Investment Pitches

Pitch Summary:
Rockwell Automation is another "picks and shovels" investment in the Industrials sector—an established company well-positioned to benefit from reshoring trends, increased defense spending, and the broader adoption of automation and AI in manufacturing. As the economy grows, we expect more industries to invest in faster, smarter, and more reliable production systems, which directly supports demand for Rockwell's offerings. Its portfolio of automation technologies—including sensors, software, and control systems—helps make domestic manufacturing more efficient and cost-effective. In the defense space, Rockwell also supplies critical systems used in military production facilities. Unlike Boeing, Rockwell is not a turnaround story. It is already a key enabler of advanced manufacturing and a leader in industrial AI, offering solutions for predictive maintenance, quality control, and digital twins that optimize factory operations with leaner workforces. We saw compelling demonstrations of Rockwell's technology at Nvidia's GTC conference in March, which reinforced our investment thesis. We began accumulating shares of Rockwell in early March at an average price of approximately $271 per share.

BSD Analysis:
WestEnd views Rockwell as a high-quality industrial automation leader positioned to benefit from multiple secular trends. The fund initiated the position at $271 per share, emphasizing this is not a turnaround but rather an established market leader. The investment thesis centers on Rockwell's exposure to reshoring trends, defense spending increases, and accelerating AI adoption in manufacturing. Key differentiators include the company's comprehensive automation portfolio spanning sensors, software, and control systems that enhance manufacturing efficiency. The fund highlights Rockwell's leadership in industrial AI applications including predictive maintenance, quality control, and digital twins. Defense exposure provides additional growth drivers through military production facility systems. Management's attendance at Nvidia's GTC conference reinforced their conviction in the company's technology leadership and AI capabilities.

Pitch Summary:
Given our conviction in Boeing's recovery, we also sought out complementary opportunities—"picks and shovels" plays—that could benefit from Boeing's resurgence. Howmet Aerospace stood out. Beyond its direct connection to Boeing, Howmet is well positioned to benefit from broader sector tailwinds, including rising demand in aerospace and defense and the growing emphasis on building resilient domestic supply chains. As a key supplier of critical components for both commercial and military aircraft, Howmet plays an essential role in supporting next-generation manufacturing. Its expertise in advanced materials and precision engineering makes it a go-to partner for aerospace companies raising quality standards and adopting new technologies. We began building a position in Howmet in early March at an average cost of $130 per share.

BSD Analysis:
WestEnd positions Howmet as a "picks and shovels" play to capitalize on aerospace recovery and Boeing's turnaround. The fund initiated the position at $130 per share, viewing Howmet as a critical supplier benefiting from multiple industry tailwinds. The investment thesis emphasizes Howmet's role in domestic supply chain resilience and next-generation manufacturing capabilities. Key value drivers include rising aerospace and defense demand, advanced materials expertise, and precision engineering capabilities that make it essential for quality-focused aerospace companies. The company's dual exposure to commercial and military aircraft provides diversified revenue streams. WestEnd sees Howmet as well-positioned for the broader reshoring trend and increased defense spending, while its advanced materials capabilities align with industry adoption of new technologies.

Pitch Summary:
Long-time clients may recall our liquidation of Boeing in early January 2024 following the Alaska Airlines door plug incident. We exited at around $227.62. Following a management shakeup, however, with new leadership under former engineer Kelly Ortberg, we noticed the firm was working to bounce back from safety issues, production problems, and financial losses. The company focus had decisively shifted to quality, stabilizing aircraft output, and rebuilding trust. We viewed Boeing's commercial side as a turnaround story, accommodated by the steady income provided by the firm's defense business. WestEnd began accumulating shares in December 2024 at an average price of $175.47. With strong demand for air travel and a huge backlog of plane orders, delivering aircraft on time is crucial, in which Boeing has demonstrated significant improvement this year. While the latest tragic Air India crash slightly hit the stock, it has recovered as it became apparent that pilot error was the most likely cause. We remain confident that Boeing can further improve execution and take advantage of industry trends like reshoring and increased defense spending, while capitalizing on high demand from China after the country lifted its ban Boeing deliveries due to the temporary tariff truce.

BSD Analysis:
WestEnd presents Boeing as a turnaround story following significant operational and safety challenges. The fund re-entered the position at $175.47 after previously exiting at $227.62 following the Alaska Airlines incident, suggesting they see substantial value at current levels. The investment thesis centers on new leadership under Kelly Ortberg driving operational improvements and quality focus. Key catalysts include strong air travel demand, a substantial order backlog, and improved on-time delivery performance. The fund views Boeing's defense business as providing steady income while the commercial side recovers. Macro tailwinds include reshoring trends, increased defense spending, and renewed Chinese demand following the lifting of delivery bans. The position represents a contrarian bet on operational execution improvement in a structurally growing industry.

Pitch Summary:
We began accumulating shares of GE Aerospace in April of last year, with our current position established at an average cost of approximately $149 per share. Like Boeing, GE stands to benefit from powerful macro trends including reshoring, increased defense spending, and the global rebound in air travel. But unlike Boeing, GE is not a turnaround story. The company has already successfully repositioned itself as a focused aerospace leader. It's investing heavily in U.S. factories and suppliers to expand production capacity, improve supply chain resilience, and support reshoring initiatives. GE also plays a critical role in defense. On the commercial side, it powers the majority of widebody aircraft in North America and holds a dominant position in the narrow-body segment through its joint venture with Safran Aircraft Engines, CFM International. GE's high-margin engine MRO business is another bright spot, poised for growth as airlines extend the life of existing aircraft. In effect, GE benefits both from Boeing's recovery and from broader structural demand in aviation. We also see GE as an innovation leader—applying AI and digital tools to improve predictive maintenance, streamline inspections, and enhance manufacturing processes. Altogether, our investment in GE reflects confidence in a stable, future-focused company that's positioned at the center of global aerospace and industrial growth.

