Investment Pitches

Pitch Summary:
Alight, Inc. is a leading cloud-based human capital technology provider of enterprise-level software that helps businesses and their employees manage critical human resources functions. Through its investments in software and automation, Alight has built a distinct advantage that allows its customers to deliver HR services at a much lower cost while providing a better experience for employees. We slightly trimmed the position early in the quarter when the stock appreciated on the announced sale of a non-strategic business unit and news that an activist investor had initiated a position. Later in the period, the stock declined when Alight announced weaker-than-expected results. We believe the softer quarter will prove to be an isolated event.

BSD Analysis:
The manager maintains conviction in Alight's cloud-based HR technology platform despite recent earnings disappointment. The investment thesis centers on the company's competitive advantage through software automation that delivers cost savings and improved employee experience for enterprise clients. The manager's tactical trading approach demonstrates portfolio discipline, trimming on strength from asset sale news and activist involvement, then holding through weakness. The characterization of weak results as an "isolated event" suggests confidence in the underlying business model and long-term growth trajectory. Alight's enterprise-focused SaaS model provides recurring revenue visibility and scalability. The human capital management market continues expanding as companies digitize HR functions, supporting the structural growth opportunity.

Pitch Summary:
Byrna Technologies, Inc. is a leading at-home self-defense company that designs, manufactures, and sells non-lethal alternative defense solutions for consumers and law enforcement. Primarily sold through Byrna's e-commerce store and Amazon storefront, Byrna's non-lethal handheld and shoulder-fired personal security devices do not require a background check or firearm license. We believe the company's innovative solutions have an expansive opportunity for growth. While the company continues to execute well and fundamentals remain strong, the stock price softened in the quarter as a result of relatively low trading volumes and subsequently, we trimmed our position.

BSD Analysis:
The manager presents a bullish case for Byrna Technologies based on its differentiated non-lethal defense solutions targeting both consumer and law enforcement markets. The investment thesis highlights the regulatory advantage of products that bypass background check requirements, creating a broader addressable market than traditional firearms. The direct-to-consumer distribution strategy through e-commerce and Amazon provides scalable growth potential with attractive margins. Despite strong fundamental execution, the manager acknowledges position trimming due to liquidity concerns reflected in low trading volumes. The "expansive opportunity for growth" suggests early-stage market penetration in a large total addressable market. The company's innovative approach to personal security addresses growing safety concerns while avoiding regulatory friction.

Pitch Summary:
LegalZoom.com Inc. is a leading online platform providing small businesses with legal, compliance, and tax services that allow them to start and operate within the required regulations. The stock underperformed during Q2 on weak guidance from management that indicated its small businesses, the company's core customers, were under pressure. We believe that the company will continue to gain share due to its strong brand and network effects which will allow them to sell on a broad range of services to small businesses. We also see room for significant operating leverage as the expanded range of products and services begins to generate revenue after several years of investment. We added to our position during the period on share price weakness.

BSD Analysis:
The manager maintains a bullish stance on LegalZoom despite Q2 underperformance driven by weak guidance reflecting pressure on small business customers. The investment thesis centers on the company's competitive moat through strong brand recognition and network effects, enabling cross-selling opportunities across an expanding service portfolio. The manager sees significant operating leverage potential as multi-year product investments begin monetizing. The decision to add to the position during weakness demonstrates conviction in the long-term value proposition. This contrarian approach suggests confidence that current small business headwinds are temporary while the structural growth opportunity remains intact. The platform's regulatory compliance focus provides defensive characteristics in an increasingly complex business environment.

Pitch Summary:
FIVN was a top detractor in the quarter after reporting better-than-expected first quarter earnings accompanied by revenue guidance for the second quarter that was slightly below expectations. The 2Q24 shortfall is related to the pace at which some large deals will realize revenue through the year, while the company kept its full year 2024 guidance the same. FIVN reported $247 million of revenue, 13% year-over-year revenue growth and $7 million higher than estimates, and $0.48 of EPS, 17% growth and $0.10 better than estimates. Five9 is a leader in providing cloud-based software to contact centers. The company's suite of applications provides contact center agents with a unified communication platform (voice, email, text, chat, web, social) and a desktop of tools to help agents engage customers more quickly and effectively. FIVN is well-positioned as contact centers transition to the cloud and has high customer retention (112% net revenue retention last quarter). The company doubled its strategic sales team over the past year and signed new partnerships with AT&T, CDW and Microsoft. We believe the company can grow its top line in the high teens, while improving on its 1Q 61% gross margin and 11% operating income margin, leading to 20%+ EPS growth for the foreseeable future.

