Investment Pitches

Pitch Summary:
During the quarter, we bought shares of RadNet, Inc., the largest owner and operator of fixed-site, freestanding diagnostic imaging centers in the U.S, with 399 locations. The company's imaging centers offer multi-modality imaging services, including magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), and other related procedures. The company develops leading positions in regional markets to leverage operational efficiencies and contracting benefits with health plans. Currently, the company has a strong regional presence in California, Maryland, New York, and New Jersey. RadNet is benefiting from several secular growth trends. The aging population is driving increased demand for diagnostic imaging services. Payors are steering volume to less costly outpatient providers like RadNet, away from higher cost hospitals, and patients prefer the experience of care in an outpatient setting over a hospital. New technology is driving higher demand for more advanced imaging modalities like MRI, CT and PET, all of which generate higher revenue and margin per procedure for RadNet. In addition, we think RadNet is well positioned to lead the transformation of the radiology field with AI and radiology software products. RadNet's emerging Digital Health business offers AI algorithms for enhanced cancer detection, allowing for earlier and more accurate diagnosis and preventive screening. The company has the largest repository of imaging data from its imaging centers, which it can use to train and re-train its algorithms, providing a competitive advantage. The company's newly launched DeepHealth OS cloud-native operating system helps operate all aspects of the radiology service line, from scheduling and patient preparation to technologist workflow to interpretation and referral management. RadNet is investing for growth in this business, which we think can grow 30% per year and scale at very high incremental margins. Over time, AI will enable RadNet to lower costs in its own imaging centers in a material way, driving margin expansion. Finally, RadNet is well capitalized with cash on the balance sheet for accretive acquisitions. RadNet purchases other independent imaging center operators that are not as well capitalized to make investments in new technology or lack scale to contract at favorable rates with payors. RadNet is also expanding through health system joint ventures, including with Cedars Sinai, MemorialCare, Dignity Health and Adventist Health. Additionally, the company intends to use acquisitions to bolster its offerings in the Digital Health business. We think the stock is attractively valued on current estimates based on the growth characteristics of the imaging center business alone and does not reflect the upside potential from the Digital Health business or future acquisitions.

BSD Analysis:
Baron initiated a position in RadNet, viewing it as a compelling play on secular healthcare trends and AI transformation in radiology. The manager highlights RadNet's dominant position as the largest operator of outpatient diagnostic imaging centers with 399 locations and strong regional market presence. The investment thesis centers on multiple growth drivers: aging demographics increasing imaging demand, payor preference for lower-cost outpatient settings, and technological advancement driving higher-margin procedures. Baron is particularly bullish on RadNet's AI initiatives, noting the company's competitive advantage through its vast imaging data repository for algorithm training and the launch of DeepHealth OS. The Digital Health segment is expected to grow 30% annually with high incremental margins, while AI implementation should drive cost reduction and margin expansion across existing centers. The manager also sees value in RadNet's acquisition strategy and joint venture expansion with major health systems, viewing the stock as attractively valued relative to its growth potential.

Pitch Summary:
Ares Management, in the financials sector, is an alternative asset manager offering private credit, real asset and private equity strategies. Ares is a leading player in private credit, a large and growing market that continues to be supported by secular tailwinds such as increased bank regulation, rising retail penetration and the migration of insurance assets. Scaled players such as Ares should take outsize share of industry asset growth and drive fee-related earnings margin expansion over time. Ares also has a balance sheet light strategy and more predictable cash flows, with the vast majority of its realized income from fee-related earnings. Finally, Ares's high underwriting standards and performance in past downturns position the company well to not only manage through a future credit cycle but also emerge stronger versus peers.

