Investment Pitches

Pitch Summary:
Dangerous side effects (cancer and cardiac problems, could even be fatal); unapproved facilities and test results; related to 'snake oil' salesman; incoming share dilution; thousands of unreported adverse events based on FDA inspection; business could be cut by 70%;

BSD Analysis:
biote distributes hormone replacement therapies through a practitioner network. The short thesis stresses limited clinical validation of its treatments, exposure to regulatory crackdowns on alternative medicine claims, and a fragile business model that depends on constant recruitment of practitioners rather than organic consumer pull. Financials remain pressured by negative cash flow and repeated equity raises, raising dilution risk. Bears argue the company lacks scale, with weak payer coverage limiting addressable market size.

Pitch Summary:
Even though the share is down over 60% YTD, there could be more downside due to: a) questionable history makes it difficult to make partnerships; b) multiple expensive but failed acquisitions; c) overreliance on MSFT and GOOGL;

BSD Analysis:
Perion Network generates revenue primarily through digital advertising and its search monetization deal with Microsoft Bing. The short thesis points to heavy concentration risk, as a renegotiation of the Bing contract could wipe out a significant share of earnings. Additionally, the rise of AI-driven search interfaces threatens the existing monetization model, while the cyclical nature of ad budgets adds volatility. Competitors like Google and Meta have broader ecosystems, leaving Perion strategically disadvantaged.

Pitch Summary:
Foot Locker is in the midst of a turnaround, led by former Ulta CEO Mary Dillon. The company is investing heavily in revamping its loyalty program, remodeling stores, and enhancing its digital presence. These strategic initiatives, coupled with increased emphasis on wholesale partnerships, position Foot Locker for a strong 2024. Despite challenges, such as Nike allocation concerns, the company's investments and industry tailwinds create opportunities for growth. The potential for improved customer engagement and operational efficiency supports a positive outlook.

BSD Analysis:
Foot Locker's strategic investments are aimed at revitalizing its brand and improving customer experience. The focus on loyalty programs and digital enhancements aligns with current retail trends, potentially driving customer retention and sales. The remodeling of stores and partnerships with brands enhance Foot Locker's market positioning. While Nike allocation remains a concern, the company's proactive strategies and industry tailwinds provide a favorable environment for growth. The turnaround efforts, if successful, could lead to significant value creation for shareholders.

Pitch Summary:
Trubar has shown impressive performance with significant revenue growth and improved profitability. The brand is expanding rapidly, entering 5,000 more retailers this year, which could surpass current revenue guidance. The ecommerce channel is performing well, and there are plans for SKU expansion. Despite recent dilution from a private placement, insider buying indicates confidence in the company's future. With sufficient cash and focus, Trubar is positioned to execute its strategy effectively throughout 2024.

BSD Analysis:
Trubar's recent private placement, while dilutive, was partially offset by insider buying, signaling confidence in the company's prospects. The expansion into additional retailers and the strong performance of the ecommerce channel highlight the brand's growth potential. The planned SKU expansion into protein powders and cookies could further enhance revenue streams. The bankruptcy of a competitor, PureKana, reduces market competition, potentially benefiting Trubar. The company's strategic focus and financial positioning suggest a promising outlook for continued growth.

Pitch Summary:
Sow Good has shown significant momentum in a rapidly growing market, with production quality and capacity far ahead of its competition. Despite a recent offering that led to a temporary drop in stock price, the company's fundamentals have improved. The company had a stellar earnings call, reiterating guidance and outlining future plans. If guidance holds, Sow Good could achieve a $25M EBITDA run rate by the end of 2024, making its current valuation attractive. The potential for multiple expansion could lead to the stock price doubling over the next year.

BSD Analysis:
The recent offering, while initially negative due to its impact on the stock price, provided an opportunity to increase the position at a lower price. Sow Good's strong earnings call and guidance suggest robust future growth, with the potential for significant EBITDA expansion. The company's leadership in production quality and capacity positions it well against competitors. The market's rapid growth and the company's strategic positioning could drive substantial returns. The valuation at 6x EV/EBITDA is compelling for a company with triple-digit annual growth.