BSD Analysis:
The manager maintains a bullish outlook on Five9 despite near-term guidance concerns, focusing on strong underlying fundamentals and secular cloud migration trends. Q1 results demonstrated solid execution with 13% revenue growth to $247 million, exceeding estimates by $7 million, and EPS of $0.48 beating by $0.10. The slight Q2 guidance miss relates to large deal timing rather than fundamental demand weakness, with full-year guidance unchanged. Five9's leadership position in cloud-based contact center software benefits from the ongoing digital transformation of customer service operations. The unified communication platform spanning voice, email, text, chat, web, and social channels provides comprehensive solutions for modern contact centers. Strong customer retention metrics with 112% net revenue retention indicate high customer satisfaction and expansion opportunities. Strategic investments including doubling the sales team and partnerships with AT&T, CDW, and Microsoft should accelerate growth. The manager projects high-teens revenue growth with margin expansion from current 61% gross margins and 11% operating margins, targeting 20%+ EPS growth driven by operating leverage.

Pitch Summary:
ADYEN was a top detractor in the quarter following a 1Q24 trading update that included higher than expected volumes (+46% year-over year growth versus 37% expected), but with lower-than-expected take rates (147 basis points versus 155 basis points). This resulted in revenue that was slightly below consensus estimates. Payment volume growth was strong across all segments with digital leading the way at +51%. The 3-basis-point decline in take rate was attributed to existing customers growing rapidly and hitting price reduction tiers. We believe that volume growth is more important than near-term take rate movements. The company operates a global payments platform, integrating the full payments stack to serve modern global merchants. Unlike many of its legacy peers, Adyen's roots are in technology designed specifically for multi-platform sellers. The company's platform was fully built in-house on a single code base and operates as a single, integrated end-to-end network, giving it an advantage over competitors that have separate platforms for gateway, risk management, processing, issuing, acquiring and settlement. The company's single platform also allows its merchant customers to use one payment service provider globally across all commerce channels (in-store, on the web, and on mobile devices), providing them lower payment costs, a single back end, a single contract and better visibility of end customers. We believe that the transition to next-generation, single-provider, omni-channel payment processing is in its infancy, and we believe the company will continue to take market share against its competitors. The company should have healthy revenue growth in the coming quarters as it rolls out more products and features, and we expect margins to expand as it leverages its fixed cost infrastructure.

BSD Analysis:
Despite being a detractor due to take rate compression, the manager maintains conviction in Adyen's superior technology platform and long-term growth trajectory. Payment volumes exceeded expectations with 46% year-over-year growth versus 37% expected, demonstrating strong underlying demand. Digital segment leadership with 51% growth highlights Adyen's competitive positioning in high-growth channels. The manager correctly prioritizes volume growth over near-term take rate fluctuations, as existing customers hitting price reduction tiers indicates successful client expansion. Adyen's technological differentiation through a single, integrated platform built in-house provides significant advantages over legacy competitors using multiple disparate systems. The unified global platform offers merchants lower costs, operational simplicity, and enhanced customer visibility across all commerce channels. The manager views the transition to next-generation omni-channel payment processing as early stage, positioning Adyen to capture market share. Expected margin expansion through fixed cost leverage and new product rollouts should drive healthy revenue growth despite temporary take rate headwinds.

Pitch Summary:
DIS was the top detractor in the quarter following a mixed earnings report, with operating income, EPS, and free cash flow all roughly in line, but weakness in segment revenue and operating income. The Entertainment segment saw slightly weaker than expected revenue and operating income due to lighter Content Sales and Licensing partially offset by stronger Linear Networks and Direct-to-Consumer (DTC). The DTC business grew, with Disney+ Core adding more subscribers than expected (+6.3m v +5.8m) and generated $47 million of operating income versus expectations of breakeven. The Sports segment generated revenue below expectations, but operating income was better than expected, both driven by ESPN. The Experiences segment beat both revenue and operating income expectations on the back of strong international parks results, price increases at Walt Disney World and cruises, but Disneyland unexpectedly had negative growth in the quarter. In addition, guidance for slightly weaker Experiences revenue and operating income growth as visitor growth normalizes post-Covid also weighed on the stock. DIS is blessed with a deep library of unique content that includes both live sports (providing large, non-time shifted audiences) and incomparable brands, including Disney, Marvel, Pixar and Lucasfilm, as well as the ABC network, which make it among the best-positioned media companies in the new landscape to combine multi-channel and DTC distribution. In addition, its theme park, cruise and theatrical businesses continue to be generational rites of passages for children and young adults around the world. We think CEO Bob Iger is doing a steady job rationalizing investments in each of the company's segments, which should lead to higher and more consistent profitability at the theme parks, better value realization in the linear assets, and consolidation of the company's DTC assets leading to higher profitability sooner. We therefore expect DIS to grow its free cash flow significantly over the next 3-4 years, from its depressed $1 billion in 2022, to more than double 2023's $4.9 billion, exceeding its previous $10 billion peak in 2018.

