Investment Pitches

Pitch Summary:
Provider of wellness services onboard cruise ships and destination resorts, OneSpaWorld Holdings Ltd. (OSW), also traded higher as strong consumer trends drove another significant earnings beat and subsequent raise in full year guidance. Meanwhile, management strengthened the balance sheet by paying down and restructuring its expensive first lien term loan as well as ramped up capital returns to shareholders through buybacks and dividends.

BSD Analysis:
Ariel expresses confidence in OneSpaWorld's business model as a provider of wellness services across cruise ships and destination resorts. The company delivered strong operational performance with earnings significantly exceeding consensus estimates, leading to raised full-year guidance. Management's proactive balance sheet optimization through debt restructuring and paydown of expensive financing demonstrates sound capital allocation. The increase in shareholder returns via buybacks and dividends signals management's confidence in cash generation and future prospects. The investment thesis benefits from favorable consumer trends toward wellness and experiential spending. OneSpaWorld's positioning within the recovering cruise and resort industries provides multiple growth vectors as travel demand normalizes.

Pitch Summary:
Norwegian Cruise Line Holdings Ltd. (NCLH) advanced over the period following a top- and bottom-line earnings beat and subsequent raise in full-year guidance. Stronger than anticipated consumer demand, healthy onboard spending, robust pricing, solid cost containment and continued progress on leverage reduction boosted results. Looking ahead, NCLH remains focused on right sizing its cost base and improving margins to further strengthen its foundation for sustainable and profitable growth. With a young average fleet and solid liquidity position, we remain enthusiastic about the name.

BSD Analysis:
Ariel maintains a bullish stance on Norwegian Cruise Line following strong quarterly results that exceeded expectations on both revenue and earnings. The manager highlights multiple positive operational drivers including robust consumer demand, healthy onboard spending, and effective pricing power. Management's focus on cost optimization and margin improvement demonstrates disciplined capital allocation while the company continues to reduce leverage. The investment thesis centers on NCLH's structural advantages including a relatively young fleet and strong liquidity position. These factors position the company well for sustainable growth as the cruise industry continues its post-pandemic recovery. The manager's enthusiasm reflects confidence in management's execution and the company's competitive positioning within the leisure travel sector.

Pitch Summary:
In 2019, we found such an opportunity in a graphics processing technology company called NVIDIA. At the time, we felt NVIDIA would be a good way to leverage the growing interest in video games, as most of its chips were popular amongst "gamers" to enhance graphics. But what really grabbed our interest was its smaller, albeit faster-growing, data center business that was positioned to benefit from the emergence of high-performance computing, such as deep learning and machine learning, and the related field of AI. The rest, as they say, is history.

BSD Analysis:
Mairs & Power's NVIDIA investment represents a prescient early bet on AI infrastructure, initiated in 2019 when the company was primarily viewed as a gaming chip provider. The fund's original thesis focused on gaming demand but was particularly attracted to NVIDIA's emerging data center business and its positioning for high-performance computing applications. The managers recognized the potential for deep learning, machine learning, and AI before these became mainstream investment themes. This investment exemplifies the fund's ability to identify transformative technology trends early and hold positions through significant appreciation. NVIDIA's evolution from gaming-focused to AI infrastructure leader validates the fund's long-term investment approach. The position has become one of their largest contributors to performance, demonstrating how patient capital can capture secular technology shifts. The fund views NVIDIA as a core AI enabler alongside Microsoft, Amazon, and Alphabet in their technology portfolio.

Pitch Summary:
A perfect example is Microsoft, which has grown to become the largest holding in the Growth Fund. Microsoft has a near monopoly on the office software productivity market with its Microsoft Office Suite. The company's Azure platform is a leader in cloud computing and has been steadily gaining share. Thanks to its Office and Azure products, the company is deeply embedded within many enterprise IT ecosystems. Therefore, it should be well-positioned to expand its presence within its customer base, as it rolls out premium-price AI solutions. The company is not resting on its laurels and plans on spending an astounding $80 billion in 2025 to build out AI data centers.

