Investment Pitches

Pitch Summary:
NRP is predominantly a coal royalty company owning 13M acres of mineral interests. In any given year, free cash flow is typically 80%+ from mineral royalties and up to 20% from their JV in a soda ash mining company. Of the coal royalty revenue, 65-75% typically come from metallurgical coal royalties with the remainder from thermal coal royalties. I like that the business is primarily exposed to metallurgical coal, a key ingredient in making steel and one where limited new supply is being added. Royalty companies earn revenue from any mining that is done on the land they own. They'll work out a contract with the mining company as to what percentage of revenue needs to be paid as a royalty. These can be fantastic businesses as I learned during my time at T. Rowe as a small cap metals and mining analyst. I came to appreciate companies like Franco Nevada, a precious metals royalty company with an eye for the long term. With properly capitalized royalty companies, time is really your friend in a number of ways. Land ownership allows the royalty companies to ride out the more difficult times. Furthermore, royalty companies benefit from significant operating leverage when commodity volumes and prices increase as their minimal costs (operating margins are typically 70-75%) remain unchanged. With a producer, it's not uncommon to see rising costs accompany rising prices. Based on my estimates, NRP has 25+ years of remaining reserves on its metallurgical coal royalties, and 70+ years of remaining reserves on its thermal coal royalties. That's a lot of duration. And yet the business trades at a high single digit multiple of normalized earnings. The market is saying we can only capitalize 8-10 years of earnings, yet we have 25+ years of reserves. So what is the disconnect and why does the opportunity exist? For starters, cash flows have declined as each of their commodities are in year 3 of a bear market. From 2022 – 2024, operating cash flow (before interest payments) was $250-$310M. Last year, it decreased to $165M as a result of their commodities not doing well. The balance sheet has improved dramatically as the business has gone from ~$1.4B in debt 10 years ago to debt-free by the end of this year. As debt is fully paid off, management will likely transition to distributing all cash to shareholders. Even over the last few years, there have been times when the business was producing a lot of operating cash flow which was mostly being absorbed by interest and principal payments on their debt. This is a significant change – so much so that I could argue that NRP is an entirely different business than it was before. The company is also a publicly traded partnership which prevents some investors from buying it. With much less of the significant debt burden going forward, the company could produce $15-25 per share of free cash flow (pre-tax) in a more reasonable operating environment. There's not a perfect comp for NRP but other publicly traded partnerships trade between a 6-10% dividend yield. NRP should fall somewhere in the middle based on how it's business stacks up. At $20 of cash flow and a 10% dividend yield, we could be looking at a $200 stock vs. $125 today. At an 8% yield, we're talking $250 or a double from here. NRP is a high-quality business with a long reserve life that could potentially grow over time. Its commodities remain essential. There is also optionality in the company's large land base, which could be used for other productive purposes over time. For example, carbon capture initiatives are currently uneconomical, but NRP has participated in them in the past and could benefit if the economics improve. The primary risks are a prolonged commodity downturn and poor capital allocation. While we are already in a commodity downturn which reduces some of this risk, conditions could worsen and lead producers to pause production. On capital allocation, management owns roughly 30% of the units, which gives me confidence they care deeply about how capital is deployed and have learned from past decisions. To sum it all up, NRP is an inexpensive, quality business with some long-term optionality and a significantly improved balance sheet that should lead to a positive capital allocation change in the near future. It has a great risk reward and provides different exposures to the Right Tail Portfolio.

BSD Analysis:
The manager presents a compelling value thesis for NRP, a coal royalty company with 13 million acres of mineral interests generating 80%+ of free cash flow from royalties. The investment case centers on a dramatic balance sheet transformation from $1.4B debt to debt-free status by year-end, which should enable full cash distribution to shareholders. With 25+ years of metallurgical coal reserves and 70+ years of thermal coal reserves, the company trades at a high single-digit earnings multiple despite substantial reserve duration. The manager estimates $15-25 per share in normalized free cash flow, suggesting potential upside to $200-250 versus the current $125 price based on 8-10% dividend yields typical for publicly traded partnerships. Key catalysts include the debt payoff completion and transition to shareholder distributions, while the 30% management ownership provides alignment on capital allocation. The thesis acknowledges commodity cycle risks but views the current downturn as already reflected in depressed cash flows of $165M versus historical $250-310M levels.