BSD Analysis:
Despite being a top detractor, the manager maintains a constructive bull thesis on Disney based on unique content assets and operational improvements under CEO Bob Iger. The mixed earnings showed resilience with Disney+ Core exceeding subscriber expectations by adding 6.3 million versus 5.8 million expected, while achieving $47 million operating income against breakeven expectations. The manager emphasizes Disney's unparalleled content library including live sports, Disney, Marvel, Pixar, and Lucasfilm brands that provide competitive advantages in the evolving media landscape. Theme parks demonstrated strength internationally with successful price increases, though Disneyland faced unexpected headwinds. The investment thesis centers on Iger's strategic rationalization across segments driving margin improvement and cash flow recovery. The manager projects significant free cash flow growth from the depressed $1 billion in 2022 to potentially exceeding the previous $10 billion peak by 2026-2027. Disney's multi-generational appeal and diversified revenue streams across parks, streaming, and content licensing provide defensive characteristics during the streaming transition.

Pitch Summary:
Apple shares were a top contributor in the quarter after a difficult start to the year. The stock was down nearly 11% in the first quarter, driven by factors we discussed in last quarter's update, including an antitrust case, an Apple Watch patent dispute, and slowing China iPhone sales. Ultimately the company's fiscal 2Q24 earnings report delivered a slightly better than expected quarter on both the top and bottom lines and guidance that was also better than investor expectations. Better 2Q24 revenue and gross margins were driven by stronger than expected Services revenues, which grew 14% year-over-year, continuing a multi-quarter trend of accelerating growth. Gross margins of 46.6% expanded from last quarter's decade high of 45.9%. Guidance of $90 billion of revenue for 3Q24 was roughly in line with published expectations, reassuring investors. The stock also got a boost from research reports suggesting that iPhone sales may see a boost from an upgrade cycle driven by the upcoming rollout of Apple's AI assistant. Although near-term trends are a bit muted, Apple is carrying lean inventory into an iPhone refresh cycle later this year and easing comps in the rest of its portfolio. With an installed base of 2.2 billion active devices and significant growth in the company's recurring revenue Services segment, we believe that Apple remains one of the most innovative, best positioned and most profitable companies in the mobile technology industry.

BSD Analysis:
The manager presents a recovery story for Apple following a challenging first quarter decline of 11% due to antitrust concerns, patent disputes, and China headwinds. The Q2 earnings demonstrated resilience with better-than-expected results across revenue and margins, restoring investor confidence. Services revenue growth of 14% year-over-year represents accelerating momentum in the high-margin recurring revenue segment. Gross margins expanded to 46.6% from the previous decade high of 45.9%, showcasing operational efficiency improvements. The manager highlights Apple's massive installed base of 2.2 billion active devices as a competitive moat driving Services growth. Upcoming iPhone refresh cycle with AI integration could catalyze an upgrade supercycle, supported by lean inventory positioning. Despite near-term headwinds, the combination of margin expansion, Services acceleration, and AI-driven product innovation reinforces Apple's position as a dominant mobile technology franchise. The Q3 guidance of $90 billion revenue meeting expectations provides stability for the recovery narrative.

Pitch Summary:
GOOG was a top contributor in the second quarter following strong first quarter earnings driven by better-than-expected Search and YouTube revenues and a reacceleration in the company's Cloud business. AI advances helped improve targeting and measurement in the company's advertising businesses, including in YouTube's fast growing Shorts segment. Google Search revenue was $46 billion, YouTube revenue was $8 billion, and Cloud revenue was $10 billion, 3%, 5% and 2% better than expected respectively. Margins in both operating segments, Services and Cloud, were also ahead of expectations leading to $1.89 of EPS, 25% higher than estimates. With its high margin business model (42% EBITDA margins last quarter), continued strength across its core Search and YouTube franchises, and continued growth and expanding profitability in its still relatively small Cloud business, we continue to view Alphabet as among the best-positioned secular growth franchises in the market. Additionally, GOOG shares trade at a compelling 19x the Street's 2025 EPS estimate, a discount to the Russell 1000 Growth Index.

