Investment Pitches

Pitch Summary:
Vivid Seats, Inc. is an online ticket marketplace that connects fans of live events with ticket sellers. While the company has executed well, top-line revenue growth has been challenging. Two of its competitors, looking to enhance near-term value before going public, are aggressively crowding the online advertising market, placing pressure on Vivid Seats' visibility, sales, and top-line growth. Also weighing on the stock are market concerns about a potentially weakening environment for live concerts and recurring stock sales from the company's private equity partner. Despite these pressures, we remain confident in the company's prospects and held our position steady during the period.

BSD Analysis:
The manager maintains a bullish view on Vivid Seats despite acknowledging multiple near-term headwinds affecting the business. The investment thesis appears to rest on the company's strong execution capabilities and position in the online ticket marketplace, even as revenue growth faces pressure from competitive dynamics. The manager identifies specific challenges including aggressive advertising spending by competitors preparing for IPOs, which is reducing Vivid Seats' market visibility and sales conversion. Additional concerns include potential weakness in the live entertainment market and ongoing stock sales by private equity stakeholders creating technical pressure. However, the decision to hold the position steady suggests confidence in the company's long-term competitive position and ability to navigate these temporary challenges. This appears to be a contrarian play where the manager believes current pressures are masking the underlying value of a well-executed business model in a growing market.

Pitch Summary:
LegalZoom.com Inc. is an online platform providing legal, compliance, and tax services to small businesses. Its performance suffered during the period following the sudden departure of its CEO and the appointment of the board chairman, who is a relatively unknown and unproven public company CEO. This leadership change, combined with a challenging macroeconomic environment for small business clients, weighed on the stock. While we maintain a favorable view of the company's potential, we are taking a wait-and-see position with the new management. We believe the stock's attractive valuation and a relatively favorable risk/reward profile provides room for patience and held our position during the period.

BSD Analysis:
The manager adopts a cautious neutral stance on LegalZoom following significant leadership disruption and macroeconomic headwinds. The sudden CEO departure and replacement with an unproven board chairman creates execution risk during a critical period for the business. The challenging environment for small business clients compounds these concerns, as this represents LegalZoom's core customer base. However, the manager recognizes the company's fundamental value proposition in providing essential legal and compliance services through a scalable online platform. The attractive valuation metrics and favorable risk/reward profile suggest the market may have oversold the stock relative to its long-term potential. The decision to maintain the position reflects confidence in the underlying business model while acknowledging near-term uncertainty. This appears to be a patience play where the manager is waiting for management stability and improved market conditions before reassessing the investment thesis.

Pitch Summary:
Stoneridge, Inc. develops electronic safety systems primarily for automotive and commercial vehicles. The company provides balanced exposure to the commercial truck and passenger vehicle markets, and we like the potential for one of its flagship products, MirrorEye, which provides its commercial vehicle customers with critical safety benefits, fuel economy gains, and potential savings on insurance premiums. We also see potential in some of the company's new products and overlooked businesses. The stock struggled during the quarter as lingering delays in the post-pandemic recovery and exposure to the electric vehicle market affected performance. Despite these setbacks, Stoneridge realized improved margins and free cash flow, strengthening its balance sheet, and we maintained our position during the quarter.

BSD Analysis:
The manager maintains a bullish stance on Stoneridge despite recent headwinds, highlighting the company's diversified exposure across commercial truck and passenger vehicle markets. The investment thesis centers on MirrorEye, a flagship product that delivers tangible value through safety improvements, fuel efficiency gains, and insurance cost reductions for commercial vehicle operators. The manager sees additional upside potential in the company's newer product offerings and underappreciated business segments. While acknowledging near-term challenges from post-pandemic recovery delays and EV market exposure, the fund emphasizes improving operational metrics including margin expansion and free cash flow generation. The strengthened balance sheet provides financial flexibility during this transitional period. The decision to maintain the position reflects confidence in the long-term value proposition despite temporary market pressures. This appears to be a quality turnaround story with improving fundamentals and multiple growth drivers.