BSD Analysis:
ClearBridge added Ares Management as a new position, targeting the alternative asset management space with a focus on private credit leadership. The manager's investment thesis is built on secular tailwinds including increased bank regulation, rising retail penetration, and insurance asset migration that should benefit scaled players like Ares. The company's balance sheet-light model generates predictable cash flows primarily from fee-related earnings, providing attractive margin expansion potential. ClearBridge emphasizes Ares's superior underwriting standards and historical performance during downturns as competitive advantages. This represents a defensive growth play on the expanding alternative credit market with strong cyclical resilience and market share capture potential.

Pitch Summary:
AppLovin, in the IT sector, is the world's leading mobile game and app advertising platform, providing software for marketing and monetization, powered by its proprietary AI targeting engine (Axon). We see opportunity for AppLovin to continue to expand and grow its share of the market for mobile app marketing, at a time when mobile gaming ad spending is recovering from a higher rate-driven trough. We also see the potential for the company to expand its addressable market to include e-commerce advertising, around which early checks have been encouraging. With strong incremental margins and management keeping expenses controlled, the company should be able to drive significant free cash flow growth as revenue continues to scale.

BSD Analysis:
ClearBridge initiated a position in AppLovin, viewing it as the world's leading mobile game and app advertising platform. The manager's thesis centers on AppLovin's proprietary AI targeting engine (Axon) and its dominant position in mobile app marketing during a recovery phase for mobile gaming ad spending. The investment case is strengthened by the company's potential expansion into e-commerce advertising, where early indicators appear promising. The manager emphasizes AppLovin's strong incremental margins and disciplined expense management as key drivers for significant free cash flow growth. This represents a growth play on the mobile advertising recovery with AI-powered differentiation and potential market expansion catalysts.

Pitch Summary:
Molina Healthcare is a leading managed care company. Molina is the fourth largest player in managed Medicaid but has consistently delivered industry-leading growth and margins. In our view, this is thanks to the company's exceptional management team and culture of operational excellence. We think Molina has a long runway for growth via continued share gains in Medicaid and untapped opportunities in their Medicare and Marketplace business segments. Recently, fundamentals have been pressured by an unprecedented redeterminations cycle in Medicaid, and valuations have compressed due to uncertainty around policy changes in a new political administration. We believe earnings pressure from redeterminations is temporary and that any Medicaid policy changes will prove manageable, providing us an opportunity to purchase shares at a meaningful discount to intrinsic value.

BSD Analysis:
Harris Associates initiated a position in Molina Healthcare, viewing the managed care company as an attractive opportunity during temporary fundamental pressures. The fund highlights Molina's strong competitive position as the fourth-largest managed Medicaid player with industry-leading growth and margins driven by exceptional management and operational excellence. Harris sees significant growth potential through continued Medicaid market share gains and expansion into underpenetrated Medicare and Marketplace segments. The current Medicaid redeterminations cycle has created temporary earnings headwinds, but Harris views this as cyclical rather than structural, expecting normalization as the process concludes. Political uncertainty around potential Medicaid policy changes has compressed valuations, creating what Harris considers an attractive entry point below intrinsic value. The fund's confidence in management's ability to navigate policy changes and operational challenges supports the investment thesis. Harris's contrarian approach reflects conviction that current pressures are temporary while Molina's competitive advantages and growth opportunities remain intact, positioning the company for strong long-term performance as conditions normalize.

Pitch Summary:
First Citizens Bancshares was a detractor during the quarter. The U.S.-headquartered bank's stock price declined due to macroeconomic uncertainty, and despite strong fourth-quarter 2024 earnings and positive 2025 guidance, with earnings per share ahead of consensus expectations. Loans and deposits both grew at healthy rates during the fourth quarter, and management expects continued strong growth in 2025. We continue to believe that First Citizens is a well-run regional bank that is led by a best-in-class management team. We appreciate management's track record of value accretive capital allocation and think the stock offers an attractive upside.