BSD Analysis:
The manager maintains a strong bull thesis on Alphabet based on robust fundamentals across all business segments and attractive valuation. The company delivered impressive Q1 results with Search, YouTube, and Cloud revenues all exceeding expectations by 3%, 5%, and 2% respectively. AI integration is driving improved targeting and measurement capabilities, particularly benefiting YouTube's rapidly growing Shorts segment. The manager emphasizes Alphabet's exceptional profitability with 42% EBITDA margins and diversified revenue streams providing stability. Cloud business reacceleration demonstrates progress in the competitive enterprise market while maintaining expanding profitability. EPS of $1.89 came in 25% above estimates, reflecting operational excellence across segments. The valuation argument is compelling at 19x 2025 EPS estimates, trading at a discount to growth indices despite superior fundamentals. The combination of secular growth positioning, margin expansion, and reasonable valuation makes Alphabet an attractive long-term holding.

Pitch Summary:
NVDA shares were our top contributor in the quarter following blowout 1Q results and guidance driven by strong data center sales (+427% year-over-year). The company reported revenue of $26 billion, up 262% year-over-year, and EPS of $6.12, up 462% year-over-year and 9% ahead of expectations. Revenue guidance for 2Q of $28 billion was 5% above very high expectations. The artificial intelligence arms race kicked-off by ChatGPT and Alphabet's Bard, among others, has generated tremendous demand for Nvidia's next generation graphic processors. NVDA is the leading designer of graphics processing units (GPU's) required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming-focused chip vendor to one of the largest semiconductor/software vendors in the world. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. Following recent results, Jensen Huang, founder and CEO of NVIDIA stated in the company's press release, "a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process."

BSD Analysis:
The manager presents a compelling bull case for NVIDIA driven by the AI revolution and exceptional financial performance. The company delivered extraordinary Q1 results with 262% revenue growth and 462% EPS growth, significantly beating expectations. NVIDIA's dominant position in GPU technology positions it as the primary beneficiary of the AI infrastructure buildout, with data center sales surging 427% year-over-year. The manager highlights NVIDIA's successful transformation from a gaming-focused company to a diversified semiconductor leader with over 20% revenue CAGR over the past decade. The asset-light business model generates substantial free cash flow while expanding operating margins. CEO Jensen Huang's vision of a trillion-dollar infrastructure transition from general purpose to accelerated computing validates the massive addressable market opportunity. The strong Q2 guidance of $28 billion revenue, exceeding high expectations, demonstrates continued momentum in AI demand.

Pitch Summary:
EPAM Systems: The company provides digital platform engineering and software development services worldwide. Slowing demand has pressured the stock, and shares declined further after management significantly reduced its revenue guidance. This allowed us to purchase a cash generative business at an attractive valuation.

BSD Analysis:
The manager positions EPAM Systems as a high-quality technology services company available at a compelling valuation following recent operational challenges. The company specializes in digital platform engineering and software development services for global clients. Weakening demand conditions have created headwinds for the business, culminating in management's decision to significantly reduce revenue guidance. This guidance cut triggered additional selling pressure, creating what the manager views as an attractive entry opportunity. The investment thesis emphasizes EPAM's strong cash generation capabilities and proven business model in digital transformation services. The manager appears confident that current demand weakness is cyclical rather than structural, making the current valuation particularly attractive for a business of this quality. This represents a classic value play on a temporarily distressed but fundamentally sound technology services provider.

Pitch Summary:
Endava: Endava is a UK-based technology consulting firm that provides a variety of IT services –including infrastructure, artificial intelligence, cloud-based software and payment services – to businesses worldwide. After robust IT spending during the pandemic, Endava has experienced slowing client demand more recently, leading to a decline in the stock price. However, we believe the long-term trend toward digitization is a strong tailwind, and we used this opportunity to purchase the stock at a significant discount.

BSD Analysis:
The manager presents Endava as a compelling technology services play experiencing temporary cyclical headwinds. The UK-based firm operates across multiple high-growth IT verticals including AI, cloud infrastructure, and payment services for global enterprise clients. Following the pandemic-driven IT spending boom, the company has faced a natural deceleration in client demand, pressuring shares lower. The manager views this as a temporary cyclical downturn rather than a structural impairment to the business model. They emphasize the secular digitization trend as a powerful long-term catalyst that should drive sustained demand for Endava's services. The investment thesis relies on the company's positioning in high-value technology consulting segments and the expectation that current demand weakness will prove transitory. This represents a growth-at-a-reasonable-price opportunity in the technology services sector.

