Investment Pitches

Pitch Summary:
Old Dominion Freight Line (ODFL) boasts a rich history within the Less-Than-Truckload (LTL) shipping sector.Established in 1934 by Earl and Lillian Congdon with a single truck traversing the route between Richmond and Norfolk,Virginia, ODFL has blossomed into a prominent player in the industry. The company's enduring success can be attributed to its unwavering commitment to exceptional customer service and a laser focus on efficient operations. This dedication is evident not only in its organic growth but also in its strategic acquisitions throughout the years. Key purchases like Bottoms- Fiske Truck Line (1957) and Wichita Southeast Kansas Transit (2006) exemplify ODFL's proactive approach to expanding its geographic reach and service offerings within the LTL market. The trucking industry caters to two main shipment categories: LTL for smaller freight and full truckload for larger volumes. ODFL has capitalized on the rising trend of LTL shipping, partly driven by the e-commerce boom. The company's strategic advantage hinges on several core strengths that differentiate it from competitors: Unparalleled Network: ODFL boasts an extensive LTL hub-and-spoke network, strategically positioned to facilitate efficient deliveries and achieve industry-leading on-time rates. This robust infrastructure allows ODFL to offer customers a level of reliability and speed unmatched by its peers. Customer-Centric Focus: Unlike many competitors who prioritize cost-cutting measures, ODFL prioritizes exceptional customer service at competitive pricing. This unwavering commitment fosters long-term client relationships, building trust and loyalty within the industry. Direct Operational Control: While some competitors outsource or downsize their networks to reduce costs, ODFL maintains a high degree of operational control. The company owns and operates the majority of its service centers and trucks. This direct control ensures flexibility, responsiveness to customer needs, and the ability to maintain consistently high quality standards across its operations. Embracing Technology: ODFL actively leverages technology to optimize costs, streamline operations, and enhance the customer experience. By continually investing in innovative solutions, the company stays ahead of the curve, ensuring its processes remain efficient and adaptable in an ever-evolving industry. The confluence of rising LTL demand, a commitment to exceptional service, and a focus on operational efficiency positions ODFL for sustained growth. The company's long-term strategy of capacity expansion and reinvestment is likely to solidify its leadership role within the LTL shipping industry. Furthermore, ODFL's dedication to technological innovation positions them to capitalize on any upcoming trends or disruptions within the logistics landscape. These factors combine to create a compelling long-term growth profile for Old Dominion, with the potential for double-digit annual increases

BSD Analysis:
The manager presents Old Dominion Freight Line as a premium LTL shipping operator with sustainable competitive advantages built over 90 years of operations. ODFL differentiates itself through an unparalleled hub-and-spoke network that delivers industry-leading on-time performance, creating customer loyalty and pricing power. Unlike cost-cutting competitors, ODFL prioritizes exceptional service while maintaining direct operational control over its network, ensuring quality consistency and operational flexibility. The company benefits from the structural shift toward LTL shipping driven by e-commerce growth while leveraging technology investments to optimize operations. ODFL's customer-centric approach and superior service quality have built strong competitive moats in a fragmented industry. The combination of rising LTL demand, operational excellence, capacity expansion, and technological innovation positions the company for sustained growth. The manager sees potential for double-digit annual growth as ODFL continues to gain market share and expand its network reach.

Pitch Summary:
Alimentation Couche-Tard (ATD.TO), despite being the global leader in convenience stores (owners of Circle K), remains relatively unknown to many investors. While the company reports in USD and derives most revenue from the US, its TSX listing makes it inaccessible to some US-based funds. The convenience store industry is highly fragmented, with single-store operators dominating over 60% of the market. Couche-Tard, despite its size, holds just 5% of the US market, leaving significant room for growth. The industry boasts remarkable stability. For 17 consecutive years pre-2019, sales grew at a steady 4.4% annually, demonstrating resilience during recessions and market downturns. Couche-Tard champions a decentralized operating structure, empowering its thousands of stores to adapt to local needs and trends. This agility proved invaluable during COVID-19, allowing stores to quickly adjust to regulations and implement delivery/pick-up options. This focus on local needs, fostered by a strong entrepreneurial culture, is a key driver of consistent same-store sales growth. Executive compensation is directly tied to metrics that create shareholder value, including return on capital employed (historically exceeding 15%), same-store sales growth, and employee engagement. This strong alignment incentivizes management to make decisions that benefit investors for the long term. This focus is further underscored by the Chairman's significant ownership stake in the company at over $5billion. The market has overblown the threat of electric vehicles (EVs) on the industry. Even if EVs have an impact, it's likely decades away. Furthermore, Couche-Tard's valuation is significantly lower than its competitor, Casey's, despite being a superior business. Couche-Tard offers a compelling combination of growth and value. By reinvesting 35-40% of profits at a high return on capital employed (15%+), the company generates organic growth of 5-6% annually. Combined with share buybacks (3-5% per year) and a roughly 1% dividend yield, this translates to a potential compounded annual growth rate (CAGR) of 8-12%. Management's ambitious target of doubling cash flow in 5 years suggests as 12% CAGR, but even conservative estimates point to market-beating returns. This potential comes with a lower risk of capital loss compared to the broader market, making Couche-Tard a valuable addition to our long-term portfolio.

