Investment Pitches

Pitch Summary:
It is well established that the world must undergo an energy transition particularly given the pace of technological development. There is a lot of talk about energy sources but less focus traditionally on how we transmit energy. Cables facilitate underground transmission of energy from one place to another. They are the highways of energy and yet investors don't seem to naturally think about them as beneficiaries of the energy transition. Prysmian does the whole end-to-end transmission of electricity from the point of generation to transmission (high voltage) to distribution (medium voltage) to end users (low voltage). The high voltage (HV) space in particular requires highly technical nous and experience. There are only three companies in the world that can do subsea high voltage direct current (HVDC) cables and they are all listed - Prysmian, NKT and Nexans. These 3 companies hold an 86% combined share of the HV market and there are high barriers to entry due to: The need for a track record of projects with similar technologies High capex related to factories and vessels Technology risk - especially with the market shifting into new technologies (e.g. >220kV HVDC) Risk aversion of the major customers in the space - the Transmission and Distribution Operators' (TSO and DSO) - to wanting to work with new players. They have a high preference towards established operators for critical infrastructure projects for obvious reasons. Prysmian is an example of a company that showcases the power of combining our software, Taurient, with our own insights. We manually added the stock to our "Idea Triage" funnel but Taurient's idea score put it at the top of the list. Given the combination of the AI saying we should prioritise work on it and us having prior, deep knowledge and unique insights on the company, adding it to the portfolio made a lot of sense. Prysmian came to our attention from Arms' time at Grok, the private investment firm of Atlassian co-founder Mike Cannon-Brookes. One of Grok's most ambitious undertakings is Suncable, a project which aims to export solar energy from the Northern Territory to Singapore via a >4,000km HVDC subsea cable. As part of that DD Arms did a thorough analysis of Prysmian and saw firsthand the structural imbalance in HV due to ongoing capacity shortages, forcing transmission and distribution operators to book production slots through large tenders now for installations planned in 2026-31. The structural demand/supply imbalance equates to five years' worth of backlog for all three key players. We like Prysmian over the other two as our DD suggested that the company has the best technology and experience and also has funding support from its cash-generative telco business which is important given the highly capital intensive nature of HVDC subsea cable projects. Pure-play competitor, NKT, tends to need to tap the markets on a fairly regular basis. Although it was subsea cables that brought Prysmian to our attention, the company benefits in all areas of its transmission business given the material acceleration we have seen in power demand driven by electrification trends such as EVs and charging, heat pumps and data centres. Utilities in Europe and the US drastically need to update the power grids, with significant queues building to connect new renewable energy sources to the grid and an ageing infrastructure that will struggle to cope with load growth. The major EU utilities are already targeting 10%+ growth in regulated assets and this does not factor in the needs from data centres and AI. The US is also struggling with a fragmented grid across 13 regions and 3 separate networks. Over $15B of funds and grants for transmission and the grid have been set aside to support projects in the US. Prysmian is the only listed cable manufacturer with high exposure to the US market and especially medium and high voltage transmission. The group has key relationships with large Utility companies. In particular, there is significant potential for E3X technology and advanced conductors, singled out among grid enhancing technologies by the regulator and seeing strong momentum with several recent partnerships announced. Prysmian announced an EBITDA target for Power Grids of €410m by 2027 but we think this is undercooked, in line with the company's traditional conservatism. These favourable market dynamics combined with a knowledge of the skill level and acumen that was apparent in the company's high and middle levels of management piqued our interest. Financial analysis showing the strength of the company's balance sheet and FCFs, led to viewing Prysmian as a high quality stock and one where we feel that the Projects/High voltage business is highly underappreciated by the market. Prysmian has a medium-term EBITDA target of €2B in 2027 from ~€1.5B in 2022. Given the market dynamics, we believe the company has the potential to generate closer to €3B. This is supported by the fact that the company has historically been conservative with earnings estimates by orders of magnitude and we see this continuing. On a conservative EBITDA multiple (assuming no re-rating in the stock) as well as some probability-weights on the bull and bear-case scenarios, we believe there is at least 30% upside on the stock with limited downside risk.

BSD Analysis:
Minotaur presents a compelling thesis on Prysmian as a pure-play beneficiary of the global energy transition, specifically focusing on the overlooked transmission infrastructure segment. The fund highlights Prysmian's dominant position in the highly specialized subsea HVDC cable market, where only three companies globally possess the technical capabilities, creating significant barriers to entry. The manager emphasizes a structural supply-demand imbalance with five years of backlog across all players, driven by accelerating electrification trends including EVs, data centers, and renewable energy grid connections. Prysmian's competitive advantages include superior technology, established customer relationships with utilities, and funding support from its cash-generative telecom business, unlike pure-play competitor NKT which requires regular market financing. The investment case is strengthened by significant infrastructure spending commitments, including over $15B in US grid funding and 10%+ growth targets from major EU utilities. The manager believes Prysmian's conservative EBITDA guidance of €2B by 2027 significantly understates potential, with upside to €3B given favorable market dynamics and the company's historical pattern of conservative estimates.

Pitch Summary:
Embotelladora Andina is a pan-Latin-America Coca-Cola bottling and distribution franchisee listed in Chile. We appreciate that both Andina and Coca-Cola are benefiting from changes in the nature of bottler agreements, including recently established concentrate pricing agreements between bottlers and Coca-Cola that bring more visibility on the ROI-attractiveness of investments made by bottlers for growth. In addition, a large segment of Andina's business operates in the refillable bottles space, which has high barriers to entry and increases the competitive strength of Andina's distribution capabilities. Andina shares have recently suffered from multiple compressions due to regional macro-political headwinds in 2022 and 2023. However, the company demonstrated consistent earnings growth and expanding returns over this same time period. In spite of the improving business quality and easing political tension, Andina shares recently traded near a 15-year low multiple, and we were happy to purchase shares of the company at a discount to other quality bottlers and our estimate of the company's business value.