Pitch Summary:
Vir Biotechnology is a leader in the exciting field of immunotherapy, and specifically a therapy known as Bispecific T-Cell engagers, or BiTEs. BiTEs hold a tremendous amount of promise in oncology, as the therapy helps recruit a patient's innate immune system to kill cancer cells, as well as for infectious diseases, like hepatitis delta and HIV. Vir's approach is to mask their T-Cell engagers with a proprietary technology exclusively licensed from Sanofi, so that the therapy is only activated when it encounters diseased cells, which should increase the effectiveness of the treatment while minimizing off-target toxicity, a major problem encountered by other BiTEs in development. Vir recently completed a large collaboration deal with Astellas following the release of successful Phase 1 data for its drug in prostate cancer, which will give them enough cash to fund clinical trials for the next several years.

BSD Analysis:
Jacob Funds identifies Vir Biotechnology as a leader in the promising field of Bispecific T-Cell engagers (BiTEs), positioning the company at the forefront of next-generation immunotherapy. The manager highlights BiTEs' significant potential in both oncology and infectious diseases, including hepatitis delta and HIV, by leveraging the patient's immune system to target diseased cells. Vir's competitive advantage lies in its proprietary masking technology exclusively licensed from Sanofi, which addresses a critical limitation of other BiTEs in development by activating only when encountering diseased cells. This approach should enhance treatment effectiveness while minimizing off-target toxicity, a major challenge facing competing BiTE therapies. The recent collaboration deal with Astellas, triggered by successful Phase 1 data in prostate cancer, validates Vir's approach and provides substantial funding runway for continued clinical development. This partnership not only offers financial security for several years of clinical trials but also demonstrates institutional confidence in Vir's technology platform. Jacob Funds' investment reflects their conviction in Vir's differentiated BiTE technology and its potential to address significant unmet medical needs across multiple therapeutic areas.

Pitch Summary:
Energous is a name we have tracked for a long time, as we were intrigued by its consumer-focused wireless power technology. Unfortunately, the company was never able to overcome numerous technical and operational challenges and was very close to going bankrupt. However, the company made a smart pivot to utilize its wireless technology capabilities in the enterprise space. Its PowerBridge Pro transmitters help its clients keep track of the vast array of ambient wireless devices, tags and sensors that are now key data-gathering elements of most modern enterprises' networks. The company has secured one large retail client to help serve as a major reference customer and prove its capabilities and expertise. That client has meant big revenue growth and narrowing losses over the past 12 months, and hopefully a robust pipeline of opportunities will lead to more substantial clients and a breakeven business soon.

BSD Analysis:
Jacob Funds presents a turnaround story for Energous, highlighting the company's successful pivot from struggling consumer wireless power technology to enterprise-focused solutions. After nearly facing bankruptcy due to technical and operational challenges in the consumer market, Energous repositioned its wireless technology capabilities for enterprise applications. The company's PowerBridge Pro transmitters now serve a critical function in helping enterprises manage and track the proliferation of ambient wireless devices, tags, and sensors that have become essential data-gathering components of modern business networks. The fund emphasizes the validation provided by securing one large retail client as a major reference customer, which has driven significant revenue growth and narrowing losses over the past year. This reference customer relationship demonstrates Energous's capabilities and provides credibility for expanding to additional enterprise clients. Jacob Funds sees potential for a robust pipeline of opportunities that could lead to more substantial client wins and ultimately achieve breakeven operations. The investment reflects confidence in Energous's ability to monetize the growing enterprise need for wireless device management and tracking solutions.

Pitch Summary:
Robinhood is a consumer fintech platform offering commission-free trading alongside a growing suite of financial services, including crypto trading, banking, credit, and advisory products. Its business model historically has been from transaction-based revenues (notably payment for order flow), net interest income, and subscriptions. Recent initiatives around prediction markets and tokenization have enormous potential and strong early results that could make Robinhood into the broader financial "super-app" it has long wanted to be. This diversification and future growth potential gives Robinhood a much larger opportunity beyond its current addressable market that we believe will lead to higher earnings and a higher valuation multiple.