BSD Analysis:
Microsoft has become Mairs & Power's largest holding, representing their conviction in the company's dominant market position and AI transformation strategy. The fund highlights Microsoft's near-monopolistic position in office productivity software and Azure's leadership in cloud computing as key competitive moats. The managers emphasize the company's deep enterprise customer entrenchment, which positions Microsoft to cross-sell premium AI solutions to its existing base. The fund views Microsoft's planned $80 billion AI data center investment in 2025 as evidence of management's commitment to maintaining technological leadership. This massive capital allocation demonstrates the company's ability to invest aggressively while maintaining strong cash generation. The investment thesis centers on Microsoft's ability to monetize AI across its product suite, leveraging existing customer relationships for higher-margin services. The fund sees this as a perfect example of how established technology companies with strong cash flows align with their investment philosophy.

Pitch Summary:
Given this backdrop, we continue to add to our small cap holdings and initiated a position in Clearfield (CLFD), a fiber optics product provider based in Minneapolis, Minnesota. The company provides a number of cabinets, cassettes, microducts, optical components, terminals, and wall boxes necessary in the management, protection, and delivery of fiber optic solutions. Many of its products allow for labor savings, which should be in high demand given the current shortage of fiber installers. Spurred on by cloud computing, the Internet of Things, and generative AI, telecoms continue to roll out fiber networks nationwide. Government-funded efforts are also expanding fiber infrastructure in underserved areas in the hopes of closing the digital divide, ensuring all Americans have access to fast, reliable high-speed Internet. Clearfield's products should benefit immensely from both privately-and-publicly-funded fiber.

BSD Analysis:
Mairs & Power initiated a new position in Clearfield, a Minneapolis-based fiber optics infrastructure company, as part of their small-cap investment strategy. The fund's thesis centers on the company's positioning to benefit from accelerating fiber network deployments driven by cloud computing, IoT, and AI demand. Clearfield's product portfolio includes critical fiber management components like cabinets, cassettes, and optical terminals that enable labor savings during installation—a key advantage given the current shortage of skilled fiber installers. The investment case is strengthened by dual demand drivers: private telecom infrastructure expansion and government-funded broadband initiatives aimed at closing the digital divide in underserved areas. The fund views this as an opportunistic entry into a company that should benefit from both private sector technology trends and public infrastructure spending. The regional focus aligns with Mairs & Power's preference for Upper Midwest companies. This represents a tactical play on the ongoing fiber infrastructure buildout across America.

BSD Analysis:
Aristotle added Tronox anticipating a cyclical recovery in titanium dioxide demand combined with improving competitive dynamics. The company's leadership position in titanium dioxide pigment manufacturing provides exposure to paint, plastics, and industrial applications across multiple end markets. Current expectations for demand recovery suggest the cyclical trough may be behind the company, positioning it for margin expansion as volumes normalize. A changing competitive backdrop, likely involving industry consolidation or capacity rationalization, should support pricing power and market stability. Management's cost savings initiatives provide additional earnings leverage as demand recovers, creating multiple drivers for improved financial performance. Tronox's essential product applications in construction, automotive, and consumer goods provide defensive demand characteristics despite cyclical volatility. The investment thesis combines cyclical timing with structural improvements, reflecting confidence in both market recovery and the company's competitive positioning. This represents a value opportunity in a commodity chemical with improving fundamentals.

BSD Analysis:
Aristotle initiated a position in Hexcel, viewing the aerospace materials supplier as positioned for recovery from COVID-era disruptions and Boeing-specific manufacturing issues. The company's leadership in carbon fiber, honeycomb, and composite materials for aerospace applications provides exposure to the commercial aircraft recovery cycle. Hexcel's financial performance has been negatively impacted by pandemic-related demand destruction and Boeing's production problems, creating a depressed valuation base. The manager expects company-specific self-help initiatives to drive operational improvements while commercial aircraft build rates normalize. The combination of cyclical recovery and internal improvements should support enhanced financial performance over the next several years. Hexcel's specialized materials are critical components in modern aircraft manufacturing, providing defensive characteristics and high switching costs. The investment reflects confidence in aerospace industry recovery and the company's ability to capitalize on improving demand dynamics while executing operational enhancements.