BSD Analysis:
Oakmark initiated a position in Embotelladora Andina, a Latin American Coca-Cola bottler, at compelling valuations near 15-year low multiples. The managers appreciate improved bottler economics from new concentrate pricing agreements with Coca-Cola that enhance ROI visibility for growth investments. Andina's competitive moat stems from its refillable bottle operations, which create high barriers to entry and strengthen distribution capabilities. Despite regional macro-political headwinds causing multiple compression in 2022-2023, the company maintained consistent earnings growth and expanding returns. The disconnect between improving fundamentals and depressed valuation relative to other quality bottlers created an attractive entry opportunity. Easing political tensions should support multiple re-rating as business quality improvements become more apparent.

Pitch Summary:
Bravida Holding is the Nordic region's leading provider of solutions for the service and installation of electrical, heating and plumbing, HVAC and other technical functions in buildings and facilities. Bravida is primarily exposed to non-residential construction, remodeling, and services, each of which is more defensive than construction spending overall, enabling a structurally growing earnings profile. Longer term, it is likely that Bravida's through-cycle organic growth can increase as electrification intensifies demand for installation content and environmentally-conscious remodeling. We also like that Bravida's management team has expanded the company's scale and scope of business through accretive acquisitions, and since the region's installation market is quite fragmented, we believe there is ample opportunity for continued value creation. The stock price has come under pressure recently due to the construction cycle slowdown, but we believe Bravida will fare better than its peers thanks to its advantaged business mix and profit-aligned operating model. This provided the opportunity to purchase shares in the company at a discount to our estimate of intrinsic value.

BSD Analysis:
Oakmark initiated a position in Bravida, viewing the Nordic installation services leader as attractively valued amid construction cycle headwinds. The managers highlight Bravida's defensive exposure to non-residential construction, remodeling, and services rather than volatile new construction. They see structural growth drivers from electrification trends increasing installation content demand and environmental remodeling requirements. The fragmented Nordic installation market provides acquisition opportunities for continued value creation. Management's track record of accretive acquisitions and the company's profit-aligned operating model should enable outperformance versus peers during the downturn. The recent stock price pressure from construction cycle concerns created an attractive entry point below intrinsic value estimates.

Pitch Summary:
At the right price, we would fill the portfolio with the rest. Orbis Global first owned Alphabet (then just called Google) in late 2008, and the Strategy has held it cumulatively for over a decade on and off since then. We have also held Microsoft, Apple, Amazon, and Meta before. But while several of the Seven are now regarded as unassailably successful, sentiment has been less rosy for Alphabet. For us, that is part of the appeal. The sceptical view of Alphabet goes something like this. Microsoft and its partner OpenAI have eaten Google's lunch on artificial intelligence (AI), which will become the key capability for all technology businesses, including internet search. Employees worry that shareholders dominate the company's culture, while shareholders worry it has been dominated by overly political employees and a thick layer of middle managers. It is easy to understand the scepticism on Google's AI efforts. In November 2022, OpenAI launched ChatGPT, and the next February, Microsoft announced it would incorporate ChatGPT into its Bing search engine. Microsoft CEO Satya Nadella took explicit aim at Google, noting that Bing could win market share and profits even while driving down the profit margins of all internet search players. The next day, Google previewed its own AI bot, called Bard, which spectacularly flopped. That paints a scary picture for Google's prospects, particularly Nadella's search salvo, which calls to mind Jeff Bezos' quip that "your profit margin is my opportunity". But it is easy to overstate Google's challenges. Most importantly, chat apps do not produce better results for all searches. We see this in the numbers, where both ChatGPT and Bing have lower weekly retention rates than Google Search. While ChatGPT's app and website have raced ahead of other AI competitors, they have added just 20 million daily users over the past year, bringing the total to 50 million. That sounds big, but Google has 800 million daily users on its mobile app and 1.6 billion on its Chrome web browser. Comparing search against search, you have to squint to see Bing's inroads. On mobile, Bing has less than one daily user for every thousand Google users, and on desktop, Bing's share of daily searches is just 4%—up a grand total of 0.4 percentage points from the pre-ChatGPT days. Neither challenger has stopped Google from growing, and its search volumes and ad revenues are both up about 10% over the past year. In its latest earnings report, Google laid some of these demons to rest, materially increasing our conviction in its fundamentals. After embedding AI into its own "search generative experience", Google's search engagement is up (because users are getting better answers), its search profit margins are up (because advertisers are following users), and its cost to serve AI queries is down (by 80% since their initial introduction). We took this as encouraging evidence that Google is not just surviving in an AI world, but thriving. The market agreed, sending the shares up roughly 15% since that earnings report. And Google's core business remains attractive for other reasons. Even today, digital advertising accounts for less than 60% of total US ad spending, and less than half in other developed markets. Digital ads should continue to take share from traditional television advertising, boosted by the far-better relevance and returns on investment for marketers. That in turn should allow Google's core advertising revenues to keep growing for years to come. That does not mean Google can coast. In a few areas, it clearly needs to improve, including in its AI products. The company has already fixed the most glaring problems with Gemini (the new Bard), explaining that the model was improperly calibrated. That may be true, but it is hard to dismiss the idea that Gemini's output has been skewed by the political priorities of Google's outspoken staff. Still, we believe Google will continue to improve. Proficiency in AI boils down to engineering talent, access to cutting-edge computer chips, and large data sets on which to train the AI models. Google has all three. While the company was slower to launch consumer AI apps than OpenAI and Microsoft, that is not for a lack of ability. The company has been developing AI for years, and experts across the tech world regard Google's AI engineering prowess as first class, backed up by the company's 58% share of citations for academic papers on AI. Google can back up that engineering ability with computing power, as one of the handful of companies that can afford to deploy Nvidia's leading AI chips at scale. Rarer still, Google has even developed an in-house AI chip with competitive performance to Nvidia's. Nor will data be a problem. Google's decades-long dominance of search gives it access to a trove no competitor could hope to amass today. As the company refines Gemini, we believe it should be seen as more competitive with ChatGPT, helping to stave off any threats to the search business. If AI isn't likely to threaten Google's profitability, its expenses still could. There, the company has lagged peers like Meta in managing its sprawling workforce. Though Alphabet did conduct layoffs in 2023, it still has 15% more full-time employees today than it did in 2021, while Meta's full-time headcount is smaller. Meta's experience is instructive. 18 months ago, the company was perceived as unfocused, bloated, burning money on unprofitable initiatives, and sloppy at executing—all criticisms that have been levelled at Google today. After reducing its workforce, Meta is now seen as focused and disciplined, and it seems to be executing better as a result. If Meta's example is any indication, any improvement from Google could be well-rewarded by stockmarkets. Alphabet, to its credit, is not ignoring shareholders. Last year, the company bought back $61.5 billion of its own stock, reducing its share count by 3.3% even after awards to employees. We expect the company to buy back around $70 billion this year, suggesting an ongoing "shareholder yield" of about 3%. That is remarkable for a company of Alphabet's quality. We look at the math the following way. Alphabet earned $74 billion last year, but that is weighed down by severance expenses and losses in the "other bets" segment focused on nascent opportunities. Excluding those losses, we see the company trading at 22 times trailing core earnings, to say nothing of the $79 billion of net cash on its balance sheet. That valuation is only a hair above the multiple of the broader S&P 500, and in relative terms it is unusually low for Alphabet. In our view, Alphabet deserves more of the premium it usually has. This is a business with returns on equity and net profit margins of over 20%, both well above the market average, with above-average growth prospects to boot. If the valuation stays where it is and the company can grow at even 10% per annum, growth and free cash flow alone should drive a near-15% p.a. long-term return. That growth potential is supported by Alphabet's commanding positions in several big businesses. Its core search business is unique, and its YouTube unit is unique in the West. Alongside OpenAI, Alphabet is one of two leaders in AI services; alongside Nvidia, it is one of two in AI accelerator chips; alongside Apple, Android is one of two mobile operating systems; and behind Amazon and Microsoft, Google is one of three hyperscale cloud services operators. Each of these businesses is valuable and has extraordinary potential—but that is often lost as investors focus excessively on threats to the search business. The company does have its risks, however. AI could prove more disruptive than we expect. Advertising spending is cyclical, so if the US economy slows or crashes, Alphabet won't be immune. But weighing up the risks against the price and the quality of the business, Alphabet looks reasonable to us, and it also brings diversification to the portfolio, as its share price behaves differently to many of our other holdings.