BSD Analysis:
Jacob Funds articulates a transformation thesis for Robinhood, viewing the company's evolution from a commission-free trading platform into a comprehensive financial super-app. The manager highlights Robinhood's diversification beyond its traditional revenue streams of payment for order flow, net interest income, and subscriptions into new growth areas including prediction markets and tokenization. These recent initiatives are showing strong early results and represent significant expansion of Robinhood's addressable market opportunity. The fund sees these new products as key differentiators that could drive both higher earnings and multiple expansion as the market recognizes Robinhood's broader financial services potential. The prediction markets and tokenization initiatives particularly align with emerging fintech trends and could position Robinhood at the forefront of next-generation financial products. Jacob Funds' conviction reflects their belief that Robinhood's platform and user base provide a strong foundation for building a comprehensive financial ecosystem. The investment thesis centers on Robinhood successfully executing its super-app strategy and capturing a larger share of its users' financial lives.

Pitch Summary:
Reddit operates a global social platform built around user-generated communities monetized primarily through advertising and premium subscriptions. With over 100 million daily active users, the platform benefits from highly engaged niche communities and a large database of real-time conversational data, which is increasingly valuable for ad targeting and AI training. Acknowledging that Reddit has done an impressive job improving ad monetization, the real opportunity is to broaden its reach by becoming tied in with all the large language model companies. Already signing some small licensing deals, we believe that Reddit's data will become more valuable over time as machine-generated content becomes more pervasive and less useful.

BSD Analysis:
Jacob Funds presents a compelling bull case for Reddit that extends beyond traditional social media metrics to focus on the platform's unique data value proposition in the AI era. The manager acknowledges Reddit's operational improvements in ad monetization but identifies the real opportunity in data licensing to large language model companies. With over 100 million daily active users generating authentic conversational data across highly engaged niche communities, Reddit possesses a differentiated dataset that becomes increasingly valuable as AI training data. The fund's thesis hinges on the premise that as machine-generated content proliferates and becomes less useful for AI training, Reddit's human-generated, real-time conversational data becomes more precious. Early licensing deals validate this approach, and Jacob Funds expects Reddit's data monetization to expand significantly as more LLM companies seek high-quality training data. This positions Reddit not just as a social media platform but as a critical data infrastructure provider for the AI industry. The investment reflects confidence in Reddit's ability to monetize its unique community-driven content ecosystem in multiple ways.

Pitch Summary:
Circle is a financial technology platform centered on stablecoins and blockchain-based payments infrastructure, most notably as the issuer of USDC, a dollar-backed digital currency. Today, the company generates revenue primarily from interest earned on reserve assets, such as short-term Treasuries, backing its stablecoins, while expanding into developer infrastructure, payments networks, and tokenized financial products. While recent results already highlight rapid growth in USDC circulation and transaction volumes, we believe we're at an inflection point where adoption could accelerate over the next few years.

BSD Analysis:
Jacob Funds presents a bullish thesis on Circle Internet Group, positioning it as a key beneficiary of the growing stablecoin and blockchain payments ecosystem. The manager highlights Circle's dominant position as the issuer of USDC, which generates revenue through interest on reserve assets backing the stablecoin. The fund sees Circle at an inflection point where adoption could accelerate significantly over the coming years. The company's expansion into developer infrastructure, payments networks, and tokenized financial products provides multiple revenue streams beyond its core stablecoin business. With rapid growth already evident in USDC circulation and transaction volumes, Circle appears well-positioned to capitalize on the broader adoption of digital currencies and blockchain-based financial infrastructure. The timing of this investment coincides with increasing institutional and retail acceptance of stablecoins as a bridge between traditional finance and digital assets. Jacob Funds' conviction in Circle reflects their belief in the long-term structural shift toward blockchain-based financial services.

Pitch Summary:
The adjustment in investor expectations has not been limited to companies making the largest investments. Aon plc has also experienced share price pressure despite a business model that is less directly tied to the capital intensity of artificial intelligence. Aon continues to generate operating margins near 30% and returns on invested capital in the mid-20% range, supported by a highly recurring revenue base and long-standing client relationships. Aon's core business involves helping large enterprise clients understand and manage highly complex risks, whether related to insurance, cyber threats, evolving regulations, or an increasingly intricate global environment. This work relies heavily on expertise and judgment. While artificial intelligence may enhance aspects of its capabilities, it is unlikely to displace the central role the firm plays for its clients, as is suggested by its near 20% sell-off from its peak last February.