BSD Analysis:
WestEnd positions GE Aerospace as a high-quality aerospace leader with dominant market positions, acquired at $149 per share beginning in April 2024. The manager distinguishes GE from Boeing as an established leader rather than a turnaround, emphasizing the company's successful transformation into a focused aerospace pure-play. The investment thesis centers on GE's market-leading positions in both widebody and narrow-body engine markets, with particular strength through the CFM International joint venture with Safran. Key value drivers include the high-margin MRO business benefiting from fleet age extension, substantial investments in U.S. manufacturing capacity supporting reshoring trends, and strong exposure to defense spending growth. The manager highlights GE's innovation leadership in applying AI and digital technologies to enhance predictive maintenance and manufacturing efficiency. This represents a quality growth investment with multiple revenue streams, dominant market positions, and strong exposure to structural aerospace industry tailwinds including commercial aviation recovery and defense modernization.

Pitch Summary:
Rockwell Automation is another "picks and shovels" investment in the Industrials sector—an established company well-positioned to benefit from reshoring trends, increased defense spending, and the broader adoption of automation and AI in manufacturing. As the economy grows, we expect more industries to invest in faster, smarter, and more reliable production systems, which directly supports demand for Rockwell's offerings. Its portfolio of automation technologies—including sensors, software, and control systems—helps make domestic manufacturing more efficient and cost-effective. In the defense space, Rockwell also supplies critical systems used in military production facilities. Unlike Boeing, Rockwell is not a turnaround story. It is already a key enabler of advanced manufacturing and a leader in industrial AI, offering solutions for predictive maintenance, quality control, and digital twins that optimize factory operations with leaner workforces. We saw compelling demonstrations of Rockwell's technology at Nvidia's GTC conference in March, which reinforced our investment thesis. We began accumulating shares of Rockwell in early March at an average price of approximately $271 per share.

BSD Analysis:
WestEnd presents Rockwell Automation as a high-quality industrial automation leader positioned to capitalize on multiple structural trends, acquired at $271 per share in March. The manager emphasizes Rockwell's established market position rather than a turnaround story, highlighting the company's comprehensive automation portfolio including sensors, software, and control systems. The investment thesis centers on Rockwell's ability to benefit from reshoring trends, increased defense spending, and the accelerating adoption of AI in manufacturing. Key differentiators include the company's leadership in industrial AI applications such as predictive maintenance, quality control, and digital twin technologies that enable more efficient operations with reduced workforce requirements. The manager's conviction was reinforced by technology demonstrations at Nvidia's GTC conference, suggesting strong validation of Rockwell's AI capabilities. This represents a quality growth play on the digitization and automation of domestic manufacturing with multiple tailwinds supporting long-term demand growth.

Pitch Summary:
Given our conviction in Boeing's recovery, we also sought out complementary opportunities—"picks and shovels" plays—that could benefit from Boeing's resurgence. Howmet Aerospace stood out. Beyond its direct connection to Boeing, Howmet is well positioned to benefit from broader sector tailwinds, including rising demand in aerospace and defense and the growing emphasis on building resilient domestic supply chains. As a key supplier of critical components for both commercial and military aircraft, Howmet plays an essential role in supporting next-generation manufacturing. Its expertise in advanced materials and precision engineering makes it a go-to partner for aerospace companies raising quality standards and adopting new technologies. We began building a position in Howmet in early March at an average cost of $130 per share.

BSD Analysis:
WestEnd positions Howmet Aerospace as a strategic "picks and shovels" play to complement their Boeing investment, acquired at $130 per share in March. The manager highlights Howmet's critical role as a supplier of advanced components for both commercial and military aircraft, emphasizing the company's expertise in advanced materials and precision engineering. The investment thesis centers on Howmet's positioning to benefit from multiple industry tailwinds including rising aerospace and defense demand, supply chain reshoring initiatives, and the broader recovery in commercial aviation. The company's dual exposure to commercial and military markets provides diversification while its advanced manufacturing capabilities position it as an essential partner for aerospace OEMs focused on quality improvements and technological advancement. This represents a leveraged play on aerospace recovery with strong fundamentals in advanced materials and precision manufacturing. The manager views Howmet as well-positioned to capitalize on the structural trends driving the aerospace sector.

Pitch Summary:
Long-time clients may recall our liquidation of Boeing in early January 2024 following the Alaska Airlines door plug incident. We exited at around $227.62. Following a management shakeup, however, with new leadership under former engineer Kelly Ortberg, we noticed the firm was working to bounce back from safety issues, production problems, and financial losses. The company focus had decisively shifted to quality, stabilizing aircraft output, and rebuilding trust. We viewed Boeing's commercial side as a turnaround story, accommodated by the steady income provided by the firm's defense business. WestEnd began accumulating shares in December 2024 at an average price of $175.47. With strong demand for air travel and a huge backlog of plane orders, delivering aircraft on time is crucial, in which Boeing has demonstrated significant improvement this year. While the latest tragic Air India crash slightly hit the stock, it has recovered as it became apparent that pilot error was the most likely cause. We remain confident that Boeing can further improve execution and take advantage of industry trends like reshoring and increased defense spending, while capitalizing on high demand from China after the country lifted its ban Boeing deliveries due to the temporary tariff truce.

