at the company's Lendcare subsidiary, which violated consumer protection laws in Alberta. Despite being a long-term holding since 2017 that generated substantial returns from $27 to over $200 per share, the fund sold the entire position upon uncovering legal issues through AI-assisted research. The manager acknowledges initially dismissing a negative report but later found substantive evidence of regulatory violations that prompted the immediate exit. This represents a disciplined approach to risk management, prioritizing capital preservation over attachment to a historically successful investment. The sale occurred at $123-124 per share in December 2025, well below the August highs of $200-205. The decision reflects concerns about potential regulatory overhang and reputational damage in the consumer finance sector. The manager's transparency about changing their investment thesis demonstrates intellectual honesty and adaptive portfolio management.

Pitch Summary:
McKesson, the oldest company in our portfolio, is a great illustration. McKesson began delivering pharmaceuticals by horse and buggy in 1833, almost 200 years ago. The world has changed a lot since then, but what hasn't is the need to get pharmaceuticals from point A to point B safely, securely, and efficiently. That is a societal need that will never change. Today McKesson uses trucks and vans, but someday it may use drones or something else entirely. The world is certain to change in ways we cannot fathom. Those changes will inevitably have a trickle-down effect on McKesson. We're confident McKesson can weather the change for a few reasons. First, as discussed, McKesson's core service of delivering pharmaceuticals will never be obsolete. The specific means of delivering them may change, but the core service won't. McKesson is a technology consumer, not a technology supplier, and will adopt beneficial technologies as they become available. Second, McKesson operates atop a stable and consolidated industry with a fragmented customer base. Growth plods along at a slow but steady pace. Scale advantages protect the industry from new competitors. The total addressable market is not large enough for a new competitor to justify the tens of billions of dollars of investment it would take to replicate McKesson's physical infrastructure. It cannot be disrupted overnight. Third, McKesson provides a mission-critical service. The American medical system rests on its shoulders. Yet it earns net margins of 1-2%. It provides significant value relative to its cost, which gives it bargaining power. To generalize, Eagle Point looks for: 1. Products and services that satisfy timeless human desires; 2. A stable and consolidated industry with predictable and moderate growth; 3. A fragmented customer base; 4. A competitive advantage or "moat" which creates a barrier to entry; 5. Hard to replicate physical infrastructure; 6. A mission-critical product or service; 7. Products with a low price relative to their value; and 8. A business that is not dependent on rapidly changing technology. Few businesses have all of these qualities. McKesson is one of the rare ones. The more qualities a business has, the better they're positioned to confront change from a position of strength. It would take a lot of time and money to replicate McKesson's physical infrastructure, with no promise of any customers when it was done.

BSD Analysis:
Eagle Point Capital presents McKesson as the exemplar of their investment philosophy, highlighting the company's 193-year operating history and mission-critical role in pharmaceutical distribution. The managers emphasize McKesson's defensive characteristics, noting its stable industry position with fragmented customers and consolidated competition that creates high barriers to entry. They view the company's physical distribution network as nearly impossible to replicate, requiring tens of billions in infrastructure investment with no guaranteed customer base. The thesis centers on McKesson's essential service delivery that transcends technological disruption - while delivery methods may evolve from horse-and-buggy to drones, the core need for safe pharmaceutical distribution remains constant. The managers appreciate McKesson's low 1-2% net margins as a competitive advantage, arguing this provides significant value relative to cost and enhances bargaining power. Eagle Point positions McKesson as a "cockroach-like" business that exemplifies their preference for hardy, mission-critical companies over technology-dependent "panda" businesses that face rapid obsolescence.

Pitch Summary:
One of the largest Natural Gas producers in the U.S. is EQT. Led by Toby Rice, a leading voice in the energy industry, EQT is expanding rapidly. Natural gas has replaced a significant portion of coal used in the utility industry. Natural gas is cheaper, has significantly less pollution, and is safer to produce than coal. The company has closed acquisitions over the past two years and continues to make strategic investments. EQT now owns almost all the assets they need, from wells and drilling natural gas out of the ground to the pipelines needed to transport the product. EQT has also pioneered "long-lateral" drilling, which allows them to reach miles of reservoir from a single starting point. This approach is far more efficient than traditional methods, as it minimizes the surface footprint and maximizes the amount of gas recovered per well, leading to increased profitability.