BSD Analysis:
Harris Associates maintains conviction in First Citizens despite stock underperformance driven by macroeconomic uncertainty rather than company-specific fundamentals. The fund highlights strong Q4 2024 earnings that exceeded consensus expectations, demonstrating the bank's operational resilience amid challenging conditions. Healthy loan and deposit growth in Q4 with management's positive 2025 guidance indicates continued business momentum and market share gains. Harris emphasizes the quality of First Citizens' management team, characterizing them as best-in-class with a proven track record of value-accretive capital allocation decisions. The fund's appreciation for management's capital allocation discipline suggests confidence in the bank's ability to generate superior returns through economic cycles. Despite recent stock weakness, Harris views the valuation as offering attractive upside potential relative to the bank's fundamental strength and growth prospects. The investment thesis centers on First Citizens' operational excellence, strong management, and ability to execute growth strategies while maintaining disciplined risk management practices.

Pitch Summary:
IQVIA Holdings (IQV) was a detractor during the quarter. The U.S.-headquartered life sciences tools and services company's stock price declined due to a slowdown in R&D Solutions segment growth amid large pharma portfolio reprioritizations related to the Inflation Reduction Act. However, IQV is growing faster than competitors through this challenging period for the industry and expanding its scope of work with several clients. Management expects R&DS growth to improve in the second half of this year based on strength in leading indicators, such as RFP flow and biopharma funding. In addition, the cyclical recovery in the Technology and Analytics Solutions segment is playing out as anticipated, including a return to double-digit growth in real-world evidence. We were pleased to see management execute a large opportunistic share repurchase in the quarter. We believe the stock is cheap and trading at a significant discount to private market values.

BSD Analysis:
Harris Associates maintains a bullish stance on IQVIA despite recent headwinds from Inflation Reduction Act-related pharma portfolio reprioritizations affecting R&D Solutions growth. The fund emphasizes IQVIA's competitive outperformance during industry challenges, highlighting faster growth than peers and expanding client relationships as evidence of market share gains. Management's expectation for R&DS growth improvement in the second half based on leading indicators like RFP flow and biopharma funding supports Harris's conviction in the cyclical recovery thesis. The Technology and Analytics Solutions segment's return to double-digit growth in real-world evidence demonstrates the anticipated cyclical recovery is materializing. Harris views management's opportunistic share repurchase as value-accretive capital allocation, reflecting confidence in the business fundamentals. The fund considers IQVIA undervalued relative to private market comparables, suggesting significant upside potential as industry conditions normalize. Harris's investment thesis relies on IQVIA's market-leading position in life sciences services and the company's ability to gain share during challenging industry periods.

Pitch Summary:
Alphabet was the top detractor during the quarter. The U.S.-headquartered company's stock price declined despite having posted fourth-quarter 2024 earnings that were in line with consensus expectations. Search revenue growth remained strong, and management reiterated that the new "AI Overviews" feature is driving higher engagement with comparable monetization. The one miss during the quarter was in the Cloud segment, where revenue grew 30% year-over-year but fell slightly short of consensus expectations. We believe the shortfall was largely due to short-term capacity constraints and that the long-term growth outlook for Google Cloud remains robust. We continue to see Alphabet as a collection of great businesses that can further benefit from the company's world class AI capabilities. With shares trading at just 15x our estimate of next year's earnings per share, we believe the stock is meaningfully undervalued.

BSD Analysis:
Harris Associates maintains strong conviction in Alphabet despite recent stock underperformance, viewing the decline as disconnected from solid fundamental performance. The fund highlights robust search revenue growth and successful AI integration through "AI Overviews" that's driving higher engagement without sacrificing monetization. While Google Cloud's 30% growth slightly missed expectations, Harris attributes this to temporary capacity constraints rather than competitive or demand issues, maintaining confidence in the long-term cloud growth trajectory. The fund views Alphabet as a portfolio of high-quality businesses well-positioned to benefit from world-class AI capabilities across multiple segments. At 15x estimated forward earnings, Harris considers the valuation meaningfully undervalued for a company with Alphabet's growth prospects and competitive advantages. The investment thesis centers on the company's dominant search franchise, growing cloud business, and AI leadership providing multiple avenues for value creation. Harris's conviction reflects confidence in Alphabet's ability to monetize AI innovations while maintaining market leadership across core business segments.