BSD Analysis:
WestEnd presents Boeing as a compelling turnaround opportunity under new leadership, having re-entered the position at $175.47 after previously exiting at $227.62 following safety incidents. The manager emphasizes Boeing's strategic pivot toward quality and operational stability under CEO Kelly Ortberg, positioning the company to benefit from robust commercial aviation demand and a substantial order backlog. The investment thesis centers on Boeing's dual revenue streams from commercial aircraft and defense contracts, providing stability during the turnaround phase. Key catalysts include improved on-time delivery performance, the resumption of Chinese deliveries following tariff de-escalation, and broader industry tailwinds from reshoring initiatives and increased defense spending. The manager demonstrates confidence in Boeing's execution capabilities and views current valuation as attractive given the company's market position and recovery trajectory. This represents a classic turnaround play with multiple operational and macro catalysts supporting the bull case.

Pitch Summary:
We began accumulating shares of GE Aerospace in April of last year, with our current position established at an average cost of approximately $149 per share. Like Boeing, GE stands to benefit from powerful macro trends including reshoring, increased defense spending, and the global rebound in air travel. But unlike Boeing, GE is not a turnaround story. The company has already successfully repositioned itself as a focused aerospace leader. It's investing heavily in U.S. factories and suppliers to expand production capacity, improve supply chain resilience, and support reshoring initiatives. GE also plays a critical role in defense. On the commercial side, it powers the majority of widebody aircraft in North America and holds a dominant position in the narrow-body segment through its joint venture with Safran Aircraft Engines, CFM International. GE's high-margin engine MRO business is another bright spot, poised for growth as airlines extend the life of existing aircraft. In effect, GE benefits both from Boeing's recovery and from broader structural demand in aviation. We also see GE as an innovation leader—applying AI and digital tools to improve predictive maintenance, streamline inspections, and enhance manufacturing processes. Altogether, our investment in GE reflects confidence in a stable, future-focused company that's positioned at the center of global aerospace and industrial growth.

BSD Analysis:
WestEnd positions GE Aerospace as a high-quality aerospace leader with dominant market positions, acquired at approximately $149 per share starting in April 2024. The manager distinguishes GE from turnaround stories, emphasizing its successful transformation into a focused aerospace company with strong competitive moats. The investment thesis highlights GE's market dominance in both widebody aircraft engines in North America and narrow-body engines through the CFM International joint venture with Safran. Key value drivers include the high-margin MRO business positioned for growth as airlines extend aircraft lifecycles, substantial investments in U.S. manufacturing capacity supporting reshoring initiatives, and critical defense applications. The manager emphasizes GE's innovation leadership in applying AI and digital tools for predictive maintenance and manufacturing optimization. Multiple tailwinds support the investment including reshoring trends, increased defense spending, global aviation recovery, and Boeing's resurgence, positioning GE at the center of aerospace industry growth with both cyclical and structural demand drivers.

Pitch Summary:
Rockwell Automation is another "picks and shovels" investment in the Industrials sector—an established company well-positioned to benefit from reshoring trends, increased defense spending, and the broader adoption of automation and AI in manufacturing. As the economy grows, we expect more industries to invest in faster, smarter, and more reliable production systems, which directly supports demand for Rockwell's offerings. Its portfolio of automation technologies—including sensors, software, and control systems—helps make domestic manufacturing more efficient and cost-effective. In the defense space, Rockwell also supplies critical systems used in military production facilities. Unlike Boeing, Rockwell is not a turnaround story. It is already a key enabler of advanced manufacturing and a leader in industrial AI, offering solutions for predictive maintenance, quality control, and digital twins that optimize factory operations with leaner workforces. We saw compelling demonstrations of Rockwell's technology at Nvidia's GTC conference in March, which reinforced our investment thesis. We began accumulating shares of Rockwell in early March at an average price of approximately $271 per share.

BSD Analysis:
WestEnd presents Rockwell Automation as a high-quality industrial automation leader positioned to capitalize on multiple secular trends, acquired at approximately $271 per share in March. Unlike their turnaround plays, the manager emphasizes Rockwell's established market position and current leadership in industrial AI and advanced manufacturing solutions. The investment thesis centers on the company's comprehensive automation portfolio including sensors, software, and control systems that enable more efficient domestic manufacturing. Key growth drivers include reshoring trends, increased defense spending, and broader AI adoption in manufacturing environments. The manager highlights Rockwell's advanced capabilities in predictive maintenance, quality control, and digital twin technologies that optimize factory operations with reduced workforce requirements. The validation of their technology at Nvidia's GTC conference reinforces the company's position at the intersection of industrial automation and artificial intelligence, positioning it as a critical enabler of next-generation manufacturing.

Pitch Summary:
Given our conviction in Boeing's recovery, we also sought out complementary opportunities—"picks and shovels" plays—that could benefit from Boeing's resurgence. Howmet Aerospace stood out. Beyond its direct connection to Boeing, Howmet is well positioned to benefit from broader sector tailwinds, including rising demand in aerospace and defense and the growing emphasis on building resilient domestic supply chains. As a key supplier of critical components for both commercial and military aircraft, Howmet plays an essential role in supporting next-generation manufacturing. Its expertise in advanced materials and precision engineering makes it a go-to partner for aerospace companies raising quality standards and adopting new technologies. We began building a position in Howmet in early March at an average cost of $130 per share.

BSD Analysis:
WestEnd positions Howmet Aerospace as a strategic "picks and shovels" play to complement their Boeing investment, acquired at $130 per share in March. The manager highlights Howmet's critical role as a supplier of advanced components for both commercial and military aircraft, emphasizing the company's expertise in advanced materials and precision engineering. The investment thesis centers on Howmet's positioning to benefit from multiple industry tailwinds including Boeing's recovery, rising aerospace and defense demand, and the strategic shift toward resilient domestic supply chains. The company's dual exposure to commercial and military markets provides diversification while its advanced manufacturing capabilities position it as an essential partner for aerospace companies upgrading quality standards and adopting new technologies. This represents a leveraged play on the broader aerospace recovery with strong fundamentals in advanced materials and precision manufacturing.