BSD Analysis:
The manager presents a bullish case for EQT based on its scale advantages, technological leadership, and the structural shift from coal to natural gas. The company's position as one of the largest US natural gas producers provides operational leverage and cost advantages in a commodity business. CEO Toby Rice's industry leadership and strategic vision appear to be key factors in the manager's confidence. The coal-to-gas transition in power generation creates a long-term tailwind driven by cost, environmental, and safety advantages. EQT's vertical integration strategy, owning assets from wellhead to pipeline, reduces third-party dependencies and captures more value across the supply chain. The pioneering of long-lateral drilling technology demonstrates operational excellence and competitive differentiation. This drilling approach improves capital efficiency by maximizing resource recovery while minimizing environmental impact through reduced surface footprint. The combination of scale, technology leadership, vertical integration, and favorable industry dynamics positions EQT to benefit from sustained natural gas demand growth.

Pitch Summary:
ONEOK is a critical midstream player, operating one of the largest natural gas and natural gas liquids (NGL) networks in North America. Following their recent major acquisitions, they now control essential infrastructure to transport energy from the Permian and Bakken Basins to the Gulf Coast. With a "tollbooth" business model that generates consistent fee-based income and a history of robust dividend growth, ONEOK remains a premier way to play the increasing demand for domestic energy security. Now that the company has acquired important assets, we would like to see them deleverage and pay off their debt. Given the dangerous products transported via their system, we believe Oneok's strong environmental standards reduce the risk of a negative event.

BSD Analysis:
The manager presents a bullish thesis on ONEOK based on its strategic infrastructure position and defensive business model characteristics. The company's control of critical pipeline networks connecting major production basins to export facilities creates significant competitive moats and pricing power. Recent acquisitions have strengthened ONEOK's strategic position in key energy corridors, particularly the high-growth Permian Basin. The "tollbooth" fee-based model provides predictable cash flows with limited commodity price exposure, appealing to income-focused investors. The manager emphasizes domestic energy security trends that should drive sustained demand for ONEOK's infrastructure. However, the manager expresses some concern about leverage levels following recent acquisitions, preferring debt reduction over additional growth investments. The acknowledgment of environmental and safety risks demonstrates awareness of ESG considerations, while the manager's confidence in ONEOK's operational standards suggests these risks are manageable. The combination of strategic assets, defensive cash flows, and dividend growth history makes ONEOK an attractive energy infrastructure play.

Pitch Summary:
Alphabet is the parent company to Google search and cloud, YouTube, Gemini, Waymo, and more. Through AI, the company has found a way to leverage their immense amount of data. This has led to their AI model named Gemini to be a top performing model. In addition to this, they have broken into a new business: AI chips called TPUs. These compete directly with Nvidia chips and even outperform in some areas, further boosting the attractiveness of the stock.

BSD Analysis:
The manager presents a bullish case for Alphabet based on its successful AI monetization and competitive positioning against Nvidia. The company's vast data assets across search, YouTube, and cloud services provide unique training advantages for AI model development. The Gemini AI model's top-tier performance demonstrates Alphabet's ability to compete effectively in the AI arms race despite being perceived as a laggard. The development of TPU chips represents a significant strategic breakthrough, creating both cost advantages for internal AI workloads and a potential new revenue stream. The manager highlights that TPUs outperform Nvidia chips in certain applications, suggesting Alphabet could capture share in the lucrative AI chip market. This vertical integration strategy reduces dependence on external chip suppliers while potentially generating high-margin hardware revenue. The diversified business model across search, cloud, YouTube, and autonomous vehicles provides multiple avenues for AI monetization. The manager views Alphabet as undervalued given its AI capabilities and competitive positioning.