BSD Analysis:
The manager identifies Alimentation Couche-Tard as an undervalued global convenience store leader trading at a discount due to its TSX listing limiting US institutional access. The company operates in a highly fragmented industry where it holds only 5% market share despite its leadership position, providing significant consolidation opportunities. The convenience store sector demonstrates remarkable stability with 17 consecutive years of 4.4% annual growth pre-2019, showing resilience through economic cycles. Couche-Tard's decentralized operating model and entrepreneurial culture drive consistent same-store sales growth while management compensation aligned with ROCE metrics ensures shareholder-friendly capital allocation. The Chairman's $5 billion ownership stake further aligns interests. The manager dismisses EV concerns as overblown and notes the company trades at a discount to inferior competitor Casey's. With 15%+ ROCE and disciplined reinvestment generating 5-6% organic growth plus 3-5% buybacks, the investment offers 8-12% CAGR potential with lower downside risk.

Pitch Summary:
EVO is a leading B2B supplier specializing in live casino solutions for online gambling operators. With over 300 clients worldwide, they provide the technology and infrastructure that power the thrilling world of live dealer games. Despite its significant market capitalization, Evolution (EVVTY) has experienced a dramatic stock price decline. The apparent catalyst for this drop was an anonymous report submitted to the New Jersey Division of Gaming Enforcement.The report, which many consider to be poorly constructed and biased, alleges that EVO's games are accessible in countries subject to US sanctions. However, the accusations don't seem to reveal any groundbreaking information – most people familiar with online gambling understand that with sufficient effort, geo-restricted content can often be accessed from unauthorized locations. Evolution (EVVTY) reigns supreme in the global live casino market. Their user experience, operational efficiency, and constant innovation (their "great strengths") put them miles ahead of the competition. This potent combination fueled impressive growth and profit margins as the pandemic accelerated online gambling. However, the very qualities that make them such a leader can also be a vulnerability. Just like any highly successful company, it attracts unwanted attention. In this case, their dominance might make them a target for those who might try to exploit potential regulatory grey areas. This creates a classic dilemma for the current market trend of "ESG Investing." Funds have been forced to sell this stock down no matter the price and this has created a valuation that makes no sense to us. Evolution boasts a compelling financial profile. Trading at a low-teens EV/EBIT ratio, the company delivers impressive organic growth of 15-20% annually, fueled by sky-high EBIT margins in the 70s. Furthermore, their balance sheet is bolstered by a net cash position, providing a significant financial cushion. EVO strategically leverages the global trend of offline-to-online gambling migration. By continually investing in expanding capacity and fostering innovation, they aim to widen the gap between themselves and smaller competitors. Moreover, the management team and board with a 12% insider ownership stake, has a proven track record of making astute capital allocation decisions, as evidenced by their strategic buyback programs. Given this success, it wouldn't be surprising to see them launch a new buyback initiative in the near future. We sold the SEK listed share in Q1 to simplify our portfolio currencies, but the purchase in Q2 was done with the American Depository Shares (EVVTY). This will take some patience until the narrative around iGaming and Evolution subside, but we believe there is great upside at today's valuation and see plenty of room for multiple expansion in the future.

BSD Analysis:
The manager presents a compelling contrarian investment thesis on Evolution AB, viewing the recent stock decline as a buying opportunity created by ESG-driven selling pressure. Evolution dominates the live casino market with superior technology, operational efficiency, and innovation capabilities that create significant competitive moats. The company trades at an attractive low-teens EV/EBIT multiple despite delivering 15-20% organic growth and exceptional EBIT margins in the 70s. The strong balance sheet with net cash provides downside protection while management's 12% ownership stake and history of smart capital allocation decisions align interests with shareholders. The manager believes the regulatory concerns are overblown and that the offline-to-online gambling migration trend will continue to drive long-term growth. The investment requires patience as ESG concerns subside, but offers significant upside potential through both earnings growth and multiple expansion.

Pitch Summary:
Atlassian (TEAM) is another enterprise SaaS company; they sell workflow solutions for teams to collaborate better. This is a new addition to our portfolio last quarter. Atlassian offers significant value at current prices. Similar to Salesforce, they have very unique data for their customers, which they already are leveraging with AI. Shares have caught some bids and started moving up recently; the company is attractively priced.

BSD Analysis:
Torre Financial presents Atlassian as a new portfolio addition with significant value potential, emphasizing the company's workflow collaboration solutions for enterprise teams. The manager highlights Atlassian's unique customer data assets, which are being leveraged for AI applications, creating competitive advantages and enhanced product value. Despite being a recent addition to the portfolio, the investment thesis centers on attractive valuation levels and the company's strategic positioning in team collaboration software. The manager notes recent positive momentum with shares beginning to move higher, suggesting market recognition of the company's value proposition. Atlassian's data-driven AI capabilities differentiate it from competitors and provide opportunities for product enhancement and customer retention. This represents a quality software business with strong competitive moats trading at attractive levels. The combination of essential enterprise software, AI integration, and reasonable valuation supports the bullish investment case.

Pitch Summary:
PayPal (PYPL) is a repeat bottom performer. Alex Chriss and the new executive team have been busy making many changes. PayPal seems well positioned with their Braintree processing, enhanced checkout flows, and new opportunity to build out an advertisement business. Shares started building momentum throughout the quarter. Apple announced a series of enhancements and capabilities for Apple Pay. The heightened competition concerned investors and put a halt to the momentum. There's a lot of value in shares at current prices. The concern is PayPal's ability to reinvigorate their branded checkout. Management will need to start demonstrating real change there to win investors back.

