Investment Pitches

Pitch Summary:
At the stock level, Corcept Therapeutics' shares outperformed after the company's key drug achieved positive study results for the treatment of a new condition, significantly increasing its addressable market.

BSD Analysis:
The manager highlights Corcept Therapeutics as a positive contributor to portfolio performance during the quarter. The investment thesis centers on the company's successful clinical trial results for its key drug in treating a new medical condition. This clinical success represents a significant catalyst as it substantially expands the drug's addressable market opportunity beyond its current indications. The positive study results likely validate the drug's efficacy and safety profile in the new therapeutic area, potentially accelerating regulatory approval timelines. This market expansion could drive meaningful revenue growth and improve the company's long-term commercial prospects. The manager's bullish stance appears justified given the clinical milestone achievement and its implications for future market penetration. The outperformance during the quarter reflects investor optimism about the expanded commercial opportunity.

Pitch Summary:
DraftKings Inc. is a dominant player in the domestic online sports betting industry, which is evolving towards a favorable duopoly market structure. Jason Robbins, the company's CEO and founder, built a culture of technological and marketing innovation to create a top sports betting product while competing against international peers with a large head start in the category. We believe the company is positioned to capitalize on the rapid growth of the U.S. sports betting market. We expect online betting to expand at a 15% to 17% same-state growth rate over the next several years. Approximately half the U.S. population does not have access to sports betting, and future legalization of large states (such as Texas or Florida) could extend the growth runway of the industry into the 2030s. DraftKings's financial model is inflecting positively because it has been operating in many states for more than three years. As a result of this maturation, the company has been able to rationalize its customer acquisition costs, which allows for high incremental margins to flow through its income statement. Promotions that are paid to acquire new customers have declined, and the company is recognizing economies of scale from national advertising campaigns. The stock has been under pressure because of concerns about potential state tax rate increases, macroeconomic uncertainty, and possibly unfavorable recent betting results. We believe investors have overestimated the impact of these factors. We expect the company to earn margins in line with management estimates under most tax scenarios. We expect a 30%-plus CAGR in FCF over the next several years as FCF margin expands from low single digits to over 20%. In addition, the company has an excellent balance sheet, and it has recently prioritized returning capital to shareholders through buybacks.

BSD Analysis:
The manager presents a compelling bull case for DraftKings based on its dominant position in the evolving U.S. sports betting duopoly and significant operational leverage as the business matures. The investment thesis hinges on the massive addressable market expansion, with approximately half the U.S. population lacking access to sports betting and potential legalization in large states like Texas and Florida extending growth into the 2030s. Key financial inflection points include rationalized customer acquisition costs after three years of state-level operations, declining promotional spending, and economies of scale from national advertising. The manager expects 15-17% same-state growth rates and projects 30%+ free cash flow CAGR as margins expand from low single digits to over 20%. Despite near-term headwinds from state tax concerns and macroeconomic uncertainty, the strong balance sheet and shareholder-friendly capital allocation through buybacks support the long-term value creation story.

Pitch Summary:
We took advantage of meaningful price weakness to initiate a position in Vertiv Holdings Co during the quarter. Vertiv is a global leader providing critical data infrastructure solutions for data centers, communication networks, and commercial and industrial businesses. The company's core competency is providing solutions to cool and power data centers. These tasks are technically complex and integral to the successful construction of data centers, and we expect building trends to remain robust because of the continued rapid adoption of AI. Vertiv has a portfolio of both air and liquid cooling solutions. The company's equipment is required as rack density in AI data centers is expected to increase from 5-10/kW per rack to potentially upwards of 900-1,000+/kW per rack over the next five years due to the adoption of advanced semiconductor chips. Higher energy density racks generate more heat and will require liquid cooling, as water has a heat carrying capacity 3,500 times higher than that of air. We think Vertiv is well positioned to maintain its leadership in this burgeoning market opportunity because of its technology, its strategic partnership with NVIDIA (the largest manufacturer of AI chips), its strong service network, and its ability to scale manufacturing quickly and reliably to meet its customers' global needs. At its most recent investor event in November 2024, Vertiv gave long-term revenue growth guidance that implies a 12% to 14% CAGR through 2029, and we think this figure could prove conservative. While data centers are approximately 80% of Vertiv's total revenue, McKinsey has estimated global data center demand to grow at a 20% CAGR in its base case scenario or potentially up to 30% CAGR through 2030 in its accelerated scenario. Given uncertainty regarding future tariff policy, we are reassured that a small percentage of the company's manufacturing inputs are sourced from China. With healthy revenue growth and continued margin expansion, we believe that Vertiv has the potential to grow its EBITDA at a mid to high teens rate into the foreseeable future.

