Investment Pitches

Pitch Summary:
Among our long positions, one of our largest contributors was top contributor was Paylocity Holding Corp. (PCTY). The company provides software for payroll and human-resources management using the software-as-a-service (SaaS) business model. Paylocity's stock traded lower early in the year after revenue growth decelerated but rebounded this quarter following steadier operating results. Paylocity has been a longtime holding in some Wasatch portfolios, and we were pleased to see revenue growth stabilize.

BSD Analysis:
Wasatch maintains a bullish stance on Paylocity, viewing it as a quality SaaS provider in the payroll and HR management space. The manager highlights the company's recovery from earlier revenue growth deceleration, with the stock rebounding on steadier operating results in Q4. As a longtime holding across Wasatch portfolios, PCTY represents a core position in their software & services allocation. The stabilization of revenue growth appears to validate their long-term thesis on the company's competitive position in the mid-market HR software segment. The manager's satisfaction with the revenue growth stabilization suggests confidence in the company's ability to maintain its market position and return to more consistent growth patterns. This pitch reflects Wasatch's preference for established SaaS businesses with proven business models and recurring revenue streams. The positive performance contribution during the quarter reinforces their conviction in the investment thesis.

Pitch Summary:
The largest detractor from strategy performance was TransMedics Group, Inc. (TMDX). The medical technology company develops and sells organ preservation and assessment technologies for organ transplants. The company's stock experienced substantial gains for much of 2024 but was down in October after the company released quarterly earnings that fell short of investors' expectations. However, we continue to believe TransMedics has established itself as the standard of care in the organ transplant market.

BSD Analysis:
Despite being the largest quarterly detractor, the managers maintain strong conviction in TransMedics' long-term prospects and competitive positioning. The company operates in the specialized organ preservation and assessment technology market for transplants, representing a critical healthcare need with limited competition. TransMedics experienced significant gains throughout most of 2024, indicating strong underlying business momentum before the recent earnings disappointment. The managers' continued confidence stems from their belief that TransMedics has achieved standard-of-care status in organ transplantation, suggesting sustainable competitive advantages. The quarterly earnings miss appears to be a temporary setback rather than a fundamental deterioration in the business model. The organ transplant market represents a high-value, mission-critical application where TransMedics' technology provides significant clinical benefits. The managers' maintained conviction despite recent volatility reflects their long-term view of the company's market leadership and growth potential.

Pitch Summary:
Construction Partners, Inc. (ROAD) was an additional contributor. Construction Partners is a civil infrastructure company specializing in public and private infrastructure projects such as highways, roads, bridges, airports, and commercial and residential sites. During the quarter, the company announced strong fiscal year 2024 results, including 17% revenue growth and a 40% increase in net income. Management also announced a deal to purchase Lone Star Paving, an asphalt production and paving firm. We believe the acquisition will be quite accretive for the company. Looking forward, we like Construction Partners' growth potential and geographic footprint. Construction Partners has a large presence in Southern states, where population growth is high and states need to expand and improve infrastructure.

BSD Analysis:
The managers highlight Construction Partners as a compelling infrastructure play with strong fundamental momentum and strategic positioning. The company delivered impressive fiscal 2024 results with 17% revenue growth and 40% net income expansion, demonstrating operational leverage and execution excellence. The Lone Star Paving acquisition represents strategic value creation that the managers expect to be highly accretive to earnings. Construction Partners benefits from favorable demographic trends with significant exposure to high-growth Southern states experiencing population influx. The company's geographic footprint positions it well to capitalize on infrastructure investment needs driven by population growth. The combination of organic growth, strategic acquisitions, and favorable end-market dynamics creates multiple growth drivers. The managers' bullish outlook reflects confidence in the company's ability to execute on both organic opportunities and inorganic expansion.

Pitch Summary:
Another top contributor was Paylocity Holding Corp. (PCTY). The company provides software for payroll and human-resources management using the software-as-a-service (SaaS) business model. Paylocity's stock traded lower early in the year after revenue growth decelerated but rebounded this quarter following steadier operating results. Paylocity has been a longtime holding in the portfolio, and we were pleased to see revenue growth stabilize.