Pitch Summary:
ConocoPhillips was a contributor during the quarter. The U.S.-headquartered oil and gas exploration and production company's stock price rose as the company's 2025 guidance benefitted from the substantial synergies from the recent acquisition of Marathon. We look forward to a large inflection in free cash flow over the next handful of years as several major capital investments come online. We continue to appreciate management's focus on returning capital to shareholders.

BSD Analysis:
Harris Associates maintains a bullish outlook on ConocoPhillips, highlighting the substantial synergies being realized from the Marathon acquisition that are enhancing 2025 guidance. The fund anticipates a significant free cash flow inflection over the coming years as major capital investments reach production, demonstrating confidence in the company's project execution capabilities. Harris appreciates management's disciplined approach to capital allocation, particularly the focus on returning capital to shareholders through dividends and buybacks. The Marathon acquisition appears to be delivering expected value creation through operational synergies and enhanced scale benefits. ConocoPhillips' ability to generate substantial free cash flows while maintaining shareholder-friendly capital allocation policies aligns with Harris's investment criteria. The fund's positive view is supported by the company's strong operational execution and management's track record of value creation. The combination of acquisition synergies, upcoming production growth, and shareholder returns creates a compelling investment proposition for Harris Associates.

Pitch Summary:
Deere was a contributor during the quarter. Despite the strong stock performance, the company's fundamentals are weak due to the trough in the farm cycle. We are encouraged that the management team continues to invest aggressively in the business during this downturn, which can help increase the company's advantages over peers. While it is impossible to precisely predict when the upturn will occur, when it does we believe that Deere will earn over $30 in EPS. At less than 15x our estimate of normal earnings, we believe the stock remains attractive.

BSD Analysis:
Harris Associates maintains a contrarian bullish position on Deere despite acknowledging weak current fundamentals due to the cyclical trough in agricultural markets. The fund appreciates management's counter-cyclical investment strategy, viewing aggressive business investments during the downturn as a competitive advantage builder that will strengthen Deere's market position when the cycle recovers. Harris demonstrates conviction in the cyclical nature of agricultural equipment demand, expecting a meaningful earnings recovery when farm conditions improve. The fund's $30+ EPS target for normalized earnings suggests significant upside potential from current levels. At less than 15x estimated normal earnings, Harris views the valuation as attractive for a market-leading agricultural equipment manufacturer. The investment thesis relies on Deere's ability to emerge from the current cycle with enhanced competitive advantages and stronger market positioning. Harris's patience with cyclical timing reflects confidence in Deere's long-term franchise value and management's strategic investments during challenging periods.

Pitch Summary:
Intercontinental Exchange (ICE) was a contributor during the quarter. The U.S.-headquartered financial exchange and data company's stock price rose during the quarter as it reported solid fourth quarter 2024 results led by 16% growth in its Energy Futures business. After a couple years of using cash flow to pay down debt from its two major mortgage acquisitions Ellie Mae and Black Knight, management resumed share repurchase in the first quarter of 2025. We believe share repurchases are an attractive capital allocation opportunity for ICE today. We continue to view ICE as a well-managed, high-quality business with a bright future ahead.

BSD Analysis:
Harris Associates maintains a bullish stance on ICE, highlighting the company's strong operational performance with 16% growth in Energy Futures driving solid Q4 2024 results. The fund appreciates management's disciplined capital allocation approach, having used cash flow to deleverage following major mortgage acquisitions of Ellie Mae and Black Knight before resuming shareholder returns. The resumption of share repurchases in Q1 2025 signals management's confidence in the business and provides attractive capital allocation opportunities at current valuations. Harris views ICE as a high-quality, well-managed franchise with strong competitive positioning in financial exchanges and data services. The fund's positive outlook is supported by the company's diversified revenue streams and bright long-term prospects. ICE's ability to generate strong cash flows while maintaining operational excellence reinforces the investment thesis. The combination of operational growth, disciplined capital allocation, and quality management team supports Harris's continued conviction in the position.