BSD Analysis:
Aristotle added Axalta Coating Systems anticipating both cyclical recovery and company-specific improvements under new management. The investment thesis combines expected demand rebound for the company's coating products with self-help initiatives implemented by the new management team. Axalta's exposure to commercial and light vehicle markets positions it to benefit from automotive industry recovery and industrial activity normalization. The company's high-performance liquid and powder coating solutions serve diverse end markets including automotive OEM, refinishing, and industrial applications, providing multiple avenues for growth. New management's focus on operational efficiency and strategic initiatives should drive stronger revenue and earnings growth over the next several years. The combination of cyclical tailwinds and structural improvements creates a compelling risk-reward profile. Aristotle's timing suggests confidence in both the cyclical turning point and management's ability to execute on transformation initiatives, positioning the company for outperformance as markets recover.

BSD Analysis:
Aristotle initiated a position in Americold Realty Trust, viewing the cold storage REIT as undervalued by the market. The manager believes company-specific productivity initiatives are underappreciated and not reflected in current valuation metrics. Strong industry dynamics support the investment thesis, with growing demand for temperature-controlled logistics driven by e-commerce growth, food safety requirements, and supply chain optimization trends. Americold's technology-oriented approach to cold storage solutions differentiates it from traditional warehouse operators and creates competitive advantages. The company's global leadership position and comprehensive service offering to food producers, processors, distributors, and retailers provides diversified revenue streams and defensive characteristics. The manager's confidence in both company-specific improvements and favorable industry tailwinds suggests potential for multiple expansion as operational enhancements become evident. This represents a value opportunity in a specialized REIT with secular growth drivers.

BSD Analysis:
Aristotle acquired Amentum Holdings through the spin-off and merger of Jacobs Solutions' Critical Mission Solutions and Cyber & Intelligence businesses. The manager views the combined entity as well-positioned to benefit from increased government spending on digital modernization, cybersecurity, and next-generation technologies. The merger creates exposure to new end markets and geographic opportunities while generating operating scale efficiencies. Amentum's focus on serving US and allied government agencies provides stable, long-term revenue streams with high barriers to entry. The company's expertise in critical mission solutions and cyber intelligence aligns with growing government priorities around national security and technological advancement. The combination enhances the company's competitive positioning and ability to capture larger, more complex contracts. Aristotle's decision to maintain the position reflects confidence in the strategic rationale and potential for incremental shareholder value creation through operational synergies and market expansion.

BSD Analysis:
Aristotle maintains its position in Ardmore Shipping despite near-term headwinds affecting the tanker market. The company faced pressure from weakening spot rates, geopolitical concerns impacting shipping routes, and broader industry downturn. However, the manager emphasizes the company's position of strength, highlighting recent shareholder-friendly capital allocation decisions that demonstrate management's commitment to returning value. Strong operating performance suggests effective fleet management and cost control despite challenging market conditions. The favorable industry supply-demand backdrop provides a structural tailwind, with limited new vessel deliveries supporting future rate recovery. Ardmore's focus on modern mid-sized vessels in the product and chemical transportation segment positions it well for market recovery. The manager's conviction reflects confidence in the cyclical nature of shipping markets and the company's ability to capitalize when conditions improve.

Pitch Summary:
Acadia Healthcare (ACHC), a behavioral healthcare and substance abuse treatment services company, continues to be impacted by the negative sentiment surrounding the news headlines related to patient care and questions about billing practices. While we take these developments seriously, we believe investors' reaction to the news has been more severe than warranted. Industry peers have faced similar levels of scrutiny in the past with limited fundamental impact, and unless additional information is uncovered, we believe the current scrutiny will be resolved without much of an impact on their business. We continue to believe the company is well positioned to be an important part of the solution to an unfortunately growing need for behavioral health services.

