Investment Pitches

Pitch Summary:
D'Ieteren was the most significant contributor to performance over the month, adding +113bps to NAV as the position returned +13%. As highlighted in September's letter, last Autumn the company announced an extraordinary €74 per share special dividend, equivalent to 39% of the company's market cap at the time. Selling pressure from tax-sensitive investors – who faced Belgian Withholding Tax rates of up to 30% vs. AGT's 10% net rate – pushed the shares down from €226 to a low of €188. During this period, we increased our position by more than 70% at an average price just shy of €200 per share. This made D'Ieteren our largest position at a 9.3% weight on the 9th December when the shares closed at €200 per share. On the 10th December the company traded ex-dividend of the €74 per share special dividend yet closed the day at €160 i.e. some +27% above the implied ex-dividend price of €126. Net of 10% tax, AGT received proceeds of £35m, equivalent to 3.1% of NAV. As we look ahead, we expect investors to retune their focus on D'Ieteren's fundamentals. The last year has seen a relatively difficult operating environment for Belron, the crown jewel asset that repairs and replaces vehicle glass, which accounts for 68% of NAV. As higher insurance premiums have seen customer propensity to repair decline, and the insured market (to which Belron are more exposed than peers) cede share to the cash market. During Q3 we saw a number of US auto service peers cut guidance, however D'Ieteren re-affirmed Belron's guidance, which, in our view, speaks to the continued and considerable self-help measures the company can utilise. In 2025 we expect D'Ieteren to hold a Capital Markets Day – the first since Carlos Brito was appointed Belron CEO. We view this and new Belron long-term margin guidance as key catalysts, which should help re-focus investor attention on the attractive long-term outlook for the company and its structural tailwinds. D'Ieteren shares currently trade at €162, which represents an 50% discount to our estimated NAV. The October 2024 transaction between Belron minority shareholders at a €32.2bn enterprise value ("EV") pegs D'Ieteren's 50% equity stake at €221 per D'Ieteren share. This valuation was higher than we had modelled – having previously estimated Belron to be worth €24.5bn EV, or 17x our estimate for 2024 EBIT. It does however put a line in the sand for future, more meaningfully sized transactions in Belron's equity, such as an IPO or further private equity sales. As and when these occur, we expect this to be a positive catalyst for D'Ieteren's very wide discount to narrow. As such, despite strong recent performance, D'Ieteren is our second largest position at 7.4% weight.

BSD Analysis:
The manager presents a compelling bull case for D'Ieteren based on a significant discount to estimated NAV of approximately 50%. The investment thesis centers on the company's crown jewel asset Belron, which operates in the vehicle glass repair and replacement market and represents 68% of NAV. Despite near-term headwinds from higher insurance premiums affecting repair propensity, the manager highlights D'Ieteren's ability to reaffirm guidance while peers cut theirs, demonstrating operational resilience. A key catalyst is the October 2024 Belron minority transaction at €32.2bn enterprise value, which provides a concrete valuation benchmark and suggests potential for future value-realizing events like an IPO. The manager expects the upcoming Capital Markets Day in 2025 and new margin guidance to refocus investor attention on the company's attractive long-term structural tailwinds. The position sizing at 7.4% weight reflects high conviction despite recent strong performance.