Pitch Summary:
Louis Vuitton Moët Hennessy (LVMH) is the world's largest luxury goods company with a portfolio of 75 brands, including prestigious houses Louis Vuitton and Christian Dior. Importantly, the company is focused on fashion and leather goods. This is one of the more attractive subcategories within the sector and where Vuitton has high brand desirability and scale, which drive industry leading profitability. The business is run by Bernard Arnault, who we consider to be one of the best CEOs in Europe, and who is fully aligned with shareholders given his family's 41% ownership. The opportunity exists because of the recent fears around tariffs and the macro environment (initially in China and increasingly in the U.S.). We view this as a rare opportunity to purchase shares in LVMH at a discounted valuation to its peers and the company's own trading history. We expect that the industry will recover over the medium term, that recent innovations will help sustain attractive revenue growth and that self-help will serve to reaccelerate earnings growth.

BSD Analysis:
Harris Associates views LVMH as a rare opportunity to acquire the world's premier luxury goods company at a discounted valuation due to temporary macro concerns. The manager emphasizes LVMH's dominant market position with 75 luxury brands including prestigious houses Louis Vuitton and Christian Dior, focused on the attractive fashion and leather goods subcategory. High brand desirability and scale advantages drive industry-leading profitability and sustainable competitive moats. Leadership under Bernard Arnault, considered one of Europe's best CEOs, provides exceptional management quality with strong shareholder alignment through 41% family ownership. Recent fears around tariffs and macro headwinds in China and the U.S. have created a temporary valuation discount relative to peers and historical trading multiples. The manager expects medium-term industry recovery supported by recent innovations that should sustain attractive revenue growth. Self-help initiatives should drive earnings growth acceleration as macro concerns subside. This combination of premium brand portfolio, exceptional leadership, and temporary valuation discount creates an attractive entry point for long-term value creation.

Pitch Summary:
Mitsubishi Estate is the largest owner of real estate in Tokyo's Marunouchi neighborhood. Marunouchi is the prime business district in Tokyo where office rental space has historically been characterized by low vacancy rates and rising rents, even in deflationary environments. In our view, Japan's shift to an inflationary environment will provide additional tailwinds to Mitsubishi's growing rental income in Marunouchi. We also like that the company has been strategically monetizing assets in other regions and returning funds to shareholders through buybacks and dividends, helping to boost the company's return on equity. We were happy to recently purchase shares at a discount to our estimate of net asset value and private market comparable transactions. We believe the gap between share price and intrinsic value should narrow as capital is returned to shareholders.

BSD Analysis:
Harris Associates views Mitsubishi Estate as an undervalued real estate play with prime Tokyo exposure and attractive capital allocation. The manager emphasizes the company's dominant position as the largest owner in Tokyo's Marunouchi district, the city's premier business area with historically low vacancy rates and rising rents even during deflationary periods. Japan's transition to an inflationary environment should provide additional tailwinds for rental income growth in this prime location. Strategic asset monetization in other regions demonstrates management's focus on optimizing the portfolio and returning capital to shareholders through buybacks and dividends. This capital return strategy helps boost return on equity and creates shareholder value. The manager was able to purchase shares at a discount to estimated net asset value and private market comparable transactions, suggesting significant upside potential. The combination of prime real estate exposure, favorable macro trends, and disciplined capital allocation should help narrow the gap between current share price and intrinsic value.