BSD Analysis:
The managers view Paylocity as a successful turnaround story within their portfolio, representing a top quarterly contributor. The company operates in the attractive SaaS payroll and HR management space with recurring revenue characteristics. After experiencing revenue growth deceleration earlier in the year that pressured the stock, Paylocity demonstrated operational stabilization in the recent quarter. The managers' long-term conviction in the holding reflects confidence in the company's competitive positioning and market opportunity. The revenue growth stabilization suggests management has successfully navigated through temporary headwinds. As a longtime portfolio holding, Paylocity represents the managers' patience with quality businesses through cyclical challenges. The rebound performance validates their conviction in the company's underlying business model and execution capabilities.

Pitch Summary:
BellRing Brands, Inc. (BRBR) was a top contributor to strategy performance during the quarter. BellRing provides various nutritional products and is best known for its Premier Protein and Dymatize brands. The company has continued to produce solid operating results. Net earnings for BellRing's latest quarter were up 55% from the same period last year, and its Premier Protein brand reached all-time highs in household penetration. As fundamentals continue to come in ahead of estimates, the stock has moved higher.

BSD Analysis:
The managers highlight BellRing as a top quarterly contributor driven by strong fundamental execution. The company delivered impressive 55% net earnings growth year-over-year, demonstrating robust operational leverage. The Premier Protein brand achieved record household penetration levels, indicating successful market share expansion and brand strength. The consistent outperformance versus estimates suggests management's ability to execute on growth initiatives effectively. BellRing operates in the attractive nutritional products market with strong brand recognition through Premier Protein and Dymatize. The combination of earnings acceleration and market share gains positions the company well for continued growth. The managers' positive tone reflects confidence in the company's competitive positioning and execution capabilities.

Pitch Summary:
We invest with a business owner's lens, paying close attention to how management is allocating capital and making business decisions that are important to long-term performance. For example, when U-Haul invests its free cash flow from the truck rental business to build out capacity in their storage business, those results may not translate to share price changes in the short-term. Meanwhile, the company continues to expand its market share and enhance its competitive position in a core segment of their business that strongly complements their truck rental business. We strongly believe U-Haul's investment decisions represent fundamental value creation and we believe the equity price performance will eventually reflect this added value.

BSD Analysis:
Yacktman approaches U-Haul with a long-term business owner perspective, focusing on management's strategic capital allocation rather than short-term stock price movements. The fund highlights U-Haul's disciplined reinvestment of free cash flow from the established truck rental business into expanding storage capacity, viewing this as intelligent diversification within complementary business lines. While these investments may not immediately translate to share price appreciation, Yacktman believes they are building sustainable competitive advantages and market share expansion. The storage business represents a natural extension of U-Haul's core moving services, creating operational synergies and customer cross-selling opportunities. Management's focus on long-term value creation over short-term earnings optimization aligns with Yacktman's investment philosophy. The fund expresses confidence that the market will eventually recognize the fundamental value being created through these strategic investments. This patient capital approach reflects Yacktman's conviction in U-Haul's business model and management execution.

Pitch Summary:
Bolloré has continued to take steps to increase the underlying value of the company. Merely three years ago, Bolloré also owned an African ports and logistics business and a European freight forwarding business. Today the company simply holds positions in two leading media companies and a net cash balance approximately equal to its market capitalization. One of its two media holdings, Vivendi, announced that it is also simplifying its structure by spinning off its major subsidiaries (Canal+, Havas, and Louis Hachette Group) as separate companies, transforming the media conglomerate. Bolloré also owns a large stake in Universal Music Group, a leader in the music streaming industry. Universal Music Group continues to unlock value with the recently announced partnership with Spotify, as well as potential moves to list the company in the U.S. with associated market access benefits. Bolloré has also taken steps to simplify its corporate structure, beginning with three small subsidiaries in the labyrinth ownership structure. We believe the value of Bolloré to be two-to-three times its current market valuation.

BSD Analysis:
Yacktman views Bolloré as a compelling value unlock story following significant corporate simplification over the past three years. The company has transformed from a complex conglomerate with African logistics and European freight operations into a focused media investment vehicle with substantial net cash. The portfolio now centers on two key media assets: Vivendi and Universal Music Group, both undergoing their own value-enhancing restructuring initiatives. Vivendi's announced spin-offs of Canal+, Havas, and Louis Hachette Group should unlock hidden value within the media conglomerate. Universal Music Group's strategic partnership with Spotify and potential U.S. listing represent additional catalysts for value realization. The manager emphasizes Bolloré's net cash position approximating its entire market capitalization, providing significant downside protection. Ongoing corporate structure simplification efforts should reduce the conglomerate discount. Yacktman's bold valuation assessment of two-to-three times current market value reflects confidence in the sum-of-the-parts analysis and pending value catalysts.