Pitch Summary:
Globe Life: The company provides insurance services such as whole and term life insurance, supplemental health policies and annuities to lower- and middle-income customers. Globe Life declined in April following news of an informal SEC investigation into allegations of unethical business practices. This gave us an opportunity to purchase the stock at a deep discount to intrinsic value. We believe the current controversy is overblown, and we expect the stock to recover.

BSD Analysis:
The fund manager views Globe Life as an opportunistic value play following regulatory concerns. The company operates in the life and supplemental health insurance space, serving lower- and middle-income demographics. An informal SEC investigation into alleged unethical business practices created significant downward pressure on the stock price in April. The manager believes this regulatory overhang is temporary and overblown relative to the company's fundamental business quality. They capitalized on the market dislocation to acquire shares at what they consider a substantial discount to intrinsic value. The thesis centers on a recovery trade as regulatory concerns subside and the market refocuses on the company's underlying insurance operations. This represents a classic contrarian value investment where temporary negative sentiment creates an attractive entry point.

Pitch Summary:
Interfor is a North American lumber producer with sawmills situated throughout the continent in close geographic location to major timber baskets. We recently bought more shares of what we believe is a company fighting well below its weight class. The lumber industry is currently depressed due to heavily discounted lumber prices, which have declined significantly from the Covid-19 boom period for myriad reasons including a slowdown in new housing construction caused by persistently high-interest rates. Within this context, it's no surprise that Interfor's stock is under pressure. However, our investment in Interfor is not based on short-term earnings speculation. We didn't buy more shares anticipating the bottom; we bought more shares because we believe the company is currently valued at a substantial discount to its intrinsic value, which is the present value of its future cash flows. This results in a high return opportunity with manageable risk. Our investment is predicated upon the replacement cost of Interfor's productive capacity. We believe that rebuilding Interfor's business would cost multiples of the current valuation, and we are also confident that North America still needs lumber. Of course, no one would spend the money to rebuild the business in the current environment given the lack of any economic return. In fact, the opposite is likely to happen as the financial stress continues to weigh on less cost competitive and weaker financed competitors and capacities. We have confidence in Interfor's management team, having met with them on multiple occasions. Our colleague Mike DeRop has toured several of their southern mills, meeting many of the team members. Through this first-hand research we have found both the people and its capital properties to be assets of high quality, even as it struggles through the current industry weakness. We like to focus on simple facts when we build our investment theses. Lumber pricing today is unsustainable. It has been below break-even for the last year. In this case we see that the best companies in the industry with the lowest costs and the best balance sheets are still losing money, and that is not sustainable. It follows then that if you believe lumber is still a necessary product the price will naturally have to return to more normalized levels of approximately $500 per thousand board feet, well above today's prices of ~$350. This pricing would lead to earnings not far off from the current market cap of the company. When this happens is what we cannot know, so we focus on the companies in the strong financial positions managed by savvy capital allocators who will be not only take advantage of the improved conditions simply surviving but also improve the ability of their businesses to generate free cash flow along the way. We would be remiss if we didn't note that the balance sheet has leverage today, which does cause strain, but believe this debt structure is manageable. We further believe that the company has several levers to pull should the strain grow to a less manageable level. An example of that is the companies have cumulative duties of $570m, which they only carry on their balance sheet for $160m. These are deposits that the company has paid over time that are held in trust by the U.S. and if they sold these assets today they would likely be able to get 35 cents on the dollar, with a back-in on incremental recoveries.

BSD Analysis:
Robotti has increased their position in Interfor, a North American lumber producer, viewing it as significantly undervalued relative to intrinsic value. The investment thesis is built on replacement cost analysis - rebuilding Interfor's productive capacity would cost multiples of current market valuation. Current lumber prices around $350 per thousand board feet are unsustainable and below break-even levels for even the most efficient producers. The fund expects normalization to approximately $500 per thousand board feet, which would generate earnings approaching the company's current market cap. Management quality has been validated through direct meetings and facility tours, providing confidence in capital allocation capabilities. While the balance sheet carries leverage creating near-term strain, the company has financial flexibility including $570 million in cumulative duties carried at only $160 million book value. The investment represents a classic value opportunity where temporary industry distress has created a substantial discount to intrinsic value for a quality operator with strategic assets.