Pitch Summary:
Rentokil Initial PLC is the largest pest control company globally. We think pest control is a good business that grows GDP+ with low volatility, earns attractive margins, and has low capital intensity with strong cash flow generation. As a market leader, Rentokil additionally benefits from scale advantages that drive lower procurement and customer acquisition costs, and greater customer monetization, thanks to the breadth of products and services the company can offer at a premium price. Due to industry fragmentation, Rentokil also has a strong pipeline of acquisitions with attractive economics. While most of Rentokil's mergers and acquisitions are bolt-ons, they have occasionally done large deals. Their most recent large deal, the acquisition of Terminix, has gone poorly to-date and resulted in a share price decline in excess of the deal value. While Terminix's integration will take several quarters to complete, we believe they will ultimately succeed and that the resulting business will be a stronger and more profitable one that can deliver growth in line with the industry's average. This should drive a re-rating in the shares towards peer and private market multiples. We believe the market has overly discounted the business's future prospects.

BSD Analysis:
Harris Associates views Rentokil Initial as an attractive defensive growth business trading at a significant discount due to temporary integration challenges. The manager highlights pest control as a high-quality business model with GDP+ growth, low volatility, attractive margins, and strong cash flow generation with minimal capital requirements. Rentokil's global market leadership provides sustainable competitive advantages through scale benefits including lower procurement costs, reduced customer acquisition expenses, and enhanced customer monetization through cross-selling. The fragmented industry structure creates abundant acquisition opportunities with attractive economics for the market leader. While the Terminix acquisition has created near-term challenges and share price weakness, the manager expects successful integration over several quarters. The combined entity should emerge as a stronger, more profitable business capable of delivering industry-average growth rates. Current valuation appears overly discounted relative to the business's defensive characteristics and long-term prospects, creating potential for re-rating toward peer and private market multiples.

Pitch Summary:
Flutter Entertainment is the world's largest online gambling company, boasting a portfolio of premier online sports betting and casino brands including FanDuel, Sportsbet, Pokerstars and Paddy Power. The company commands the No. 1 market position across the vast majority of its revenue base driven by its best-in-class product. We appreciate that online gambling favors scaled players and believe that management has Flutter well-positioned to capitalize on strong secular growth tailwinds as the penetration of online gambling continues to increase. A recent sell-off in the share price provided the opportunity to buy shares in a company led by a management team that is renowned for top-notch execution and capital allocation.

BSD Analysis:
Harris Associates views Flutter Entertainment as the dominant global leader in online gambling with significant competitive advantages and secular growth tailwinds. The manager emphasizes Flutter's market-leading position across its revenue base, driven by best-in-class products and premier brand portfolio including FanDuel, Sportsbet, PokerStars, and Paddy Power. The online gambling industry's natural tendency to favor scaled players creates sustainable competitive moats that benefit market leaders like Flutter. Management's reputation for exceptional execution and capital allocation provides confidence in the company's ability to capitalize on growth opportunities. The secular trend toward increased online gambling penetration creates a multi-year growth runway that should benefit the market leader disproportionately. A recent share price sell-off provided an attractive entry point for this high-quality business with strong competitive positioning. The combination of market leadership, secular growth tailwinds, and proven management execution creates a compelling investment opportunity in the expanding online gambling market.

Pitch Summary:
Asahi Group Holdings is a leading global beverage company and Japan's largest beer company. In our view, the Japanese beer market will see tailwinds over the coming years as a result of liquor tax reform and price increases following years of decline. With a strong CEO in Atsushi Katsuki and the country's best-selling beer brand, we believe the company is uniquely positioned to capitalize on these tailwinds and expand domestic profits over the medium term. In addition, we like that Asahi commands attractive market positions in Australia and Central Europe, which support high margins and revenue growth. Lastly, after years of deleveraging following large acquisitions, we expect management to increase shareholder returns while continuing to realize the benefits of the company's global procurement initiatives. Despite this compelling setup, we were able to purchase shares in this above-average business at a below-average valuation, in our view.

