Investment Pitches

Pitch Summary:
ISS A/S is a facility management company, specializing in services that are non-core to their customers. Its services include routine and specialized cleaning, food management and catering, building management, security, and other services. We like the company's scale, focus, geographic footprint, wide array of services, employee base, and sticky customer relationships. Its focus on services that are non-core to its customers allows for the company to benefit from the trend of outsourcing these types of services. The company executed well throughout the pandemic showing consistent progress towards its goals including growth, margins, free cash flow, and financial leverage. The company has improved margins and is entering a relatively more normalized operating environment, and it continues to trade at an attractive discount to our estimate of fair value.

BSD Analysis:
Vulcan initiated a position in ISS A/S, attracted to the company's dominant position in the global facility management industry with strong competitive advantages. The fund values ISS's comprehensive service offering including cleaning, catering, security, and building management services that are non-core to customers, creating natural outsourcing opportunities. The company's significant scale, broad geographic footprint, extensive employee base, and sticky customer relationships provide sustainable competitive moats. ISS demonstrated operational resilience during the pandemic, consistently achieving progress on key metrics including growth, margins, free cash flow generation, and financial leverage management. The fund sees the company well-positioned to benefit from the secular trend toward outsourcing non-core services as businesses focus on their primary operations. With improving margins and a return to more normalized operating conditions, ISS appears attractively valued relative to Vulcan's fair value estimate, providing an opportunity for long-term value creation in the facility services sector.

Pitch Summary:
CoStar Group is a premier information services provider to the commercial and residential real estate industries. It is founder led, sells access to mission critical data and information assets, and is supported by a largely recurring, subscription-based revenue model. While it is difficult to pinpoint the exact reason for the stock's underperformance over the last quarter, its operating results continue to impress us. Therefore, with a stable value, we followed our discipline and added to our position.

BSD Analysis:
Vulcan maintains a bullish stance on CoStar Group despite recent stock underperformance, viewing the company as a premier information services provider with strong competitive advantages. The fund values CoStar's founder-led management structure and mission-critical data assets that create high switching costs for customers in the commercial and residential real estate industries. The largely recurring, subscription-based revenue model provides predictable cash flows and demonstrates the essential nature of CoStar's services. While unable to identify specific reasons for recent stock weakness, Vulcan remains confident in the underlying business fundamentals based on continued strong operating results. The fund's decision to add to the position during the underperformance period reflects disciplined value investing and conviction in the long-term thesis. CoStar's dominant market position in real estate information services, combined with recurring revenue characteristics and founder leadership, supports the investment rationale despite short-term volatility.

Pitch Summary:
During the first quarter, Alphabet's revenue growth accelerated and margins expanded. The company continues to introduce new search pathways with advanced models and algorithms that are 100 times more efficient than they were 18 months ago. Disruption risks to core search from generative AI have not completely abated, but Alphabet's technical prowess and historical investments in leading technologies are becoming more apparent.

BSD Analysis:
Vulcan maintains a bullish stance on Alphabet, highlighting the company's strong operational performance with accelerating revenue growth and margin expansion. The fund emphasizes Alphabet's significant technological advancement, noting that current search algorithms are 100 times more efficient than those from 18 months ago, demonstrating rapid innovation capabilities. While acknowledging that generative AI disruption risks to core search business remain a concern, Vulcan believes Alphabet's technical expertise and historical technology investments position the company well to navigate this transition. The fund appears confident that Alphabet's deep AI capabilities and massive scale advantages will enable it to maintain its dominant search position while potentially benefiting from AI-driven opportunities. The combination of strong current fundamentals, technological leadership, and strategic positioning in the AI revolution supports the continued investment thesis despite competitive uncertainties.

Pitch Summary:
Sdiptech acquires and develops niche infrastructure companies that contribute to more sustainable, efficient, and safe societies. Today, Sdiptech is a collection of approximately 40 operating businesses. We believe these businesses are positioned well to compete and possess a natural ability to grow their competitive moats. Sdiptech's management team has appropriately navigated the varied markets over the past few years and has consistently operated with the long-term in mind. Over the last two years, the stock price has traded at a substantial discount to our estimate of fair value. We followed our discipline and added to the position accordingly. The recent share price increase could be attributed to the company's consistently strong operating performance.