BSD Analysis:
Orbis presents a compelling contrarian case for Alphabet, arguing that AI concerns are overblown and the stock offers attractive value. The manager demonstrates that despite ChatGPT and Bing's emergence, Google's search dominance remains intact with 800 million mobile users versus ChatGPT's 50 million, and Bing capturing only 4% desktop search share. Recent earnings showed Google's AI integration actually improved search engagement and margins while reducing serving costs by 80%. At 22x core earnings (excluding other bets losses) with $79 billion net cash, the valuation appears reasonable for a business generating 20%+ ROE and profit margins. The $70 billion annual buyback program provides a 3% shareholder yield, while digital advertising's structural growth runway supports long-term revenue expansion. Management efficiency concerns exist, but Meta's successful workforce optimization provides a potential roadmap for value creation.

Pitch Summary:
Nintendo is an example of one of the more idiosyncratic investments that we have made recently. Its core business of proprietary video game hardware and software needs no introduction, but it is increasingly undergoing a transformation that is less widely appreciated. Nintendo has a long history and a reputation for conservatism. The company has had just six presidents since it was founded as a playing card manufacturer in 1889, and has been slow to embrace many of the changes that other entertainment companies have made long ago. Nintendo's historical reluctance to monetise its vast intellectual property (IP) has also been frustrating for many investors, as has the boom-bust cyclical nature of its hardware releases. A lot of this is changing. Unlike previous consoles, the Nintendo Switch is a single "hybrid" device that can be played on a television and on the go. Previously, Nintendo had always maintained separate home and portable platforms with different, highly customised hardware and software. This is not only more expensive to produce, but also discourages third-party game development, which ultimately means fewer games and greater pressure to deliver something new in the next hardware cycle. With a single platform that uses industry standard components, the Switch enables both internal and external developers to create more games for the system and keep customers engaged with the product. Digital downloads and subscriptions can also give games a new lease on life, something that was never possible with the physical cartridges of the past. We estimate that Nintendo currently makes about $26 in profit, across all its businesses, for each of its 120 million or so annual Nintendo Switch users—and there is room for both of those numbers to be much higher. At the same time, Nintendo is expanding beyond games into theme parks and movies—a playbook that Disney has followed for decades, but Nintendo has been slow to embrace due to a reluctance to build capacity inhouse and caution over outside depictions of its IP. With media companies increasingly interested in video game IP, Nintendo has now found eager partners willing to make movies and theme parks on their terms. These deals appear promising with low downside risk, as Nintendo can receive licensing fees and/or a percentage of profits without needing to finance projects completely out of pocket. While these deals are often lucrative on their own, they also strengthen Nintendo's core video game business—interest in parks and movies generate greater interest in games, and vice-versa. Nintendo saw this play out when The Super Mario Bros. Movie, released last year, increased sales for their Mario video game franchise. We believe Nintendo has only scratched the surface in these adjacent areas, and over the long term, we believe Nintendo has real potential to become a true multimedia juggernaut that looks very different from its "cyclical" past. The burning questions for this investment thesis are unique to Nintendo as a company and have very little to do with any broader economic developments or market trends. Instead, the success or failure of this investment will be driven by Nintendo's ability to boost the profitability of its core video game business and to monetise its formidable yet still relatively untapped IP. If these efforts are successful, we believe it could result in a step change in Nintendo's profitability and valuation—in our view, the Nintendo "ecosystem" would cost far more to replicate or to acquire than its current enterprise value of $49 billion suggests. That said, if its next console, the Switch 2, is a flop, it could be a major setback. As shown in the chart below, our view is that the risk-reward opportunity skews favourably for Nintendo—there is a lot of upside if they succeed in transforming the business, but otherwise limited downside since expectations are already low.