BSD Analysis:
Harris Associates initiated a position in Asahi Group Holdings, viewing it as an above-average business trading at below-average valuation with multiple catalysts for value creation. The manager expects the Japanese beer market to benefit from structural tailwinds including liquor tax reform and price increases after years of market decline. Strong leadership under CEO Atsushi Katsuki combined with Japan's best-selling beer brand positions Asahi to capitalize on these favorable market dynamics and expand domestic profitability. International diversification through attractive market positions in Australia and Central Europe provides high-margin revenue growth and reduces dependence on the domestic market. The company's balance sheet strength following years of deleveraging post-acquisitions enables increased shareholder returns through dividends and buybacks. Global procurement initiatives should continue delivering cost synergies and margin expansion. The combination of market recovery, pricing power, international diversification, and capital return potential creates multiple value drivers for the investment thesis.

Pitch Summary:
Thyssenkrupp was a contributor during the quarter. The Germany-headquartered industrial conglomerate's stock price rose throughout the quarter driven in part by solid first-quarter results and also by government action. Following the February general election, the newly elected German government voted to increase spending with a particular focus on defense. While all segments could potentially benefit, we believe Thyssen's Marine Systems segment should see significantly increased demand and orders going forward. In addition, management was already planning to spin off Marine Systems and this help to unlock further value within the conglomerate. We believe management is taking significant structural and operational action to improve the business and that the shares remain undervalued.

BSD Analysis:
Harris Associates views thyssenkrupp as an undervalued industrial conglomerate positioned to benefit from both operational improvements and favorable government policy changes. The manager highlights solid Q1 results as evidence of underlying business momentum across the diversified industrial platform. The newly elected German government's decision to increase defense spending creates a significant tailwind for Thyssen's Marine Systems segment, which should see substantially increased demand and order flow. The planned spin-off of Marine Systems represents a key value unlock catalyst that should help realize the conglomerate's sum-of-the-parts value. Management's structural and operational initiatives demonstrate commitment to business improvement and shareholder value creation. The combination of government defense spending increases and strategic portfolio optimization provides multiple value creation pathways. Despite recent share price appreciation, the manager maintains conviction that shares remain undervalued relative to intrinsic value and improvement potential.

Pitch Summary:
Alibaba Group was a contributor during the quarter. The China-headquartered consumer discretionary company's stock price rose throughout the period as it delivered strong third-quarter 2024 results, driven by accelerating growth in its E-commerce and Cloud businesses. Top-line growth in E-commerce improved meaningfully following the introduction of new fees and monetization tools for merchants. Cloud revenue grew due to strong demand for cloud services and AI demand. Over the past few years Alibaba has aggressively invested in AI and, as a result, is one of the early leaders in China today. Alibaba is unique in that they are a leader in both cloud computing services (similar to AWS) and large language models (similar to ChatGPT). Even with the share price appreciation in 1Q, we believe the company continues to offer attractive upside.

BSD Analysis:
Harris Associates maintains a bullish outlook on Alibaba despite recent share price appreciation, citing strong Q3 2024 results driven by accelerating growth across core business segments. The manager highlights meaningful improvement in e-commerce top-line growth following the introduction of new merchant fees and monetization tools, demonstrating pricing power and platform optimization. Cloud revenue growth reflects strong demand for both traditional cloud services and AI capabilities, positioning Alibaba to capitalize on the AI revolution in China. The fund emphasizes Alibaba's unique dual leadership position in cloud computing services (comparable to AWS) and large language models (similar to ChatGPT), creating a differentiated competitive moat. Years of aggressive AI investment have established Alibaba as an early leader in China's AI landscape. The manager's conviction remains strong despite recent gains, suggesting significant remaining upside potential. This dual-platform leadership in cloud and AI provides multiple growth vectors and defensive positioning.

Pitch Summary:
BNP Paribas was the top contributor during the quarter. The France-headquartered bank's stock price rose throughout the period as it posted strong fiscal-year 2024 results. Performance was driven by strength in the Corporate and Institutional Banking (CIB) and Personal Finance segments. The company also demonstrated improved efficiency, with revenue growth outpacing cost growth. Given BNP's strong underlying profitability and highly diversified business, we believe the bank is well-positioned for sustained capital generation and long-term growth.