BSD Analysis:
Vulcan maintains a bullish stance on Sdiptech, viewing the company as a well-managed collection of niche infrastructure businesses with strong competitive positioning. The fund appreciates the company's focus on sustainable, efficient, and safe infrastructure solutions, which aligns with long-term secular trends. With approximately 40 operating businesses in the portfolio, Sdiptech has built a diversified platform of companies that possess natural moat-widening characteristics. Management's long-term orientation and skillful navigation of varied market conditions over recent years demonstrates operational excellence. The fund's decision to add to the position during a period when shares traded at substantial discounts to fair value reflects disciplined value investing. Recent share price appreciation appears justified by consistently strong operating performance across the portfolio companies. The combination of secular tailwinds in infrastructure, quality management execution, and attractive valuation entry points supports the long-term investment thesis.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the U.S. and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan initiated a position in CarMax, attracted to the company's dominant market position and omnichannel competitive advantages in the fragmented used car market. As the largest used car retailer with the third-largest wholesale business and substantial captive financing operations, CarMax has built a differentiated platform that generates higher profit per vehicle and solid returns on capital. The fund sees significant market share opportunity as competitors face structural challenges - small independents lack resources for digital investment while digital-only players prioritize profitability over volume. CarMax's continued investment in digital infrastructure has enhanced customer experience across buying, selling, and financing touchpoints. Management's recent focus on balance sheet deleveraging and operational right-sizing has meaningfully de-risked the business model. The combination of a leaner cost structure, improved competitive positioning, and market share gains should position CarMax well for outperformance when used car volumes normalize from current depressed levels.

Pitch Summary:
Qorvo is a leader in radio frequency (RF) systems and power management solutions for mobile devices, wireless infrastructure, aerospace and defense, the Internet of Things, and various other applications. Qorvo's chipsets are a small cost but are critical components in modern mobile devices. As data needs increase and telecommunications technology continues to evolve and become more complex, more RF content is needed in each device. The complexity and barriers to entry intensify as content requirements increase and space constraints become more pronounced. Qorvo operates in an oligopoly with only a small number of companies capable of producing these increasingly complex chipsets at scale. Qorvo should also benefit as growth accelerates in adjacent markets and these markets eventually become a larger piece of the business through the adoption of the Internet of Things, satellite, Wi-Fi, and other markets. The company has faced headwinds over the past few years including lower demand in China, excess inventory in the channel, and factory underutilization; but secular tailwinds should drive growth and, in turn, margin expansion.

BSD Analysis:
Vulcan initiated a position in Qorvo, viewing the company as a leader in the critical RF semiconductor space with strong competitive positioning. The investment thesis centers on the secular trend of increasing RF content per device as telecommunications technology becomes more complex and data needs grow. Qorvo operates in an oligopoly structure with high barriers to entry, as only a few companies can produce these increasingly sophisticated chipsets at scale. The fund sees significant opportunity in adjacent growth markets including IoT, satellite communications, and Wi-Fi applications that should diversify revenue streams over time. While acknowledging recent headwinds including weak China demand, channel inventory issues, and factory underutilization, Vulcan believes these are cyclical challenges that mask the underlying secular growth drivers. The combination of essential technology positioning, oligopoly market structure, and expanding addressable markets should drive long-term growth and margin expansion as the business cycle normalizes.

Pitch Summary:
Planet Fitness pioneered the "high value, low price" (HVLP) gym model and operates over 2,500 gyms globally with 18.7 million members. Their straightforward, no-frills approach offers excellent value, appealing to a diverse and casual fitness demographic. Members enjoy a clean environment, regularly updated equipment, and accessible pricing starting at $10 per month, with their premium "Black Card" membership providing extensive benefits and access to all locations. Planet Fitness captured roughly 90% of U.S. gym membership growth from 2011-2019. The company's dominant scale coupled with high advertising spend drives powerful growth, and the company plans to double its number of U.S. locations. Planet Fitness demonstrates robust same-store sales growth, high EBIT margins, strong returns on capital, and excellent free cash flow conversion.

BSD Analysis:
Vulcan initiated a position in Planet Fitness, attracted to the company's disruptive "high value, low price" business model that has proven highly successful in capturing market share. The fund sees significant runway for growth, with management planning to double U.S. locations from the current 2,500+ base. Planet Fitness's dominant market position is evidenced by capturing 90% of U.S. gym membership growth from 2011-2019, demonstrating the appeal of their accessible $10/month pricing model. The company's scale advantages enable high advertising spend that drives continued growth while maintaining strong unit economics. With 18.7 million members and a focus on the casual fitness demographic, Planet Fitness has built a differentiated franchise model. The combination of robust same-store sales growth, high EBIT margins, strong returns on capital, and excellent free cash flow conversion creates an attractive investment profile for long-term value creation.