Pitch Summary:
Long-time clients may recall our liquidation of Boeing in early January 2024 following the Alaska Airlines door plug incident. We exited at around $227.62. Following a management shakeup, however, with new leadership under former engineer Kelly Ortberg, we noticed the firm was working to bounce back from safety issues, production problems, and financial losses. The company focus had decisively shifted to quality, stabilizing aircraft output, and rebuilding trust. We viewed Boeing's commercial side as a turnaround story, accommodated by the steady income provided by the firm's defense business. WestEnd began accumulating shares in December 2024 at an average price of $175.47. With strong demand for air travel and a huge backlog of plane orders, delivering aircraft on time is crucial, in which Boeing has demonstrated significant improvement this year. While the latest tragic Air India crash slightly hit the stock, it has recovered as it became apparent that pilot error was the most likely cause. We remain confident that Boeing can further improve execution and take advantage of industry trends like reshoring and increased defense spending, while capitalizing on high demand from China after the country lifted its ban Boeing deliveries due to the temporary tariff truce.

BSD Analysis:
WestEnd presents Boeing as a compelling turnaround opportunity under new leadership, having re-entered the position at $175.47 after previously exiting at $227.62 following safety concerns. The manager emphasizes Boeing's strategic pivot toward quality and operational stability under CEO Kelly Ortberg, positioning the company to benefit from robust commercial aviation demand and a substantial order backlog. The investment thesis centers on Boeing's dual revenue streams from commercial aircraft and defense contracts, providing stability during the turnaround phase. Key catalysts include improved on-time delivery performance, the resumption of Chinese deliveries following tariff de-escalation, and broader industry tailwinds from reshoring initiatives and increased defense spending. The manager demonstrates confidence in Boeing's execution capabilities and views current valuation as attractive given the company's market position and recovery trajectory. This represents a classic turnaround play with multiple operational and macro catalysts supporting the bull case.

Pitch Summary:
This quarter I will discuss an investment we made in Talen Energy (NASDAQ:TLN). Talen is the only stock we own across both our Event-Driven and Growth Portfolios. Talen Energy is an unregulated power generator whose primary asset is a 2.2 gigawatt nuclear power plant located outside of Berwick, PA. The Company also owns an additional 8.4 gigawatts of mostly natural gas powered plants in the Mid-Atlantic region. The investment story for Talen begins with the Company's 2022 bankruptcy. Talen was a debt-strapped private-equity backed company with a sprawling power generation portfolio. In addition to managing a complex capital structure, the company maintained a hedging strategy to protect itself from a sudden drop in energy prices. Ironically, Talen wasn't protected from a sudden rise in energy prices. When the war in Ukraine broke out in Spring 2022, natural gas prices soared. Talen was short natural gas futures, as a hedge, and was stuck with a large short-term financial loss requiring it to post collateral at the exchange. Talen was unable to post collateral and instead filed for bankruptcy protection. Post-bankruptcy restructuring situations tend to be good hunting grounds for investments because you can often find otherwise good companies married to bad balance sheets. After shedding liabilities that made a company insolvent, opportunistic investors are often able to buy restructured assets at attractive prices. To take this idea further, I believe Talen is a better business today than it was pre-bankruptcy. The bankruptcy process allowed Talen to clean up its balance sheet by converting debt liabilities to equity capital. Talen also restructured its hedging program so that it no longer would need to provide collateral in the case of energy market volatility. In a stroke of luck, Talen no longer needs to hedge its nuclear power generation at all because the Inflation Reduction Act introduced a tax credit scheme that protects nuclear power plants when electricity prices fall. The combination of the new hedge program and the nuclear power tax credits has fundamentally transformed the asset/liability profile of the company. Talen's new management team resolved a pragmatic strategy for Talen 2.0. First, divest non-core assets including the Texas energy portfolio, a data center shell, and a bitcoin mining project. Second, regain a mainstream equity listing by uplisting from the illiquid over-the-counter market to the Nasdaq. Finally, return excess capital to shareholders while maintaining a conservative leverage ratio. The event-driven investment thesis was quite attractive. Talen traded at a discounted valuation to more established nuclear peers such as Constellation Energy (NASDAQ:CEG) and had a number of catalysts to unlock value for investors. I learned about the situation in February 2024 and made our initial investment at ~$69 per share. Approximately two-thirds of Talen's revenue is generated from its massive dual unit nuclear power plant. The more I learned about the prospects