Pitch Summary:
Most drivers likely view auto insurance as a requirement, relatively homogenous but expensive, and a purchase that should be price-shopped frequently. For much of the last 25 years, GEICO's direct-to-consumer model and laser focus on being the lowest cost provider, in terms of underwriting expenses, allowed it to grow market share. Auto insurance may seem homogenous to car owners, but to insurers, drivers differ greatly. Notably, while most people believe they are better-than-average drivers, data – and common sense – suggest otherwise. Enter Progressive and its technology. Progressive pioneered telematics, the ability to monitor how safely a driver drives. At first it was a device in the car but now it's a phone app, but either way Progressive can use technology to better assess who actually is above average and who is merely overconfident. Progressive can offer price discounts to good drivers and increase rates for poor drivers. The poor drivers may leave Progressive, perhaps even moving to GEICO, but the risk pool improves for Progressive. Thus, while GEICO is still more efficient in its underwriting costs, Progressive's cost of paying customers' claims is below GEICO's and in recent years has more than offset GEICO's underwriting cost advantage. Further, with an industry-leading combined ratio, which compares claims paid and underwriting expenses to premiums collected, Progressive can offer savings to customers and invest in marketing. Again, with a data-driven approach, effective marketing allows the business to grow its policy book faster than GEICO and the industry overall, nearly doubling market share in the last decade. Progressive is now the second largest auto insurer, trailing State Farm. The auto insurance industry remains fragmented and we expect Progressive's digitally enabled share gains can continue.

BSD Analysis:
NZS Capital presents a compelling bull case for Progressive Corporation centered on its technology-driven competitive advantage in auto insurance. The manager highlights Progressive's pioneering use of telematics to assess driver risk more accurately than traditional methods, enabling superior risk selection and pricing. This data-driven approach has allowed Progressive to achieve a better combined ratio than competitors like GEICO, despite higher underwriting costs. The fund emphasizes Progressive's market share gains, noting it has nearly doubled its market share over the past decade to become the second-largest auto insurer. The investment thesis rests on Progressive's ability to continue gaining share in a fragmented industry through its digital capabilities and superior risk assessment. The manager views Progressive as a prime example of digital disruption in a traditionally analog industry. With an industry-leading combined ratio providing pricing flexibility and marketing investment capacity, Progressive appears well-positioned for continued growth.

Pitch Summary:
Oracle (ORCL) soared after the company reported stellar earnings that smashed quarterly earnings expectations and shares climbed even higher after the company updated long-term growth aspirations at an investor event featuring several new products. The stock has re-rated over 60% in 2024 and cemented its status as an AI contender (and not an AI pretender) and the only vendor providing a complete enterprise technology stack. Oracle has partnerships with all three big cloud providers, and the company's compelling infrastructure offering position the company as a durable "picks-and-shovels" provider to AI workloads.

BSD Analysis:
The fund manager demonstrates high conviction in Oracle's AI transformation, noting the company's exceptional earnings performance and 60% stock re-rating in 2024. Oracle's positioning as the sole provider of a complete enterprise technology stack creates significant competitive differentiation in the AI market. Strategic partnerships with all major cloud providers (AWS, Microsoft Azure, Google Cloud) provide Oracle with unparalleled market access and distribution capabilities. The manager's characterization of Oracle as an "AI contender" rather than "pretender" suggests confidence in the company's genuine AI capabilities and execution. Oracle's infrastructure offerings position it as a critical "picks-and-shovels" provider, benefiting from AI workload growth regardless of specific AI application winners. The updated long-term growth targets and new product launches demonstrate management's commitment to AI market leadership. This durable positioning in AI infrastructure should drive sustained revenue growth and margin expansion.