BSD Analysis:
Torre Financial maintains a contrarian bullish stance on PayPal despite its status as a repeat underperformer, emphasizing the new management team's transformation efforts under CEO Alex Chriss. The manager highlights multiple value drivers including Braintree processing capabilities, enhanced checkout experiences, and emerging advertising business opportunities. While acknowledging competitive pressure from Apple Pay enhancements that halted recent momentum, the investment thesis centers on significant value at current price levels. The key risk identified is PayPal's ability to revitalize its branded checkout experience, which requires demonstrable execution from management. The manager appears confident in the company's strategic positioning but recognizes the need for tangible progress to restore investor confidence. This represents a turnaround play in digital payments with multiple optionality drivers trading at attractive valuations. The combination of new leadership, strategic initiatives, and depressed valuation creates potential for significant upside.

Pitch Summary:
Salesforce (CRM), similar to other enterprise SaaS companies, dipped after citing elongated sales cycles. They have changed their go-to-market strategy, focusing on customer needs with a platform approach instead of selling products individually. This seems well timed, as many companies are looking to consolidate vendors benefitting those with larger platforms. Salesforce has a very unique data set – they have every interaction their customers have with their customers. This data is likely to be a great source of value when coupled with AI. Salesforce is also attractively priced.

BSD Analysis:
Torre Financial maintains a bullish view on Salesforce despite near-term sales cycle challenges, emphasizing the company's strategic pivot to a platform-based approach. The manager views the shift from individual product sales to integrated platform solutions as well-timed, aligning with enterprise customers' vendor consolidation trends. Salesforce's competitive advantage lies in its unique customer interaction dataset, which becomes increasingly valuable when combined with AI capabilities. This data moat provides significant barriers to entry and enables enhanced customer insights and automation. The manager believes current valuation levels present an attractive opportunity following the recent dip, with the platform strategy positioning Salesforce to benefit from enterprise digital transformation. The combination of market-leading CRM position, valuable data assets, and AI integration potential supports long-term growth prospects. This represents a quality software franchise trading at a discount due to temporary execution headwinds.

Pitch Summary:
Workday (WDAY) offers human resource management and financial planning software to large enterprises. They help companies with two of their most critical assets: their people and their money. Workday has grown steadily over time and has a long runway. Shares fell after they reduced full year guidance, citing longer sales cycles. Guidance and backlog fell short of expectations. Workday is a critical need for any modern enterprise. Shares are attractively valued.

BSD Analysis:
Torre Financial views Workday's recent weakness as a buying opportunity in a mission-critical enterprise software provider. The manager emphasizes the company's strategic importance in managing enterprises' most valuable assets - human capital and financial resources. Despite near-term headwinds including reduced guidance and elongated sales cycles, the investment thesis remains intact based on Workday's essential role in modern enterprise operations. The manager highlights the company's consistent historical growth and long-term runway for expansion as large enterprises continue digital transformation initiatives. Current valuation levels reflect temporary execution challenges rather than structural competitive threats, creating an attractive entry point. The combination of mission-critical software, large addressable market, and temporary valuation dislocation supports the bullish stance. This represents a high-quality SaaS business trading at a discount due to cyclical rather than secular concerns.

Pitch Summary:
Veeva Systems (VEEV) sells software solutions to large pharmaceutical companies, helping them develop drugs more quickly with clinical-focused software and sell more with dedicated CRM software. Veeva has a proven model, being profitable throughout most of its history. Recent concerns stem from slightly lower guidance than expected and lower deferred revenue. Customers are going with shorter contracts. We find these concerns to be temporary. We are excited about the long-term prospects and find shares trading at a very attractive valuation.

BSD Analysis:
Torre Financial maintains conviction in Veeva Systems despite recent headwinds, viewing current concerns as temporary rather than structural. The manager emphasizes the company's proven business model serving large pharmaceutical companies with mission-critical clinical and CRM software solutions. Veeva's consistent profitability throughout its history demonstrates the durability and quality of its franchise in the life sciences vertical. While acknowledging near-term challenges including reduced guidance, lower deferred revenue, and shorter customer contracts, the manager believes these reflect temporary market conditions rather than competitive threats. The investment thesis centers on long-term secular growth in pharmaceutical R&D spending and Veeva's entrenched position with major customers. Current valuation levels present an attractive entry point for a high-quality software business with strong competitive moats. This represents a temporary dislocation in a fundamentally sound growth story.

Pitch Summary:
Agree Realty (ADC) appeared as a bottom performer for a series of quarters, and appears as a top performer for the first time. As a triple-net REIT, Agree Realty's valuation is closely tied to interest rates. Rates have been steady for a year now. Markets expect the next move to be a rate cut. ADC pays an almost 5% dividend, with steady monthly distributions. Management is savvy, making great decisions with foresight and building a high quality portfolio of tenants including Walmart, Home Depot, Dollar General, Kroger, and many more. Shares are attractively priced.