for nuclear power, the more bullish I became. There are strong trends in both energy supply and demand that support the fundamentals for existing nuclear power producers. Beginning with the supply argument: nuclear power plants are a highly valuable and scarce asset. Nuclear power plants are valuable because nuclear is the only source of carbon-free energy that is reliable enough to be considered "base load energy". Other sources of reliable energy are either dirty (fossil fuels), are not yet reliable (solar, wind), or are not abundant (hydro, geothermal). The US has agreed to phase out coal and other dirty power sources over time. Coal used to account for one-third of power generation but now accounts for roughly 10%. This supply gap has largely been filled by natural gas and crude oil. Nuclear was previously vilified as a dangerous source of electricity; however, politicians on both sides have become much more pro-nuclear in recent years as an increasingly attractive alternative. This has led to a number of nuclear plant extensions, talks of restarts, and new tax incentives. Nuclear power is scarce because it is extremely costly and timely to build. Almost all US nuclear reactors were built between 1967 and 1990. Regulatory costs skyrocketed after the Three Mile Island accident in 1979. The Vogtle electric plant in Georgia was the only new nuclear plant added in the last 30 years. Vogtle took 15 years and $30 billion to build (after coming in over 2x budget). Nuclear power plants just aren't economically viable relative to the cost of building new natural gas plants. However, this makes existing plants, like the one Talen owns, more valuable. Moving on to the demand argument: electricity demand growth is accelerating as the US adopts electric cars and builds more data centers. Electricity demand has historically grown in-line with population growth; however, recent technology shifts have accelerated the demand on the grid. Artificial intelligence applications are more compute intensive and therefore require more electricity. For example, ChatGPT uses as much as 30x more electricity per query than Google search. Research from the Boston Consulting Group projects data center energy use in the US will 3x from 130 terawatt hours in 2022 to 390 terawatt hours by 2030. Regional power regulators have sharply increased their demand growth forecasts. PJM, the regulator for 13 states in the Northeast and Midwest, projected 5 year demand growth of 2.6% in 2022 and nearly doubled its forecast one year later to 4.7% growth. The strong demand growth for electricity bodes well for Talen's non-nuclear plants as well. All electric utilities stand to benefit from greater utilization and higher electricity prices in the coming years. The Growth Portfolio has fundamentally different underwriting criteria than the Event-Driven Portfolio. For Event-Driven, I am primarily looking for hard catalysts to unlock value combined with strong downside protection. On the other hand, the Growth Portfolio invests in high-quality assets with long-term earnings growth potential. The Venn diagram typically doesn't overlap because the types of companies with transformational catalysts are usually challenged or under-managed which is why they need to be restructured or sold. Talen is an exception for several reasons. First, there is a wide moat around the business simply because a new nuclear power plant of Susquehanna's scale cannot be replicated at a cost anywhere near the current enterprise value of Talen. Furthermore, nuclear power plants operate with high margins and limited operational complexity. These are the attributes of a very high-quality asset. Second, we view the management team as high quality. Since we have invested, Talen has under-promised and over-delivered on every key aspect of the story. The company has reduced leverage, monetized virtually all of its non-core assets, repurchased a substantial portion of the stock, and successfully uplisted to the Nasdaq exchange. Operational results have also been excellent. It is rare to find an asset as well-run as Talen appears to be. Third, we have identified a tangible growth catalyst playing out over the next 10 years. Talen agreed to sell a data center co-located with the nuclear plant to Amazon Web Services for $650 million in March 2024. Over the next 10 years, AWS has contracted to purchase as much as 1 gigawatt of power per year for a price nearly double the rate of the wholesale power price. This contract alone has the potential to generate an incremental $255 million in EBITDA for Talen per year by 2034 vs. Talen's current $700 million EBITDA run rate. Amazon is willing to pay a premium to source reliable carbon-free energy for a large data center and it will also benefit from certain tax credits associated with the project. Finally, we see additional opportunities for per share value growth above and beyond the AWS deal. I am bullish on the supply/demand story for electricity playing out in the coming years. In addition, Talen believes there are additional opportunities to co-locate data centers next to its other power plants. Talen's capital allocation strategy of creatively monetizing existing assets while returning capital to shareholders should continue to work. After gaining more confidence in Talen's execution and long-term growth potential, I added Talen to the Growth Portfolio at ~$99 per share in April.