Pitch Summary:
The payments landscape has undergone a significant transformation in recent years, driven by technological advancements, changing consumer behaviours (including the rise of contactless payments), and regulatory developments. Digital payments have experienced a surge in growth as ecommerce adoption—a key driver of transactions—continues to grow. In our view, the payments space is ripe for disruption. Existing payment systems in the West (particularly back-end systems which govern how we pay for and receive payments in a digital economy) have remained essentially the same for decades. They are complex and costly for both merchants and consumers. They appear designed largely for the benefit of established banking oligopolies—including their layers of bureaucracy and outdated technology—rather than customer experience. Unencumbered by legacy systems and processes, new players are entering the market with a technology-led approach. The excitement around these disruptors was palpable during the pandemic given the accelerated shift towards "online everything". Stock prices of fintech-related companies rose dramatically and a flurry of new listings signaled an overheated market—despite the long-term positive outlook for the sector. All these shares fell significantly from their pandemic era highs. We however believe that the long-term outlook remains very positive for many of these companies. Some represent compelling investment opportunities. One such example, and a Top 10 holding in the Fund, is Block. Block is a leader when it comes to financial technology and we believe that it is very well-positioned to capitalise on the evolving payments landscape. With its dual ecosystems—Square for businesses and Cash App for individuals—Block is driving innovation in commerce and personal finance. Block (formally Square) was founded in 2009 by Jack Dorsey and Jim McKelvey and was initially created to solve a specific challenge of helping small businesses accept credit card payments on smartphones. Its first product, Square Reader, was a small device that plugged into a mobile phone's headphone jack allowing users to swipe credit cards. The company soon realised that rather than simply being in the business of making a credit card reader, it had in fact created a service helping small businesses increase their sales. That insight led, over time, to the roll-out of a comprehensive suite of tools and services for sellers which today includes more than 30 distinct software, hardware, and financial services products. These offerings no longer just facilitate payment processing, but have extended to include business management tools (like appointment bookings, digital invoices, loyalty programs and payroll processing) as well as financial services for businesses of all sizes. Importantly, its products are designed to be user friendly and integrate seamlessly with each other. This 'ecosystem' is known as Square. Square's sellers are typically small businesses who are often denied reasonable access to credit by traditional financial services companies. Since 2013 Square has also been providing eligible businesses with options for financing their growth or ongoing operational needs. Square's approach to lending is relatively unique. Having served these and other similar businesses for years, Square has valuable data which has allowed it to develop sophisticated underwriting models that use real-time transactional data, AI, and machine learning to predict risk, determine eligibility, and set customer limits. By capturing real-time activity across balances, purchase behaviour, transaction decline rates, etc., it can continuously refine and improve its models. With this data, Square is able to offer loans to eligible sellers which are simple to accept and repay, with transparent fees and terms. Not only do these loans facilitate a seller's growth but also typically leads the seller to adopt additional Square services, further benefitting Square's ecosystem. Sellers repay their loans through fixed percentages of their revenue and sellers are not offered another loan after a missed payment. While credit risk and balance sheet intensity are obvious concerns, these products are relatively low value and short duration, and Square has demonstrated attractive returns with impressive loss rates over time. The Square ecosystem has facilitated over $220bn in Gross Payment Volume (GPV) for its sellers over the last 12 months. We would expect GPV to continue to grow significantly in the future. While currently largely focused on the US market, Square does have an international presence with significant potential. By democratising financial tools, Square likely has a long runway of opportunity to continuously expand its customer base. By growing the value of services offered to these customers, Square is entrenching its ecosystem and, in our view, building a sustainable and scalable business with significant long-term monetisation opportunities. Block's second major ecosystem is Cash App. While Square is focused on merchant offerings, Cash App's focus is on individuals. Cash App began as a simple peer-to-peer (P2P) payment platform, allowing users to send money to friends and family easily using just an email address or phone number. Over time, it has evolved into a comprehensive suite of easy-to-use financial services that address the needs of its users. Cash App aims to become one of the top providers of banking services to US households which earn up to $150,000 per year, a segment that represents approximately 80% of consumers and more than 50% of household income. To date, Cash App has seen wide adoption in the US and is resonating particularly with younger demographics—approximately 70% of inflows are from individuals under 42 years old (Generation Z and Millennials). Younger demographics tend to be early adopters of technology while users of personal finance services have tended to be relatively loyal historically. Over time, as the younger demographic's purchasing power increases, Cash App is well-positioned for further growth, even without acquiring new users. Cash App's size and scope is already substantial, with over 57mn monthly transacting actives and with over 43% of these users making use of Cash App card, a Visa debit card linked to Cash App cash balances. Customers can seamlessly make payments (online or in-store), deposit money into their Cash App account as well as having the ability to transfer money. Cash App Borrow also provides small, short-term loans, with eligibility determined using customer data built up over time—similar to Square Loans. Not only does Cash App offer a suite of banking services, it also makes investing in US stocks and Bitcoin accessible for customers and even provides a mobile-first solution for customers to file tax returns. We expect Cash App's utility to continue to improve and there is an opportunity for more customers to choose Cash App as their primary provider of banking services over time. Block's recent focus has been getting users to deposit their paychecks directly into Cash App. As further products are added to the platform, user engagement and barriers to switching increase. This heightened engagement and customer retention drives higher revenue and profits for the company by increasing lifetime customer value and reducing churn. Management have done an excellent job of growing the Square and Cash App ecosystems. They have done so with a focus on profitability while also scaling them for the long term. Rather than chasing user growth, they have first focused their efforts on the US market and on increasing engagement with their products. Taken individually, we believe the Square and Cash App ecosystems are likely to generate substantial returns for Block's shareholders over time. In combination, however, they present an intriguing opportunity. Square has a larger ambition which, if executed successfully, could significantly enhance returns over time. At current valuations we don't believe we are paying for the asymmetric opportunity presented. The opportunity stems from being able to connect Block's ecosystems, an opportunity not easily replicated by competitors, many of which only operate on one side of the transaction (i.e. either on the side of the merchant or the individual). By integrating its ecosystems, Block is looking to create a seamless financial platform where businesses and consumers interact directly. The opportunities for integration are wide-ranging. From a merchant's perspective, gaining access to Cash App's user base not only provides additional sales opportunities, but also deeper insights into these customers which in turn allows for more tailored recommendations. These include personalised deals and rewards or loyalty programs. Cash App users benefit from enhanced discoverability and personalisation with seamless payments between merchants and Cash App balances. Over the long term, this integration also provides an opportunity for Block to disintermediate parts of the payment process, reducing complexity as well as lowering costs. Block is already making progress with this integration, which is further highlighted by its 2022 acquisition of Afterpay, a significant player in 'buy now, pay later' (BNPL). BNPL fits seamlessly into both ecosystems: for Square it helps attract more customers by boosting sales conversion, and for Cash App it provides a flexible financing solution for consumers and makes managing instalments easier. By integrating it with both ecosystems, however, Block can leverage additional benefits. Cash App users, for example, can discover (via the app) which Square merchants offer BNPL and merchants can tie offers and rewards to transactions to entice buyers. Afterpay has driven over 460 million leads to merchants over the last 12 months and has become a key driver of advertising revenue for Block, a further high margin revenue stream which it can grow over time. Block is also building out additional ecosystems which we believe could prove valuable over time and yet are currently largely unmonetised. One example is Spiral which builds and funds free, open-source projects aiming to advance the adoption of Bitcoin. Over time, the more connections created between its ecosystems, the more resilient and useful they are likely to become by amplifying the network effects. Leveraging customer data across its ecosystems is also likely to become particularly useful to Block in an increasingly AI driven world. Block has strong, founder-led management who are well aligned with shareholders' interests through their significant share ownership. We believe that the significant long-term growth prospects of Block's Square and Cash App ecosystems are not reflected in Block's current valuation. While Block has already contributed positively to the Fund's performance since we first bought it in August 2023, we continue to find it very attractive.