BSD Analysis:
Orbis identifies Nintendo as an underappreciated transformation story, moving beyond its traditional cyclical hardware business model toward a sustainable multimedia ecosystem. The manager emphasizes the strategic importance of the Nintendo Switch as a unified platform that reduces development costs and encourages third-party participation, breaking from Nintendo's historically fragmented approach. With approximately $26 profit per user across 120 million Switch users, significant monetization upside exists through improved user engagement and expanded IP licensing. The expansion into theme parks and movies represents a low-risk, high-reward strategy that creates synergistic value across entertainment verticals, as demonstrated by The Super Mario Bros. Movie's positive impact on game sales. Nintendo's conservative management approach, while historically frustrating, now provides optionality as the company selectively embraces modern monetization strategies. At a $49 billion enterprise value, Orbis believes the Nintendo ecosystem is significantly undervalued relative to replacement cost, with asymmetric risk-reward favoring substantial upside if the transformation succeeds.

Pitch Summary:
Rolls-Royce, the third-largest holding, is a perfect example. Not to be confused with the luxury car brand, Rolls is a manufacturer of aircraft engines, propulsion solutions, and power systems. The engine business is what's known as a "razor and blade" business model, as they make most of their money by selling "blades"—the long-term service agreements linked to flying hours—rather than the "razors" (engines). But during the pandemic, all of their customers suddenly stopped shaving—the unprecedented mass grounding of planes—which put their largest business segment under significant stress. As contrarian investors, we saw this as an opportunity to buy deeply discounted shares in a company that we knew well, having owned it since 2015. Another way to think about Rolls' aviation business is with an insurance analogy. From an airline's perspective, the long-term service agreements guarantee the performance of Rolls' engines for a fixed period, usually a little over 10 years. If all goes well, Rolls collects a steady stream of cash flows—a bit like an insurer if there aren't any accident claims. But when something goes wrong, Rolls, like the insurer, is on the hook for the costs. It is therefore "underwriting" the quality and reliability of its engines, and getting the pricing right is absolutely critical. If they price too high, they risk losing business to competitors. If they price too low, they risk losing money. It's a delicate balance and one that Rolls did not always get right in the past. Long before anyone had heard of Covid, Rolls had reliability issues with its Trent 1000 engine, which is used in the Boeing 787 Dreamliner. In 2016, a number of planes were grounded when cracking was discovered in the turbine blades. The resulting reputational damage meant that some airline customers decided to switch to its main competitor GE. Rolls managed to put most of the early Trent issues behind them, but only after several years and several billion dollars of losses. As a result of the double whammy of the Trent problem followed by the pandemic, Rolls found itself chronically underperforming in what should be a fantastic business. Either through the lens of a duopoly creating a critical product, or viewing the business as an insurer with a direct relationship to their customers (that is, without the multiple layers seen in the insurance industry that each take its slice of value), Rolls' Civil Aerospace business ought to be quite profitable. That said, Rolls took full advantage of the downturn to make long overdue cost cuts across the business and has emerged stronger. Rolls is now in a position to price new and existing contracts in a way that reflects the value the company creates, driving a more healthy stream of free cash flow that should be available to shareholders over time. At the same time, fresh opportunities have emerged elsewhere in the business. Rolls' defence segment is benefitting from greater global defence spending, as Rolls is a supplier for several long-term initiatives including being selected to power submarines being built for the security alliance between Australia, the UK, and the US (AUKUS). The company's power systems segment is a direct beneficiary of AI-fuelled data centre demand, and even further upside is possible if Rolls can achieve commercial viability within its narrow-body aircraft and small modular nuclear reactor businesses. In the span of just a few years, Rolls has gone from being a stockmarket pariah to a company with multiple enduring tailwinds behind its business. This is often the point when we—as contrarians—might think about selling and recycling capital into newer ideas, but we still think Rolls is undervalued at its current share price. Putting some rough numbers on it, we think the company can deliver about £0.50 per share in free cash flow (FCF) by 2028. If we assume an exit multiple of 20 times FCF, that suggests that the share price could double from its current level. This is far from guaranteed—Rolls will need to continue to execute—but we think it remains an attractive opportunity and it is worth being patient.

BSD Analysis:
Orbis presents a compelling turnaround thesis for Rolls-Royce, emphasizing the company's transformation from pandemic victim to multi-faceted growth story. The manager highlights the attractive "razor and blade" business model in Civil Aerospace, where long-term service agreements provide recurring revenue streams tied to flight hours. Following significant cost restructuring during the downturn, Rolls-Royce has emerged with improved pricing power and operational efficiency. The investment case is strengthened by multiple growth drivers including defense spending benefiting the AUKUS submarine program, AI-driven data center demand for power systems, and potential upside from narrow-body aircraft engines and small modular reactors. With a target of £0.50 per share in free cash flow by 2028 and applying a 20x multiple, Orbis sees potential for the stock to double from current levels. The manager's long-term ownership since 2015 demonstrates deep conviction and intimate knowledge of the business fundamentals.