BSD Analysis:
The manager initiated a new position in Vertiv, capitalizing on price weakness to gain exposure to the AI-driven data center infrastructure boom. The investment thesis centers on Vertiv's leadership in cooling and power solutions for data centers, which are becoming increasingly critical as AI adoption drives rack density from 5-10kW to potentially 900-1,000+kW per rack. This dramatic increase in energy density necessitates liquid cooling solutions, where Vertiv holds competitive advantages through its technology portfolio and strategic NVIDIA partnership. Management's 12-14% revenue CAGR guidance through 2029 appears conservative given McKinsey's estimates of 20-30% data center demand growth. The company benefits from limited China manufacturing exposure, reducing tariff risks. With 80% revenue exposure to the data center market and strong margin expansion potential, the manager expects mid-to-high teens EBITDA growth, making this an attractive secular growth play.

Pitch Summary:
Shares of Verisk Analytics, Inc., a leading data and analytics vendor, contributed to performance. The company reported solid quarterly results, including particularly strong organic revenue growth. CEO Lee Shavel also sounded upbeat about Verisk's growth potential in 2025. Verisk also benefited from the investor rotation into more defensive stocks driven by tariff-related uncertainty. We maintain conviction in the company's competitive positioning, long-term growth, margin expansion, and its ability to deploy capital accretively.

BSD Analysis:
The manager maintains a bullish stance on Verisk based on strong fundamental execution and defensive characteristics that appeal to investors during uncertain times. The company delivered solid quarterly results with particularly impressive organic revenue growth, suggesting healthy underlying demand for its data analytics services. CEO Lee Shavel's optimistic commentary about 2025 growth prospects indicates management confidence in the business trajectory. The manager emphasizes Verisk's competitive moat in data analytics, which provides pricing power and recurring revenue streams. Key investment merits include the company's ability to expand margins over time and deploy capital effectively through acquisitions or buybacks. The defensive nature of Verisk's business model makes it attractive during periods of tariff-related market volatility.

Pitch Summary:
Shares of P&C insurance software vendor Guidewire Software, Inc. contributed to performance in the quarter. After a multi-year period, we believe Guidewire's cloud transition is substantially complete, and cloud architecture will be the sole product path going forward. We expect its ARR to continue benefiting from new customer wins and migrations of the existing customer base to InsuranceSuite Cloud. We also expect the company to shift R&D resources to product development from infrastructure investment, which will help drive cross-sales into its sticky installed base and potentially accelerate ARR over time. We are also encouraged by Guidewire's subscription-based gross margin expansion, which improved by more than 1,000 basis points in its most recently reported quarter. We believe Guidewire will be the critical software vendor for the global P&C insurance industry, capturing 30% to 50% of its $15 billion to $30 billion total addressable market and generating margins above 40%.

BSD Analysis:
The manager presents a compelling bull case for Guidewire based on the successful completion of its cloud transition and strong margin expansion trajectory. The thesis centers on the company's dominant position in the P&C insurance software market, with management expecting to capture 30-50% of a $15-30 billion addressable market. Key catalysts include ongoing customer migrations to InsuranceSuite Cloud, which should drive recurring revenue growth, and a strategic shift in R&D spending from infrastructure to product development that could accelerate cross-selling opportunities. The 1,000+ basis point improvement in subscription-based gross margins demonstrates operational leverage, while the manager's target of 40%+ margins suggests significant profitability potential. The sticky nature of the installed customer base provides revenue visibility and pricing power in this mission-critical software category.