Pitch Summary:
Similar to the earnings results for Nvidia, shares of Broadcom (AVGO) initially sold off after the company reported solid earnings that fell light of elevated market expectations, but the stock did recover from its drawdown in the matter of a few weeks. With an enticing combination of custom chip offerings as well as networking assets, Broadcom remains one of the best positioned companies as part of the AI revolution. Broadcom outlined a path to derive a majority of its revenue from the AI end market within a couple of years, and the non-AI part of the business has stabilized after a deep correction. The company's dominant market position in its end markets, along with durable growth, strong margins and best-in-class capital allocation, presents an opportunity to compound capital over time.

BSD Analysis:
The fund manager expresses strong conviction in Broadcom's AI positioning despite short-term market volatility following earnings. The manager highlights Broadcom's unique combination of custom chip capabilities and networking infrastructure as key differentiators in the AI ecosystem. Management's guidance to derive majority revenue from AI markets within years demonstrates clear strategic focus and execution capability. The stabilization of non-AI business segments after correction provides a solid foundation for AI-driven growth acceleration. Broadcom's dominant market positions across multiple end markets create sustainable competitive advantages and pricing power. The manager emphasizes the company's superior capital allocation track record, suggesting confidence in management's ability to deploy AI revenues effectively. Strong margins and durable growth characteristics position Broadcom as a high-quality compounder in the AI infrastructure space.

Pitch Summary:
Shares of Apple Inc. (AAPL) increased during the quarter after reporting quarterly results in August that met or exceeded expectations. The company also benefited from holding an investor event in September to introduce the newest iteration of products and accessories. Apple introduced the latest iteration of its flagship model, the iPhone 16, which features updated hardware and a refreshed operating system that integrates AI but will be exclusive to newer iPhone models, which could compel a refresh cycle. The gradual introduction of AI into the Apple product ecosystem is consistent with the company's historical fast follower approach and represents a new tenant of the investment thesis as the market awaits further information related to the company's AI strategy.

BSD Analysis:
The fund manager maintains a bullish stance on Apple, highlighting the company's successful Q3 earnings that met or exceeded expectations and the strategic launch of the iPhone 16 with integrated AI capabilities. The manager views Apple's gradual AI integration as consistent with its proven 'fast follower' strategy, positioning the company to benefit from AI-driven upgrade cycles. The AI-exclusive features in newer iPhone models are expected to drive hardware refresh cycles, creating a compelling catalyst for revenue growth. Apple's methodical approach to AI implementation aligns with its historical product development philosophy, reducing execution risk while maintaining competitive positioning. The manager sees AI integration as a new pillar of the investment thesis, suggesting confidence in Apple's ability to monetize AI capabilities across its ecosystem. The timing of AI feature rollouts appears strategically designed to drive sustained upgrade cycles rather than one-time benefits. This positions Apple to capture both immediate hardware sales and longer-term services revenue from AI-enhanced user experiences.

Pitch Summary:
Lockheed Martin is a new investment for the Fund. This defence contractor had been on our radar for some time, and in July we pulled the trigger. Call it dumb luck, but by quarter's end that initial 2.0% tranche had grown to 2.4% as a result of its 25.8% return. There was reason for it. In the interim Lockheed's management reported impressive results revealing its strong backlog and upgrading its full year guidance. We increased our estimates slightly, but not enough to warrant increasing our position at what we now see to be a reasonably (perhaps slightly highly) priced business.

BSD Analysis:
Alluvium initiated a position in Lockheed Martin, a defense contractor that had been on their watchlist for an extended period. The investment thesis appears to be validated by strong operational performance, with management reporting impressive quarterly results that exceeded expectations. The company demonstrated robust fundamentals through a strong order backlog, which provides revenue visibility and supports management's decision to upgrade full-year guidance. While the fund increased their earnings estimates following the strong results, they remain disciplined on valuation, noting the stock now trades at fair to slightly elevated levels. The 25.8% quarterly return suggests the market recognized the improving fundamentals and strong execution. Lockheed's position in the defense sector benefits from geopolitical tensions and sustained government spending on defense capabilities. The fund's measured approach to position sizing reflects their value-oriented investment philosophy.