BSD Analysis:
The manager presents a compelling turnaround story centered on Talen Energy's emergence from bankruptcy as a cleaner, more focused nuclear power generator. The thesis rests on three key pillars: the scarcity value of existing nuclear assets in a carbon-conscious world, accelerating electricity demand driven by AI and data centers, and a transformative AWS partnership that could boost EBITDA by 36% over the next decade. The bankruptcy restructuring eliminated problematic hedging exposures and debt burdens while new tax credits from the Inflation Reduction Act provide downside protection for nuclear generation. Management has executed flawlessly on asset monetization, debt reduction, and the Nasdaq uplisting, demonstrating operational competence. The AWS deal represents a paradigm shift where tech giants pay premium rates for reliable, carbon-free power co-located with data centers. With electricity demand forecasts doubling and nuclear being the only scalable baseload clean energy source, Talen appears positioned to benefit from both supply scarcity and demand acceleration. The manager's dual investment across event-driven and growth strategies reflects confidence in both near-term catalysts and long-term structural advantages.

Pitch Summary:
Talen Energy is an unregulated power generator whose primary asset is a 2.2 gigawatt nuclear power plant located outside of Berwick, PA. The Company also owns an additional 8.4 gigawatts of mostly natural gas powered plants in the Mid-Atlantic region. The investment story for Talen begins with the Company's 2022 bankruptcy. Talen was a debt-strapped private-equity backed company with a sprawling power generation portfolio. In addition to managing a complex capital structure, the company maintained a hedging strategy to protect itself from a sudden drop in energy prices. Ironically, Talen wasn't protected from a sudden rise in energy prices. When the war in Ukraine broke out in Spring 2022, natural gas prices soared. Talen was short natural gas futures, as a hedge, and was stuck with a large short-term financial loss requiring it to post collateral at the exchange. Talen was unable to post collateral and instead filed for bankruptcy protection. Post-bankruptcy restructuring situations tend to be good hunting grounds for investments because you can often find otherwise good companies married to bad balance sheets. After shedding liabilities that made a company insolvent, opportunistic investors are often able to buy restructured assets at attractive prices. To take this idea further, I believe Talen is a better business today than it was pre-bankruptcy. The bankruptcy process allowed Talen to clean up its balance sheet by converting debt liabilities to equity capital. Talen also restructured its hedging program so that it no longer would need to provide collateral in the case of energy market volatility. In a stroke of luck, Talen no longer needs to hedge its nuclear power generation at all because the Inflation Reduction Act introduced a tax credit scheme that protects nuclear power plants when electricity prices fall. The combination of the new hedge program and the nuclear power tax credits has fundamentally transformed the asset/liability profile of the company. Talen's new management team resolved a pragmatic strategy for Talen 2.0. First, divest non-core assets including the Texas energy portfolio, a data center shell, and a bitcoin mining project. Second, regain a mainstream equity listing by uplisting from the illiquid over-the-counter market to the Nasdaq. Finally, return excess capital to shareholders while maintaining a conservative leverage ratio. The event-driven investment thesis was quite attractive. Talen traded at a discounted valuation to more established nuclear peers such as Constellation Energy (NASDAQ:CEG) and had a number of catalysts to unlock value for investors. I learned about the situation in February 2024 and made our initial investment at ~$69 per share. Approximately two-thirds of Talen's revenue is generated from its massive dual unit nuclear power plant. The more I learned about the prospects for nuclear power, the more bullish I became. There are strong trends in both energy supply and demand that support the fundamentals for existing nuclear power producers. Beginning with the supply argument: nuclear power plants are a highly valuable and scarce asset. Nuclear power plants are valuable because nuclear is the only source of carbon-free energy that is reliable enough to be considered "base load energy". Other sources of reliable energy are either dirty (fossil fuels), are not yet reliable (solar, wind), or are not abundant (hydro, geothermal). The US has agreed to phase out coal and other dirty power sources over time. Coal used to account for one-third of power generation but now accounts for roughly 10%. This supply gap has largely been filled by natural gas and crude oil. Nuclear was previously vilified as a dangerous source of electricity; however, politicians on both sides have become much more pro-nuclear in recent years as an increasingly attractive alternative. This has led to a number of nuclear plant extensions, talks of restarts, and new tax incentives. Nuclear power is scarce because it is extremely costly and timely to build. Almost all US nuclear reactors were built between 1967 and 1990. Regulatory costs skyrocketed after the Three Mile Island accident in 1979. The Vogtle electric plant in Georgia was the only new nuclear plant added in the last 30 years. Vogtle took 15 years and $30 billion to build (after coming in over 2x budget). Nuclear power plants just aren't economically viable relative to the cost of building new natural gas plants. However, this makes existing plants, like the one Talen owns, more valuable. Moving on to the demand argument: electricity demand growth is accelerating as the US adopts electric cars and builds more data centers. Electricity demand has historically grown in-line with population growth; however, recent technology shifts have accelerated the demand on the grid. Artificial intelligence applications are more compute intensive and therefore require more electricity. For example, ChatGPT uses as much as 30x more electricity per query than Google search. Research from the Boston Consulting Group projects data center energy use in the US will 3x from 130 terawatt hours in 2022 to 390 terawatt hours by 2030. Regional power regulators have sharply increased their demand growth forecasts. PJM, the regulator for 13 states in the Northeast and Midwest, projected 5 year demand growth of 2.6% in 2022 and nearly doubled its forecast one year later to 4.7% growth. The strong demand growth for electricity bodes well for Talen's non-nuclear plants as well. All electric utilities stand to benefit from greater utilization and higher electricity prices in the coming years. First, there is a wide moat around the business simply because a new nuclear power plant of Susquehanna's scale cannot be replicated at a cost anywhere near the current enterprise value of Talen. Furthermore, nuclear power plants operate with high margins and limited operational complexity. These are the attributes of a very high-quality asset. Second, we view the management team as high quality. Since we have invested, Talen has under-promised and over-delivered on every key aspect of the story. The company has reduced leverage, monetized virtually all of its non-core assets, repurchased a substantial portion of the stock, and successfully uplisted to the Nasdaq exchange. Operational results have also been excellent. It is rare to find an asset as well-run as Talen appears to be. Third, we have identified a tangible growth catalyst playing out over the next 10 years. Talen agreed to sell a data center co-located with the nuclear plant to Amazon Web Services for $650 million in March 2024. Over the next 10 years, AWS has contracted to purchase as much as 1 gigawatt of power per year for a price nearly double the rate of the wholesale power price. This contract alone has the potential to generate an incremental $255 million in EBITDA for Talen per year by 2034 vs. Talen's current $700 million EBITDA run rate. Amazon is willing to pay a premium to source reliable carbon-free energy for a large data center and it will also benefit from certain tax credits associated with the project. Finally, we see additional opportunities for per share value growth above and beyond the AWS deal. I am bullish on the supply/demand story for electricity playing out in the coming years. In addition, Talen believes there are additional opportunities to co-locate data centers next to its other power plants. Talen's capital allocation strategy of creatively monetizing existing assets while returning capital to shareholders should continue to work. After gaining more confidence in Talen's execution and long-term growth potential, I added Talen to the Growth Portfolio at ~$99 per share in April.

BSD Analysis:
The manager presents a compelling post-bankruptcy restructuring thesis for Talen Energy, emphasizing the company's transformation from a debt-laden entity to a clean balance sheet nuclear power generator. The investment case centers on nuclear power's scarcity value as the only reliable carbon-free baseload energy source, positioned to benefit from accelerating electricity demand driven by AI data centers and electric vehicle adoption. The manager highlights Talen's strategic AWS partnership, which provides a 10-year power purchase agreement at premium pricing that could nearly double current EBITDA by 2034. The thesis is strengthened by management's successful execution of asset monetization, debt reduction, and capital returns since emerging from bankruptcy. Nuclear power's regulatory barriers to new construction create a protective moat around existing assets like Talen's 2.2 GW Susquehanna plant. The manager's dual investment approach across both event-driven and growth portfolios reflects confidence in both near-term catalysts and long-term structural demand trends. With electricity demand forecasts rising sharply and limited nuclear capacity additions possible, Talen appears well-positioned to capitalize on the energy transition's baseload power requirements.