Pitch Summary:
We initiated a small position in Arcellx, Inc., a biotechnology company that together with Gilead Sciences, Inc. is developing a next-generation CAR-T cell therapy it calls "Anito-cel" for the treatment of multiple myeloma. While we generally do not invest in emerging biotechnology companies, we took a small position in Arcellx given that the market is large and proven (currently a $3.5 billion opportunity that could expand to $12 billion or more over time), and that we believe Arcellx has a safer CAR-T therapy than the currently approved solution. Moreover, the company has over $600 million of net cash on its balance sheet and a favorable manufacturing agreement with Gilead. We believe that this combination makes the company more than fully funded through profitability. Multiple myeloma is relatively common blood cancer, and a number of different therapies are used to treat it. CAR-Ts are a one-and-done customized genetically engineered t-cell therapy. With this type of therapy, the hospital collects a patient's blood, sends it off for the T-cells to be engineered to attack a certain antigen that appears on cancer cells, and then these engineered CAR-T cells are reinfused back into the patient to attack the cancer cells. CAR-Ts have started to transform treatment modalities and appear to be the most efficacious treatment for multiple myeloma. A competitive treatment called Carvykti (developed by a partnership of Legend Biotech Corporation and Johnson & Johnson) has been launching rapidly in the second line (2L+) setting. Carvykti already has $1 billion in sales worldwide in 2024 (up more than 100% year over year). The issue with Carvykti is that although it's very efficacious, it appears to cause delayed neurotoxicity (neurological damage) in 5% to 10% of patients and in rare cases (2% or potentially higher) Parkinsons-like symptoms, which is devastating and uncurable. The promise of Arcellx's Anito-cel process is that it appears to have similar efficacy to Carvykti while avoiding these neurotoxicity risks. Beyond the safety differentiation, Arcellx is also partnered with Gilead, which gives them access to state-of-the-art manufacturing with faster turnaround times and more reliable manufacturing success rates, as well as Gilead's existing sales infrastructure for Yescarta (a CAR-T used to treat a different type of blood cancer). Arcellx will present final data from its pivotal study in fourth line (4L+) multiple myeloma patients this year and we think this will be sufficient to file for FDA accelerated approval. It is also enrolling its phase 3 study in 2L+ multiple myeloma patients. We think a significant portion of the roughly 75,000 patients diagnosed with multiple myeloma each year in the U.S. and EU should receive a CAR-T over the course of their treatment, and that multiple myeloma CAR-Ts will ultimately be a $10 billion to $15 billion category. Based on our conversations with doctors, we think most doctors will seek out Arcellx's Anito-cel as the safer option for patients and we think Anito-cel will capture meaningful share of the market for multiple myeloma treatment.

BSD Analysis:
Baron initiated a small position in Arcellx despite typically avoiding early-stage biotech, attracted by the large proven market opportunity and superior safety profile of Anito-cel. The multiple myeloma CAR-T market represents a $3.5 billion current opportunity expanding to $12+ billion, with existing competitor Carvykti already generating $1 billion in sales despite significant neurotoxicity risks. Arcellx's key differentiation lies in Anito-cel's similar efficacy to Carvykti while avoiding the 5-10% delayed neurotoxicity and 2%+ Parkinson's-like symptoms. The Gilead partnership provides manufacturing advantages, faster turnaround times, and access to existing Yescarta sales infrastructure. With over $600 million in net cash and favorable manufacturing terms, Arcellx is fully funded through profitability. Baron expects doctors to prefer the safer Anito-cel option, positioning the company to capture meaningful share of the $10-15 billion ultimate market opportunity.

Pitch Summary:
Karman Holdings Inc. is a leading proprietary space and defense solutions provider. We initiated a position in February 2025 when the company executed its IPO. Formed via four key acquisitions by Dallas-based private equity firm, Thrive Capital, in the early 2020s, Karman has a management team with a strong mix of executive experience and technical, engineering talent. Karman designs, tests, and manufactures mission-critical systems for existing and emerging missile and space programs, which are some of the growthiest and in-demand segments of the defense industry. Segments include Hypersonics & Strategic Missile Defense (33.2% of revenues), Space & Launch (33.3%), and Tactical Missile & Integrated Defense Systems (33.5%). Karman has become an outsourcer of choice for highly technical systems related to these programs. It has unique experience in complex/proprietary manufacturing methods, high end materials and composites, and system level design. Nearly 90% of Karman's sales are sole-sourced from the company, and 94% of its revenue is tied to proprietary IP-driven solutions (including patent protected technologies). The company's unique capabilities have allowed it to grow revenue organically at a low double-digit rate over time (with total growth including acquisitions at over 30%) with adjusted cash flow margins in excess of 30%. We believe Karman can continue to expand its solution set over time and that it is poised to grow nicely over the next five years as it targets the priorities that are emerging in the new defense budget.