Pitch Summary:
During the quarter, we established a new position in Tempus AI, Inc., an intelligent diagnostics and health care data company. Founder/CEO Eric Lefkofsky says, "Tempus was designed to bring AI to diagnostics, because diagnostics sit at the epicenter of life and death decisions. Physicians rely on test results at each pivot point. When that data is connected to medical records for the patient for whom it was ordered, we have the necessary ingredients to contextualize the diagnostic and personalize it, resulting in more tailored and optimal therapies." Tempus has two synergistic business units: Genomics and Data & Other. Within the genomics business, Tempus provides diagnostic tests, particularly for cancer treatment selection. The company's labs sequence the tumor's genome and transcriptome (gene expression) and can help oncologists select the best treatment for their patients. Compared with other cancer diagnostics companies, Tempus has industry-leading tests in terms of breadth, accuracy, and turnaround time and it is the only lab that provides data on how other patients with similar clinical profiles have fared on different therapies. We think the cancer treatment selection sequencing market has a long runway for growth and Tempus is well positioned as a leader in the field. There are approximately 700,000 patients in the U.S. diagnosed with metastatic cancer each year and each patient could benefit from several therapy selection tests (solid and liquid biopsy, as well as testing upon recurrence). As access and reimbursement improves, we think cancer therapy selection diagnostics could address a $10 billion total addressable market (TAM) in the U.S. alone. We believe that Tempus's diagnostic business could more than triple in size and exceed $1 billion in revenues by 2030. The genomics testing data also feeds into Tempus's value as a data company. Tempus has amassed a huge (over 200 petabytes) proprietary multimodal dataset that combines clinical patient data (which includes clinical records and imaging data from two-way collaborations with health systems) with genomic testing data from the Genomics business. Tempus's dataset includes 7.7 million clinical records, over 1 million imaging records, over 910,000 matched clinical and molecular dataset profiles, and over 970,000 samples that were sequenced. In addition to using this data to empower more intelligent diagnostics, Tempus licenses this data to biopharmaceutical companies who use it to design smarter clinical trials and identify potential new drug targets. Tempus works with 19 of the top 20 pharmaceutical companies in this capacity and has disclosed 9-figure deals with three biopharmaceutical companies. In total, Tempus has $620 million in remaining contract value and an additional $300 million in opt-ins, compared to approximately $169 million in Data revenues in 2023. Based on our discussions with customers, they see immediate value using the data to better define biomarkers and stratify patient populations. We think this proprietary dataset is unique and would prove challenging for competitors to replicate. We also believe that it brings meaningful value to biopharmaceutical R&D and are therefore willing to underwrite a long runway for growth for Tempus as more customers take advantage of its data in their drug development programs.

BSD Analysis:
The manager initiated a new position in Tempus AI, viewing it as a unique leader in AI-powered precision medicine with two synergistic business units creating significant competitive advantages. The genomics business provides industry-leading cancer diagnostic tests with superior breadth, accuracy, and turnaround time, uniquely offering data on how similar patients fared on different therapies. With 700,000 U.S. patients diagnosed with metastatic cancer annually and a potential $10 billion total addressable market, the manager believes the diagnostic business could exceed $1 billion in revenues by 2030. The data business represents a powerful moat, with over 200 petabytes of proprietary multimodal datasets combining clinical records, imaging data, and genomic testing results. This dataset includes 7.7 million clinical records and partnerships with 19 of the top 20 pharmaceutical companies, generating $620 million in remaining contract value plus $300 million in opt-ins. The manager emphasizes the dataset's uniqueness and difficulty to replicate, providing meaningful value to biopharmaceutical R&D for clinical trial design and drug target identification.

Pitch Summary:
Cloudflare, Inc. provides content delivery network services, cloud cybersecurity, denial-of-service mitigation, Domain Name Service, and ICANN-accredited domain registration services. Shares fell 14.5% during the quarter on remarks from the CEO about worsening macro conditions, citing the negative impact of geopolitical uncertainties on customer buying behavior. On the positive side, the company posted strong quarterly results with revenue growth of 30% year-over-year, showing evidence that the changes to the company's go-to-market strategy were resonating with solid growth across its large customer cohorts (revenues from customers spending over $100,000 represented 67% of the total, up from 62% in the first quarter of 2023), double-digit improvement in sales productivity, and new pipeline attainment ahead of plan. Cloudflare reiterated revenue guidance for the year on resilience in cybersecurity spend. While we fine-tuned our model on the back of the company's increased macro headwind commentary, pushing out revenue reacceleration estimates from the second quarter of 2024 to the first quarter of 2025, this is still ahead of guidance. We retain conviction in the long-term thesis: a strong founder-led business with a unique global network and significant pricing advantages powering a disruptive multi-product growth story with improving margins. We therefore remain shareholders.

BSD Analysis:
Despite the 14.5% stock decline due to macro headwind concerns, the manager maintains conviction in Cloudflare's long-term thesis, viewing the company as a founder-led disruptor with unique competitive advantages. The company delivered strong 30% year-over-year revenue growth, demonstrating that go-to-market strategy changes are resonating with customers. Large customer growth is particularly encouraging, with revenues from customers spending over $100,000 representing 67% of total revenue, up from 62% in the prior year. The manager notes double-digit improvement in sales productivity and new pipeline attainment ahead of plan, indicating strong execution despite macro challenges. While pushing out revenue reacceleration estimates from Q2 2024 to Q1 2025 due to geopolitical uncertainties, the manager believes this timeline remains ahead of guidance. The investment thesis centers on Cloudflare's unique global network, significant pricing advantages, and multi-product growth story with improving margins, supported by resilient cybersecurity spending trends.

Pitch Summary:
Shopify Inc. is a cloud-based software provider for multi-channel commerce. Shares declined 14.4% in the second quarter despite reporting solid quarterly results with revenue growth of 23% year-over-year, which implies continued market share gains, after the company announced it is entering an investment cycle. Since the increased investment period comes after over a year of consistent margin expansion, it left short-term-focused investors disappointed. We, however, believe that this is the right course of action for several reasons. First, the company expects solid returns on the increased marketing spend with 18-month payback periods. Second, the investment should help solidify Shopify's competitive position and drive further market share gains. Finally, the increased spend should contribute to the probability of success in newer areas of opportunity with large addressable markets, including offline commerce, international, and enterprise. Shopify shared several metrics showing early success, with gross merchandise value up 130%, 38%, and 32% year-over-year in B2B, EMEA, and offline, respectively. We remain shareholders due to Shopify's strong competitive positioning, innovative culture, and long runway for growth, as it still holds less than a 2% share of the global commerce market.

BSD Analysis:
Despite the stock's 14.4% decline, the manager maintains strong conviction in Shopify's long-term investment strategy, viewing the current investment cycle as strategically sound after a year of margin expansion. The company delivered solid 23% year-over-year revenue growth, indicating continued market share gains in the competitive commerce platform space. The manager supports management's decision to increase marketing spend with expected 18-month payback periods, believing this will solidify Shopify's competitive position and drive further market share gains. Early success metrics are encouraging, with gross merchandise value surging 130%, 38%, and 32% year-over-year in B2B, EMEA, and offline segments respectively. The investment thesis centers on Shopify's massive addressable market opportunity, holding less than 2% of the global commerce market, combined with the company's strong competitive positioning and innovative culture. The manager views short-term margin pressure as acceptable given the long-term growth runway in offline commerce, international markets, and enterprise segments.