Pitch Summary:
VusionGroup reaffirmed its 2024 target of achieving €1 billion in sales and improving its adjusted EBITDA margin by 50-100 basis points. Additionally, the company implied room for an upward revision to the 2025 guidance as Walmart accelerates its ESL implementation. We continue to see strong revenue upside and margin expansion opportunities, as the company hinted at onboarding another large U.S. client by year-end and broadened its VAS offering. Although competitors like Hanshow are aggressively building their U.S. operations, we believe VU still has an edge in U.S. penetration due to its early mover advantage and the ongoing geopolitical tensions between China and the U.S., which may intensify if Trump takes office. Despite initially categorizing VusionGroup as a special situation investment, we now view it more as a quality compounder that can outgrow the economic cycle and benefit from inflation as retailers look to hedge inflationary pressures. We will continue to monitor the development as we head to Taiwan to conduct further due diligence on the company's upstream suppliers.

BSD Analysis:
The manager has evolved their view of VusionGroup from a special situation to a quality compounder, highlighting the company's strong execution toward €1 billion sales target and margin expansion of 50-100 basis points. The investment case is strengthened by Walmart's accelerated ESL implementation and potential upward revision to 2025 guidance, with another large US client expected by year-end. VusionGroup maintains competitive advantages through early mover positioning in the US market and benefits from US-China geopolitical tensions that may disadvantage Chinese competitor Hanshow, particularly under a potential Trump administration. The manager sees the business as inflation-resilient, as retailers use ESL technology to hedge inflationary pressures through dynamic pricing capabilities. The expansion of value-added services (VAS) offerings provides additional revenue diversification and margin enhancement opportunities. The manager's planned due diligence trip to Taiwan to assess upstream suppliers demonstrates thorough fundamental research approach to validate the investment thesis.

Pitch Summary:
Payment momentum and income growth continue to drive the business and generate 20%+ top and bottom-line growth. As the world enters the AI era, we believe Kaspi is well-positioned to ride this wave with the help of its extensive database and top engineering talent in Central Asia, a huge opportunity yet to be fully addressed by the market. We continue to view KSPI as the best flywheel business in the world, a regional monopoly that has morphed into a government-like entity, effectively taxing the entire Kazakhstan population. All eyes are now on the company's international expansion plan, which we believe will become more concrete once the Ukraine war ends. We believe KSPI is well-positioned to capture international expansion opportunities, aided by the management team's strong track record of making big, calculated bets when the right opportunity arises. With Kazakhstan poised to remain an important trade corridor between the East and the West post-Ukraine conflict, and its increasing importance on the international stage due to its uranium and oil & gas resources, we continue to believe this high-quality compounder should warrant at least a 20x P/E multiple.

BSD Analysis:
The manager views Kaspi.KZ as an exceptional flywheel business generating consistent 20%+ growth across top and bottom lines through its dominant digital ecosystem in Kazakhstan. The investment thesis emphasizes Kaspi's unique positioning as a "government-like entity" that effectively monetizes the entire Kazakhstan population through its comprehensive platform. The manager sees significant AI upside potential given Kaspi's extensive database and top engineering talent in Central Asia, representing an underappreciated opportunity. International expansion represents a key catalyst once geopolitical tensions subside, with management's proven track record of strategic execution providing confidence. Kazakhstan's strategic importance as an East-West trade corridor and its valuable natural resources (uranium, oil & gas) support the long-term growth outlook. The manager believes the quality compounder deserves at least a 20x P/E multiple, suggesting current valuation remains attractive for this regional technology monopoly.

Pitch Summary:
We conducted further due diligence on the company over the past quarter. We spoke with tourists, local tour guides, regulars at the casino, and people working at the Naga Citywalk duty-free, and confirmed that overall traffic at Naga 1 and 2 is trending towards pre-COVID levels. This trend aligns with the official tourism data posted in May, which showed Chinese tourism visitations up 50% YoY to roughly 30% of 2019 levels and Phnom Penh airport arrivals up 10% YoY to 78% of 2019 levels. We expect the recovery to accelerate with the new international airport adding more direct flights, especially from China, next year. In the backdrop, the new prime minister Hun Manet, a childhood friend of Nagacorp's current CEO Chen Yiy Fon, continues to deepen international ties with neighboring countries. Beijing has appointed its highly regarded "wolf warrior" diplomat Wang Wenbin as Cambodia's ambassador, demonstrating a commitment to strengthening ties and investments in Cambodia. Meanwhile, the United States has sent its defense secretary to discuss military exchanges, and Japanese companies like MinebeaMitsumi and Tsuho have committed to investing $400 million into the country. We believe Cambodia will continue to attract record foreign direct investments and strengthen international ties, which bodes well for the country's economic development and political stability, ultimately benefiting Nagacorp over the long run. That said, the market still have low expectations for Nagacorp, as it trades at a discount to its historical average and Macau peers. We believe the regional monopoly is on track for a rerating once it pays down its July 2024 debt overhang. Additionally, as tourism recovers and Nagacorp evolves into a more organic business in the post-junket world, we foresee a 100%+ share price upside by 2029 for investors patient enough to wait.

BSD Analysis:
The manager presents a compelling recovery thesis for NagaCorp based on extensive ground-level due diligence confirming traffic recovery to pre-COVID levels. The investment case centers on Cambodia's improving tourism fundamentals, with Chinese visitation up 50% YoY and airport arrivals recovering to 78% of 2019 levels. Political tailwinds include the new prime minister's personal relationship with NagaCorp's CEO and strengthening international ties evidenced by significant foreign investments from Japan and diplomatic engagement from China and the US. The manager views NagaCorp as undervalued relative to historical metrics and Macau peers, trading at a discount despite its regional monopoly position. Key catalysts include debt reduction in July 2024 and the transition to a more sustainable post-junket business model. The manager projects 100%+ upside by 2029, reflecting confidence in the long-term recovery trajectory and structural advantages of the regional gaming monopoly.