BSD Analysis:
Torre Financial highlights Agree Realty's transition from consistent underperformer to top contributor, driven by interest rate stabilization and expectations for future cuts. The manager emphasizes the REIT's attractive 5% dividend yield with reliable monthly distributions, providing steady income in the current environment. The investment thesis centers on management's strategic acumen in building a high-quality tenant portfolio featuring defensive retail giants like Walmart, Home Depot, and Dollar General. These tenants provide stability and creditworthiness in the triple-net lease structure, reducing operational risk for the REIT. The manager views current valuation levels as attractive, particularly given the interest rate backdrop and quality of underlying assets. This represents a defensive income play with potential for capital appreciation as rates decline. The combination of strong management, quality tenants, and attractive yield supports the bullish stance.

Pitch Summary:
Adobe (ADBE) flipped into a top performer this quarter, after appearing as a bottom performer Q1. Concerns have been plenty. Investors have been worried about competitors Figma and Canva encroaching their market. The whole creative market apparently was facing existential risk, with concerns about generative AI solutions eliminating the need for specialized tools. The recent earnings release changed sentiment – shares bounced back after an unexpectedly strong report. Adobe's Firefly is being deeply integrated across their suite of products. It is clear enterprises need more tailored solutions and cannot fully leverage consumer-facing generative AI solutions. Large companies need tooling to ensure consistency across their assets, from brand tone, messaging, colors, design, and more. Rather than limit usage, AI applied to the creative space has unlimited potential. With AI, companies can test 100s or 1000s of asset variations for marketing campaigns and optimize automatically. Adobe is well positioned. Shares are fairly valued.

BSD Analysis:
Torre Financial presents Adobe as a successful turnaround story, transitioning from bottom to top performer following strong earnings that addressed market concerns. The manager acknowledges competitive threats from Figma and Canva, as well as existential AI risks, but argues these fears were overblown. The investment thesis centers on Adobe's Firefly AI integration across its creative suite, positioning the company to benefit rather than suffer from AI adoption. The manager emphasizes enterprise customers' need for sophisticated, consistent brand management tools that consumer AI solutions cannot provide. Adobe's AI capabilities enable massive scale testing and optimization of creative assets, expanding rather than limiting market opportunities. The combination of strong execution, AI integration, and enterprise positioning supports the bull case. This represents a quality software franchise successfully navigating technological disruption while maintaining competitive advantages.

Pitch Summary:
The Trade Desk (TTD) is another repeat top-performer. Helping businesses make more money is an attractive business to be in. The Trade Desk helps their customers distribute and optimize advertisements across many different distribution platforms. With 2024 being an election year, advertisement spend is expected to be strong. The Trade Desk shares are quite expensive.

BSD Analysis:
Torre Financial maintains a bullish view on The Trade Desk despite acknowledging elevated valuation concerns. The manager emphasizes the company's attractive business model of helping customers generate revenue through optimized advertising distribution across multiple platforms. The investment thesis is supported by secular tailwinds, particularly the 2024 election cycle driving increased advertising spend. The company's repeat appearance as a top performer demonstrates consistent execution and market share gains in the programmatic advertising space. While shares trade at premium valuations, the manager appears confident in the underlying business quality and growth trajectory. The Trade Desk's platform approach and cross-channel optimization capabilities position it well in the evolving digital advertising landscape. This represents a growth play in the expanding programmatic advertising market with strong competitive positioning.

Pitch Summary:
Alphabet (GOOGL), the parent company of Google, had a rough start into the AI-era. Over time, their expertise and dominance has become ever more prevalent. Alphabet has been investing heavily in their cloud computing platform, Google Cloud Platform (GCP). GCP offers specific differentiated solutions for large data sets and developing machine learning models. Google may have the largest and most robust infrastructure for AI. Throughout the quarter, Google has demonstrated their ability to execute quickly. Google's Gemini AI is now offered to Google Workspace users as an add-on. Google Search results include gen-AI answers that are highly functional. Google develops their own AI-capable semiconductor chips. Additionally their big bets such as Waymo self-driving cars continue to move in the right direction. On top of strong fundamentals, Google has significant optionality. The market started paying more attention this quarter. Google shares are still attractively priced.

BSD Analysis:
Torre Financial presents a compelling turnaround narrative for Alphabet, acknowledging initial AI-era struggles but emphasizing the company's emerging dominance. The manager highlights Google's massive AI infrastructure advantage and rapid execution capabilities across multiple fronts. Key catalysts include GCP's differentiated machine learning solutions, Gemini AI integration into Workspace, enhanced search functionality, and proprietary semiconductor development. The investment thesis extends beyond core operations to include optionality from moonshot projects like Waymo autonomous vehicles. Despite the company's market leadership and technological moats, the manager notes attractive valuation levels, suggesting the market hasn't fully recognized Google's AI positioning. The combination of strong fundamentals, execution momentum, and significant optionality creates a compelling risk-adjusted opportunity. This represents a high-conviction position in a dominant technology platform with multiple growth vectors.

Pitch Summary:
Crowdstrike (CRWD) has appeared in the top performer list the last 3 quarters. The momentum continues this quarter, increasing 20% in Q2 alone. Cybersecurity is seen as mission-critical for enterprises of all sizes. Crowdstrike is emerging as the next-generation leader. Their cloud-native solutions are top tier and they've continued to expand their platform with more and more offerings. While shares are expensive at this level, shares are supported by strong fundamentals including consistently strong revenue growth and high profitability.