Pitch Summary:
Samsung is one of the world's leading technology companies, and it can be owned at a price close to tangible book value. The company competes in core parts of the technology sector—memory chips, foundry, and phones—and it can be owned at a valuation that stands in stark contrast to its industry peers. Samsung has had some business performance challenges in 2024, most notably in the High Bandwidth Memory (HBM) chip segment. The company has taken steps to secure its position in that segment going forward. Samsung's foundry business rivals that of Taiwan Semiconductor Manufacturing Company Limited (TSMC), and its phone business competes directly with Apple. Samsung announced plans for a large share buyback which is an astute capital allocation decision given the value of the company. Samsung remains conservatively capitalized with net cash and marketable securities representing about a third of market value.

BSD Analysis:
Yacktman presents Samsung as a compelling value opportunity trading near tangible book value despite being a leading global technology company. The manager highlights Samsung's diversified technology portfolio spanning memory chips, foundry services, and smartphones, positioning it as a direct competitor to industry leaders like TSMC and Apple. While acknowledging 2024 challenges in the High Bandwidth Memory segment, the fund views Samsung's corrective measures as positive for future positioning. The announced share buyback program is seen as intelligent capital allocation given the company's undervaluation. Samsung's conservative balance sheet with net cash and marketable securities representing approximately one-third of market value provides additional downside protection. The stark valuation discount relative to technology peers creates an asymmetric risk-reward profile. Yacktman's conviction appears rooted in the disconnect between Samsung's fundamental business quality and its current market pricing.

Pitch Summary:
Bolloré has continued to take steps to increase the underlying value of the company. Merely three years ago, Bolloré also owned an African ports and logistics business and a European freight forwarding business. Today the company simply holds positions in two leading media companies and a net cash balance approximately equal to its market capitalization. One of its two media holdings, Vivendi, announced that it is also simplifying its structure by spinning off its major subsidiaries (Canal+, Havas, and Louis Hachette Group) as separate companies, transforming the media conglomerate. Bolloré also owns a large stake in Universal Music Group, a leader in the music streaming industry. Universal Music Group continues to unlock value with the recently announced partnership with Spotify, as well as potential moves to list the company in the U.S. with associated market access benefits. Bolloré has also taken steps to simplify its corporate structure, beginning with three small subsidiaries in the labyrinth ownership structure. We believe the value of Bolloré to be two-to-three times its current market valuation.

BSD Analysis:
Yacktman views Bolloré as a compelling sum-of-the-parts value play following significant portfolio simplification over the past three years. The company has transformed from a complex conglomerate with African logistics operations to a focused media holding company with substantial net cash. The investment thesis centers on hidden value within Bolloré's media holdings, particularly through Vivendi's announced spin-offs of Canal+, Havas, and Louis Hachette Group. Universal Music Group represents a key value driver with recent Spotify partnership and potential U.S. listing providing multiple expansion catalysts. Management's ongoing corporate structure simplification should reduce the conglomerate discount and improve transparency. With net cash approximately equal to market capitalization, downside protection appears substantial. Yacktman's valuation assessment of two-to-three times current market value suggests significant upside potential as value crystallizes.

Pitch Summary:
Samsung is one of the world's leading technology companies, and it can be owned at a price close to tangible book value. The company competes in core parts of the technology sector—memory chips, foundry, and phones—and it can be owned at a valuation that stands in stark contrast to its industry peers. Samsung has had some business performance challenges in 2024, most notably in the High Bandwidth Memory (HBM) chip segment. The company has taken steps to secure its position in that segment going forward. Samsung's foundry business rivals that of Taiwan Semiconductor Manufacturing Company Limited (TSMC), and its phone business competes directly with Apple. Samsung announced plans for a large share buyback which is an astute capital allocation decision given the value of the company. Samsung remains conservatively capitalized with net cash and marketable securities representing about a third of market value.

BSD Analysis:
Yacktman presents Samsung as a compelling value opportunity trading near tangible book value despite being a leading global technology company. The manager acknowledges 2024 challenges in the High Bandwidth Memory segment but emphasizes Samsung's competitive positioning across memory chips, foundry services, and smartphones. The investment thesis centers on valuation disparity versus peers, with Samsung trading at a significant discount despite competing directly with premium-valued companies like TSMC and Apple. Management's announced share buyback program demonstrates disciplined capital allocation given the perceived undervaluation. The company's conservative balance sheet with net cash and marketable securities representing approximately one-third of market value provides downside protection. Yacktman views current business performance challenges as temporary while the fundamental competitive position remains intact.