Pitch Summary:
Recently, we made a strategic investment in ArcelorMittal S.A., marking our first direct investment in a steel producer in many years. We believe ArcelorMittal's focus on the more environmentally friendly EAF (electric arc furnace) method, combined with its attractive valuation, positions it as one of the best companies to capitalize on the ongoing changes in the steel industry. This investment highlights two of our core investment philosophies. First, our grassroots macroeconomic approach requires a deep understanding of a company's customers, suppliers, and competitors to gain a comprehensive view of the industry. This approach led us to identify ArcelorMittal and quickly grasp the dynamics surrounding its business. Second, this investment is a prime example of our "ugly duckling" strategy, where we seek undervalued companies with current obstacles but a strong potential for future growth. Despite facing challenges in recent years, including one-time events at their Kazakhstan operations and overall industry headwinds, we see significant upside for ArcelorMittal.

BSD Analysis:
Robotti has initiated a new position in ArcelorMittal, marking their first direct steel producer investment in years. The investment thesis centers on the company's strategic focus on electric arc furnace (EAF) technology, which is more environmentally sustainable than traditional blast furnace methods. This positions ArcelorMittal advantageously as the steel industry undergoes environmental transformation. The fund views this as an "ugly duckling" opportunity - a quality company trading at attractive valuations due to temporary headwinds. Recent challenges include operational issues at Kazakhstan facilities and broader industry weakness, but these appear to be transitory factors. The steel industry has seen significant M&A activity with large premiums to market prices, suggesting public markets are undervaluing steel assets. ArcelorMittal's global scale, technological advantages, and current valuation discount create compelling risk-adjusted return potential. The investment aligns with Robotti's contrarian approach of buying quality businesses during periods of industry distress.

Pitch Summary:
Corpay (CPAY), a fleet and corporate payments company, declined due to concerns of a macro slowdown in its fleet customers as well as declining gasoline prices. (Corpay earns a percentage on its customers' gasoline purchases.) The fleet business generates significant cash flow that the Founder & CEO has redeployed very effectively into corporate payments acquisitions. In fact, late in the quarter, Corpay announced its second largest corporate payments acquisition. We held our position because we are confident that the CEO (who owns $550M in shares of the company, which aligns our interests) will efficiently allocate capital at high ROIC into the corporate payments segment.

BSD Analysis:
The manager maintains conviction in Corpay despite near-term headwinds from macro concerns and declining gasoline prices affecting the fleet business. The investment thesis focuses on the company's strategic transformation through acquisitions in the higher-growth corporate payments segment, funded by strong cash flows from the fleet business. Management quality and alignment are key pillars of the investment case, with the founder-CEO owning $550 million in shares, ensuring strong alignment with shareholders. The manager emphasizes the CEO's proven track record of efficient capital allocation at high returns on invested capital. The recent announcement of the second-largest corporate payments acquisition demonstrates continued execution of the strategic pivot toward higher-margin, less cyclical revenue streams.

Pitch Summary:
Teva Pharmaceutical (TEVA), a global manufacturer of generic and branded drugs, outperformed its peers and the broader market in the second quarter due to positive clinical data, successful product launches, and stabilizing generic pricing. Promising first-quarter sales from newer products like Ajovy for migraine and Austedo for tardive dyskinesia and Huntington's continue to highlight its innovative capabilities. TEVA also provided positive phase 3 data on Olanzapine for schizophrenia and received approval for biosimilar versions of Humira and Stelara. These developments, along with a stabilizing generic market, have improved TEVA's financial performance in recent years, allowing it to reduce net leverage to ~3x, with further reductions planned. Despite this progress, many investors undervalue TEVA at a ~7x Enterprise value (EV)/EBITDA, treating it like a commodity-generic company despite its transformation. We continue to hold the security.

BSD Analysis:
The manager presents a compelling turnaround thesis for Teva Pharmaceutical, emphasizing the company's successful transformation from a commodity generic manufacturer to a more diversified pharmaceutical company with innovative capabilities. The investment case centers on multiple positive catalysts including strong performance from newer branded products like Ajovy and Austedo, positive clinical trial results, and successful biosimilar approvals. The manager highlights significant balance sheet improvement with net leverage reduction to 3x and plans for further deleveraging. The valuation argument is particularly strong, noting the market's failure to recognize Teva's transformation, trading at only 7x EV/EBITDA despite improved fundamentals. The stabilizing generic pricing environment provides additional tailwinds for the business model.