Pitch Summary:
Shares of Coupang, Inc., Korea's largest e-commerce marketplace, appreciated 17.8% in the second quarter on strong quarterly results with revenue growth of 33% year-over-year (in constant currency, excluding the impact of an accounting change for fulfillment services and the acquisition of Farfetch), showing continued acceleration from 20% growth in the first quarter of 2023, and 29% growth in the fourth quarter of 2023, driven by market share gains within Korean e-commerce and retail overall. EBITDA margins in its core Product Commerce segment also continued to surprise to the upside, reaching 7.2%, up 210bps year-over-year. We view Coupang as one of the most competitively advantaged e-commerce businesses globally, with significant runway for both revenue and earnings growth as the company continues to gain market share in the U.S. $500 billion-plus Korean retail market, while expanding its offerings into additional categories, expanding its ecosystem via a third-party marketplace, expanding internationally and continuing to invest in infrastructure density to further capture inefficiencies, enhancing the customer experience and improving profit margins.

BSD Analysis:
The manager views Coupang as one of the most competitively advantaged e-commerce businesses globally, with the company demonstrating accelerating growth momentum in Korea's massive retail market. Revenue growth of 33% year-over-year shows continued acceleration from prior quarters, driven by sustained market share gains in Korean e-commerce and retail. The improving unit economics are particularly compelling, with EBITDA margins in the core Product Commerce segment reaching 7.2%, up 210 basis points year-over-year. The investment thesis centers on Coupang's significant runway for growth within Korea's $500+ billion retail market, where the company continues expanding into new categories and building out its third-party marketplace ecosystem. The manager emphasizes the company's infrastructure investments to capture inefficiencies, enhance customer experience, and improve profit margins, while also noting international expansion opportunities.

Pitch Summary:
CrowdStrike Holdings, Inc. is a cloud-architected SaaS cybersecurity vendor offering endpoint security, threat intelligence, and cyberattack response services. Shares continued their strong performance from the first quarter and were again a top contributor, rising 19.6% in the second quarter on better execution than peers in the broader security space. The company reported strong quarterly results with 33% year-over-year revenue growth, driven by customers standardizing their cyber-security spend on CrowdStrike with free cash flow margins reaching 35%. With accelerating share gains in its core endpoint detection and response market, emerging products including Cloud, Identity, and SIEM reaching material scale, and newer products in Data Protection and AI ramping quickly, net new annual recurring revenue and total revenue look to sustain a long duration of growth. With its leading competitive positioning in cybersecurity, the growing threat landscape (which is also driven by the advancements in AI, making hackers more dangerous), its unique lightweight, single-agent, architecture, and its platform approach, we retain conviction in CrowdStrike, which is emerging as the security platform to beat in terms of scale, profitability, and free cash flow conversion.

BSD Analysis:
The manager expresses strong conviction in CrowdStrike as the emerging leader in cybersecurity platforms, driven by superior execution relative to peers and accelerating market share gains. The company delivered impressive 33% year-over-year revenue growth with free cash flow margins reaching 35%, demonstrating both growth and profitability. The investment thesis centers on CrowdStrike's unique lightweight, single-agent architecture that enables customers to standardize their cybersecurity spending on one platform. The manager highlights the company's expanding product portfolio beyond core endpoint detection, with Cloud, Identity, and SIEM products reaching material scale while newer AI and Data Protection offerings ramp quickly. The growing threat landscape, amplified by AI making hackers more dangerous, creates a favorable tailwind for cybersecurity demand. CrowdStrike's platform approach and competitive positioning suggest sustainable long-duration growth in net new annual recurring revenue.

Pitch Summary:
NVIDIA Corporation sells semiconductors, systems, and software for accelerated computing, gaming, and GenAI. NVIDIA's stock continued its run, rising 36.8% in the second quarter and finishing the first half of 2024 up 150.7%. NVIDIA continued to report unprecedented growth at scale, with quarterly revenues of $26 billion growing 262% year-over-year, datacenter segment revenues of $22.6 billion up 427% year-over-year, and operating margins of 69.3%. NVIDIA's growth is even more impressive as it is approaching a new product cycle with Blackwell going into production in the third quarter and speaks to the urgency of demand for GPUs as customers are not waiting for the next generation architecture despite its improved performance to cost ratio. The Blackwell architecture, and in particular, the new GB200 NVL72/36 racks, which the company believes would become "the new unit of compute" (and will start shipping in 2025) would in our view: 1) increase the company's content per server (for example an NVL72 rack would have 18 compute trays with 4 Blackwell GPUs and 2 Grace CPUs in each, and 9 switch trays with NVIDIA content); and 2) further strengthen its competitive advantages as the demand for datacenter-scale computing grows due to scaling laws (models become more capable with size and as they are trained on more data), new model types (such as Mixture of Experts that increase the demand on sharing of data between GPUs) and model optimization mechanisms (such as tensor parallelism, pipeline parallelism, and expert parallelism – which also increase the demands from the connectivity layer), and increase the relative importance of NVIDIA's networking and full-system capabilities and in particular the capabilities enabled by the latest generation of NVLink – connecting up to 576 GPUs together, up from 8. While the stock's strong performance has pulled forward some of the longer-term upside (which we manage through position sizing), we remain early in the accelerated computing platform shift and in the adoption of AI across industries and therefore remain shareholders.

BSD Analysis:
The manager maintains a strong bullish stance on NVIDIA despite the stock's 150.7% year-to-date performance, viewing the company as the dominant force in the AI revolution. The investment thesis centers on NVIDIA's unprecedented revenue growth of 262% year-over-year to $26 billion, with datacenter revenues surging 427% to $22.6 billion and operating margins reaching 69.3%. The upcoming Blackwell architecture represents a significant catalyst, with the GB200 NVL72/36 racks positioned to become "the new unit of compute" starting in 2025. The manager emphasizes NVIDIA's strengthening competitive moat through advanced networking capabilities and full-system integration, particularly the latest NVLink technology connecting up to 576 GPUs. While acknowledging valuation concerns due to the stock's run-up, the manager believes we remain in the early stages of AI adoption across industries. The position sizing reflects risk management while maintaining conviction in the long-term accelerated computing platform shift.