Pitch Summary:
Regardless of the increasing revenue and higher guidance, the company allows spam bots and fraud on its platform, likely to face significant lawsuits and / or regulatory actions;

BSD Analysis:
Klaviyo offers marketing automation tools for e-commerce, focusing on email and SMS campaigns. While revenue growth has been rapid, bears argue it is unsustainable due to intensifying competition from Shopify-native tools, Salesforce, and Adobe. Customer concentration around Shopify is an additional vulnerability if platform integration economics shift. Growth expectations are high, with valuation embedding near-perfect execution, leaving little margin for error. Margins are strong today but could compress if customer acquisition costs rise or churn accelerates.

Pitch Summary:
Since our write-up of Dentalcorp in our Q3 2023 investor letter, the company's share price has traded in both directions with significant volatility. We have closely watched this volatility because in just a few months, the difference between the high and low price is a wide 40%. Observing such volatility, one might believe the share price is responding to information that impacts cash flows, and thus the company's intrinsic value. As a reminder, Dentalcorp is an owner/operator of Canadian dental practices. Since our Q3 2023 letter, there has been no significant disruption to dentistry. In fact, Dentalcorp's cash flows are highly predictable as the business is more inflation and recession-resilient than average, ~89% of Dentalcorp's patient visits are recurring, Canada has among the highest dental compliance rates in the world, and the company's interest expense is fixed. Given the utility-like predictability of Dentalcorp's cash flows, what could be driving the share price's volatility? Although we do not know the minds of other market participants with any degree of certainty, we think the market is focused on short-term oriented data points like quarter-by-quarter M&A volume and revenue growth. It makes sense to track these data points, but it would be a mistake to extrapolate changes in them from one quarter to the next without more context or study. Short-term oriented investors can miss the forest for the trees with an isolated focus on these quarterly figures. M&A volume is relevant for Dentalcorp because it is an M&A platform consolidating Canadian dentistry. The company guides to acquiring $20M of pro-forma EBITDA each year. It is relatively unimportant if the company acquires $7M or $3M of EBITDA (the company's run rate EBITDA is $250M+) in any given quarter so long as acquisitions occur at attractive prices and shortfalls in one quarter's M&A volume is recovered in future quarters. M&A is seasonal and often lumpy, and prior quarters prove this. In Q4 2023, Dentalcorp acquired ~$9M of pro-forma EBITDA, whereas in the prior quarter Q3 2023, the company acquired just ~$1M of pro-forma EBITDA. It is worth noting that although the company's current strategy is sector consolidation via M&A, they could equally, and we think very profitably, stop consolidating the sector, cut M&A related corporate costs, and efficiently operate or sell their current practices in a steady state. Dentalcorp shareholders have many ways to win. Quarterly revenue growth is important to monitor. In 2023, Dentalcorp's same practice revenue growth ("SPRG") was 6.5%. In the most recent quarter Q1 2024, the company's SPRG was a weaker 0.9%. Yet it would be a mistake to overextrapolate a quarterly SPRG deceleration. As it turns out, a new government dental subsidy is launching in Q2 2024 and eligible patients deferred their previously scheduled Q1 visits in order to qualify for the subsidy. We expect the new government subsidy to be positive for Dentalcorp as the addressable market of Canadian dental patients will go up. Taking a step back, Dentalcorp trades at a TEV/EBITDA of ~9x (2024E) and 11% FCF yield (2024E). The company has a clear line of sight to strong annual FCF growth over the next few years with minimal execution risk. These trading multiples are too low for a leading consolidator of an essential, resilient private cash-pay healthcare sector with predictable cash flows and aligned management. We believe Dentalcorp is worth more than $11 per share, 70%+ higher than the current share price.