BSD Analysis:
Douglass Winthrop views Aon's recent 20% decline as an overreaction, presenting an attractive opportunity in a high-quality financial services business. The fund emphasizes Aon's impressive financial metrics, including operating margins near 30% and returns on invested capital in the mid-20% range, supported by a highly recurring revenue base and deep client relationships. Aon's core value proposition centers on helping large enterprise clients navigate complex risk management challenges across insurance, cyber threats, regulatory compliance, and global operational risks. The fund believes this expertise-driven business model is largely insulated from AI disruption, as the work requires sophisticated judgment and client relationships that technology cannot easily replicate. While AI may enhance certain capabilities, it's unlikely to displace Aon's central advisory role for complex enterprise risk management. The recent selloff appears disconnected from the company's fundamental business quality and competitive positioning. Management's focus on recurring revenue streams and long-term client partnerships provides stability and predictable cash flow generation.

Pitch Summary:
This dynamic is evident in the recent share price volatility of Microsoft and Amazon. Both companies are investing heavily in artificial intelligence infrastructure, committing tens of billions of dollars annually to data centers and related capabilities. Microsoft's capital expenditures are expected to exceed $100 billion this year, while Amazon's are projected to be even higher, driven largely by continued expansion of AWS and AI-related infrastructure. These investments have raised questions about near-term returns, contributing to share price declines of approximately 33% and 20%, respectively, from their 52-week highs. Amazon's core business is well-moated from scale and a management culture focused on continuous efficiency improvement, consistent with its aspiration to be "Earth's most customer-centric company." Amazon Web Services (AWS) remains the leading cloud infrastructure provider and a primary toll road for AI deployment. AWS generates operating margins of approximately 30–35% and contributes over half of Amazon's consolidated operating income, despite representing a minority of total revenue. While near-term earnings and cash flow will be affected by increased investment, these expenditures are likely to reinforce competitive positioning over time. The recent share price declines appear to reflect a reassessment of timing rather than a deterioration in long-term value and likely represent opportunity.

BSD Analysis:
Douglass Winthrop maintains a bullish stance on Amazon despite the 20% decline from recent highs, viewing the selloff as a timing-related opportunity rather than fundamental weakness. The fund emphasizes Amazon's well-moated core business protected by scale advantages and a customer-centric management culture focused on continuous efficiency improvements. AWS stands out as the crown jewel, maintaining leadership in cloud infrastructure while serving as a critical "toll road" for AI deployment. Despite representing a minority of total revenue, AWS generates impressive 30-35% operating margins and contributes over half of consolidated operating income, demonstrating exceptional profitability. The fund acknowledges that massive AI infrastructure investments will pressure near-term cash flows but believes these expenditures will strengthen long-term competitive positioning. Management's track record of reinvesting for future growth while building dominant market positions supports the investment thesis. Current market concerns appear focused on investment timing rather than questioning Amazon's strategic direction or competitive advantages.

Pitch Summary:
This dynamic is evident in the recent share price volatility of Microsoft and Amazon. Both companies are investing heavily in artificial intelligence infrastructure, committing tens of billions of dollars annually to data centers and related capabilities. Microsoft's capital expenditures are expected to exceed $100 billion this year, while Amazon's are projected to be even higher, driven largely by continued expansion of AWS and AI-related infrastructure. These investments have raised questions about near-term returns, contributing to share price declines of approximately 33% and 20%, respectively, from their 52-week highs. At the same time, the underlying businesses remain exceptionally strong. Microsoft continues to generate operating margins above 40% and returns on invested capital in the high-20s% range, supported by durable growth in Azure and its broader enterprise software ecosystem. Azure revenue has continued to grow at a rate in excess of 25% year-over-year, reflecting both cloud adoption and early AI-related demand. While near-term earnings and cash flow will be affected by increased investment, these expenditures are likely to reinforce competitive positioning over time. The recent share price declines appear to reflect a reassessment of timing rather than a deterioration in long-term value and likely represent opportunity.

BSD Analysis:
Douglass Winthrop presents a compelling bull case for Microsoft despite recent share price volatility. The fund views the 33% decline from 52-week highs as a timing reassessment rather than fundamental deterioration, creating an attractive entry opportunity. Microsoft's exceptional financial metrics remain intact with operating margins above 40% and returns on invested capital in the high-20s range. The Azure cloud platform continues robust growth exceeding 25% year-over-year, driven by both traditional cloud adoption and emerging AI demand. While the $100+ billion annual capital expenditure program for AI infrastructure pressures near-term cash flows, management believes these investments will strengthen long-term competitive positioning. The fund emphasizes Microsoft's durable enterprise software ecosystem and views current market concerns as short-sighted. This represents a classic quality company trading at a discount due to temporary market sentiment around AI investment timing.