BSD Analysis:
Aristotle maintains conviction in Acadia Healthcare despite recent negative headlines regarding patient care and billing practices. The manager acknowledges the seriousness of these developments but believes the market reaction has been disproportionate to the likely fundamental impact. Drawing on historical precedent, they note that industry peers have weathered similar scrutiny with minimal long-term business effects. The investment thesis centers on Acadia's positioning to address the growing demand for behavioral health services, a secular tailwind driven by increasing mental health awareness and treatment needs. The manager's contrarian stance suggests they view current weakness as a buying opportunity, betting that regulatory concerns will resolve without material business disruption. This reflects confidence in the company's operational capabilities and the essential nature of its services in an underserved market.

Pitch Summary:
Chart Industries (GTLS), a company specializing in the design and manufacturing of highly engineered equipment for the industrial gas, energy, and biomedical industries, reported record high orders, a substantial increase in sales, and a strong backlog, driven by surging demand for its cryogenic equipment used in the clean energy sector, coupled with a changing positive sentiment around LNG by the new administration.

BSD Analysis:
Aristotle highlights Chart Industries as a top contributor driven by exceptional operational performance and favorable policy tailwinds. The company delivered record orders and substantial sales growth, indicating strong execution and market positioning. The robust backlog provides revenue visibility while surging demand for cryogenic equipment in clean energy applications demonstrates the company's exposure to secular growth trends. The manager emphasizes the positive shift in LNG sentiment under the new administration, suggesting regulatory and policy support for the company's core markets. Chart's specialized equipment for industrial gas, energy, and biomedical industries positions it well in multiple growing end markets. The combination of strong fundamentals and supportive policy environment creates a compelling investment thesis for continued outperformance.

Pitch Summary:
Insights Enterprises (NSIT), is a global technology "solutions integrator" specializing in designing, building and managing complex IT solutions for businesses of various size and scale. Areas of expertise include data center, cloud, security, and AI. Over the next several years, NSIT is poised to benefit from increased demand from an increasing complex technology landscape, the continued transition of enterprise business to the cloud and the emergence of AI as a must have IT tool. They are also expected to realize improved financial performance over the next several years as the benefits of strategic investments that have expanded the company's portfolio of IT solutions are realized as well as from the integration/cross-selling of acquisitions completed over the past couple of years.

BSD Analysis:
Aristotle Capital added Insight Enterprises, positioning for growth in enterprise IT services and emerging technologies. The company operates as a technology solutions integrator, helping businesses navigate complex IT implementations across cloud, security, data center, and AI solutions. NSIT is well-positioned to benefit from multiple secular trends including cloud migration, cybersecurity investments, and AI adoption. The fund expects the company to capitalize on increasing technology complexity that requires specialized integration services. Strategic investments in expanding the solutions portfolio should drive higher-margin revenue growth. Recent acquisitions provide cross-selling opportunities and expanded capabilities. The investment thesis centers on NSIT's role as a critical partner for enterprise digital transformation. As businesses increasingly rely on complex technology stacks, specialized integrators like NSIT become more valuable and should command premium valuations.

Pitch Summary:
Hexcel (HXL), develops and manufactures structural materials for use in commercial aerospace, space and defense, and industrial applications. As a leading supplier of carbon fiber, honeycomb and other composite materials for the aerospace industry the company's financial performance has been negatively impacted by Covid-era disruptions and Boeing's company-specific manufacturing problems. We believe the combination of company-specific self-help initiatives and an improving outlook for commercial aircraft build rates bodes well for improved financial performance from HXL.

BSD Analysis:
Aristotle Capital initiated a position in Hexcel, betting on aerospace recovery and operational improvements. The company is a leading supplier of advanced composite materials to the aerospace industry, including carbon fiber and honeycomb structures. HXL has been negatively impacted by COVID-related disruptions and Boeing's manufacturing issues, creating a depressed valuation. The fund expects recovery as commercial aircraft build rates improve and Boeing resolves its production problems. Company-specific self-help initiatives should drive operational efficiency and margin improvement. The investment thesis combines cyclical aerospace recovery with company-specific turnaround potential. As a specialized supplier with high barriers to entry, HXL should benefit disproportionately from aerospace industry normalization. The fund sees this as a classic cyclical recovery play in a high-quality industrial franchise.