BSD Analysis:
Silver Beech maintains conviction in Dentalcorp despite 40% share price volatility, attributing the swings to short-term focused investors rather than fundamental changes. The manager emphasizes the utility-like predictability of dental cash flows, with 89% recurring patient visits and Canada's high dental compliance rates providing stability. Dentalcorp operates as a consolidation platform in Canadian dentistry with $250M+ run-rate EBITDA and targets $20M annual acquisition EBITDA. The manager dismisses quarterly M&A volume fluctuations as noise, noting the seasonal and lumpy nature of acquisitions. A temporary Q1 2024 same-practice revenue growth slowdown to 0.9% (vs 6.5% in 2023) is explained by patients deferring visits to qualify for new government dental subsidies launching in Q2. At 9x TEV/EBITDA and 11% FCF yield, the manager views the valuation as too low for a leading consolidator in an essential healthcare sector. The $11+ price target represents 70%+ upside, reflecting confidence in predictable cash flow growth with minimal execution risk.

Pitch Summary:
We recently initiated a new position in WillScot Mobile Mini ("WillScot"). WillScot is the leading North American provider of portable and turnkey modular building units and storage space. WillScot's 156k modular units and 212k portable storage units are leased to a diverse 80k+ customer base across industrial, infrastructure, education, government, and natural resources users. WillScot's products are mission-critical and possess minimal technological or obsolescence risk. On a large construction site, project managers work in modular units where they update and store site-specific documents (work orders, safety reports, etc.). WillScot also offers customers an extensive array of value-added products and services ("VAPS"). These VAPS include unit furnishings, air conditioning, solar panels, restrooms, tech hardware, and many other add-ons. WillScot's extensive offerings help fulfill a structural shift in customer demand for flexible modular and reduced waste/lower carbon footprint solutions. We estimate that WillScot has over 50% market share in its core modular unit product offering. The company's strong position in an oligopolistic market, combined with leading customer satisfaction and extensive VAPS, drives exceptional pricing power. Between 2019 and 2023, average rent per unit for WillScot's modular fleet grew at a 16% CAGR, and this strong rent growth occurred as fleet utilization declined by 10% over the same period. It is exceedingly rare for a leased product to experience such exceptional pricing dynamics during a declining utilization environment. Furthermore, based on our interviews with customers, we estimate that WillScot's products average ~0.5% of total project costs. WillScot's market presence, strong historical pricing power, and small but essential place in the value chain, give us confidence that the company's favorable pricing dynamics are likely to continue. We believe WillScot Mobile Mini is an attractive investment because: High-quality business: Contracted, recurring revenues: WillScot's products are leased to customers with an average lease duration of three years. Leases provide contracted, recurring revenues that are more resistant to economic shocks than speculative revenues. Embedded pricing power: Due to strong historical rent growth, there is a ~30% spread between market rents and in-place rents on WillScot's modular fleet. Without any future market rent growth and by simply marking new leases to market rents, WillScot can raise revenues by about 10% per year over the next three years (assuming steady utilization rates). Leading market position: WillScot cemented its #1 market position via a strong track record of M&A. The company has 50%+ market share in the oligopolistic modular unit market. In addition, pending FTC approval, WillScot intends to acquire McGrath RentCorp, its largest competitor. If approved by the FTC, we believe the transaction will be very accretive. Small portion of value chain but mission critical: We estimate WillScot's products account for an average of 0.5% of total project costs for any given customer. High returns on capital: In 2023, WillScot achieved a 19% after-tax return on tangible capital. Looking forward, WillScot's capex-light VAPS penetration will continue to drive even stronger incremental returns. Manageable economic risk: The market has recently discounted WillScot's prospects as it fears a "higher for longer" interest rate environment will result in less construction activity and fewer housing starts. Indeed, these circumstances are negative for WillScot. However, we believe WillScot is relatively insulated from short-term economic weakness due to its three-year average lease duration contracted revenues. We find it more likely that utilization of WillScot's products has troughed than peaked, as housing starts and remodeling projects resume at an accelerated pace to fill shortages caused by a decline in recent activity, in addition to infrastructure policy tailwinds. Aligned management team: WillScot's management is incented via an ROTC driven compensation structure and ownership of $200M+ shares. We have been impressed by management's ability to "walk the talk." Here is the company's CEO on the recent earnings call: "We have internally generated cash flow and balance sheet capacity that we need to deploy as responsible stewards of shareholder capital. So, the share repurchase is absolutely a wonderful use of capital at these valuations, and we intend to continue that deployment." Since WillScot's IPO in 2017, this same management team has achieved a 24%+ total shareholder return CAGR. Attractive valuation: WillScot trades at a TEV/EBITDA of ~11x (2023E) / ~10x (2024E) and ~7% free cash flow ("FCF") yield (2024E). This valuation is too low for a dominant infrastructure services business with 40%+ EBITDA margins, predictably growing cash flows, and high returns. By comparison, the S&P 500's industrial sector trades at a TEV/EBITDA of ~15x (2024E). We think WillScot's intrinsic value per share is $60+, more than 50% higher than its current share price.