BSD Analysis:
Torre Financial maintains a bullish stance on CrowdStrike, highlighting its consistent outperformance over three consecutive quarters with 20% gains in Q2 alone. The manager emphasizes CrowdStrike's positioning as the next-generation cybersecurity leader, driven by mission-critical enterprise demand and superior cloud-native solutions. The investment thesis centers on platform expansion and strong fundamentals, including consistent revenue growth and high profitability. While acknowledging current valuation concerns, the manager believes the premium is justified by the company's market leadership and robust financial metrics. The cybersecurity sector's defensive characteristics and CrowdStrike's technological advantages support the long-term investment case. The manager's confidence is reinforced by the company's ability to maintain momentum in a competitive landscape. This represents a quality growth play in an essential enterprise technology segment.

Pitch Summary:
Ryanair – Irish low-cost airline (1.8% NAV) We've also written about Ryanair in the past. We argued that the airline has material cost advantages deriving from its low-priced aircraft purchases and more productive use of operational staff, but particularly from its higher fleet utilisation and its airport costs, which we argued were its most sustainable source of advantage. Given the scale and density of its network, its marketing power, and its low cost base, Ryanair is uniquely able to drive traffic to secondary airports and thus able to command lower fees with those partners. We believed that investors were overly focused on the potential erosion of the staff productivity advantage as Ryanair adopted collective bargaining with its flying staff, and that the historically low valuation failed to reflect the growth outlook. We met the company's chief legal officer at the Ryanair headquarters in Dublin recently. As a 20 year veteran of the business, he made a compelling case that the paranoid, cost-focused culture of the business endures despite its very different scale and market position compared to when he joined. The management team is unusually stable. He noted a number of occasions where Ryanair employees have left to join other airlines and then returned having found it difficult to instil the Ryanair approach elsewhere. Somewhat similarly to Admiral, the core thesis on Ryanair today is that it is a much bigger business, and arguably a better positioned one, than it was before Covid, but the market is not reflecting that. The shares have risen a paltry 13% since the end of 2019, yet the fleet is 35% larger (than FY 2020 ending in March), average fares are 35% higher and ancillary revenues have increased by 17% per passenger. Group revenue is almost 60% higher than in FY2020. The industry capacity environment is tighter, and the future outlook for new plane deliveries much more constrained thanks to supply chain issues, than it was in the past. Ryanair has gained share in every one of its major markets since before Covid. Meanwhile Easyjet has stayed in its core of slot-constrained large city airports as well as diversifying into package holidays, and Wizz has pivoted to the middle east – both shying away from direct competition with their Irish peer. After communicating a positive outlook for the summer of 2024 earlier in the year, the company's CEO Michael O'Leary noted in early May that fares were weaker than expected. This has disturbed investors. Management confirmed the trend at its FY results in May and the company repeated its commentary when we spoke to them at the end of June. It is unable to provide a specific explanation, but notes the weakness is widespread geographically. The most likely explanations are wider pressure on consumer discretionary budgets, and a waning of the wanderlust-at-any-price that airlines benefited from as consumers emerged from Covid restrictions. Other airlines have reported similar dynamics: Jet2 noted on 24 April "recently, pricing has been more competitive, particularly for April and May departures", whilst on 4 July Norwegian Air Shuttle highlighted "softer traffic demand during the second quarter (of 2024), with a contraction in both load factor and yield compared to last year" as one of the drivers of its profit warning. Ryanair's share price has declined by 25% from its peak in April to the end of June, which means the enterprise value has declined by around 30%. We didn't forecast this summer's apparent fare weakness. Neither can we provide a wholly satisfying or reassuring explanation of it. But we are happy to profit from the market's reaction to it. Our belief is that either this is a minor wobble that will eventually prove to be noise, or, if it is the emerging sign of something more serious (such as a recession), Ryanair will be able to navigate this period better than its competitors, and emerge even stronger, as it has in previous crises. Ryanair's profitability is highly variable: this reflects the cyclicality of demand (relative to supply) and the volatility of fuel prices, which are the company's largest cost line. However, the long-term average net income per passenger is around EUR 10. This reflects a much higher margin than other European short-haul airlines as a result of the substantial cost advantage the Irish airline enjoys. Even excluding the heavily Covid-affected years, Ryanair's average net income margin of 17% was c. 10% points higher than the other main European airlines. We believe the cost gap has widened since pre-Covid, thanks to Ryanair's aggressive negotiations with Boeing and its airport partners, so if anything, we would expect the profit per passenger to trend upwards (the cost gap to peers is the key constraint on medium term profitability). And it will be difficult for peers to make much headway on closing this gap any time soon given the duration of order books on narrow body planes for the world's two relevant aircraft manufacturers. Given its aircraft delivery schedule, Ryanair should reach 230m passengers in FY 2027. The range of outcomes around this projection is not very wide. Using the EUR 10 per passenger profit figure, the base case post-tax earnings outlook for Ryanair in three years' time is EUR 2.3 billion. The stock currently trades with an enterprise value of just over EUR 17 billion. The EV could easily be twice that in three years' time, and on a materially smaller share count (the first buyback since FY2020 was announced alongside FY results in May). In addition, we estimate the company is now valued below the replacement cost of its fleet. Ryanair may not offer the most comfortable journey, but our buying criteria is not focused on comfort. Like its passengers, we are focused on value, and looking through this current pricing wobble, we think the stock is unambiguously cheap.