Pitch Summary:
Healthpeak Properties (DOC), is a healthcare-focused real estate investment trust (REIT) that develops, owns and manages medical office buildings, senior housing assets and life science facilities. Following an industry-wide life sciences building boom that created a supply/demand imbalance, DOC is poised to benefit from improved lease rates with its properties as excess industry capacity is absorbed. A solid fundamental backdrop for the demographically driven senior housing portfolio and stability within its medical office building portfolio should allow the company to produce improved financial performance over the next several years.

BSD Analysis:
Aristotle Capital added Healthpeak Properties, betting on recovery in life sciences real estate and demographic tailwinds in senior housing. The fund believes DOC is well-positioned as excess life sciences capacity gets absorbed, leading to improved lease rates and occupancy. The life sciences building boom created oversupply, but as this normalizes, DOC's high-quality properties should benefit from tightening markets. The senior housing portfolio benefits from favorable demographics as the aging population drives demand. Medical office buildings provide stability and defensive characteristics. The investment thesis combines cyclical recovery in life sciences with structural demographic trends in senior housing. The fund expects improved financial performance as supply/demand dynamics normalize and demographic trends accelerate. This represents a diversified healthcare REIT play with multiple improvement catalysts.

Pitch Summary:
Columbus McKinnon (CMCO), is a designer and manufacturer of a variety of material handling products and industrial lifts. The company is expected to benefit from a cyclical rebound in demand following a period of subdued performance as well as the harvesting of investments they've made over the past several years in faster growing, higher margin intelligent motion solutions (conveyance and automation).

BSD Analysis:
Aristotle Capital initiated a position in Columbus McKinnon, anticipating both cyclical recovery and benefits from prior strategic investments. The company manufactures material handling equipment and industrial lifts, markets that have experienced weakness but are positioned for rebound. CMCO has invested heavily in intelligent motion solutions, including conveyance and automation technologies, which offer higher margins and faster growth than traditional products. The fund expects the company to harvest returns from these investments as demand recovers. This represents a classic industrial cyclical play with a technology upgrade story. The combination of cyclical tailwinds and product mix improvement toward higher-value solutions should drive improved financial performance. The investment thesis relies on both external market recovery and internal portfolio transformation paying off.

Pitch Summary:
Axalta Coating System (AXTA), is a global manufacturer, marketer and distributor of high-performance liquid and powder coating solutions for commercial and light vehicle, industrial and aftermarket refinishing. In addition to an expected cyclical rebound in demand for the company's products, self-help initiatives implemented by a new management team will likely drive stronger revenue and earnings growth over the next several years.

BSD Analysis:
Aristotle Capital added Axalta Coating System to the portfolio, betting on both cyclical recovery and management-driven improvements. The fund expects a rebound in demand for the company's coating solutions across automotive and industrial end markets. New management has implemented self-help initiatives that should drive operational improvements and margin expansion. The investment thesis combines cyclical tailwinds with company-specific turnaround potential under new leadership. AXTA operates in specialty chemicals with exposure to automotive production and industrial maintenance markets. The fund anticipates stronger revenue and earnings growth as both external demand recovers and internal efficiency measures take effect. This represents a classic value play on operational improvement during a cyclical upturn.

Pitch Summary:
Americold Realty Trust (COLD), a global leader in temperature-controlled logistics, offering innovative technology-oriented supply chain and cold storage solutions to food producers, processors, distributors, and retailers was added to the portfolio. We believe that company-specific productivity initiatives coupled with strong industry dynamics are underappreciated by the market and not reflected in our estimate of the current valuation.