BSD Analysis:
Silver Beech initiated a position in WillScot Mobile Mini, viewing it as a dominant infrastructure services business trading at an attractive valuation. The manager highlights WillScot's exceptional pricing power, with average rent per unit growing 16% annually from 2019-2023 despite declining utilization, demonstrating the mission-critical nature of their modular units. The company commands over 50% market share in an oligopolistic market and benefits from embedded pricing power with a 30% spread between market and in-place rents. WillScot's business model features contracted recurring revenues with three-year average lease terms, providing stability during economic downturns. The manager appreciates the company's high returns on capital (19% after-tax ROTC in 2023) and aligned management team with significant equity ownership. At 11x TEV/EBITDA and 7% FCF yield, the manager believes the valuation is too low for a business with 40%+ EBITDA margins and predictable cash flows. The $60+ price target represents over 50% upside from current levels.

Pitch Summary:
Paywalled (The site mentioned: The Bear Cave explores the recent resurgence of “meme stocks,” the players involved, and why AMC is the worst positioned among the hype. In short, The Bear Cave believes AMC is a dead company walking and its promoters are a disgrace for the U.S. public markets.)

BSD Analysis:
AMC is the largest U.S. movie theater chain but faces secular decline in cinema attendance as streaming adoption accelerates. Despite occasional box office hits, revenues remain inconsistent and the balance sheet is overleveraged. The company has repeatedly diluted shareholders to refinance debt, yet free cash flow remains inadequate to cover maturities. Bears argue the equity value depends on speculative trading rather than improving fundamentals.

Pitch Summary:
The court ruled against the company's key monopolistic protection and it was not disclosed to investors; the company concealed this material information and now it will compete against others;

BSD Analysis:
Insulet develops the Omnipod, a tubeless insulin pump. While adoption continues, the short thesis highlights a stretched valuation given intensifying competition from Medtronic, Tandem, and Dexcom’s integrated systems. Margins face pressure from reimbursement dynamics and heavy R&D spending required to maintain differentiation. International expansion adds execution risk, with regulators scrutinizing device safety and pricing. The stock trades at a premium that leaves little room for missteps.