BSD Analysis:
Baron participated in Karman Holdings' February 2025 IPO, attracted to the company's leadership position in high-growth defense segments including hypersonics, space launch, and tactical missiles. The company's diversified revenue base across three key segments (each representing roughly one-third of sales) provides balanced exposure to the fastest-growing areas of defense spending. Karman's competitive moat is built on proprietary manufacturing capabilities, advanced materials expertise, and system-level design, with 90% of sales being sole-sourced and 94% tied to IP-driven solutions. The combination of organic low double-digit growth and 30%+ cash flow margins demonstrates strong operational execution. Baron believes Karman is well-positioned to capitalize on emerging defense budget priorities, with the company's unique technical capabilities and patent-protected technologies providing sustainable competitive advantages in mission-critical applications.

Pitch Summary:
During the quarter we "invested in reverse" and initiated a position in Wingstop Inc. Wingstop shares have recently underperformed, as following two straight years of very strong same-store sales growth, trends have returned to normalized levels. We took advantage of this opportunity to own this high-quality company at a compelling valuation relative to its growth and margin prospects. Wingstop is a franchised limited-service restaurant company that serves cooked-to-order wings, tenders, and chicken sandwiches and is the leader within the popular chicken wing category. Wingstop restaurants operate on a relatively simple operating model of made to order chicken wings and sandwiches and the majority of its food is consumed off-premise, which allows for a smaller square footage store. The combination of a simple operating model and smaller stores provides an efficient model for franchisees with stores generating $2 million in revenue per store with restaurant level margins of around 25%. Additionally, new stores require a relatively modest initial investment of $500,000 which leads to best-in-class cash on cash returns in excess of 70% for franchisees. Wingstop ended 2024 with over 2,500 global locations and we expect the company to grow units at a 10% compounded annual growth rate over the long term. Eventually, we see a path to 10,000 units globally, supported by the company's leadership in the wing category and strong unit economics as described above. We also expect Wingstop to be able to grow same-store sales in the mid-single-digit range as it invests in brand awareness campaigns, improves digital efficiency and ordering times, and expands its menu offering. The combination of 10%-plus unit growth and mid-single-digit same-store sales should lead to mid-teens revenue growth and high teens profit growth over the foreseeable future. We are also attracted to Wingstop's high margin, free-cash flow generative, asset light franchise business model.

BSD Analysis:
Baron initiated a position in Wingstop using their "investing in reverse" strategy, capitalizing on normalized same-store sales growth after two exceptional years. The manager is attracted to Wingstop's leadership position in the chicken wing category and its efficient franchise model that generates $2 million per store with 25% restaurant-level margins. The modest $500,000 initial investment requirement delivers best-in-class 70%+ cash-on-cash returns for franchisees, supporting aggressive expansion. Baron expects 10% annual unit growth toward an eventual 10,000 global locations, combined with mid-single-digit same-store sales growth driven by brand awareness, digital improvements, and menu expansion. This should translate to mid-teens revenue growth and high-teens profit growth. The asset-light franchise model generates strong free cash flow, making it an attractive long-term compounder at current valuations.

Pitch Summary:
Montrose Environmental Group, Inc., a leading environmental solutions company, detracted from performance during the quarter. This was due to concerns that the Environmental Protection Agency (EPA) under the Trump administration will reduce enforcement of environmental regulations that require the type of consulting, testing, remediation and monitoring that Montrose provides. We believe these concerns are misguided, and that given its current high single-digit multiple of cash flow, Montrose is hugely underpriced. Montrose's business is driven by state regulations as well as contaminants that have a long-regulated history with bipartisan support (including from the current EPA Administrator). Montrose has successfully grown through both Democratic and Republican administrations (including the first Trump administration), and the company believes the Trump administration's initiatives on cost efficiency, U.S. manufacturing, and domestic energy production could create large new opportunities for the company.

BSD Analysis:
Baron views market concerns about Montrose Environmental as misguided, seeing the current weakness as a compelling buying opportunity. The manager argues that fears of reduced EPA enforcement under the Trump administration ignore the company's diversified regulatory drivers, including state-level regulations and bipartisan environmental priorities. Montrose's track record of growth through both Democratic and Republican administrations, including the previous Trump presidency, demonstrates the resilience of its business model. The company's exposure to cost efficiency, U.S. manufacturing, and domestic energy production initiatives could actually create new growth opportunities under the current administration. Trading at a high single-digit cash flow multiple, Baron believes Montrose is significantly undervalued relative to its stable, regulation-driven business model.