BSD Analysis:
Aristotle Capital initiated a position in Americold Realty Trust, viewing the cold storage REIT as undervalued by the market. The fund believes the company's productivity initiatives and favorable industry dynamics are not properly reflected in the current stock price. As a global leader in temperature-controlled logistics, COLD operates in a specialized niche with high barriers to entry and growing demand from food supply chain participants. The investment thesis centers on operational improvements and structural industry tailwinds that should drive improved financial performance. The fund sees this as a value opportunity where fundamental improvements are not yet recognized by investors. Cold storage demand continues to grow with e-commerce food delivery and changing consumer preferences toward fresh and frozen foods.

Pitch Summary:
Our other notable new holding is CBL & Associates Properties, Inc. I consider CBL another expression of our "long-term commercial property recovery" theme, where we seek to buy fundamentally sound real estate that will benefit from gradually improving sentiment. CBL is an operator of traditional malls, outlet malls, open air shopping centers, and lifestyle properties. CBL entered bankruptcy during the COVID crisis, shedding debt and reemerging in 2021. There's no question that the mall business is not what it used to be, but CBL has done an admirable job in reducing leverage, investing in its best properties, and returning capital to shareholders. Today, CBL owns a portfolio of 87 properties and manages 4 others for third parties. The portfolio ranges in quality from "Class A-ish" malls doing $500+ of annual sales per square foot, to challenged properties in tertiary markets. CBL's value is concentrated in its best properties, but the lower-quality properties still produce cash and the company is actively marketing some for sale. I value CBL shares at $40-45. At $28, CBL trades at an attractive discount to fair value, but I am also attracted by the low downside risk. The company has almost $9 per share in excess cash and owns a collection of properties totally unencumbered by debt. These properties produced $66 million in 2023 cash flow. At 7x cash flow, these properties are worth another $15 per CBL share. Together with the cash, that's value of $24 per share before considering any of the debt-encumbered properties. And there is plenty of value there, too. Some of CBL's properties are owned by a holding company that carries a term loan of $730 million. As long as these properties are worth more than 5.5x cash flow, CBL's equity in the holding company has value. CBL also has numerous properties with non-recourse property debt. Some of these properties are not currently cash-flowing for CBL because their cash flow is insufficient to satisfy their debt service ratios. These represent pure optionality for CBL. Either things don't improve and CBL hands the keys to the lenders, the lenders agree to restructure the debt and the properties become cash-flowing again, or property performance improves and the debt service issue is resolved. There's no way these properties can be actual liabilities for CBL, and plenty of ways they can have value again. CBL's best properties are mainly held through joint ventures with other operators. The company is working to consolidate some of these, and just announced the purchase of its JV partners' interests in three malls in Nashville, Kansas City, and St. Louis. Like our other commercial property holdings, CBL & Associates Properties has its fair share of challenges. But there are plenty of encouraging signs. CBL's net operating income was steady from 2023 to 2024, and occupancy ticked higher in the third quarter. The company's debt burden is very manageable and shrinking monthly from scheduled amortization and property sales. It's unlikely that investors will wake up tomorrow, decide malls are the future of commerce, and bid CBL shares to $80 or $100. But I do think the combination of strong cash flow, continued debt reduction, strategic reinvestment in CBL's best assets, and healthy distributions and share repurchases will drive shares higher this year and next.

BSD Analysis:
Waters presents CBL as a post-bankruptcy recovery play with compelling risk-adjusted returns and significant downside protection. The company emerged from COVID-era bankruptcy with a cleaned-up balance sheet and has demonstrated disciplined capital allocation through debt reduction and shareholder returns. Waters' sum-of-the-parts analysis reveals substantial value with $9 per share in excess cash plus unencumbered properties worth $15 per share, providing $24 of value before considering debt-encumbered assets. At $28, shares trade near this conservative floor with significant optionality from improving mall fundamentals. The portfolio spans quality levels from Class A malls generating $500+ per square foot to challenged properties that provide pure upside optionality. Recent operational improvements include steady NOI and rising occupancy, while the company actively consolidates joint venture interests. Waters' $40-45 target suggests 43-61% upside potential. The investment benefits from non-recourse debt structures that limit downside while providing upside participation in any retail real estate recovery.