Pitch Summary:
Marks and Spencer is the largest U.K. apparel retailer by value, with that division accounting for approximately half the company's profit and the other half coming from its premium food retail business. Over the last seven years, Marks and Spencer has been executing a strategic plan to turn its business around by reducing promotions, cutting range options, improving cost efficiency, and improving capital investments. While these improvements started before the pandemic, the company saw its clothing and home business, as well as part of its food business, significantly impacted by COVID. Additionally, concerns about economic weakness in the U.K. contributed to a severely discounted valuation in 2020-2022. At the time, we were attracted to Marks and Spencer's free-cash-flow generation, property ownership, and its defensive food business. Over the last two years, the share price has rebounded meaningfully as the company has shown consistent sales and earnings growth, driven by continued market share gain in its food business and the successful turnaround of its apparel business. As a result, consensus earnings estimates have improved, along with market sentiment for the company's prospects. Following the significant rally this year, we divested our holding as the share price exceeded our estimate of intrinsic value.

BSD Analysis:
Brandes exited their Marks and Spencer position after a successful turnaround investment that reached full valuation. The manager originally invested during 2020-2022 when the UK retailer traded at severely discounted levels due to COVID impacts and UK economic concerns. The investment thesis was based on the company's free cash flow generation, valuable property ownership, and defensive food retail business. Over seven years, M&S executed a strategic transformation including promotion reduction, range optimization, cost efficiency improvements, and capital investment upgrades. The turnaround proved successful with consistent sales and earnings growth driven by food business market share gains and apparel division recovery. Brandes demonstrated disciplined value investing by exiting when the share price exceeded their intrinsic value estimate following significant appreciation. The exit reflects their systematic approach to realizing gains when investments reach fair value rather than holding for momentum.

Pitch Summary:
STMicroelectronics (STM) is a semiconductor supplier with a diverse product portfolio serving the automotive, industrial, personal electronics, and communications equipment markets. STM holds a strong market position in automotive semiconductors, general purpose micro-controllers, and power semiconductors. These markets are expected to see attractive growth over the next decade, driven by the adoption of electric vehicles, advanced driver-assistance systems (ADAS), and the proliferation of connected devices (Internet of Things/IoT), which will increase semiconductor content in autos and devices. However, weakness in the auto semiconductor market this year, which represents around 40% of STM's revenue, has led to a decline in sales. The company has subsequently cut its earnings guidance, resulting in significant market negativity. Consequently, STM is currently trading at a substantial valuation discount relative to its history and many semiconductor peers. While the company's margins are expected to contract in the near term, we believe that its current challenges are largely cyclical, and that the growing semiconductor content demand should lead to a recovery in its auto and industrial end markets. Although we cannot predict the timing for a recovery, STM's exposure to secular growth drivers and its strong market positions support a positive long-term outlook, in our opinion. Similar to our purchase of Infineon earlier this year, we believe STM represents a compelling opportunity at its current valuation level, with strong growth potential despite cyclical challenges.

BSD Analysis:
Brandes initiated a position in STMicroelectronics, viewing the semiconductor company as a compelling value opportunity trading at a substantial discount due to cyclical headwinds. The manager highlights STM's strong market positions in automotive semiconductors, microcontrollers, and power semiconductors, which are expected to benefit from secular growth drivers including electric vehicle adoption, ADAS systems, and IoT proliferation. While acknowledging near-term margin pressure from weakness in the auto semiconductor market (40% of revenue), Brandes believes the current challenges are cyclical rather than structural. The investment thesis centers on STM's exposure to long-term semiconductor content growth in automotive and industrial applications. The manager draws parallels to their earlier Infineon purchase, suggesting confidence in their semiconductor investment approach. Despite the inability to predict recovery timing, Brandes views the current valuation discount as an attractive entry point for a company with strong competitive positioning in growing end markets.