Pitch Summary:
Indie Semiconductor, Inc. designs automotive semiconductors for advanced driver assistance (ADAS), in-cabin features, and other applications. Shares fell during the quarter on a miss in forward revenue guidance due to an inventory correction in the broader automotive semiconductor industry that was exacerbated by continued automotive macroeconomic uncertainty. We retain conviction. Revenue growth continued to outperform peers, and the company is winning new sockets in future platforms. Indie remains well positioned over the medium and long term, supported by its $7.1 billion strategic backlog and its radar, vision, and other programs that will ramp through 2025 and more meaningfully into 2026. We believe indie will return to outsized growth by the end of 2025 and will significantly outpace the broader industry on its path to $1 billion in revenue by the end of this decade supported by contract visibility. As its product mix shifts to ADAS, its margins should meaningfully improve as well.

BSD Analysis:
Baron remains confident in indie Semiconductor despite recent guidance disappointment, viewing current weakness as cyclical rather than structural. The manager emphasizes that indie continues to outperform peers in revenue growth and is securing new design wins in future automotive platforms. The company's $7.1 billion strategic backlog provides strong revenue visibility, with key programs in radar and vision expected to ramp significantly in 2026. Baron expects a return to outsized growth by late 2025, driven by the automotive industry's recovery and indie's competitive positioning. The shift toward higher-margin ADAS products should drive meaningful margin expansion. The manager sees a clear path to $1 billion in revenue by decade-end, supported by contract visibility and the secular growth in automotive semiconductors.

Pitch Summary:
Exact Sciences Corporation is a cancer diagnostics company. Its flagship product is Cologuard, a stool-based screening test for colorectal cancer (CRC). Shares detracted from performance in the quarter due to fears of competitive blood-based CRC tests which may launch in 2025. While these tests cost more than Cologuard, they are somewhat more convenient for patients. However, blood-based tests do not have the same level of pre-cancer sensitivity as Cologuard, and Cologuard is significantly better at detecting pre-cancerous growths called Advanced Adenoma. Moreover, Exact Sciences is developing its own blood-based tests that we anticipate will be as accurate as competitor tests but will cost significantly less than those tests as it uses a different type of analytics to get its results. So, either way, we believe Exact Sciences will win. It also has a huge channel presence in CRC which will enable it to be successful in both fecal and blood-based CRC testing. In addition, with 60 million Americans not receiving any CRC screening at all, there is ample opportunity for multiple players to win.

BSD Analysis:
Baron maintains a bullish stance on Exact Sciences despite recent competitive concerns around blood-based colorectal cancer tests. The manager's thesis centers on Cologuard's superior pre-cancer detection capabilities, particularly for Advanced Adenoma, which blood-based alternatives cannot match. Exact Sciences is developing its own blood-based tests using different analytics that should be cost-competitive while maintaining accuracy. The company's established channel presence in CRC screening provides a significant distribution advantage for both existing and future products. With 60 million Americans currently not receiving any CRC screening, the addressable market remains vast enough to support multiple players. The manager views current weakness as temporary, driven by competitive fears rather than fundamental deterioration.

Pitch Summary:
We also added to our position in ServiceTitan, Inc., a provider of business management software for the field service industry, which was another new purchase in the prior quarter. The company reported strong financial results with 29% revenue growth and solid margin expansion in the recent quarter. Management provided guidance for this year that exceeded Street expectations yet still leaves room for upside. Key focus areas include targeting enterprise customers (especially private equity-backed consolidators), upselling higher-value services, and expanding in the commercial and roofing markets. We expect the company to continue growing 20%-plus with significant margin expansion and free cash flow growth over time.

BSD Analysis:
The manager presents a compelling bull case for ServiceTitan based on strong execution and multiple growth drivers in the field service software market. The company delivered impressive Q4 results with 29% revenue growth accompanied by solid margin expansion, demonstrating both top-line momentum and operational leverage. Management's guidance exceeded Street expectations while still providing room for upside, suggesting conservative planning and execution confidence. The growth strategy focuses on high-value opportunities including enterprise customers, particularly private equity-backed consolidators that represent larger deal sizes and longer-term contracts. Additional expansion vectors include upselling higher-value services to existing customers and geographic/vertical expansion into commercial and roofing markets. The manager's long-term outlook calls for sustained 20%+ revenue growth with significant margin expansion and free cash flow generation, reflecting the scalable nature of the software business model and ServiceTitan's market-leading position in field service management.