Pitch Summary:
NICE is a global enterprise software company that provides mission-critical contact center software. NICE was a material contributor last quarter. As we said last quarter, the company continues to perform well, and fundamentals are strong. Cloud revenue has grown in line with our expectations. We believe that generative AI will continue to drive cloud adoption and that AI is an opportunity rather than a threat to NICE's business. As the leading platform in the space, the company has many competitive advantages that position them well to win. Cloud penetration is in the low 20% range today and AI will likely accelerate cloud adoption, which should benefit NICE. We believe that this growth will more than offset any seat count attrition due to automation. Furthermore, data and customer examples show AI is driving higher levels of revenue per customer and that AI specific product adoption is increasing rapidly. We followed our discipline and added to our position during the quarter.

BSD Analysis:
Vulcan maintains a bullish stance on NICE, viewing the company as a dominant player in the mission-critical contact center software space. The fund manager sees generative AI as a significant growth catalyst rather than a threat, believing it will accelerate cloud adoption and drive higher revenue per customer. With cloud penetration currently in the low 20% range, NICE appears well-positioned to benefit from this secular shift. The company's competitive moat as the leading platform provider gives it advantages in capturing AI-driven opportunities. Despite some concerns about seat count reduction due to automation, management believes AI-driven revenue growth will more than compensate. The fund's decision to add to the position during a period of underperformance demonstrates conviction in the long-term thesis and adherence to their value discipline.

Pitch Summary:
ISS A/S is a facility management company, specializing in services that are non-core to their customers. Its services include routine and specialized cleaning, food management and catering, building management, security, and other services. We like the company's scale, focus, geographic footprint, wide array of services, employee base, and sticky customer relationships. Its focus on services that are non-core to its customers allows for the company to benefit from the trend of outsourcing these types of services. The company executed well throughout the pandemic showing consistent progress towards its goals including growth, margins, free cash flow, and financial leverage. The company has improved margins and is entering a relatively more normalized operating environment, and it continues to trade at an attractive discount to our estimate of fair value.

BSD Analysis:
Vulcan's investment in ISS A/S is based on the company's strong positioning in the outsourced facility management market, benefiting from the secular trend of businesses focusing on core competencies while outsourcing non-essential services. The fund appreciates ISS's comprehensive service offering including cleaning, catering, security, and building management, which creates cross-selling opportunities and deeper customer relationships. The company's global scale, geographic diversification, and large employee base provide competitive advantages in winning and servicing large contracts. Vulcan highlights ISS's resilient performance during the pandemic, demonstrating the defensive nature of the business and management's ability to execute on strategic objectives including growth, margin improvement, free cash flow generation, and balance sheet optimization. The company's sticky customer relationships and essential service nature provide revenue stability and pricing power. With ISS entering a more normalized operating environment following pandemic-related disruptions, Vulcan sees the combination of improved operational efficiency and attractive valuation as creating a compelling investment opportunity with potential for continued margin expansion and cash flow growth.

Pitch Summary:
CoStar Group is a premier information services provider to the commercial and residential real estate industries. It is founder led, sells access to mission critical data and information assets, and is supported by a largely recurring, subscription-based revenue model. While it is difficult to pinpoint the exact reason for the stock's underperformance over the last quarter, its operating results continue to impress us. Therefore, with a stable value, we followed our discipline and added to our position.

BSD Analysis:
Vulcan's investment thesis for CoStar Group centers on the company's dominant position as a premier information services provider to the real estate industry with mission-critical data assets. The fund values the founder-led management structure, which often provides long-term strategic vision and alignment with shareholder interests. CoStar's subscription-based revenue model offers attractive recurring revenue characteristics that provide predictable cash flows and high customer retention rates. Despite recent stock underperformance, Vulcan emphasizes that the company's operating results continue to be impressive, suggesting strong underlying business fundamentals that are not reflected in the current stock price. The fund's decision to add to the position during a period of underperformance demonstrates confidence in their valuation assessment and adherence to their disciplined value investing approach. CoStar's position as a critical data provider in the real estate ecosystem likely creates high switching costs and pricing power, supporting the sustainability of its competitive advantages and recurring revenue model.