BSD Analysis:
Ennismore presents Ryanair as a contrarian value opportunity following a 25% share price decline due to summer 2024 fare weakness. The manager emphasizes Ryanair's structural cost advantages, including superior fleet utilization, airport cost negotiations, and operational efficiency that delivers 17% net margins versus 7% for European peers. Despite recent fare pressure, the business has emerged from COVID significantly stronger with 35% larger fleet, 35% higher average fares, and 60% higher group revenue versus FY2020. The fund projects 230 million passengers by FY2027 and EUR 2.3 billion earnings using EUR 10 per passenger profitability, implying significant upside from current EUR 17 billion enterprise value. Management's cost-focused culture remains intact with stable leadership and widening competitive moats through Boeing negotiations and airport partnerships. Trading below fleet replacement cost with announced share buybacks, Ryanair represents compelling value for patient investors willing to look through cyclical fare volatility.

Pitch Summary:
Admiral Group – UK insurance company (3.8% NAV) We last wrote about Admiral in late 2022. However, we felt it worth explaining why, as of early July, we have made it our largest position. Refreshing that discussion briefly: our argument was that whilst a sharp, unexpected uptick in inflation is horrible for insurers (as the revenue they receive upfront may not cover their ballooning claims costs which arise in the future), it is a short-term negative for the industry that would end up proving to be a longer term positive for the best operator. Admiral seemed likely to manage the cycle better than its peers. An extreme cycle like this one would be likely to prompt prices to overshoot to the upside as companies sought to rebuild their balance sheets, providing healthy margins in due course. And with its operating margins in the 20s vs. peers mostly in single digits, more capital efficient balance sheet resulting in average ROE of around 50% compared to peers of 10-15% on a good day, and excellence in pricing and risk selection, Admiral would be uniquely well placed to grow volumes into the attractive environment that would result, with the recovery from the inflation shock likely to provide a couple of bonanza years. The process is not complete, but we have no reason to materially change our view thus far. The cycle has played out a little slower, but even more sharply, than we expected. Prices have risen by over 50% from the trough through Q1 2024, according to the comprehensive ABI Motor Insurance Tracker (and by significantly more than using other price indices such as Confused or the ONS). We anticipated volume growth and strong margins in 2023. In fact, Admiral continued to shed policies in H1 2023, and only began to grow, modestly, in H2 2023. We have strong evidence (we unfortunately cannot share the source) that this growth has continued and accelerated. Since December we believe Admiral has been growing extremely rapidly: we expect it to add well over 10% to its UK motor policy count in just the first half of 2024. This is much faster than anticipated by the sell side. Whilst the stock has done reasonably well since our September 2022 write-up (total return is +46% from then to the end of June), candidly we expected more. Taking a longer perspective: Admiral shares are 11% higher than at the end of 2019 (the total return is materially more of course). Yet we expect the total premiums written in 2024 to be almost double the 2019 level. And we see little to no erosion of its underlying margin structure. On our analysis, even if we ignore everything except the UK motor operations, the stock is not trading much above 10x earnings. The company is now approaching 20% market share of its core UK motor market and has grown total premiums at roughly 15% annualised over the 5 and 10 years to our estimates of 2024 numbers. It's difficult to know what the ceiling for Admiral's market share opportunity is. We note however that Direct Line once commanded around 35% of the market before its fall from grace. Progressive, the largest US motor insurer, has a very similar competitive position in the US and a similar five and ten year growth track record. It is a much lower return on equity business because it lacks Admiral's reinsurance leverage. Progressive is valued at almost 20x run-rate earnings and its stock has almost tripled since the end of 2019. Aside from highlighting that we should have invested in Progressive over the last five years, rather than Admiral, this suggests to us that Admiral is currently severely undervalued. Since the end of June we have made Admiral our largest long position. It is unusual for us to believe we have a material and relatively precise edge on predicting a company's volumes for an upcoming earnings report. The last time this happened also gives us pause: we wrote up Wise in our June 2022 letter. As we noted at the time, despite being contrarian and right on the top line owing to our proprietary data, the stock sold off 20% on its FY2022 results announcement in June following a cost warning. However, it then more than doubled in the next three months and contributed almost 5% to the Fund. Given our evidence that first half results should sharply exceed sell side expectations, we have added some call option exposure to our position to increase our leverage to a strong share price response to results in August. Don't expect a doubling of the share price in Q3, however!

BSD Analysis:
Ennismore presents a compelling contrarian thesis on Admiral Group, positioning it as their largest holding based on superior competitive positioning in the UK motor insurance market. The manager argues that Admiral's exceptional operating margins (20%+ vs peers in single digits) and 50% ROE versus peers at 10-15% create a sustainable competitive advantage. The fund expects Admiral to capitalize on industry pricing recovery, with motor insurance prices rising over 50% from trough levels through Q1 2024. Proprietary data suggests Admiral is growing UK motor policies at over 10% in H1 2024, significantly faster than sell-side expectations. At approximately 10x earnings despite approaching 20% UK market share and 15% annualized premium growth over 5-10 years, Admiral appears undervalued relative to US peer Progressive trading at 20x earnings. The manager has added call options to amplify exposure ahead of August earnings, expecting results to exceed consensus estimates. This represents a classic value opportunity in a quality franchise benefiting from cyclical tailwinds.