Pitch Summary:
Visa (originally known as BankAmericard credit card program) was founded in 1958 by Bank of America (BofA). It was the first card to offer consumers revolving credit. Mastercard (originally known as Interbank, then Mastercharge), was founded in 1966 by a group of Californian banks to compete with it. Not long after, BofA gave up control of the BankAmericard credit card program, and became the second credit card program offered by a cooperative of banks. The way these businesses evolved ensures alignment of interests, with their success dependent on banks all cooperating and agreeing to underwrite transactions. Visa and Mastercard simply developed, implemented and maintained data matching systems to facilitate the network. Fast forward to today, and Visa and Mastercard are the two largest credit card payment processors, with widespread acceptance, robust infrastructure, and extremely strong brand recognition. They have become essential intermediaries in the global payment ecosystem, benefiting from their extensive merchant and bank partnerships as well as consumer trust. Together they dominate payments processing globally (outside of China). It is important to make clear a basic but very important point. Visa and Mastercard do not take credit risk, they merely run data processing/matching systems to facilitate transactions in what is known as an "open loop" system. They differ from, for example, American Express and Diners, which operate "closed loop" systems (using their balance sheets to underwrite transactions). The open loop system appears to have insurmountable barriers to entry. Mastercard and Visa have the infrastructure, meet the regulatory requirements, and most importantly have developed the trust needed to operate their secure and reliable networks at global scale. Having progressed from what were initially "bank cooperatives" Visa and Mastercard now enjoy an entrenched position in an industry structure where interests are aligned. Few would doubt that digital payments is a growing industry - and we can't see an end to the runway. As more consumers and businesses embrace electronic payments, Visa and Mastercard will capture a larger share of global transactions. Growth drivers include increased e-commerce activity, mobile payments, contactless technology, and rising adoption in emerging markets. With highly scalable, asset-light business models, this growth comes at very little cost, high operating margins and strong cash generation. Additionally, both companies have been investing in technology and successfully penetrating related markets and adjacent revenue streams, like fintech, blockchain, real-time payments, cybersecurity, and data analytics. Decades of history suggests these earnings streams grow irrespective of the economic cycle. So then, what are the risks? Competitors? Well, perhaps Alphabet, or Apple, or Meta could develop their own "closed loop" system, but frankly, we don't think the potential returns stack up. Then there's always ongoing regulatory risks focussed on interchange fees. But of the typical 1.5% to 2.5% fee, Visa and Mastercard account for around 0.25%. In our view this is a fair price for their service, and we believe any forced reduction to interchange fees will come mainly at a cost to the other participants (ie the issuing banks).

BSD Analysis:
Alluvium presents a compelling bull case for Visa based on its dominant market position and structural advantages in the global payments ecosystem. The fund highlights Visa's evolution from a bank cooperative to an essential intermediary with insurmountable barriers to entry, including infrastructure, regulatory compliance, and global trust. The investment thesis centers on the secular growth of digital payments driven by e-commerce, mobile payments, contactless technology, and emerging market adoption. Visa's asset-light, highly scalable business model generates strong margins and cash flows that grow regardless of economic cycles. The fund acknowledges regulatory risks around interchange fees but argues Visa's 0.25% take rate is reasonable and sustainable. While competition from tech giants like Apple or Google is possible, Alluvium believes the returns don't justify building competing closed-loop systems. The pitch emphasizes Visa's defensive moat and participation in the unstoppable digitization of payments globally.

Pitch Summary:
Ribbon Communications is a new addition to the strategy. It is a leading supplier of IP-based real-time communications solutions (both equipment and software) for service provider carriers and enterprise customers. The company was created by the merger of Sonus and GENBAND in 2017, and later it entered the optical networking industry through the acquisition of ECI Telecom in 2020. Ribbon is currently benefiting from new customer wins like Tier 1 service providers Verizon and Lumen as it helps them in network transformation. Ribbon is also offering the industry's latest 5-nanometer (nm) and 3-nm optical engine technology in its new DCI (data center interconnect) product offerings, where it has a pipeline of 20 customers (mainly second-tier data center operators and telcos) deploying its solutions to connect data centers over fiber.