Pitch Summary:
The Timken Company produces engineered ball bearings and power transmission products for a wide variety of end-industries. It is one of the "big six" bearings players and typically holds a top three market share in most of its product categories. The company has been on a significant transformation journey that has decreased its exposure to more commoditized and cyclical end-markets (e.g., automotive). Simultaneously, Timken has expanded its exposure to secular growth themes like renewables and automation and has increased its proportion of higher-margin after-market volumes. Timken's recent expansion, mostly via acquisition, has focused on the smaller but faster growing Industrial Motion business, which sells various power transmission and motion control products that can be packaged with bearings, allowing the company to be a comprehensive powertrain solutions provider instead of just a parts supplier. Timken's stock trailed the broader market in the second half of 2024 on sluggish industrial activity and subsequent sales declines led by particularly weak demand from the Chinese wind industry, creating a buying opportunity. Timken exhibits attractive business characteristics, including historical returns on invested capital in excess of its cost of capital, stable free-cash-flow generation and a high proportion of after-market, higher-margin sales. While the business is cyclical and tracks broad industrial production, exposure to any single end-market or customer is minimal. The company has also consistently paid out cash to shareholders and has returned approximately $2.4 billion during the past decade. Its ongoing streak of 410 consecutive quarterly dividends is one of the longest on the New York Stock Exchange and its shares outstanding have been reduced by ~25% since 2013.

BSD Analysis:
Brandes initiated a position in Timken, viewing recent weakness as a buying opportunity driven by temporary cyclical headwinds. The manager highlights Timken's strategic transformation away from commoditized automotive markets toward higher-growth secular themes like renewables and automation. The company's Industrial Motion business expansion through acquisitions positions it as a comprehensive powertrain solutions provider rather than just a parts supplier. Timken demonstrates strong capital allocation discipline with $2.4 billion returned to shareholders over the past decade and 410 consecutive quarterly dividends. The business model benefits from high-margin aftermarket sales and diversified end-market exposure, reducing single-customer risk. Despite cyclical pressures from Chinese wind industry weakness, Timken maintains attractive fundamentals with returns on invested capital exceeding cost of capital and stable free cash flow generation. The 25% share count reduction since 2013 demonstrates management's commitment to shareholder value creation.

Pitch Summary:
Intapp offers cloud-based and AI-powered software solutions for the financial services industry. We believe the company is well-positioned and may benefit from the expected increase in deal activity (initial public offerings and M&A) in 2025.

BSD Analysis:
The fund managers are bullish on Intapp based on their expectation of increased deal activity in 2025, which should drive demand for the company's specialized financial services software. The investment thesis centers on Intapp's positioning to benefit from a cyclical upturn in IPO and M&A activity, which has been subdued in recent years due to higher interest rates and market volatility. The managers likely view the company's cloud-based and AI-powered solutions as essential tools for financial services firms managing complex transactions. As deal volumes recover, financial institutions will require sophisticated software for relationship management, compliance, and deal execution. The timing appears strategic, as the fund anticipates a more favorable regulatory and business environment that could catalyze increased transaction activity. Intapp's specialized focus on financial services provides it with deep domain expertise and sticky customer relationships that should translate to revenue growth as market conditions improve.

Pitch Summary:
CommVault Systems is a data management and protection software company that offers a platform for data security, recovery and cyber resilience. Growth has accelerated due to an increasing focus on integrating its services into companies' cloud-native workflows and infrastructure.

BSD Analysis:
The fund managers are constructive on CommVault Systems, viewing the company as benefiting from the accelerating shift to cloud-native architectures. The investment thesis is built around CommVault's successful pivot to integrate its data protection services with modern cloud workflows and infrastructure. This strategic repositioning has driven accelerated growth as enterprises increasingly adopt cloud-first strategies and require sophisticated data management solutions. The managers likely see CommVault as well-positioned in the growing cybersecurity and data resilience market, where regulatory requirements and cyber threats are driving increased spending. The company's focus on cloud-native integration differentiates it from legacy backup solutions and positions it to capture market share as enterprises modernize their IT infrastructure. The timing appears favorable given heightened awareness of data security risks and the need for comprehensive cyber resilience platforms.

Pitch Summary:
Pegasystems develops workflow automation solutions for customer engagement and relationship management purposes across various industries. The company has increasingly integrated artificial intelligence (AI) functionality into its products. Its newest AI releases already represent more than 25% of its bookings, with what we see as promising signs of continued growth.

BSD Analysis:
The fund managers are bullish on Pegasystems based on the company's successful integration of AI capabilities into its workflow automation platform. The investment thesis centers on the rapid adoption of AI-enhanced products, which already account for over 25% of bookings despite being recent releases. This suggests strong customer demand for AI-powered automation solutions in customer engagement and relationship management. The managers view this as an early indicator of sustained growth potential as enterprises increasingly prioritize AI-driven workflow optimization. The positioning appears to capitalize on the broader digital transformation trend where companies seek to automate complex business processes. The fund likely sees Pegasystems as well-positioned to benefit from the growing enterprise AI market, particularly in customer-facing applications where automation can drive significant efficiency gains.