Pitch Summary:
During the first quarter, Alphabet's revenue growth accelerated and margins expanded. The company continues to introduce new search pathways with advanced models and algorithms that are 100 times more efficient than they were 18 months ago. Disruption risks to core search from generative AI have not completely abated, but Alphabet's technical prowess and historical investments in leading technologies are becoming more apparent.

BSD Analysis:
Vulcan maintains a bullish stance on Alphabet, highlighting the company's strong operational performance with accelerating revenue growth and margin expansion. The fund emphasizes Alphabet's significant technological advancement, noting that the company's search algorithms have become 100 times more efficient over just 18 months, demonstrating rapid innovation capabilities. While acknowledging that generative AI disruption risks to core search business persist, Vulcan appears increasingly confident in Alphabet's competitive positioning due to its technical expertise and substantial historical investments in advanced technologies. The fund's commentary suggests that Alphabet's deep AI capabilities and technological infrastructure provide defensive moats against potential disruption while positioning the company to benefit from the AI revolution. The combination of improving financial metrics, technological leadership, and strategic positioning in AI appears to reinforce Vulcan's conviction in Alphabet's ability to maintain its dominant market position while capitalizing on emerging opportunities in artificial intelligence and related technologies.

Pitch Summary:
Sdiptech acquires and develops niche infrastructure companies that contribute to more sustainable, efficient, and safe societies. Today, Sdiptech is a collection of approximately 40 operating businesses. We believe these businesses are positioned well to compete and possess a natural ability to grow their competitive moats. Sdiptech's management team has appropriately navigated the varied markets over the past few years and has consistently operated with the long-term in mind. Over the last two years, the stock price has traded at a substantial discount to our estimate of fair value. We followed our discipline and added to the position accordingly. The recent share price increase could be attributed to the company's consistently strong operating performance.

BSD Analysis:
Vulcan's investment in Sdiptech reflects confidence in the company's acquisition-driven strategy focused on niche infrastructure businesses with sustainable competitive advantages. The fund appreciates Sdiptech's portfolio of approximately 40 operating companies that serve essential infrastructure needs while contributing to sustainability, efficiency, and safety objectives. Vulcan highlights management's long-term orientation and ability to navigate varied market conditions as key strengths, suggesting strong capital allocation capabilities across the diverse business portfolio. The fund's decision to add to the position during a period when the stock traded at a substantial discount to estimated fair value demonstrates disciplined value investing and conviction in the underlying business quality. Recent share price appreciation appears to reflect the market's recognition of consistently strong operating performance across the portfolio companies. Sdiptech's focus on niche infrastructure markets likely provides defensive characteristics and pricing power, while the acquisition strategy offers opportunities for continued growth and value creation through operational improvements and synergies across the platform.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the U.S. and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan's investment in CarMax is predicated on the company's competitive advantages in a highly fragmented used car market through its omnichannel approach and digital infrastructure investments. The fund sees CarMax as well-positioned to gain market share from both traditional independent dealers lacking digital capabilities and digital-only competitors now prioritizing profitability over growth. The company's scale advantages are evident through its position as the largest used car retailer and third-largest wholesale business, complemented by a substantial captive finance operation that enhances profitability per vehicle. Vulcan highlights management's recent focus on balance sheet deleveraging and operational right-sizing as key de-risking measures that position the company for improved performance when industry volumes normalize. The combination of enhanced digital customer experience, leaner cost structure, and strengthened competitive positioning suggests CarMax is emerging from a challenging period with improved operational efficiency and market positioning. This strategic repositioning, coupled with the company's scale advantages in a fragmented market, supports Vulcan's bullish outlook for sustainable market share gains and improved returns on capital.

Pitch Summary:
Qorvo is a leader in radio frequency (RF) systems and power management solutions for mobile devices, wireless infrastructure, aerospace and defense, the Internet of Things, and various other applications. Qorvo's chipsets are a small cost but are critical components in modern mobile devices. As data needs increase and telecommunications technology continues to evolve and become more complex, more RF content is needed in each device. The complexity and barriers to entry intensify as content requirements increase and space constraints become more pronounced. Qorvo operates in an oligopoly with only a small number of companies capable of producing these increasingly complex chipsets at scale. Qorvo should also benefit as growth accelerates in adjacent markets and these markets eventually become a larger piece of the business through the adoption of the Internet of Things, satellite, Wi-Fi, and other markets. The company has faced headwinds over the past few years including lower demand in China, excess inventory in the channel, and factory underutilization; but secular tailwinds should drive growth and, in turn, margin expansion.