Pitch Summary:
Intuit is a different version of the same theme. Its moat sits in the accountant-SMB relationship, and AI makes that network more useful to both sides rather than disintermediating it.

BSD Analysis:
The manager views Intuit as benefiting from AI enhancement rather than disruption, with the company's network effects between accountants and small businesses strengthening rather than weakening. The investment thesis centers on Intuit's platform becoming more valuable as AI tools improve the efficiency and capabilities of both accountants and SMB clients. Unlike software companies facing potential AI displacement, Intuit's moat lies in relationship management and workflow orchestration that AI enhances rather than replaces. The manager sees this as a misunderstood dynamic where the market applies broad "AI disruption" concerns without recognizing how AI can strengthen existing network effects. Intuit's position as an intermediary in the accountant-SMB ecosystem becomes more valuable when AI tools make both parties more productive within that relationship. This represents a contrarian view that AI will expand rather than compress Intuit's addressable market and competitive advantages.

Pitch Summary:
Software hurt us in March though the more important point is that this is not one clean call. Our view has shifted over recent months: constructive in December, net short in January, covering into weakness in February, and then rotating selectively back into names where we think the market is overestimating AI disruption. In hindsight, we were early. GitLab sold off on weak guidance, MongoDB fell sharply, and the market is still applying a blunt "AI loser" label to a wide range of businesses whose economics are actually being affected in very different ways. That bluntness is creating opportunity. In GitLab's case, AI does not reduce the need for the product; it increases it. AI coding agents are generating more code, but enterprise review backlogs, security issues and pipeline failures are rising with that complexity. More code without governance is a liability, and GitLab is building the governance layer that lets enterprises safely ship what their agents produce. We can point to GitLab at $22 building the governance layer that every enterprise will need as AI coding agents scale.

BSD Analysis:
The manager presents a contrarian bull case for GitLab, arguing the market has mischaracterized it as an "AI loser" when AI actually increases demand for its governance platform. The investment thesis centers on GitLab's role as essential infrastructure for AI-generated code management, with AI coding agents creating more complexity rather than displacing the need for DevOps governance. At $22 per share, the manager sees attractive valuation for a company positioned to benefit from the proliferation of AI coding tools. The fund's tactical approach included going net short software in January before selectively rotating back into names like GitLab where AI disruption concerns appear overblown. The manager emphasizes that increased code generation from AI agents creates greater need for review processes, security oversight, and pipeline management - GitLab's core value proposition. This positioning reflects confidence that enterprises will require more sophisticated governance tools as AI coding scales, not fewer. The weak guidance that drove the selloff appears to represent a buying opportunity rather than fundamental deterioration.

Pitch Summary:
Memory was the largest single detractor this month, with SK hynix and Micron both falling sharply despite reporting some of the best fundamentals either company has ever seen. Several things hit at once. Micron's result was excellent but higher capex guidance revived investor memories of past cycle blow-offs. Google's TurboQuant paper then landed at exactly the wrong moment, and the market leapt to the conclusion that AI models might need structurally less memory. Add in a sell-the-news move after enormous share price runs, plus a broad Iran-driven risk-off tape, and the sector went from leadership to liquidation in a matter of days. Our view is that the market has once again mistaken inference efficiency for demand destruction. The headline TurboQuant numbers compare against baselines frontier labs largely no longer use, the technique itself is not new, and software-side compression does nothing to change the physical HBM shipped inside GPUs and TPUs. More importantly, lower inference cost has so far increased total usage, not reduced it: longer context windows = more agents = more deployment. Supply remains sold out through 2026, with new capacity not arriving until late 2027, Micron has signed its first five-year customer agreement, and both Micron and SK hynix now trade at valuations that look cheaper relative to their fundamentals than when we first bought them. We have since added to our memory position. We can point to Micron trading at 3.5x next year's earnings with supply locked up for years.

BSD Analysis:
The manager maintains a bullish stance on Micron despite significant March underperformance, viewing the selloff as a buying opportunity driven by misplaced market concerns. The thesis centers on AI-driven memory demand remaining structurally strong, with the manager dismissing Google's TurboQuant efficiency gains as irrelevant to physical HBM requirements. Key fundamental support includes supply constraints through 2026, Micron's first five-year customer agreement, and an attractive 3.5x forward P/E ratio. The manager argues that inference efficiency improvements historically increase total AI usage rather than reduce memory demand. Supply-demand dynamics remain favorable with new capacity not arriving until late 2027, creating a multi-year runway for pricing power. The fund has added to positions following the correction, demonstrating conviction in the long-term AI memory thesis. This contrarian positioning reflects confidence that current valuations inadequately reflect the structural memory demand from AI workloads.