Pitch Summary:
Taiwan Semiconductor Manufacturing Company (TSM US, 2330 TT) We remain optimistic about the company's long-term prospects and envision ourselves holding shares for an extended period. As we've previously discussed, we believe the company's two key competitive advantages - consistently manufacturing cutting-edge semiconductor chips while offering highly competitive pricing - will drive robust profits for years to come. These advantages position the company for sustained success, and we're confident in its ability to maintain its leadership in the industry. The past two years have seen the company coming off a difficult semi-con downcycle period, as the industry worked off the excess inventories manufactured during the Covid-19 years. We believe TSMC is now in a good position to experience a combination of both cyclical recovery and structural growth in an increasingly high computing era. We view the company as the “Toll Road” of the semi-con industry, particularly for Artificial Intelligence (AI) computing. This perspective is succinctly captured by TSMC's CEO, Mr. C.C. Wei, when he was asked by an analyst during a result briefing, 'Which company will win the AI race?' He answered, “No matter who wins, most of them are already all our customers.” In 2024, TSMC anticipates that revenue from AI-related revenue will comprise a modest percentage of their overall earnings, falling in the low-teens range. However, their projections for the subsequent five years paint a more dynamic picture, with an anticipated CAGR of 50%. This trajectory points towards AI-related revenue contributing to over 20% of TSMC's total revenue by 2028. Such growth is underpinned by substantial capital investments, notably from tech giants like Microsoft, Google, Meta, and Amazon. These companies are intensifying their efforts to design and produce bespoke AI processors, tailored to meet their burgeoning computational demands. TSMC, boasting a dominant 90% share in manufacturing leading-edge nodes, stands poised to capitalize significantly as the preferred and reliable manufacturing partner for these hyperscalers. We are closely monitoring Intel's efforts to reenter the foundry market, an area of concern for some. From a manufacturing expertise perspective, we believe it's unlikely that Intel can challenge TSMC's current dominance. The capital expenditure requirements to sustain R&D and manufacturing leadership are enormous (TSMC will spend approximately US$30B in capex this year, twice Intel's projected EBITDA). Furthermore, Intel's internal systems and manufacturing processes, shaped by its narrow product focus over the past few decades, are not well-suited for the foundry business. In contrast, TSMC has been a pure-play foundry since its inception in 1987, serving external clients and their diverse products. This has enabled TSMC to assemble over 70,000 design systems related IP solutions in its Open Innovation Platform. This provides a vast library of knowledge, offering a comprehensive design technology infrastructure, that streamlines chip design, reduces barriers, and increases first-time silicon success rates for its partners. This capability is a significant advantage that Intel currently lacks, and catching up will likely require substantial time and effort. Nonetheless, we will continue to closely monitor Intel's progress, as well as Samsung's developments, in this area.

BSD Analysis:
TSMC enters 2026 with an unprecedented revenue growth forecast of nearly thirty percent, fueled by insatiable global demand for advanced AI and high-performance computing chips. As the sole manufacturer of the world’s most sophisticated logic chips for Apple and NVIDIA, the company holds a near-monopoly position at the leading edge of the 2-nanometer and 3-nanometer nodes. Management’s revised long-term guidance points to a 25 percent compound annual growth rate through 2029, a remarkable feat for a company of its massive scale. Despite geopolitical tensions, TSMC’s expansion of manufacturing capacity in the United States and Japan is diversifying its operational risk and securing its role in the global supply chain. Trading at a discount to many of its big tech customers, the stock remains one of the most compelling value propositions in the technology sector.

Pitch Summary:
CEO's degree claims are misleading; the company's executives and directors are associated with financial scandals; false claims that the company is expanding its physical stores; up to 50% downside;

BSD Analysis:
Boot Barn specializes in western and workwear apparel. Bears argue the company is overextending store growth in a niche category that may not support national scale. Same-store sales have slowed, suggesting demand saturation in core regions. Gross margins are vulnerable to discounting, while inventory expansion raises working capital risk. In a discretionary downturn, expansion plans could amplify downside.

Pitch Summary:
Hindenburg's Nate tweeted: We’ve had a flood of 15+ inbounds in the past week asking us to look at potential accounting fraud at $CVNA. More than I've ever seen in so short a span of time, many that describe granular red flags.

BSD Analysis:
Carvana operates an online used car marketplace with a capital-intensive logistics network. The short case emphasizes extremely high leverage, reliance on securitizing subprime loans, and exposure to volatile used car pricing. Operational improvements have reduced losses, but the company remains highly dependent on favorable credit conditions. A downturn in auto credit markets or consumer demand could rapidly destabilize liquidity, making equity value fragile.