Pitch Summary:
Disney has unique assets – differentiated content – that have enabled it to earn franchise-like profits and returns over time. It is through this content that Disney creates the universes and characters that drive movie theater revenue, TV licensing revenue, subscription revenue, music revenue, merchandise revenue and more. The universes and characters are then brought to life at Disney's parks, resorts and other experiences around the world. Certain aspects of the business are undergoing significant changes, which are pressuring near-term earnings and cash flow generation. However, we believe the intrinsic value of the unique assets remains intact. As Disney adjusts its monetization methods to match a new reality, its earnings and free cash flow generation will eventually reflect the franchise nature of its unique assets.

BSD Analysis:
Centerstone's Disney investment thesis focuses on the enduring value of the company's unique content assets and intellectual property portfolio. The fund emphasizes Disney's ability to monetize its content across multiple revenue streams including theatrical releases, licensing, streaming subscriptions, merchandise, and theme park experiences. This multi-platform approach creates a powerful flywheel effect where content drives engagement across all business segments. Centerstone acknowledges current operational challenges and earnings pressure as the company adapts its monetization strategy to evolving media consumption patterns. However, the fund believes these near-term headwinds mask the intrinsic value of Disney's irreplaceable content library and character franchises. The investment thesis relies on Disney's ability to successfully transition its business model while maintaining the franchise economics that have historically driven superior returns. Centerstone views current weakness as a temporary disconnect between market perception and underlying asset value.

Pitch Summary:
AIA Group is a prominent insurance and financial services company operating in the Asia-Pacific region. It was established as an independent company in 2010 and has grown to become one of the largest insurers in Asia, with a robust presence in markets such as Hong Kong, Mainland China and Southeast Asia. The company specializes in life insurance, retirement planning, and wealth management, catering to a diverse clientele across different demographic segments. The company generates approximately half its revenue from Hong Kong, reflecting its longstanding dominance in the local insurance market. Mainland China contributes around 20% of the company's total revenue, while Southeast Asia, encompassing markets like Singapore, Malaysia, Thailand, and Vietnam, typically accounts for another 10% to 20% of AIA's revenue. It is generally a market leader in these markets as well. The stock price has declined materially from its 2021 highs due to several factors. Among these is the broader economic environment in Asia, which has faced periods of slowdown and volatility, affecting consumer spending and investor confidence. Additionally, regulatory changes in key markets, such as adjustments to insurance policies and compliance requirements, have added operational challenges and impacted profitability. Moreover, competition within the insurance sector has intensified, with new entrants and innovative digital platforms altering market dynamics. Lastly, the reluctance among global investors to consider China-related stocks has certainly added another dimension. For all these reasons, and perhaps more, the stock currently trades at a historically low valuation which we believe is unjustified given its positive attributes. Among these is its status as a profitable, growing and dominant insurer in a region with an ample appetite for its products.

BSD Analysis:
Centerstone presents AIA Group as an undervalued opportunity in Asian insurance markets, emphasizing the company's dominant market positions across key geographies. The fund highlights AIA's leadership status in Hong Kong (50% of revenue), meaningful presence in Mainland China (20% of revenue), and strong positions across Southeast Asian markets. The investment thesis centers on the disconnect between current valuation and fundamental business quality. Centerstone acknowledges multiple headwinds including Asian economic volatility, regulatory changes, increased competition, and broader investor aversion to China-related stocks. However, the fund believes these factors have created an unjustified valuation discount for a profitable, growing insurer operating in markets with strong demographic tailwinds and insurance penetration growth potential. The company's diversified geographic footprint and market-leading positions provide defensive characteristics. Centerstone views current historically low valuations as an attractive entry point for a quality franchise business.

Pitch Summary:
Worldline is a European payment service provider (PSPs). While PSPs can provide a variety of different services, Worldline focuses on merchant acquiring and payment processing. It supports over 1.4 million merchants primarily in central/western Europe (Germany, Switzerland, France and the Benelux region). Facilitating digital payments is a high fixed cost (infrastructure investment), low marginal cost (supporting additional merchants or payment volume costs very little) business. Scale is a significant advantage. Worldline is the largest merchant acquirer in continental Europe by revenue and dollars of payments managed. It is over 30% larger than the number two player and over two times the size of the number three player. Having a local footprint is essential for merchant acquirers in Europe, in order to support the specific needs of merchants in each country. Each country has its own language, payment habits, regulations, payment networks, banks and merchants. Worldline has a good competitive position with a strong local market share across its geographic footprint. It also has a solid balance sheet. The share price declined significantly over the past year for three reasons: 1) a weaker economic environment in certain European countries where Worldline has a meaningful presence, specifically Germany; 2) fears of disruption from new "fintech" players, which we believe are unfounded; and 3) the announced termination of merchant relationships due to evolving regulatory requirements in October 2023. Regarding the last point, while these merchants accounted for less than 3% of annual revenue, the announcement may have created an association in the mind of investors between Worldline and Wirecard, which collapsed in one of Europe's biggest corporate scandals in 2020. We believe investors are prone to sell first and ask questions later. After conducting extensive research on the issue, we have no reason to believe it goes beyond what was announced. Shareholder activism over the last several months led Worldline to make meaningful changes to the board of directors, including the appointment of a new Chairman. These changes, in our opinion, should result in greater oversight and better communication going forward. We expect shareholder confidence to recover with time.

BSD Analysis:
Centerstone views Worldline as an attractive opportunity in European payment processing, emphasizing the company's dominant market position and scalable business model. The fund highlights Worldline's status as the largest merchant acquirer in continental Europe, with over 30% market share advantage versus competitors. The high fixed cost, low marginal cost economics create significant barriers to entry and operating leverage potential. Centerstone believes recent share price weakness is largely temporary, driven by economic headwinds in Germany, unfounded fintech disruption fears, and investor overreaction to regulatory merchant terminations representing less than 3% of revenue. The fund conducted extensive due diligence on the Wirecard association concerns and found no substantive issues. Recent board changes and shareholder activism should improve governance and communication. The investment thesis relies on the company's structural competitive advantages in fragmented European markets and eventual recovery of investor confidence.