BSD Analysis:
Vulcan's investment thesis for Qorvo is built on the company's position in an oligopolistic RF semiconductor market with increasing barriers to entry. The fund recognizes that while Qorvo's chipsets represent a small cost component in mobile devices, they are mission-critical, providing pricing power and customer stickiness. The secular trend toward more complex telecommunications technology and increasing data needs drives higher RF content per device, creating a favorable long-term growth trajectory. Vulcan appears to view recent headwinds including weak China demand, channel inventory issues, and factory underutilization as temporary cyclical challenges rather than structural problems. The investment case is strengthened by Qorvo's exposure to emerging growth markets including Internet of Things, satellite communications, and Wi-Fi, which could diversify revenue streams beyond traditional mobile applications. The combination of oligopolistic market structure, increasing technical complexity, and secular growth drivers in adjacent markets positions Qorvo for potential margin expansion as operating leverage improves with volume recovery.

Pitch Summary:
Planet Fitness pioneered the "high value, low price" (HVLP) gym model and operates over 2,500 gyms globally with 18.7 million members. Their straightforward, no-frills approach offers excellent value, appealing to a diverse and casual fitness demographic. Members enjoy a clean environment, regularly updated equipment, and accessible pricing starting at $10 per month, with their premium "Black Card" membership providing extensive benefits and access to all locations. Planet Fitness captured roughly 90% of U.S. gym membership growth from 2011-2019. The company's dominant scale coupled with high advertising spend drives powerful growth, and the company plans to double its number of U.S. locations. Planet Fitness demonstrates robust same-store sales growth, high EBIT margins, strong returns on capital, and excellent free cash flow conversion.

BSD Analysis:
Vulcan's investment in Planet Fitness centers on the company's successful disruption of the traditional gym industry through its high-value, low-price model. The fund highlights Planet Fitness's impressive market share capture, having secured roughly 90% of U.S. gym membership growth from 2011-2019, demonstrating the effectiveness of their strategy in targeting casual fitness consumers. With over 18.7 million members across 2,500 locations, the company has achieved significant scale advantages that support high advertising spend and drive continued growth. The accessible $10 monthly pricing model creates a low barrier to entry while the premium Black Card membership provides additional revenue opportunities. Vulcan appears attracted to the company's expansion potential, noting plans to double U.S. locations, which could significantly increase market penetration. The combination of robust same-store sales growth, high EBIT margins, strong returns on capital, and excellent free cash flow conversion suggests a highly efficient and profitable business model that aligns with Vulcan's investment criteria.

Pitch Summary:
NICE is a global enterprise software company that provides mission-critical contact center software. NICE was a material contributor last quarter. As we said last quarter, the company continues to perform well, and fundamentals are strong. Cloud revenue has grown in line with our expectations. We believe that generative AI will continue to drive cloud adoption and that AI is an opportunity rather than a threat to NICE's business. As the leading platform in the space, the company has many competitive advantages that position them well to win. Cloud penetration is in the low 20% range today and AI will likely accelerate cloud adoption, which should benefit NICE. We believe that this growth will more than offset any seat count attrition due to automation. Furthermore, data and customer examples show AI is driving higher levels of revenue per customer and that AI specific product adoption is increasing rapidly. We followed our discipline and added to our position during the quarter.

BSD Analysis:
Vulcan maintains a bullish stance on NICE, viewing the company as a dominant player in the mission-critical contact center software space with strong competitive positioning. The fund manager sees generative AI as a catalyst rather than a threat, believing it will accelerate cloud adoption and benefit NICE's business model. With cloud penetration currently in the low 20% range, there appears to be significant runway for growth as enterprises migrate to cloud-based solutions. The manager highlights that AI is already driving higher revenue per customer and increasing adoption of AI-specific products, suggesting strong monetization potential. Despite concerns about potential seat count reduction due to automation, Vulcan believes the revenue growth from AI adoption will more than offset any headwinds. The fund's decision to add to the position during a period of stock underperformance demonstrates conviction in the long-term thesis and adherence to their value discipline.