Pitch Summary:
Over the past nine months we have been able to build up a decent size position in ENDI Corp (ENDI) at around $4 per share, or two times earnings net of cash. It has since climbed to above $6.50 per share. ENDI Corp, formerly known as Enterprise Diversified and prior to that Sitestar, has been quite a ride for long-term shareholders. Eight years ago, the company was taken over by private investor Jeff Moore and Steven Kiel of Arquitos Capital. The company invested into Alluvial Fund, managed by Dave Waters. Then the wheels came off. An investment into an Arizona HVAC company failed miserably. The real estate investment, Mt. Melrose, grew too quickly and spent capital buying more homes than they could rehab and market in a reasonable amount of time, and was eventually sold. Then the Alluvial investment, the only major part of the business performing well, grew too big and triggered Investment Co. Act of 1940 regulatory issues. Management decided to fully redeem the investment and by late 2021 ENDI was left with a pile of cash, a small yet profitable internet dial up business, Sitestar, and Willow Oak Asset Management which had small revenue shares from a few small hedge funds along with offering administrative and compliance services to a handful of funds. In late December 2021 they announced a merger with CrossingBridge Advisors and Cohanzick Management, an investment advisory firm led by David Sherman that focused on mutual funds with shorter term debt instruments. Prior to starting Cohanzick and CrossingBridge, Mr. Sherman was a senior executive and Treasurer of insurance operations at Leucadia. The deal closed in August 2022. The end result was a "new company" and new management albeit with the same ticker – ENDI (note: older SEC filings are under Sitestar while newer ones are under ENDI Corp.). As part of the deal, CrossingBridge contributed some of its advisory agreements in exchange for shares valued at $8 per share, leaving the new entity with a large amount of cash and a profitable asset management business. The costs of closing the deal hurt results in 2022 yet they still reported $0.66 in EPS. In 2023 ENDI reported EPS of $0.46 per share. The share price was languishing around $4 per share. You might think things were trending in the wrong direction. Not at all! In fact, a number of positive events occurred in 2023 and even more in early 2024. On May 12, 2023, the company closed on agreement to acquire RiverPark Strategic Income Fund, which was sub-advised by David Sherman and Cohanzick. Essentially ENDI would own the full revenue stream from the advisory fees and pay RiverPark up to 50% of the revenue for the next three years and then 20% of revenue in years four and five. On October 23, 2023, ENDI launched a UCITS fund, the CrossingBridge Low Duration High Income Fund. The fund is similar to its US Low Duration High Income Fund but is intended for investors outside North America. The fund had reached $59 million in assets under management (AUM) by December 31, 2023, and over $80 million by March 31, 2024. According to the April 19, 2024, conference call this was accomplished without a seeder, and they are yet to target large family offices. On January 12, 2024, the company filed Form 15 to deregister with the SEC. This should reduce professional fees. On March 9, 2024, Crossing Bridge replaced Cohanzick as sub advisor to the RiverPark Short Term High Yield Fund as part of a deal for ENDI to acquire all remaining assets of Cohanzick for a $10 million note yielding 8%. This increased AUM by roughly $800 million. ENDI has 5.47 million shares outstanding. A current price of roughly $6.50 per share, for a $36 million market cap. Insiders own about 53%. What we felt the market was missing was that the company was no longer what it was, and more importantly it significantly increased earnings power based on the recent growth in AUM. Assets under management are currently $2.9 billion versus $1.8 billion at the end of 2023 and $1.5 billion at the end of 2022. Due to the March acquisition, true earnings power will not be reflected until the June quarter, but we estimate 2024 earnings at $0.86 per share. What made ENDI even more attractive was that they had cash and investments of $16.7 million, or $3.06 per share, as of the end of 2023. The most recent deal added $10 million of debt so net cash has subsequently decreased to $1.25 per share, but cash should build faster than earnings due to ENDI not being a full tax payer. We estimate March 2024 cash and investments at nearly $1.50 per share. At $6.50 per share ENDI is trading at just six times earnings net of cash. We think shares of ENDI are worth eight to ten times current earnings plus net cash, or $8.35 to $10 per share today with that value growing $0.25 per share every quarter. Thus, by the end of the year we see fair value being $9.75 to $11.50 per share based on slightly higher earnings run rate and an estimated cash balance of $2.30 per share. Unfortunately, due to ENDI's small size, it will be a smaller position for the fund, but big enough to be meaningful. We should note the stock has not had much liquidity the last month or so.