BSD Analysis:
THB Asset Management initiated a position in Ribbon Communications, viewing it as a compelling play on network transformation and data center connectivity trends. The manager highlights the company's strategic positioning as a leading supplier of IP-based real-time communications solutions serving both service providers and enterprise customers. The investment thesis centers on Ribbon's recent customer wins with Tier 1 providers Verizon and Lumen, demonstrating the company's ability to capture market share in network transformation initiatives. The manager emphasizes Ribbon's technological edge through its cutting-edge 5-nanometer and 3-nanometer optical engine technology in data center interconnect products. With a pipeline of 20 customers primarily consisting of second-tier data center operators and telecommunications companies, Ribbon appears well-positioned to benefit from the growing demand for fiber-based data center connectivity. The company's evolution through strategic acquisitions, including the 2017 Sonus-GENBAND merger and the 2020 ECI Telecom acquisition, has created a comprehensive portfolio spanning optical networking and communications solutions. THB's bullish stance reflects confidence in Ribbon's ability to capitalize on secular growth trends in data center infrastructure and 5G network deployments.

Pitch Summary:
QuidelOrtho: The stock price of this leading manufacturer of diagnostic health care products declined during the quarter after the company announced disappointing 2024 earnings guidance and ousted its CEO. The stock price reaction provided an opportunity to purchase shares in a company we believe has healthy long-term growth prospects at a price below our assessment of intrinsic value. The company has hired a new CEO who we expect to drive operational efficiencies and higher profitability.

BSD Analysis:
Invesco's QuidelOrtho investment capitalizes on a leadership transition and earnings disappointment creating a compelling value opportunity. The fund managers view the CEO departure and lowered 2024 guidance as temporary setbacks rather than fundamental business deterioration. Their thesis centers on the company's leading market position in diagnostic healthcare products providing sustainable competitive advantages. The new CEO hire represents a potential catalyst for operational improvements and margin expansion. The managers demonstrate confidence in the company's long-term growth prospects despite near-term execution challenges. This turnaround investment reflects their ability to identify quality healthcare businesses trading below intrinsic value during management transitions. The diagnostic healthcare market's defensive characteristics and growth potential support their long-term value creation thesis.

Pitch Summary:
Rambus: The company designs memory chips and other semiconductor products in the US, South Korea, Singapore and internationally. During the quarter, the company's share price declined due to weak earnings results and anticipation of a short-term industry downcycle. This gave us the opportunity to purchase a company that we believe will benefit long term from increased memory demand related to artificial intelligence (AI) at a price below our estimate of intrinsic value.

BSD Analysis:
Invesco's Rambus investment represents a strategic bet on the artificial intelligence memory infrastructure theme during a cyclical downturn. The fund managers view the current semiconductor industry weakness as temporary, positioning for long-term AI-driven memory demand growth. Their thesis centers on Rambus's specialized memory chip design capabilities becoming increasingly valuable as AI applications require more sophisticated memory solutions. The global footprint across key semiconductor markets (US, South Korea, Singapore) provides diversified exposure to the AI infrastructure buildout. The managers demonstrate patience in riding through near-term cyclical headwinds to capture structural growth. This contrarian approach reflects confidence in AI's transformative impact on memory requirements. The investment timing capitalizes on market pessimism about semiconductor cycles while positioning for secular AI trends.

Pitch Summary:
Beacon Roofing Supply: The company sells residential and non-residential roofing products, as well as related building products in North America. The company's recent operations were negatively affected by disruptive weather events that hurt earnings and resulted in a lower stock price during the quarter. We used this as an opportunity to purchase the shares at a price below our assessment of intrinsic value.