Pitch Summary:
Take China's largest private higher education company, China Education, which has typically traded at a forward P/E of 20–30x. It is now trading at a forward PE of 5x, which looks highly attractive, especially when you consider dividend yield of 9% and solid growth.

BSD Analysis:
East Capital presents China Education as a compelling value opportunity in the Chinese education sector. The company, historically valued at 20-30x forward P/E, now trades at just 5x forward earnings, representing a significant valuation compression. This dramatic multiple contraction appears disconnected from fundamentals, as the company continues to deliver solid growth while offering an attractive 9% dividend yield. The combination of low valuation, high dividend yield, and continued growth suggests the market has oversold the stock amid broader China market pessimism. As China's largest private higher education provider, the company benefits from structural demand for quality education services. The current valuation provides substantial upside potential if the company returns to historical trading multiples, making it an attractive contrarian investment in the Chinese market recovery theme.

Pitch Summary:
The largest name in emerging markets and in our GEMS fund is TSMC, which produces all of the advanced AI chips for Nvidia. TSMC is now up 50% year to date in USD terms, with the main trigger in the quarter being an announcement that the company would be raising prices for its advanced chips and packaging. Remarkably, this announcement was publicly welcomed by Nvidia CEO Jensen Huang, who explained that TSMC's contribution to the industry was "really great" and that "raising prices, I think, is consistent with the value that they deliver. And so I'm very happy to see them succeed". We think consensus still isn't fully pricing in the impact of these hikes and expect revenue growth of around 25% next year, compared with the consensus expectation of 21–22%. We therefore still like the name, which we believe looks reasonable at c. 10x EBITDA for next year.

BSD Analysis:
East Capital maintains a bullish stance on TSMC, viewing it as attractively valued despite strong year-to-date performance. The fund manager highlights TSMC's dominant position as the exclusive producer of advanced AI chips for Nvidia, providing significant competitive moats. The recent price increases for advanced chips and packaging, endorsed by Nvidia's CEO, demonstrate TSMC's pricing power and the critical nature of its technology. East Capital expects 25% revenue growth next year, above consensus estimates of 21-22%, suggesting the market hasn't fully recognized the impact of these price hikes. At approximately 10x forward EBITDA, the valuation appears reasonable given the company's growth prospects and strategic importance in the AI semiconductor supply chain. The manager's confidence is reinforced by strong customer relationships and the structural demand for AI processing capabilities.

Pitch Summary:
Nextage has experienced a decline in share price following its Q2 2024 earnings announcement, despite showing signs of recovery in same-store sales volume. The company is on track to meet its EBIT guidance of ¥20 billion for the fiscal year ending November 2024, despite challenges in retail gross profit per unit (GPU) due to weak add-on sales. The management's focus on improving inventory management and increasing inventory sourcing from consumers is expected to support future growth. The recent sell-off seems unwarranted as the company has historically shown quarter-over-quarter EBIT increases, driven by rising store counts. The introduction of sales support software and potential reintroduction of incentives could further enhance sales performance. Overall, Nextage is positioned to achieve its financial targets, with potential upside from improving same-store sales and operational efficiencies.

BSD Analysis:
Nextage's recent performance highlights both challenges and opportunities. The decline in retail GPU, primarily due to inexperienced sales staff and weak add-on sales, has been a concern. However, the company's proactive measures, such as installing sales support software, indicate a commitment to addressing these issues. The potential reintroduction of sales incentives, without imposing sales goals, could further motivate the sales team and boost add-on sales. Additionally, the company's strategy of better inventory management and sourcing from consumers is likely to enhance profitability. While macroeconomic changes pose a risk, Nextage's specific risk lies in maintaining high retail GPU from vehicle sales. The company's ability to adapt and improve operational efficiencies will be crucial in achieving its EBIT targets and driving long-term growth.