BSD Analysis:
The manager presents a compelling turnaround story for ENDI Corp, an asset management company that has transformed from a troubled conglomerate into a focused financial services business. The investment thesis centers on the company's dramatic AUM growth from $1.5 billion to $2.9 billion through strategic acquisitions, particularly the March 2024 Cohanzick deal that added $800 million in AUM. At 6x earnings net of cash, the valuation appears attractive for an asset manager with growing fee income streams. The manager's $8.35-$10 target price implies 8-10x earnings plus net cash, which seems reasonable for a profitable asset manager. Key catalysts include continued AUM growth, cost synergies from acquisitions, and the company's tax-advantaged structure that should accelerate cash generation. However, liquidity concerns and the company's complex corporate history present risks. The 53% insider ownership provides alignment but may limit trading liquidity for institutional investors.

Pitch Summary:
AGNC is an internally managed REIT focused on the agency RMBS sector. As the best of breed RMBS REIT, AGNC trades at a discount to tangible book value and offers a mid-teens dividend yield. With MBS spreads at a 3+ standard deviation from the mean, investors in AGNC will benefit from a normalization of mortgage credit spreads. While we wait for agency mortgage spreads to normalize, Appleseed Fund clips a ~1.3% dividend each month.

BSD Analysis:
Appleseed Fund views AGNC as the premier agency RMBS REIT, trading at an attractive discount to tangible book value while offering compelling income generation through mid-teens dividend yields. The investment thesis centers on mean reversion of mortgage-backed securities spreads, which are currently trading at extreme levels more than three standard deviations from historical norms. This statistical anomaly suggests significant upside potential as spreads normalize to historical averages. The fund benefits from immediate income generation through monthly dividends of approximately 1.3%, providing attractive carry while waiting for the normalization catalyst. AGNC's focus on agency RMBS provides government backing and reduced credit risk compared to non-agency alternatives. The internally managed structure eliminates external management fees, improving cost efficiency and shareholder alignment. This position reflects Appleseed's strategy of capturing dislocated opportunities in fixed income markets while generating substantial current income.

Pitch Summary:
Humana is one of several U.S. large managed care organizations and is primarily focused on government health insurance. Humana's share price has fallen over 40.0% from post-COVID highs due to the recent emergence of elevated medical loss ratios. In our view, Humana's stock has been severely punished and the stock was quite attractive at the time when Appleseed Fund took a position.

BSD Analysis:
Appleseed Fund initiated a position in Humana following a significant 40% decline from post-COVID highs, viewing the selloff as creating an attractive entry point. The fund managers believe the market has overreacted to elevated medical loss ratios, which represent temporary headwinds rather than structural issues. As one of the largest managed care organizations focused on government health insurance, Humana benefits from demographic tailwinds including an aging population and Medicare Advantage growth. The company's established market position and government contract relationships provide defensive characteristics during economic uncertainty. However, the investment thesis relies on medical cost normalization and margin recovery, which may take time to materialize. The fund's contrarian approach suggests confidence in Humana's ability to navigate current challenges and return to historical profitability levels. This value-oriented investment aligns with Appleseed's defensive positioning strategy.

Pitch Summary:
I recently had the opportunity to pitch a best idea at the BTIG Value Investing event in Omaha as part of the Berkshire Hathaway pilgrimage weekend. I pitched REVG, which is a manufacturer of primarily fire trucks and ambulances. We believe this is a very compelling industry due to current three-year backlogs for demand, significant price increases which have yet to fully flow through the P&L, and an oligopoly industry structure. Moreover, we believe REVG's new management team is well positioned to execute self-help initiatives to significantly increase EBITDA margins from current levels.