BSD Analysis:
Invesco's investment thesis for Beacon Roofing Supply centers on a contrarian value opportunity created by temporary weather-related headwinds. The fund managers capitalized on market overreaction to short-term operational disruptions, viewing the weather-induced earnings decline as transitory rather than structural. Their intrinsic value assessment suggests the market has oversold the stock relative to the company's fundamental worth. The timing appears opportunistic, as roofing demand typically recovers following severe weather events that initially disrupt operations. The managers demonstrate confidence in the company's North American market position and ability to normalize operations. This represents a classic value investing approach of buying quality businesses during temporary setbacks. The investment aligns with their broader strategy of identifying economically sensitive stocks trading below intrinsic value.

Pitch Summary:
PROS Holdings is a vertical software-as-a-service (SaaS) company that develops and sells software solutions and services to the travel and business-to-business (B2B) commerce industries. Specifically, the company provides CPQ (configure, price, quote), price optimization, revenue management and other services, where their AI-enabled, SaaS-based platform is used by some of the largest B2B and travel companies. During the quarter, the company reported strong fiscal second quarter operating results, where revenues and earnings beat analyst estimates. However, the company's travel segment was weaker-than-expected due to inconsistent spending by airlines on new platforms, leading management to lower their fiscal 2024 revenue guidance. While the company reaffirmed its long-term goal of achieving "rule of 40" (i.e., the combined percentage of annual revenue growth and profit margins be at least 40%), management delayed this target to fiscal year 2027.

BSD Analysis:
The manager presents a balanced view of PROS Holdings, acknowledging both operational strengths and near-term challenges in the travel segment. The investment thesis centers on PROS's AI-enabled SaaS platform serving large enterprise clients in B2B commerce and travel industries with mission-critical pricing and revenue optimization solutions. The company demonstrated solid execution in Q2 with revenues and earnings beating estimates, indicating strong underlying demand for its solutions. However, weakness in the travel segment due to inconsistent airline spending on new platforms created headwinds and forced management to lower 2024 guidance. The delay of the "rule of 40" target from 2025 to 2027 suggests execution challenges and a more conservative outlook on profitability improvements. Despite these near-term issues, the company's reaffirmation of long-term financial targets indicates confidence in the business model and market opportunity. PROS's focus on AI-enabled pricing optimization addresses a critical need for large enterprises seeking to maximize revenue and margins. The mixed performance reflects the challenges of serving cyclical end markets while building a sustainable, profitable SaaS business.

Pitch Summary:
Progyny is a leading benefits management company specializing in fertility and family building solutions. It serves a significant but underserved market through unique plan designs, coordinated clinical care, and a carefully selected provider network, resulting in superior clinical outcomes and cost savings. Infertility is a widespread issue, affecting one in eight U.S. couples, according to the CDC. Earlier this year, Progyny faced headwinds due to media attention on the Alabama Supreme Court ruling on in vitro fertilization (IVF), which was later overturned by the state legislature and no longer impacts the company. However, on September 19, Progyny announced the loss of a major client, believed to be its largest account, which caused a sharp drop in its share price. We view this loss as an isolated event, and we believe the company continues to deliver excellent clinical outcomes and provide value to patients, providers, and employers.

BSD Analysis:
The manager maintains conviction in Progyny despite recent client loss and share price volatility, viewing the setback as temporary rather than structural. The investment thesis is built on Progyny's leadership position in the large and underserved fertility benefits market, addressing a significant medical need affecting one in eight U.S. couples. The company's differentiated approach through unique plan designs, coordinated clinical care, and curated provider networks delivers superior clinical outcomes while reducing costs for employers. This value proposition creates strong customer retention and pricing power in normal circumstances. The manager dismisses the Alabama IVF ruling impact as resolved and views the major client loss as an isolated event rather than indicative of broader competitive or operational issues. The underlying market dynamics remain favorable with growing employer adoption of fertility benefits and increasing awareness of reproductive health needs. Progyny's proven ability to deliver measurable clinical and financial outcomes positions the company to recover from this temporary setback and continue gaining market share. The current weakness may present an attractive entry point given the company's strong competitive position and large addressable market opportunity.