Pitch Summary:
abrdn European Logistics Income Fund PLC ("ASLI") is a GBP 250m market capitalised closed-end fund which owns 25 mid-box logistics sites across several European countries, with a concentration in Spain and the Netherlands. What attracted our attention to this investment opportunity was the fact that, after a 6-month strategic review, ASLI has decided to wind down. We are confident this will allow management to eliminate ASLI's 22% discount to dividend-adjusted net asset value ("NAV") by selling the properties and returning the cash to the shareholders. Now that the board's proposal of an orderly wind-down was approved on 24th June and given ASLI's modern locations with strong sustainability ratings and high-quality tenants such as Amazon, DHL and Dachser, we believe shareholders can achieve 30% upside to December 2025. ASLI floated in 2019 and typically was priced at NAV until interest rates began rising in 2022, leading to the fund trading below book value. Such discounts are currently exceedingly common across closed-end funds, but without a concrete strategy to close the gap, for example through a large buyback plan, the discount can persist indefinitely. We believe several reasons contribute to the discount in ASLI, including the fund's illiquidity, lack of sell-side coverage, and a high cost base versus peers. Alongside this, the timing of property asset disposals is obviously hard to predict. However, these structural factors for mispricing are part of the reason our interest is piqued whenever a closed-end fund initiates a strategic review, a trend increasingly prevalent on the London Stock Exchange. Due to ASLI's focus on an area of structural growth, with high demand for logistics sites, we are confident that they will be in a good position with regards to both price and speed of disposals. A wind-down, by selling properties and returning the cash to shareholders quarterly, allows the shareholders to realise the full value of the assets they own. We believe NAV is more than an achievable price for the wind-down. Firstly, we are encouraged by the eleven offers received by the board during the strategic review process. Although not all bids were for the entirety of the assets, we believe this demonstrates the attractiveness of ASLI's sites, and we think a piecemeal wind-down will attract further bidders who are interested in specific assets. We believe ASLI's adjusted net initial yield lies between 5.5% and 6%, and the fact that recent European transactions have occurred at around 5% gives us confidence in the property values. Our adjustments are based on vacancies and estimated year-to-date rental growth of 2%, as leases are index-linked, allowing ASLI to pass through price increases more easily. Moreover, we think that service charge, which is currently circa 20% of total sales, is high compared to a set of listed peers. We believe new owners could potentially lower service charge as a percentage of total sales by 10 percentage points, and correspondingly increase rental revenue. Finally, ASLI's two sales over the last 14 months have come at, or above, NAV. While we believe the one-of-a-kind nature of property makes ASLI's NAV difficult to gauge, we also think this is one of the reasons the opportunity exists, and we are convinced the large discount to NAV provides a strong margin of safety here. Furthermore, the strategic review process has allowed numerous parties to become familiar with ASLI's holdings already, and therefore could lead to a flurry of deals over the next six to twelve months, shortening the timeframe in which ASLI can return cash to shareholders. Additionally, we are encouraged that the Chairman of the board seems aligned with shareholder interests, given he owns almost twice his yearly estimated post-tax director's fee in ASLI stock - a great incentive for timely disposals. Finally, we are comfortable with ASLI's loan to value of 38% in a context of a strong asset base, structural growth drivers stemming from the continuous expansion of ecommerce, and an active sales process. At the current share price of 60p, we believe the market is overlooking a compelling low-risk special situation. We see around 30% upside to December 2025. Furthermore, we expect management will sell down roughly three quarters of the properties and return the related cash over the next year, so our rate of return is more attractive than the nominal upside implies.

BSD Analysis:
Ennismore presents a compelling special situation investment in ASLI, a closed-end fund trading at a 22% discount to NAV that has approved an orderly wind-down process. The manager's thesis centers on the elimination of this discount through asset sales and cash returns to shareholders, targeting 30% upside by December 2025. The fund owns 25 modern logistics properties across Europe with high-quality tenants including Amazon and DHL, benefiting from structural e-commerce growth trends. Key catalysts include eleven offers already received during the strategic review, demonstrating asset attractiveness, and management's plan to sell three-quarters of properties within a year. The investment benefits from strong fundamentals including a conservative 38% loan-to-value ratio, index-linked leases providing inflation protection, and recent asset sales at or above NAV. Management alignment is evidenced by the Chairman's significant personal stake, creating incentives for timely execution. The thesis is supported by favorable logistics real estate fundamentals, with recent European transactions occurring at 5% yields versus ASLI's estimated 5.5-6% yield, providing valuation confidence.

Pitch Summary:
Rounding out the winners was Bank of America (BAC). To paraphrase what we said about BAC in our last letter: "Our biggest purchase in the period (by far) was a material increase in our existing holding in Bank of America. Bank of America (BAC) needs no explanation, but some comments on the opportunity we see for this holding is warranted. BAC's shares recently traded at a P/E of 8x (an earnings yield of 12%) and 80% of stated book value and pays a 3.5% dividend. BAC's return on equity is a depressed 11%+. BAC has a mix of "main street" traditional deposit gathering and lending, large corporate banking functions and a top tier investment banking franchise and wealth management business via the original Merrill Lynch businesses. The investment banking and wealth management segments contribute to approximately 40% of BAC earnings, and at the recent depressed valuations, we were getting these franchises at a discount. We historically found management's slow and steady approach to growth and returns sensible and still do. Management's decision to invest a material amount of the COVID era deposit influx into longer dated treasury and mortgage bonds a few years ago was a bad decision – but it is manageable and well known by all – to say the least. If the economy weakens, loan losses will increase. However, with a stable deposit base, strong lending controls, recurring earnings from the non-banking businesses, healthy capital and liquidity, the potential benefit from higher interest rates and a cheap stock price (down recently about 50% from recent highs and back to 2017 price levels), we like our risk reward here." Things have evolved at BAC about as we hoped they would.

BSD Analysis:
The manager presents a compelling value thesis for Bank of America based on attractive valuation metrics and diversified business model. Trading at 8x P/E (12% earnings yield) and 80% of book value with a 3.5% dividend yield, BAC offers significant upside potential from current depressed levels. The bank's diversified revenue streams, with 40% from investment banking and wealth management through Merrill Lynch, provide stability and premium valuations. Management's conservative approach to growth and capital allocation aligns with the fund's investment philosophy. While acknowledging the poor timing of bond purchases during COVID, the manager views this as a manageable, well-understood issue. The combination of stable deposit base, strong lending controls, healthy capital ratios, and potential benefits from higher interest rates creates an attractive risk-reward profile. The stock's 50% decline from recent highs back to 2017 levels presents a compelling entry point for long-term investors.