BSD Analysis:
Harris Associates maintains a bullish stance on BNP Paribas following strong fiscal 2024 results that demonstrated operational excellence across key business segments. The manager highlights the bank's improved efficiency metrics, with revenue growth outpacing cost growth, indicating effective management execution. The strength in Corporate and Institutional Banking alongside Personal Finance segments suggests diversified revenue streams that reduce concentration risk. The fund emphasizes BNP's strong underlying profitability and highly diversified business model as key competitive advantages. This diversification provides stability and multiple growth vectors for sustained capital generation. The manager's confidence in long-term growth prospects reflects their view that BNP is well-positioned to capitalize on favorable banking sector dynamics. The combination of operational efficiency improvements and diversified revenue streams supports the bullish investment thesis.

Pitch Summary:
Adient PLC (ADNT), domiciled in England (with corporate offices in Plymouth, MI; Milwaukee, WI; Burscheid, Germany; and Shanghai, China), is one the world's largest suppliers of seating systems and a leading components supplier for automotive interiors. Shares fell over the period alongside other names in the auto manufacturing space due to the potential of heightened tariffs on imports from Canada and Mexico. This is specifically problematic for ADNT given their sizeable manufacturing presence in Mexico. However, we believe issues from tariffs will be transient in nature. As such, we continue to believe ADNT is attractively valued for a company successfully right sizing their portfolio, buying back shares, and maintaining their balance sheet.

BSD Analysis:
The manager maintains conviction in Adient despite tariff-related headwinds that pressured automotive suppliers during the quarter. The investment thesis rests on the company's market-leading position as one of the world's largest automotive seating suppliers with a diversified global footprint. While the sizeable Mexican manufacturing presence creates near-term tariff exposure, the manager views these concerns as transitory policy issues rather than fundamental business challenges. The company's ongoing portfolio optimization efforts, including right-sizing operations, demonstrate management's focus on operational efficiency and margin improvement. Active share buyback programs indicate disciplined capital allocation and management confidence in the business outlook. The maintained balance sheet strength provides financial flexibility to navigate trade policy uncertainty while investing in growth opportunities. The manager believes current valuation levels fail to reflect the company's market position and operational improvements, creating an attractive risk-adjusted opportunity. The global automotive seating market's defensive characteristics and Adient's scale advantages should support long-term value creation despite near-term policy volatility.

Pitch Summary:
Fluor Corp. (FLR) is one of the largest contractors in the US. Fluor reported a disappointing 4Q24 with revenue and margins weak as the company deals with unusually low utilization driven by volatility in its businesses. Initial guidance for 2025 revenue and margin were also below consensus estimates driven by weakness at Energy Solutions partly offset by growth at Urban Solutions that is expected to be back-half weighted. Unlike many competitors that specialize in elements of project delivery, most of Fluor's revenue comes from projects where it provides full Engineering, Procurement, and Construction services. Fluor also has significant fabrication capabilities including a joint venture that operates the world's largest fabrication facility. In addition, Fluor also owns a substantial stake in NuScale (tk: SMR).

BSD Analysis:
The manager maintains a position in Fluor despite near-term operational challenges, suggesting confidence in the company's long-term competitive positioning and asset value. While 4Q24 results were disappointing with weak revenue and margins due to low utilization, the manager appears to view this as cyclical rather than structural. The full-service EPC model differentiates Fluor from competitors who focus on specialized project elements, potentially providing higher margins and customer stickiness once utilization normalizes. The company's significant fabrication capabilities, including a joint venture operating the world's largest fabrication facility, represent substantial fixed assets and competitive moats. The substantial stake in NuScale provides exposure to the emerging small modular reactor market, offering potential upside from the nuclear renaissance. Urban Solutions growth expected in the back half of 2025 suggests improving project mix and utilization trends. The manager likely views current weakness as creating an attractive entry point for a company with differentiated capabilities and valuable assets trading below intrinsic value.