Pitch Summary:
Vertiv Holdings Co. (VRT) – Vertiv is a leading critical digital infrastructure technology company that should benefit from strong growth tied primarily to the buildout and expansion of data centers and associated needs of AI technologies, including graphics processing units (GPU). The company's cooling and power management products have earned significant traction in the marketplace, and we believe Vertiv will continue to gain market share in what is a long-tailed opportunity. The company's leadership position in direct-to-chip liquid cooling technology has been a competitive advantage. Foremost GPU chip manufacturer NVIDIA has recognized Vertiv as a strong partner. The computing requirements of AI will continue to accelerate data center infrastructure growth, which is still in a nascent stage. Vertiv's cooling and power management products are vital to run data centers efficiently and safely. About 75% of Vertiv's revenue is derived from "the data center." Among its competitors, it is the most exposed to this vertical. We believe the company can grow revenue in the low-double-digit percentage range, while we expect significant margin expansion and share buybacks should allow EPS to grow in the mid-20% range over the next few years. In our view, Vertiv is complementary to the portfolio's Industrials sector holdings in Trane Technologies and Quanta Services, which are also benefiting from megatrends surrounding power management and expansion and cooling efficiency.

BSD Analysis:
NewBridge initiated a position in Vertiv Holdings, viewing it as a pure-play beneficiary of AI-driven data center infrastructure growth. The manager emphasizes Vertiv's leadership position in critical digital infrastructure, particularly its competitive advantage in direct-to-chip liquid cooling technology that has earned recognition from NVIDIA as a key partner. The investment thesis centers on the company's dominant exposure to data centers (75% of revenue), positioning it to capture the accelerating demand for cooling and power management solutions driven by AI computing requirements. NewBridge believes the data center buildout is still in nascent stages, creating a long-tailed growth opportunity for Vertiv's specialized products that are vital for efficient and safe data center operations. The manager projects low-double-digit revenue growth with significant margin expansion potential, leading to mid-20% EPS growth over the next few years supported by share buybacks. NewBridge views Vertiv as complementary to other portfolio holdings like Trane Technologies and Quanta Services, creating a diversified exposure to power management and cooling efficiency megatrends. The company's market-leading position among competitors in data center exposure and its partnership with leading GPU manufacturers provide competitive moats in this rapidly expanding market.

Pitch Summary:
Trane Technologies plc (TT) – Having owned Trane Technologies in the past, we are familiar with the company's business mix, opportunities, and risks. Trane is a leading global manufacturer and servicer of innovative indoor climate systems and refrigerated transport solutions. We view Trane as a high-quality industrials company with significant levers to grow attractively over the near to long term. While the pandemic had accelerated opportunities for Trane to improve indoor air quality across commercial and residential buildings, its objective to help its customers reduce energy costs and reduce emissions is a secular opportunity – driven by the megatrends of energy efficiency and sustainability. These global megatrends will continue to be top-of-mind considerations driving companies' and homeowners' decisions for air conditioning options. Trane became a pure play following a corporate action in March 2020 that separated its climate businesses from the other assets of Ingersoll Rand. The company is domiciled in Ireland, with U.S. corporate headquarters in Davidson, North Carolina. Seventy-eight percent of Trane's sales are derived from the Americas, while EMEA accounts for 14% of sales and Asia Pacific contributes 8% of sales. Trane is heavily leveraged to commercial sales (~65% of sales) which present opportunities and risks. The clearest opportunity is for building owners to improve the energy efficiency of their HVAC systems through new systems or retrofits using Trane's innovative product and service solutions. Economic slowdowns and/or dislocations in commercial verticals are risks. Data centers, pharmaceutical, healthcare, semiconductors, and education verticals have been areas of recent strength. While investor enthusiasm has focused on Trane's opportunity for high growth potential in data centers, this vertical likely represents a low-double-digit percentage of overall sales. That said, with the increasing use and rapid expansion of AI, Trane will continue to benefit from data center growth. Residential market sales (~20% of sales) have been relatively weak across the industry but are expected to improve. Also expected to improve are sales in the company's transportation (refrigerated truck cooling units) business (~15% of sales). The company is expected to have top-line growth in the mid-single-digit range over the next few years. Trane can drive earnings at a higher growth rate than sales through cost reductions, manufacturing efficiencies, and sales leverage. Trane is well-prepared to take advantage of the long-term megatrends of sustainability and energy efficiency. The company's products and services are aligned with these megatrends and should lead to solid financial results in the coming quarters and years.