Pitch Summary:
Lennar supplies housing to a US market where there is a chronic supply shortage. The current high mortgage rate environment has provided an entry opportunity.

BSD Analysis:
Hardman Johnston initiated a position in Lennar Corporation during Q4 2024, capitalizing on what the manager views as an attractive entry point in the homebuilding sector. The investment thesis is built on the structural supply-demand imbalance in the US housing market, where chronic housing shortages create favorable long-term dynamics for homebuilders. The manager specifically notes that current high mortgage rates have created a temporary entry opportunity, suggesting the fund is taking a contrarian approach to the housing sector. This positioning indicates confidence that the current rate environment is creating attractive valuations despite near-term headwinds. The manager appears to be betting on eventual rate normalization and continued underlying housing demand driven by demographic trends and supply constraints. The investment represents a strategic addition to the portfolio's real estate exposure, positioning for recovery when mortgage rates moderate and housing demand accelerates.

Pitch Summary:
Marvell has a strong position in data networking chips in data centers. Marvell and Vertiv's role in datacenter buildout remains strong, as does Howmet's role in making air travel more efficient.

BSD Analysis:
Hardman Johnston added Marvell Technology to the portfolio during Q4 2024, recognizing the company's strategic positioning in the data center infrastructure buildout. The manager's investment thesis focuses on Marvell's strong competitive position in data networking chips, which are critical components for data center operations. The fund views Marvell as a key beneficiary of the ongoing artificial intelligence and cloud computing infrastructure expansion, particularly as companies continue investing heavily in data center capacity. The manager notes that Marvell's role in datacenter buildout remains robust, suggesting sustained demand for the company's networking solutions. This investment aligns with the portfolio's technology exposure and represents a play on the structural growth in data infrastructure. The position was initiated alongside other technology-focused investments as the manager positioned for continued AI-driven infrastructure spending.

Pitch Summary:
SharkNinja is a fast-paced consumer products company, both through innovation and a fast follower strategy. They offer high quality products at a significant discount to brand name competitors. This has allowed them to gain share from younger, price conscious customers who also embrace their social media based marketing.

BSD Analysis:
Hardman Johnston initiated a position in SharkNinja during Q4 2024, viewing the company as an attractive consumer products investment. The manager's thesis centers on SharkNinja's dual strategy of innovation and fast-follower execution, which enables the company to compete effectively against established brands. The fund highlights SharkNinja's value proposition of delivering high-quality products at significant discounts to premium competitors, creating a compelling offering for cost-conscious consumers. The manager particularly emphasizes the company's success in capturing market share among younger demographics through effective social media marketing strategies. This positioning appears well-suited to current consumer trends favoring value and digital engagement. The investment represents a strategic addition to the portfolio's consumer discretionary exposure during a period when the manager has been selective about new positions.

Pitch Summary:
We made several changes to the portfolio in the fourth quarter. Most recently, we added a new position in the Communication Services sector in December with Pinterest (PINS), a leading visual search and discovery platform with a unique curation function that enables users to find and display new ideas and creations that focus on interests such as fashion and home décor among other consumer goods. Since 2022, a new management team has transformed Pinterest into a shopping platform, providing more value and capabilities to advertisers including direct connection with users, resulting in higher profits. In addition, the company was an early adopter of AI to increase personalization, advertising relevance options, and automated processes to increase ease-of-use for smaller advertisers. In the near term, we expect Pinterest to see monetization improvements with upside to Average Revenue Per User (ARPU) and traction in new categories and international markets.

BSD Analysis:
Renaissance initiated a new position in Pinterest, highlighting the company's successful transformation from a discovery platform into a comprehensive shopping destination under new management since 2022. The fund emphasizes Pinterest's unique visual curation capabilities that differentiate it from traditional social media platforms, particularly in fashion and home décor verticals. The manager values the direct connection between advertisers and users, which should drive higher conversion rates and advertising effectiveness. Pinterest's early adoption of AI for personalization and advertising relevance creates competitive advantages in user engagement and advertiser ROI. Renaissance sees significant monetization upside through ARPU expansion as the platform scales its shopping capabilities. The fund anticipates growth acceleration in new product categories and international markets as the shopping transformation gains momentum. The investment thesis centers on Pinterest's evolution from a discovery tool to a commerce-enabled platform with superior monetization potential.