Pitch Summary:
Ulta Beauty is the leading specialty retailer of cosmetics and hygiene products with over $11 billion in sales, representing a 10% market share in the US. Ulta has 1,395 stores in off-mall locations such as strip malls and standalone locations. The company is benefiting from tailwinds in the cosmetic industry along with share gains from department stores and pharmacies. These outlets combined are still 2x larger than Ulta, leaving plenty of room for further growth. Ulta has continuously taken share from non-specialty retailers as they carry a much wider assortment of brands and products versus their competitors which are primarily mass merchants like Walmart, pharmacies, department stores and grocery stores. The company has a loyalty program with more than 43 million members that provides the company with consumer data and insights that create a competitive advantage versus non-specialty retailers, as they can deliver beauty focused marketing promotions. The industry has been somewhat immune from the "Amazon effect", as shoppers prefer to explore new product offerings in physical stores. Recently, shares have come under pressure due to investor concerns about increasing competition from Sephora, another specialty retailer. Sephora has expanded rapidly in recent years, thanks to a partnership to expand to 1,000 in-store locations at Kohl's. Sephora's partnership with Kohls has resulted in a near-term declaration in Ulta's sales growth rate. However, with the Sephora rollout complete, we expect Ulta's growth rate to return to normal levels of 5-7%, comprised of 3% same stores sales growth and 3-4% new store count. Ulta has no debt and throws off substantial free cash flow which they are directing to share repurchases (they have bought back 20% of shares outstanding since the end of 2018). At current prices, share repurchases should reduce share count by 5% annually. When combined with 5-7% revenue growth and flat operating margins, Ulta should deliver earnings growth above 10% annually. Shares currently trade for just 14x forward earnings, which is well below their historical average of 21x and our range of 18x-21x. Over the next few years, we believe that Ulta can generate normal earnings power of $27-$31 per share representing an intrinsic value of $480-$650 per share. We initiated our position at $382.

BSD Analysis:
Pelican Bay initiated a new position in Ulta Beauty, viewing it as an attractive value opportunity in the specialty beauty retail space. The manager highlights Ulta's dominant market position with $11 billion in sales and 10% US market share, supported by 1,395 strategically located off-mall stores. The investment thesis centers on Ulta's competitive advantages including superior product assortment versus mass merchants, a 43-million member loyalty program providing valuable consumer data, and the industry's resistance to e-commerce disruption due to customers' preference for in-store product exploration. While acknowledging near-term headwinds from Sephora's Kohl's partnership expansion, the manager expects growth to normalize at 5-7% annually as this competitive pressure subsides. The financial profile is compelling with zero debt, substantial free cash flow generation, and aggressive share repurchases reducing share count by 5% annually. At 14x forward earnings versus a historical 21x average, the manager sees significant valuation upside with intrinsic value estimated at $480-$650 per share versus the $382 entry price.

Pitch Summary:
Mereo BioPharma presents a compelling investment opportunity due to its promising pipeline, which includes two late-stage assets, setrusumab and alvelestat. The company is well-positioned with a strong cash runway through 2027, reducing dilution risk. The involvement of activist investor Rubric Capital, which holds significant board influence and ownership, underscores the potential value. The stock is currently undervalued, with significant upside potential driven by upcoming catalysts, including potential partnerships or non-dilutive financing for alvelestat and interim data readouts for setrusumab.

BSD Analysis:
Mereo's strategic focus on rare diseases, particularly with setrusumab for osteogenesis imperfecta (OI), positions it well in a niche market with high unmet needs. The partnership with Ultragenyx for setrusumab provides a robust commercialization pathway, with potential milestone payments exceeding $300 million. The recent positive Phase 2/3 data for setrusumab, showing significant improvements in bone mineral density and fracture rate reduction, enhances the asset's probability of success, estimated at 85-90%. Alvelestat, targeting alpha-1 antitrypsin deficiency, benefits from recent industry developments, such as Sanofi's acquisition of a similar asset, which highlights the market's potential. The company's strategic shift towards exploring non-dilutive financing options for alvelestat suggests a reevaluation of its value, potentially leading to a lucrative deal. Institutional interest, evidenced by recent equity raises at market prices, further supports the bullish outlook. Overall, Mereo's combination of a strong pipeline, strategic partnerships, and financial stability makes it a high-conviction investment with asymmetric upside potential.

Pitch Summary:
Yakult Honsha presents an attractive investment opportunity due to its relatively low valuation compared to Western consumer staples, despite its robust financial performance. The company has demonstrated significant improvements in revenue, net income, and dividends over the past decade, yet its stock price has declined by 20% since 2015. With no net debt and a conservative balance sheet, Yakult is positioned as a defensive play with potential for capital appreciation.

BSD Analysis:
Yakult's financial metrics, such as an EV/EBITDA of 8.4x and a P/E ratio of 17.7x, suggest it is undervalued relative to its global peers like Coca-Cola and Nestle. The company's net income has more than doubled over the past decade, outpacing many of its competitors. Its dividend yield of approximately 2.2% offers a positive carry when financed with yen, given the low borrowing costs. The firm's strong balance sheet, with significant current assets and minimal liabilities, underscores its financial stability. Additionally, Yakult's strategic focus on expanding its brand presence in North America and Europe could drive future growth, especially as it capitalizes on the increasing global demand for health-oriented consumer products. Despite being a large-cap stock, Yakult's consistent profitability and improving capital returns make it a compelling investment in the current economic environment characterized by inflationary pressures and currency fluctuations.