BSD Analysis:
NewBridge re-initiated a position in Trane Technologies, a leading HVAC and climate solutions provider, based on its exposure to secular megatrends in energy efficiency and sustainability. The manager views Trane as a high-quality industrial company with multiple growth levers, particularly benefiting from the post-pandemic focus on indoor air quality and ongoing corporate/residential energy efficiency initiatives. The investment thesis centers on Trane's dominant position in commercial HVAC systems (65% of sales), where building owners are increasingly investing in energy-efficient retrofits and new systems to reduce costs and emissions. NewBridge highlights Trane's exposure to high-growth verticals including data centers, pharmaceuticals, healthcare, and semiconductors, with particular optimism about AI-driven data center expansion despite it representing only a low-double-digit percentage of sales. The company's geographic diversification (78% Americas, 14% EMEA, 8% Asia Pacific) and pure-play structure following the 2020 Ingersoll Rand spinoff provide focused exposure to climate solutions. NewBridge projects mid-single-digit revenue growth with earnings growing faster through operational leverage, cost reductions, and manufacturing efficiencies. The manager believes Trane is well-positioned to capitalize on long-term sustainability trends that should drive consistent demand for its innovative climate solutions.

Pitch Summary:
Celsius Holdings, Inc. (CELH) – Celsius is a rapidly growing developer and marketer of functional drinks and liquid supplements. Its assortment of "better for you" flavored beverages has gained share in a large, highly competitive market. The company's biggest competitors include Red Bull and Monster Beverage. Most of Celsius's sales are derived from North America (~95%), but the company has recently announced expansion into Europe and the U.K. The company's distribution agreements with PepsiCo and Suntory will contribute significantly to the company's future growth and international expansion. We believe that Celsius is not simply an "energy drink" brand but more of a lifestyle brand. The company enjoys a wide demographic profile, as consumers focus on health, wellness, and function. About half of Celsius users are women, which shows broader appeal versus its larger competitors. Its "Live Fit" brand message has resonated well and has gained share from existing energy drink customers while drawing new customer groups into the brand and category. We have also found that its appeal is widespread regionally throughout the United States. Celsius products are sold through retail stores, convenience and gas, food service and club stores, and online. Each distribution point has seen greater sales, and we expect the expansion to continue as the company gets more product facings in coolers and more shelf space in non-refrigerated spaces. While the company continues to grow its existing formulation drinks, new categories like hydration and lower caffeine options could be in the cards over time. Product innovation is a key driver for Celsius and the industry. We expect sales to grow in a mid-30% range over the next few years and believe operating margins will continue to expand as the company gains greater scale in the marketplace. We believe that having strong distribution partners like PepsiCo and Suntory, compelling product innovation, and greater brand awareness will contribute to market share gains over the next several years.

BSD Analysis:
NewBridge initiated a position in Celsius Holdings during Q2 2024, viewing it as a rapidly growing functional beverage company with significant market share expansion potential. The manager emphasizes Celsius's differentiation as a lifestyle brand rather than just an energy drink, noting its broad demographic appeal with 50% female users compared to traditional energy drink competitors like Red Bull and Monster. The investment thesis centers on strong distribution partnerships with PepsiCo and Suntory that should drive both domestic growth and international expansion into Europe and the UK. NewBridge projects mid-30% sales growth over the next few years, supported by expanding retail presence, product innovation in hydration and lower-caffeine categories, and operating margin expansion from scale benefits. The manager believes the company's "Live Fit" brand messaging resonates well with health-conscious consumers and positions Celsius to capture share from existing energy drink users while attracting new demographics to the category. Despite some volatility concerns and inventory management issues with PepsiCo during the quarter, NewBridge maintains conviction in the long-term secular growth opportunity in functional beverages.

Pitch Summary:
Intel (INTC) stumbled, and shares retreated as the company continued to struggle to right the ship as part of its shift in strategy. The company reported a weak quarter, with most results coming in below expectations, especially margins. The company did outline accelerating revenue growth in the second half of the year based off stable PC demand, the ramp up of its AI product and the recovery of end markets off of cyclical lows.

BSD Analysis:
The manager expresses concern about Intel's ongoing strategic transformation challenges while acknowledging potential recovery catalysts. The company reported disappointing quarterly results with below-expectation performance across most metrics, particularly concerning margin compression. Intel continues to struggle with its strategic pivot, indicating execution difficulties in a rapidly evolving semiconductor landscape. However, management guidance points to potential second-half acceleration driven by three factors: stabilizing PC demand, AI product ramp-up, and cyclical end-market recovery. The neutral stance reflects uncertainty about Intel's ability to successfully execute its turnaround while competing against stronger positioned rivals like NVIDIA and AMD. The manager appears cautiously optimistic about the recovery timeline but concerned about competitive positioning.