Pitch Summary:
Visa reported strong revenue and earnings-per-share growth of +15%, driven by solid consumer spending and the continued expansion of "value-added" services. Despite this fundamental strength, the market pressured shares, ostensibly due to potential regulatory and legislative headwinds. The White House recently backed a legislative amendment that could introduce incremental competition into the Mastercard/Visa duopoly in the United States. While a legal framework for competition is undoubtedly an incremental risk, we view the technological and practical execution of actual competition as far less of a threat. Furthermore, attempts to attach the amendment to recent legislation have failed, making it far from certain that this new competitive framework will see the light of day.

BSD Analysis:
Wedgewood maintains a bullish view on Visa despite regulatory concerns, emphasizing strong fundamental performance and questioning the practical implementation of competitive threats. The manager highlights robust 15% revenue and earnings per share growth driven by solid consumer spending and expanding value-added services, demonstrating the company's ability to grow beyond core payment processing. While acknowledging regulatory risks from potential legislative amendments targeting the Visa/Mastercard duopoly, the manager distinguishes between legal frameworks and practical execution challenges. The technological and operational barriers to creating meaningful competition in payment networks appear substantial, reducing the actual threat level. Recent legislative failures to attach competitive amendments suggest uncertain prospects for new regulatory frameworks. The combination of strong fundamental performance, expanding service offerings, and practical barriers to competition supports the bullish stance despite near-term regulatory noise.

Pitch Summary:
Alphabet grew its core search revenue by +17% and continues to accelerate as users spend more time on Google properties, driven by the Company's AI offerings (AI Mode and AI Overviews). At the same time, Google advertisers are adopting more AI-enabled tools to improve ad relevance and accuracy. These AI gains are unlocking significant productivity and driving margin expansion across both core Google services and the $70 billion run-rate Google Cloud business. Given this massive operating leverage, an accelerating revenue profile, and a historic ability to generate high returns on invested capital, we believe their elevated capex spending plans this year are fully justified. We continue to hold Alphabet as a top weighting.

BSD Analysis:
Wedgewood maintains a bullish stance on Alphabet, emphasizing the company's successful AI integration driving both user engagement and advertiser adoption. The manager highlights accelerating core search revenue growth of 17%, supported by increased user time on Google properties through AI Mode and AI Overviews features. The dual benefit of enhanced user experience and improved advertiser tools through AI-enabled ad relevance and accuracy creates a virtuous cycle for revenue growth. Significant productivity gains and margin expansion are evident across both core Google services and the $70 billion run-rate Google Cloud business, demonstrating operational leverage from AI investments. The manager views elevated capex spending as justified given Alphabet's historical track record of generating high returns on invested capital and the current accelerating revenue profile. The combination of massive operating leverage, revenue acceleration, and proven capital allocation supports maintaining Alphabet as a top portfolio weighting.

Pitch Summary:
Meta Platforms detracted from performance despite reporting fourth-quarter 2025 revenue growth of +24% and guiding to accelerating revenue growth of +30%, its fastest since 2021. The market began punishing stocks, such as Meta's, that are spending heavily on capex to fund AI-related infrastructure, regardless of the tremendous productivity gains they have exhibited - with headcount up just +6% on +24% revenue growth. The market further pressured the stock after oil prices spiked at the beginning of March. The assumption was that disposable income would be cannibalized at the pump, pressuring broader retail activity and related ad budgets. The forward earnings multiple on Meta has fallen to levels more consistent with much slower growth than the Company has guided to. After trimming Meta several times over the past few years, we are more likely to add to positions based on the strong Company-specific benefits that their long-term AI investments are yielding, given a valuation that is at a substantial discount compared to growth stocks and recent history.

BSD Analysis:
Despite Meta being a performance detractor, Wedgewood maintains a strongly bullish view, arguing the market is incorrectly penalizing AI infrastructure investments despite clear productivity benefits. The manager highlights exceptional fundamentals including 24% revenue growth in Q4 2025 and accelerating guidance to 30% growth, the fastest since 2021. Meta's operational efficiency is evident with headcount growing only 6% while revenue expanded 24%, demonstrating significant AI-driven productivity gains. The market's concern over AI capex spending appears misplaced given these tangible benefits. Oil price spikes created additional pressure based on assumptions about reduced advertising budgets, but this appears temporary. The forward earnings multiple has compressed to levels inconsistent with the company's guided growth trajectory, creating an attractive valuation opportunity. After previous position trims, the manager is now more likely to add to Meta given the substantial discount to both growth peers and historical valuations, while AI investments continue delivering measurable benefits.