BSD Analysis:
Alta Fox identifies REV Group as a compelling value opportunity in the specialty vehicle manufacturing sector, particularly fire trucks and ambulances. The investment thesis centers on favorable industry dynamics including three-year demand backlogs that provide revenue visibility and pricing power. Significant price increases implemented by REVG have yet to fully flow through the P&L, suggesting near-term margin expansion potential as higher-priced orders are delivered. The oligopolistic industry structure provides competitive advantages and barriers to entry that support sustainable profitability. Alta Fox expresses confidence in REVG's new management team and their ability to execute operational improvements and self-help initiatives. The fund anticipates meaningful EBITDA margin expansion from current levels through management's strategic initiatives. REVG's position as a leading manufacturer in essential emergency vehicle markets provides defensive characteristics while benefiting from municipal spending on critical infrastructure. The combination of industry tailwinds, pricing power, and operational improvement potential supports Alta Fox's bullish investment case.

Pitch Summary:
Humble Group AB was the biggest detractor in the quarter, as it gave up some of its Q4 gains. We believe the thesis is on track and that this company remains one of the cheapest stocks in our portfolio. We see the potential for it to double over the next 12 months. Humble (full thesis here) has traded down in sympathy with the Swedish First North index as the institutional investor community increasingly abandons the venue in favor of the premiere Nasdaq Stockholm exchange. Over the last six months, Humble's adjusted beta vs the FN25 index has been 1.04. This has caused the group's forward EBITDA multiple to compress from 8.4x to 7.4x, implying a FY24 free cash flow yield of ~12.5% on our estimates. We are unaware of any consumer staples company trading in the public markets at a double-digit free cash flow yield while producing mid-teens organic revenue growth rates alongside strong operating leverage. Humble is "uplisting" from the First North exchange to the Nasdaq Stockholm exchange within the next six months. We believe this could be a catalyst for shares. However, if the company continues to trade at such low valuation levels, we believe Humble is likely to be acquired by a financial sponsor or strategic consumer staples company. This industry lends itself to acquisitions given the significant distribution and cost synergies of larger strategic acquirers.

BSD Analysis:
Alta Fox views Humble Group as an exceptional value opportunity in consumer staples, trading at compressed multiples due to institutional abandonment of the Swedish First North exchange. The company exhibits rare characteristics of mid-teens organic revenue growth combined with strong operating leverage while trading at only 7.4x forward EBITDA. Alta Fox estimates a 12.5% free cash flow yield for FY24, which appears anomalous for a consumer staples company demonstrating such robust growth metrics. The pending uplisting to Nasdaq Stockholm within six months represents a potential catalyst for multiple expansion and institutional re-engagement. Alta Fox identifies acquisition potential from financial sponsors or strategic acquirers seeking distribution synergies and cost optimization opportunities. The fund's 12-month doubling potential target reflects confidence in either multiple expansion through the uplisting or strategic acquisition at higher valuations. Despite Q1 underperformance, Alta Fox maintains conviction in the fundamental thesis and views current levels as attractive entry points.

Pitch Summary:
Daktronics was another large contributor in the first quarter. We will refrain from rehashing the thesis, as we have fully covered this in previous letters. However, we believe the thesis is very much on track and that DAKT remains significantly undervalued. The stock still trades for <6x our estimate of EBITDA, implying a double-digit free cash flow yield. We believe there remains underappreciated growth and self-improvement levers at DAKT and remain long the stock.

BSD Analysis:
Alta Fox maintains a bullish stance on Daktronics, viewing the electronic display manufacturer as significantly undervalued despite strong Q1 performance. The fund's valuation analysis suggests DAKT trades at less than 6x estimated EBITDA, generating a double-digit free cash flow yield that appears attractive relative to the company's growth prospects. Alta Fox identifies multiple underappreciated catalysts including organic growth opportunities and operational improvement initiatives that could drive value creation. The fund's continued confidence in the investment thesis, despite previous detailed coverage in prior letters, suggests strong conviction in the company's fundamental trajectory. DAKT's position as a leading provider of electronic display systems for sports venues and commercial applications provides exposure to secular growth trends in digital signage and sports facility upgrades. The combination of attractive valuation metrics and multiple value creation levers supports Alta Fox's long-term bullish outlook.