Pitch Summary:
Montrose Environmental Group offers various environmental services to a diverse client base, primarily in the U.S. The company has expertise in a wide variety of areas, including environmental assessment and permitting, measurement and analysis, and remediation and reuse. Shares detracted from performance after the company delivered mixed fiscal second quarter operating results, where revenues came in slightly lower than analyst estimates. However, management maintained their fiscal 2024 revenue guidance. Separately, management commented that they are optimistic about the long-term growth from regulatory drivers following the overturning of the Chevron doctrine. This U.S. Supreme Court decision increases regulatory complexity, which drives demand for the company's advisory and consulting services. We believe this shift likely places more influence on state and local regulators, an area where the company has a competitive advantage.

BSD Analysis:
Despite near-term underperformance, the manager maintains a constructive view on Montrose Environmental Group based on long-term regulatory tailwinds. The investment thesis centers on the company's diversified environmental services platform spanning assessment, permitting, remediation, and consulting across multiple end markets. While Q2 results were mixed with revenues slightly missing estimates, management's maintained full-year guidance suggests confidence in the business trajectory. The key catalyst identified is the overturning of the Chevron doctrine, which increases regulatory complexity and shifts more authority to state and local regulators. This regulatory shift should drive increased demand for Montrose's advisory and consulting services as companies navigate more complex compliance requirements. The manager believes Montrose has a competitive advantage in dealing with state and local regulators, positioning the company to benefit disproportionately from this regulatory evolution. The company's broad service offering and geographic presence provide multiple avenues for growth as environmental regulations become more stringent and complex. This regulatory backdrop creates a multi-year growth opportunity that should drive sustained demand for Montrose's specialized services.

Pitch Summary:
StepStone Group is a private markets investment firm that focuses on providing customized investment solutions and advisory and data services to clients. The company serves public and private defined benefit and defined contribution pension funds, sovereign wealth funds, insurance companies, prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. During the quarter, shares contributed to performance following strong fiscal first quarter results, with revenues and earnings beating analyst estimates. Better-than-expected revenues were largely attributed to higher realized carried interest and core management fees, along with strong fundraising activity.

BSD Analysis:
The manager highlights StepStone Group as another top contributor, emphasizing the firm's comprehensive private markets platform serving diverse institutional and high-net-worth clients. The investment thesis focuses on StepStone's ability to provide customized investment solutions across the private markets spectrum, serving a broad client base from pension funds to family offices. The company delivered strong Q1 results with both revenues and earnings exceeding analyst expectations, demonstrating effective execution and market positioning. Revenue outperformance was driven by higher realized carried interest, indicating strong performance of underlying investments, and increased core management fees reflecting asset growth. Strong fundraising activity suggests continued client demand and the firm's ability to attract new capital commitments. StepStone's diversified client base provides stability and multiple growth vectors across different investor segments. The firm's focus on customized solutions and advisory services creates deeper client relationships and higher-value engagements. The combination of strong operational performance and robust fundraising activity positions StepStone well for continued growth in the expanding private markets ecosystem.

Pitch Summary:
Natera is a specialty lab providing genetic testing services in the reproductive health, oncology and transplant markets. Reproductive health tests are run to screen for common genetic disorders such as trisomy 13, 18, and 21 in pregnant women - these tests are also known as non-invasive prenatal testing (NIPT). The company's oncology franchise is led by Signatera, a test used to detect minimal residual disease (MRD) -the applications of this test are primarily to monitor therapy response and detect cancer recurrence. Lastly, Natera's transplant franchise is led by Prospera, a test used to monitor transplant organ rejection. Natera's tests are all based on the company's proprietary liquid biopsy platform to detect cell-free DNA. During the quarter, shares contributed to performance after the company reported better-than-expected fiscal second quarter revenues, driven by strong volume growth from new and existing patients. Moreover, higher pricing and product cost control led to gross margin expansion, as management believes this trend should continue as key productivity initiatives like less costly sequencing in the neo-natal franchise are just beginning to positively impact earnings. Importantly, Natera achieved positive cash flow for the second consecutive quarter.