Pitch Summary:
Booking Holdings detracted from overall performance during the quarter. Earnings per share grew $+17%$, with revenues up $+16%$, as travel demand remained strong late into 2025 and into early 2026. Most of the stock's weakness stemmed from investors labeling it an "AI loser" and, later in the quarter, the outbreak of war in the Middle East. Consumer AI, as a disruptive force in existing commerce, is proving to be much more difficult than markets expect. We view these AI tools and distribution channels as incremental rather than as drivers of the "zero-sum" dynamics that markets have been craving. As for the Middle East, for now, it represents a short-term disruption to travelers, particularly air travelers, given credible risks to international airline fuel supplies. However, we expect this will not be a multi-year headwind - more like a few quarters.

BSD Analysis:
Despite Booking Holdings being a detractor, Wedgewood maintains a bullish stance, viewing current weakness as temporary and driven by misplaced market concerns. The manager highlights strong fundamental performance with 17% earnings per share growth and 16% revenue growth, supported by robust travel demand extending from late 2025 into early 2026. The "AI loser" narrative appears overblown, as the manager argues consumer AI disruption in commerce is proving more difficult than anticipated, with AI tools likely serving as incremental rather than disruptive forces. The Middle East conflict represents a near-term headwind primarily affecting air travel due to fuel supply risks, but the manager expects this to be a quarterly rather than multi-year impact. The market's focus on zero-sum AI dynamics appears misguided given the complexity of consumer behavior and travel booking patterns. Strong underlying travel demand fundamentals support the view that current weakness is temporary.

Pitch Summary:
Microsoft was a leading detractor from performance in the first quarter. Despite revenue growth of +15%, operating income growth above 20%, and a backlog that more than doubled (to over $600 billion), the stock's multiple contracted to multi-year lows. Much of the initial negativity during the quarter centered on Microsoft's capital expenditures, which grew +65%. As we have shown in recent letters, Microsoft's incremental capital expenditures have yielded excellent returns over the past few years. So, while revenue "only" grew +15% compared to $65% capex growth, the more-than-doubling of the Company's backlog and the tripling of its commercial bookings are reasonable demand markers that suggest returns on invested capital from this capex cycle are likely to remain strong. Further, Microsoft is the largest shareholder in OpenAI, with a stake worth well over $100 billion based on recent fundraises, a fraction of Microsoft's $2.75 trillion market cap but close to 10X more than the Company's initial investments. Microsoft's capital allocation discipline and track record are sorely underestimated. Lastly, the market began discounting nearly all "seat-based" software stocks on the perception that they could be undermined by emerging AI workflows and competition. Rather, we believe investors are fading large-cap tech to make room for the mega IPOs later this year, particularly OpenAI, Anthropic, and SpaceX (which includes xAI). As these companies provide more disclosure and the market digests this impending glut of issuance, the long-term, complementary, and mission-critical (sticky) nature of Microsoft's productivity suite will become more evident.

BSD Analysis:
Despite Microsoft being a detractor, Wedgewood maintains a strongly bullish view, arguing the market is mispricing the company's AI investments and strategic positioning. The manager emphasizes robust fundamentals including 15% revenue growth, 20%+ operating income growth, and a backlog exceeding $600 billion that more than doubled year-over-year. While 65% capex growth appears concerning, the manager highlights Microsoft's historical track record of generating excellent returns on incremental capital investments. The tripling of commercial bookings and doubling of backlog provide strong demand indicators supporting future returns on the current capex cycle. Microsoft's OpenAI stake, worth over $100 billion, represents nearly 10x the initial investment, demonstrating exceptional capital allocation. The manager views current multiple compression to multi-year lows as temporary, driven by market rotation ahead of major tech IPOs rather than fundamental deterioration. The sticky, mission-critical nature of Microsoft's productivity suite should become more apparent as AI competition dynamics clarify and the IPO supply glut is absorbed.