Pitch Summary:
We added to our position in online broker Robinhood Markets, Inc., which was a new purchase in the prior quarter. The company reported very strong financial results for the fourth quarter with elevated trading volumes and robust growth in accounts and deposits. Client trading activity has moderated since the start of the year but remains elevated overall and the number of Gold subscribers grew 20% in the first quarter alone. At its Gold Summit in March, the company released three new products, including a low-cost advisory service, an AI-powered research tool, and a digital banking service. Robinhood is building out new products at a rapid clip yet still has a long runway to reach parity with other brokers. Additional service offerings should support continued market share gains.

BSD Analysis:
The manager presents a bullish case for Robinhood based on strong fundamental performance and rapid product expansion. The company delivered impressive Q4 results with elevated trading volumes and robust growth in both accounts and deposits, demonstrating healthy user engagement and platform adoption. While trading activity has moderated from peak levels, it remains elevated overall, and the 20% growth in Gold subscribers in Q1 alone shows strong momentum in the premium tier. The Gold Summit product launches highlight Robinhood's innovation pace, introducing a low-cost advisory service, AI-powered research tools, and digital banking services that expand the platform's value proposition. The manager emphasizes Robinhood's significant runway for growth as it builds toward feature parity with established brokers while maintaining its competitive advantages in user experience and cost structure. The investment thesis centers on continued market share gains driven by product expansion, user acquisition, and monetization improvements across the growing customer base.

Pitch Summary:
Block, Inc. provides point-of-sale technology to small businesses and operates the Cash App ecosystem of financial services for individuals. Shares fell after the company reported quarterly results and near-term guidance that were softer than expected. In the fourth quarter, gross profit growth of 14% and EPS growth of 51% were strong overall but missed Street expectations. Also, investors took a skeptical view of the 15% gross profit growth guidance for 2025 since it implies acceleration throughout the year in an uncertain macroeconomic environment. Nevertheless, management reiterated their expectation of achieving the "Rule of 40" investment framework in 2026 with mid-teens gross profit growth and a mid-20% operating margin. We continue to own the stock due to Block's long runway for growth, sustainable competitive advantages, and innovative product offering.

BSD Analysis:
The manager maintains a bullish long-term view on Block despite near-term execution concerns and guidance skepticism. While Q4 results showed solid fundamentals with 14% gross profit growth and impressive 51% EPS growth, the performance missed Street expectations, creating investor disappointment. The 2025 guidance calling for 15% gross profit growth faces skepticism given the implied acceleration required throughout the year amid macroeconomic uncertainty. However, management's commitment to achieving "Rule of 40" metrics by 2026 (mid-teens gross profit growth with mid-20% operating margins) demonstrates confidence in the business model's scalability. The manager's investment thesis centers on Block's extensive growth runway across both Square's small business ecosystem and Cash App's consumer financial services platform. Key competitive advantages include network effects, ecosystem integration, and continuous product innovation that should drive sustained market share gains and monetization improvements over time.

Pitch Summary:
Shares of alternative asset manager Apollo Global Management, Inc. detracted in the first quarter, largely stemming from a reversal in sentiment on the economy and capital markets activity. As mentioned above, alternative asset manager stocks performed well last year, especially after the November elections, on expectations of a recovery in capital markets activity fueled by deregulation and economic growth. Those expectations waned in the first quarter due to uncertainty and volatility around the Trump administration's policy initiatives. As sentiment faded, alternative asset manager stocks gave back their post-election gains. We continue to own the stock due to Apollo's differentiated focus on credit and strong management team.

BSD Analysis:
The manager maintains a bullish stance on Apollo despite near-term sentiment headwinds affecting the broader alternative asset management sector. The stock declined as investor expectations for capital markets recovery and increased deal activity moderated due to policy uncertainty and volatility around the Trump administration's initiatives. Alternative asset managers had performed strongly post-election on hopes of deregulation and economic growth, but those gains were reversed as sentiment shifted in Q1. However, the manager emphasizes Apollo's differentiated positioning within the sector, particularly its specialized focus on credit markets which provides distinct competitive advantages. The strong management team is highlighted as a key asset that should drive long-term value creation regardless of near-term market conditions. The investment thesis appears centered on Apollo's credit expertise and leadership capabilities positioning the firm to capitalize on secular growth trends in alternative investments, with the current weakness potentially creating an attractive entry point for long-term investors.