BSD Analysis:
The manager presents a compelling bull case for Natera based on its diversified genetic testing platform spanning reproductive health, oncology, and transplant monitoring. The investment thesis centers on Natera's proprietary liquid biopsy technology that enables non-invasive detection of cell-free DNA across multiple high-value medical applications. The company demonstrated strong operational momentum in Q2 with revenue beats driven by volume growth from both new and existing patients, indicating market share expansion and deeper customer penetration. Margin expansion through higher pricing and cost control initiatives suggests improving unit economics and operational leverage. The achievement of positive cash flow for two consecutive quarters marks an important inflection point toward sustained profitability. Management's confidence in continued margin improvement through productivity initiatives, particularly in the neonatal franchise, provides visibility into future earnings growth. Natera's diversified testing portfolio across three large addressable markets reduces single-product risk while leveraging the same core technology platform. The company appears well-positioned to capitalize on the growing adoption of liquid biopsy testing across multiple medical specialties.

Pitch Summary:
Hamilton Lane is a holding company that provides private markets investment solutions. The firm works with clients to design, structure, build, manage, and monitor portfolios of private market funds and direct investments. The company offers services such as customized separate accounts, specialized funds, advisory services, distribution management, and data analytics, including reporting and monitoring. During the quarter, shares contributed to performance after the company reported better-than-expected fiscal first quarter revenues. Strong revenues were driven by strong incentive fees, although core management and advisory fees also came in above analyst estimates.

BSD Analysis:
The manager highlights Hamilton Lane as a top contributor during Q3 2024, emphasizing the company's comprehensive private markets investment platform. The investment thesis centers on Hamilton Lane's diversified service offering across the private markets ecosystem, including portfolio management, advisory services, and data analytics. The company demonstrated strong operational execution with fiscal Q1 revenues exceeding expectations, driven by robust incentive fees and management fees beating analyst estimates. This performance suggests strong underlying fund performance and growing assets under management. The manager appears confident in Hamilton Lane's positioning within the growing private markets sector, where institutional demand for alternative investments continues to expand. The company's integrated platform approach provides multiple revenue streams and deepens client relationships. Hamilton Lane's ability to consistently generate strong fee income across market cycles makes it an attractive long-term holding in the specialized growth portfolio.

Pitch Summary:
We sold Estée Lauder, as Chinese consumer headwinds continue to present an unpredictable pace of recovery. And while Estée has taken action to reduce costs and drive a profit recovery plan, it is apparent that a certain level of volume will be necessary to make that plan successful, and that is difficult to predict with a high degree of certainty. China-driven travel retail business continues to be slower than anticipated, pushing out the expected timing of a recovery. Despite the weakness in share price, Estée continues to trade at a premium multiple, and consensus estimates may prove aggressive should Chinese consumer weakness linger. Lastly, with a pending transition in both the CFO and CEO roles, we see the potential for another reset as the new management team takes over.

BSD Analysis:
The manager executed a complete exit from Estée Lauder due to mounting concerns about Chinese market recovery timing and execution risks. Despite management's cost reduction efforts and profit recovery initiatives, the fund lacks confidence in volume recovery necessary for plan success. The China-driven travel retail business remains significantly weaker than expected, creating uncertainty about key revenue driver recovery. Premium valuation multiples appear unjustified given persistent operational challenges and potentially aggressive consensus earnings estimates. Leadership transitions in both CFO and CEO roles add execution risk during a critical turnaround period, potentially leading to strategy resets that could delay recovery further. The manager appears concerned that Chinese consumer weakness could persist longer than market expectations, undermining the investment thesis. Estée Lauder's heavy exposure to Chinese consumers and travel retail creates concentrated risk during a period of economic uncertainty in that market. The fund likely concluded that risk-reward dynamics had deteriorated sufficiently to warrant complete position elimination rather than continued exposure to uncertain recovery timing.