Pitch Summary:
CNH Industrial was the top detractor during the quarter. The U.S.-headquartered manufacturer of agriculture and construction equipment announced that CEO Scott Wine will be replaced by Gerrit Marx, CEO of Iveco Group, effective July 1, 2024. Scott made significant contributions to CNH Industrial in the areas of product, technology, and cost efficiency and we were disappointed to see him leave the business. We met with both Executive Chair Suzanne Heywood and Scott in April, which provided insight into the management change. CNH Industrial also slightly reduced guidance for 2024 when reporting first quarter results due to a weaker agriculture equipment market. This reduction was consistent with our forecasts and does not impact our view of the long-term profitability potential of the business. We believe that CNH Industrial's position within the structurally attractive agriculture equipment market will improve in the coming years. As a result, we continue to believe the stock is compelling.

BSD Analysis:
Despite being the quarter's top detractor, the manager maintains conviction in CNH Industrial as a compelling investment opportunity. The fund acknowledges disappointment with CEO Scott Wine's departure, recognizing his contributions to product development, technology advancement, and cost efficiency improvements. However, management met with leadership in April to gain insight into the transition to new CEO Gerrit Marx from Iveco Group. The slight 2024 guidance reduction due to weaker agricultural equipment markets aligned with the fund's expectations and doesn't alter their long-term thesis. The manager believes CNH Industrial is well-positioned within the structurally attractive agriculture equipment sector. The investment case rests on the company's market position and expected improvement in coming years. This represents a cyclical value play with long-term structural tailwinds in agricultural equipment demand.

Pitch Summary:
Alphabet was the top contributor during the quarter. The stock price rose after the U.S.-based communication services company reported first-quarter operating income growth of 31% versus the prior year. We believe management's cost reduction initiatives will improve operating efficiency and lead to faster earnings growth. In addition, we expect the company's new AI-powered features showcased at the recent Google I/O conference will increase the value of its products to users. At the current share price, we continue to see upside to our estimate of Alphabet's intrinsic value.

BSD Analysis:
The manager maintains a bullish stance on Alphabet following strong Q1 results that showed 31% operating income growth year-over-year. The investment thesis centers on operational efficiency improvements through management's cost reduction initiatives, which should drive accelerated earnings growth. The fund sees additional value creation from AI-powered features unveiled at Google I/O, expecting these innovations to enhance product value for users. The manager believes the current share price offers upside to their intrinsic value estimate. This represents a quality growth play in the communication services sector with multiple catalysts for value creation. The position benefited from strong quarterly performance and remains a conviction holding. The combination of operational leverage and AI innovation positions Alphabet well for continued outperformance.

BSD Analysis:
Oakmark identifies Etsy as a post-pandemic recovery play, emphasizing the transformational leadership of CEO Josh Silverman since 2017. The fund views the current market pessimism as excessive, with investors overly focused on near-term growth timing rather than long-term fundamentals. The thesis centers on Etsy's unique positioning in creative goods marketplaces and international expansion opportunities as key growth drivers. Management's successful transformation from a "borderline nonprofit" to a higher-margin, faster-growing enterprise demonstrates operational excellence. The COVID-19 acceleration followed by subsequent decline has created a compelling valuation entry point. Oakmark believes the macro environment for Etsy's product categories will eventually improve, positioning the company for renewed growth. The international expansion strategy provides additional runway for long-term revenue growth beyond the core domestic market.

Pitch Summary:
Deere & Company is a leading manufacturer of agricultural equipment with dominant market share positions in North America and Brazil. Despite its brand strength, technological capabilities and distribution advantages, the company's stock price has recently come under pressure due to investor fears of a trough in the current agriculture business cycle. Longer term, however, world population and food demand are expected to increase annually with land and labor devoted to agriculture set to decline each year. As a technological leader, we believe Deere is well-positioned to benefit from this dynamic as farms will need to become more productive. We also like that the company's management team has a strong track record of growing the business organically through cycles, continuously improving returns on invested capital and returning capital to shareholders. We believe Deere is worth about the same P/E as high-quality industrials, so we were excited to buy it at roughly two-thirds that level.

BSD Analysis:
Oakmark presents a compelling contrarian thesis on Deere, viewing the current agricultural cycle trough as a buying opportunity. The fund emphasizes Deere's dominant market positions in North America and Brazil, coupled with superior technological capabilities that position the company to benefit from long-term agricultural productivity trends. Management's track record of organic growth through cycles and disciplined capital allocation provides additional confidence. The valuation argument is particularly attractive, with shares trading at approximately two-thirds the P/E multiple of comparable high-quality industrials. The secular tailwinds of growing global food demand amid declining agricultural land and labor create a favorable backdrop for Deere's technology-driven solutions. This combination of cyclical opportunity and structural advantages supports the bull case despite near-term headwinds.