Pitch Summary:
Shares of leading alternative asset manager KKR & Co. Inc. fell due to macroeconomic concerns, particularly as Trump's actions on tariffs and broader economic policy were more sweeping and volatile than expected. Alternative asset manager stocks performed well last year, especially after the November elections, on hopes that a wave of deregulation and pro-growth economic policies would spur a rise in deal activity and fees. Investors have since cooled on the prospects for a capital markets recovery, pressuring KKR and its peers. Although the near-term outlook is uncertain, we think KKR is a winner in the space, and its long-term fundraising success should be driven by its breadth of products and strong investment track record rather than the near-term economic outlook.

BSD Analysis:
The manager maintains a bullish long-term view on KKR despite near-term headwinds from macroeconomic uncertainty and policy volatility. The stock declined as investor sentiment shifted from post-election optimism about deregulation and pro-growth policies to concerns about tariffs and economic policy unpredictability. While alternative asset managers initially benefited from expectations of increased deal activity and capital markets recovery, those hopes have moderated in the current environment. However, the manager emphasizes KKR's competitive advantages that should drive long-term success regardless of near-term economic conditions. Key differentiators include the firm's broad product portfolio across multiple alternative asset classes and a strong investment track record that should support continued fundraising success. The investment thesis rests on KKR's ability to capitalize on the secular growth in alternative investments driven by institutional investor allocation shifts, with fundraising momentum driven by performance rather than cyclical factors.

Pitch Summary:
Tradeweb Markets Inc. operates electronic marketplaces for fixed income securities. Shares rose during the quarter due to strong volume trends driven by favorable market conditions and share gains in key products. Credit products saw accelerating growth with trading volume up 39%, while rates products saw stable trends with 14% growth. In credit, Tradeweb continued to grow faster than the market and its primary electronic trading competitor. We believe Tradeweb can achieve solid growth in a variety of macroeconomic conditions and expect further market share gains to drive long-term upside. We continue to own the stock due to Tradeweb's strong network effects, long track record of innovation, and significant growth opportunities from the ongoing electronification of the capital markets.

BSD Analysis:
The manager presents a strong bull case for Tradeweb based on market share gains and secular electronification trends in fixed income trading. The company demonstrated robust performance with credit products accelerating to 39% volume growth while rates products maintained steady 14% growth, showing resilience across market conditions. Tradeweb's competitive positioning is evident as it continues outpacing both overall market growth and its primary electronic trading competitor in credit markets. The manager emphasizes the company's ability to generate solid growth across various macroeconomic environments, highlighting the defensive nature of the business model. Key investment drivers include powerful network effects that create switching costs, a proven track record of innovation in electronic trading platforms, and the massive secular opportunity from ongoing electronification of capital markets. The thesis centers on Tradeweb's dominant position in the structural shift from voice-based to electronic trading in fixed income markets, which should drive sustained market share gains and revenue growth over the long term.

Pitch Summary:
The Progressive Corporation is a leading auto insurance company. Shares increased as the company continued to perform well, growing its auto policy count more than 20% with underwriting margins well above its 4% target. We don't think these growth rates and margins are sustainable due to the inevitable return of pricing pressure in a competitive insurance market. However, Progressive continues to gain market share and has now surpassed Geico to become the second largest auto insurer in the U.S. behind State Farm. Shares also benefited from the relative defensiveness of insurance stocks in a risk-off market. We remain shareholders because we view Progressive as a best-in-class insurer that should continue gaining share in a large market.

BSD Analysis:
The manager maintains a bullish stance on Progressive despite acknowledging near-term headwinds, focusing on the company's competitive positioning and market share gains. Progressive delivered exceptional growth with auto policy count expanding over 20% while maintaining underwriting margins well above the 4% target, demonstrating pricing power and operational efficiency. The company achieved a significant milestone by surpassing Geico to become the second-largest auto insurer behind State Farm, reflecting sustained market share capture. While the manager acknowledges current growth rates and margins may not be sustainable due to competitive pressures, they emphasize Progressive's best-in-class execution and ability to continue gaining share in the large auto insurance market. The defensive characteristics of insurance stocks also provided portfolio benefits during the risk-off market environment. The investment thesis rests on Progressive's superior underwriting capabilities, technology advantages, and long-term market share expansion potential in a consolidated industry.