Pitch Summary:
Barry Callebaut is the dominant player in chocolate production and is also the market leader in cocoa bean processing. It is vertically integrated and has scale across every step of the value chain, from the sourcing and processing of cocoa beans to the production of chocolate. With its global chocolate manufacturing footprint and significant chocolate production, it can cluster production volumes to be closer to its customers and to drive higher capacity utilization of its production lines. In its chocolate production business, Barry Callebaut has a cost-plus pricing model in which it passes on price fluctuations of raw materials and other production costs directly to its customers, which makes its margins less volatile. Cocoa bean prices can be volatile and Barry Callebaut's cost-plus pricing model is critical in driving less risk. Over the past year, cocoa bean prices have risen significantly and reached record highs. In this challenging environment, Barry Callebaut's cost-plus pricing model worked as expected and its chocolate production business generated solid profit per ton in its most recent earnings report. It also demonstrated the benefits of having an integrated model. As one of the only vertically integrated players, Barry Callebaut has a competitive edge in sourcing. It proactively prepared for this challenging environment and indicated it has secured its cocoa bean supply for its 2024 fiscal year. With its strong competitive position, we believe Barry Callebaut is well-positioned to take market share in a volatile environment.

BSD Analysis:
Centerstone presents a compelling case for Barry Callebaut based on its dominant market position and vertically integrated business model. The fund highlights the company's cost-plus pricing structure as a key competitive advantage, allowing it to pass through volatile cocoa price fluctuations to customers while maintaining stable margins. This pricing model proved effective during recent record-high cocoa prices, with the company generating solid profit per ton. The vertical integration provides sourcing advantages that few competitors possess, enabling proactive supply chain management. Barry Callebaut's global manufacturing footprint allows for optimized production clustering near customers, driving higher capacity utilization. The fund believes the company is well-positioned to gain market share during volatile commodity environments due to its structural advantages. The investment thesis centers on the company's ability to maintain profitability through commodity cycles while leveraging its scale and integration benefits.

Pitch Summary:
Bank Grupo Financiero Banorte dropped, along with other Mexican shares, after Claudia Sheinbaum won a landslide election victory. Initial market concerns over the potential for business-unfriendly policies appear unfounded. Sheinbaum has already met with some of the largest companies in Mexico, where she emphasised a collaborative approach, and Banorte's management appears optimistic about the political backdrop.

BSD Analysis:
The managers view the post-election decline in Banorte as an overreaction to political uncertainty rather than fundamental deterioration. Their assessment suggests initial market fears about business-unfriendly policies under President Sheinbaum were misplaced, with early signals pointing toward a collaborative approach with the private sector. Direct engagement between the new administration and major Mexican companies, including positive feedback from Banorte's management, supports this view. The managers likely see this as an opportunity to own a leading Mexican bank at attractive valuations following temporary political volatility. Banorte's position as one of Mexico's largest financial institutions should benefit from continued economic growth and financial sector development. The investment thesis relies on Mexico's structural economic advantages and Banorte's market-leading position in a growing financial services market.

Pitch Summary:
Ryanair fell 19.8% after its chief executive warned of customer resistance to further above-inflation price increases. However, the airline has consistently taken market share across Europe by passing cost savings on to passengers and remains significantly cheaper than competitors. It could be about to increase cashflows following a period of intense investment in new planes.

BSD Analysis:
The managers view Ryanair's 19.8% decline as a temporary setback rather than a fundamental deterioration. While management's commentary about pricing resistance created near-term concerns, the managers emphasize Ryanair's proven ability to gain market share through cost leadership. The airline's structural cost advantage versus competitors provides pricing flexibility and defensive positioning during economic uncertainty. The investment thesis centers on Ryanair's completion of a major fleet expansion cycle, which should drive improved cash flow generation as capital expenditure moderates. The managers appear confident that Ryanair's low-cost model will continue capturing market share in Europe's fragmented airline market. The recent weakness may present an attractive entry point for a company with strong competitive positioning and improving cash flow dynamics.

Pitch Summary:
Cosmetics company Estée Lauder fell 30.5%. The business has gone through a turbulent period, driven by weakness in China as post-lockdown consumer demand remains weak and distributors work through high stock levels. While the share price reflects a short-term slowdown, our meetings with the company, industry experts and competitors have highlighted the strength of its product portfolio and the beauty sector's long-term growth prospects. Further, management's cost-cutting programme means an expected sales recovery should be accompanied by an expansion in profit margins.

BSD Analysis:
Despite the significant 30.5% decline, the managers maintain conviction in Estée Lauder as a contrarian value opportunity. Their extensive due diligence, including meetings with management, industry experts, and competitors, reinforces confidence in the company's fundamental strengths. The current weakness stems from China-specific headwinds including weak post-lockdown demand and distributor inventory normalization, which the managers view as temporary. The investment thesis relies on Estée Lauder's premium brand portfolio and the structural growth of the global beauty market. Management's proactive cost-cutting initiatives position the company for operating leverage when sales recover, potentially driving margin expansion above historical levels. The managers appear to be buying into temporary weakness in a high-quality franchise with strong long-term prospects.

Pitch Summary:
Eicher Motors, the manufacturer of the Royal Enfield motorcycle, rose 17.7%. We only recently added Eicher to our portfolio, due to expectations of volume recovery in India's premium motorcycle sector where the company has a 45% market share.

BSD Analysis:
The managers initiated a new position in Eicher Motors based on expectations of a cyclical recovery in India's premium motorcycle segment. The 17.7% quarterly gain validates their timing, as the company benefits from its dominant 45% market share in the premium motorcycle category. The investment thesis centers on volume recovery in a market segment where Eicher's Royal Enfield brand has established strong consumer loyalty and pricing power. The managers likely see this as a play on India's growing middle class and increasing discretionary spending on premium lifestyle products. With the company's market-leading position, any sector recovery should disproportionately benefit Eicher Motors. The recent addition to the portfolio suggests the managers view current valuations as attractive relative to the recovery potential.