Pitch Summary:
O'Reilly Automotive helped performance this quarter, as earnings per share grew by +13%, driven by a +6% increase in same-store sales (comps), marking the Company's 33rd consecutive year of positive comp growth. The primary driver of O'Reilly's quarterly comp performance was its professional business, which grew by over +10%. This was partially aided by tariff-driven inflation, which the Company successfully passed through to customers. Weather did not play a significant role, making this quarter a clear indicator of the Company's underlying fundamentals. Despite higher gas prices late in the first quarter potentially dampening consumer sentiment, we expect O'Reilly to continue posting solid comp and earnings growth, as the vast majority of its revenues are non-discretionary.

BSD Analysis:
Wedgewood maintains a bullish stance on O'Reilly Automotive based on the company's remarkable consistency and defensive business characteristics. The manager emphasizes the extraordinary track record of 33 consecutive years of positive comparable store sales growth, demonstrating resilient execution across various economic cycles. Professional business growth exceeding 10% highlights the company's strong positioning with commercial customers who represent a more stable and higher-margin revenue stream. O'Reilly's successful pass-through of tariff-driven inflation demonstrates pricing power and customer loyalty. The manager notes that weather neutrality in the quarter provides a cleaner view of underlying fundamental strength. Despite potential headwinds from higher gas prices affecting consumer sentiment, the predominantly non-discretionary nature of automotive aftermarket spending provides defensive characteristics. The combination of consistent execution, pricing power, and non-discretionary demand supports expectations for continued solid comparable sales and earnings growth.

Pitch Summary:
Chubb contributed to performance during the quarter, growing core operating income by +25% on +8% growth in net premiums (FX-neutral) and achieving a record-low combined ratio. Despite a soft industry backdrop, particularly in property, Chubb grew new business by +17% in its core small and middle-market segment, and international global retail premiums were up by +13%, driven by distribution through large local financial intermediaries and a direct-to-consumer digital buildout. Underwriting has benefited from a quiet year on the "mega-cat" front, but the Company has also performed well during previous periods of higher mega-cat activity and is focused on driving margins by controlling overhead through several productivity initiatives. We expect Chubb to grow earnings per share and tangible book value per share at double-digit rates this year.

BSD Analysis:
Wedgewood presents a strong bullish case for Chubb based on exceptional operational performance and market share gains despite challenging industry conditions. The manager highlights impressive core operating income growth of 25% on 8% premium growth, demonstrating significant operating leverage and underwriting discipline. Chubb's ability to grow new business by 17% in small and middle-market segments while the broader property market remains soft showcases competitive advantages and execution capabilities. International expansion through local financial intermediaries and direct-to-consumer digital channels is driving 13% premium growth globally. The company achieved a record-low combined ratio while benefiting from reduced catastrophe losses, though the manager notes Chubb's historical resilience during higher catastrophe periods. Productivity initiatives focused on overhead control should drive continued margin expansion. The manager expects double-digit growth in both earnings per share and tangible book value, reflecting confidence in the company's fundamental trajectory.

Pitch Summary:
Motorola Solutions contributed positively to performance, with organic revenue up 7% and orders growing in the double digits for the third consecutive quarter. The Company's core Land Mobile Radio (LMR) business offers a unique value proposition to its customers, particularly local governments and public safety agencies. LMR technology is well suited for inclement weather and harsh conditions because its antennas generate a high-powered signal, unlike competing modes of communication (e.g., cellular and satellite), which rely on clusters of low-power deployments and are more susceptible to degradation when power or network backhaul becomes unavailable due to power failures or deteriorating weather. In fact, Motorola devices can communicate radio-to-radio without a network if necessary. In addition, Motorola's command center software and new unmanned aerial communication platform (Silvus) are value-added services that public-safety customers are increasingly adopting to do more with the same personnel. We continue to hold Motorola as a core position in portfolios, having added to it in the fourth quarter of 2025.

BSD Analysis:
Wedgewood maintains a bullish view on Motorola Solutions based on the company's mission-critical technology moat and accelerating growth momentum. The manager emphasizes the superior reliability of Land Mobile Radio technology compared to cellular and satellite alternatives, particularly during adverse weather conditions and power outages when public safety communications are most critical. This technological advantage creates a defensible competitive position with local governments and public safety agencies. The company is successfully expanding beyond core LMR with value-added services including command center software and the Silvus unmanned aerial platform, driving customer adoption and revenue diversification. Strong operational metrics include 7% organic revenue growth and double-digit order growth for three consecutive quarters. The manager's decision to add to the position in Q4 2025 and maintain it as a core holding reflects confidence in the sustainable competitive advantages and growth trajectory.