Pitch Summary:
MercadoLibre, Inc. is the leading e-commerce marketplace and fintech provider in Latin America. Shares rebounded from weakness in the prior quarter after the company reported strong financial results that exceeded Street expectations. In the fourth quarter, revenue grew 37% and operating income grew 44% on an adjusted basis. Margins surprised to the upside, reversing a decline in the prior quarter and alleviating concerns around investment-driven impacts on near-term profitability. MercadoLibre continues to post above-market growth with gross merchandise volume up 56% and total payment volume up 49%, both on a constant-currency basis. In 2024, the company had 100 million marketplace customers and 61 million monthly fintech users with rising engagement due to the company's compelling value proposition. We believe MercadoLibre remains a prime beneficiary of the secular growth of e-commerce and digital banking in Latin America.

BSD Analysis:
The manager presents a compelling bull case for MercadoLibre based on strong fundamental performance and secular growth tailwinds. The company delivered impressive Q4 results with 37% revenue growth and 44% operating income growth, demonstrating operational leverage as margins expanded after prior quarter concerns. The scale metrics are particularly striking - 100 million marketplace customers and 61 million monthly fintech users represent significant market penetration in Latin America. Growth momentum remains robust with 56% GMV growth and 49% payment volume growth on a constant-currency basis, indicating healthy underlying business trends. The manager's thesis centers on MercadoLibre's position as the dominant beneficiary of structural shifts toward e-commerce and digital banking adoption across Latin America. The dual-sided marketplace and fintech ecosystem creates powerful network effects and cross-selling opportunities that should drive sustained growth and margin expansion over time.

Pitch Summary:
We purchased shares of PAR Technology Corporation, a leading software, hardware, and service provider to the foodservice industry. PAR is building an all-in-one software and service platform for enterprise restaurants and convenience stores to run the most critical portions of their technology stacks. Historically, the company was known as a hardware supplier to large QSR restaurant chains, but since CEO Savneet Singh took the role in late 2018, he has made software the primary focus of the business through organic investment and M&A. The company has added several complementary software pieces around its core point-of-sale software product (less than $10 million in software revenue when Savneet took over) to build a unified technology platform offering integrated solutions and data insights supporting $275 million in ARR today growing 20% or more annually. While there is a lot of competition in the small and medium-sized business portion of the market, there are significantly less competitors serving enterprise chains, with the two largest players being legacy incumbents with poor reputations when it comes to innovation and service. Enterprise foodservice is playing "catch-up" in adopting new technology, and we anticipate spend to ramp in coming years. PAR's strong reputation, modern platform purpose built for enterprise brands, and product and integration breadth give it a strong competitive positioning, as reflected by a customer list that includes many of the largest restaurant and c-store brands in the world (Burger King, Dairy Queen, and Arby's). We believe PAR will continue to grow its software revenues 20%-plus per year over the next several years, driven by wins with new restaurant brands and cross-sell of its product portfolio to existing customers. PAR just reported two consecutive quarters of adjusted EBITDA profitability driven by very strong operating leverage, and we expect the company to continue to deliver strong incremental margins as it grows revenue in excess of the required investment in its R&D or sales and marketing needed to scale its business. As profitability and cash flow ramp rapidly in the coming years (estimating over 25% EBITDA margins), combined with further accretive bolt-on and/or meaningful acquisitions, we see significant upside in the stock over time.

BSD Analysis:
Baron initiated a position in PAR Technology, attracted by the company's transformation from a hardware supplier to a comprehensive software platform for enterprise foodservice. The manager credits CEO Savneet Singh's strategic pivot since 2018, growing software revenue from under $10 million to $275 million in ARR with 20%+ growth. Baron sees a compelling competitive position in the enterprise segment, where PAR faces less competition than in SMB markets and benefits from legacy incumbents' poor innovation track record. The investment thesis relies on enterprise foodservice's technology adoption acceleration and PAR's ability to capture market share through its modern, integrated platform serving major brands like Burger King and Dairy Queen. The manager is encouraged by PAR's recent achievement of EBITDA profitability and expects strong operating leverage to drive margins above 25%. Baron anticipates continued 20%+ software revenue growth through new customer wins and cross-selling, with additional upside from strategic acquisitions as cash flow generation improves.