BSD Analysis:
Contrarius presents a comprehensive bull case for Block, viewing it as a compelling fintech disruptor positioned to capitalize on the evolving payments landscape. The manager emphasizes Block's dual ecosystem advantage, with Square serving businesses and Cash App targeting consumers, creating unique cross-selling and integration opportunities that competitors cannot easily replicate. The thesis centers on Block's data-driven lending capabilities, where real-time transaction data enables sophisticated underwriting models for small business loans, generating attractive returns with low loss rates. Cash App's strong penetration among younger demographics (70% of inflows from under-42 users) provides a growing customer base with increasing purchasing power over time. The manager highlights the significant monetization potential from ecosystem integration, particularly through the Afterpay acquisition which has already driven 460 million merchant leads and created a high-margin advertising revenue stream. Management's focus on profitability over user growth, combined with founder-led leadership and significant insider ownership, reinforces the investment conviction. At current valuations, Contrarius believes the market undervalues Block's asymmetric upside potential from ecosystem convergence and long-term growth prospects.

Pitch Summary:
Sopra Steria Group is a leading European IT services company. The IT services industry is a structurally attractive GDP+ market and an interesting way to invest in continued adoption of technology without specific technology risk. Sopra Steria is in the process of high grading its business by diversifying outside of France and by increasing its business mix toward higher margin and higher growth digital services and consulting work. After disposing of a money-losing software business, the company has an unlevered balance sheet to pursue accretive bolt-on M&A to help them in that transition. The business has a strong track record of healthy organic growth, margin expansion, and has an asset-lite business model that generates strong levels of free cash flow. Recent geopolitical uncertainty in France and a post-Covid-19 cyclical slowdown in IT spending have provided the opportunity to invest at a near-trough earnings multiple, despite the company's attractive and improving profile and robust long-term outlook.

BSD Analysis:
The manager presents Sopra Steria as a quality IT services play with structural GDP+ growth characteristics and technology exposure without concentration risk. The business transformation strategy focuses on geographic diversification beyond France and mix shift toward higher-margin digital services. Recent portfolio optimization through divestiture of loss-making assets has strengthened the balance sheet for accretive M&A opportunities. The asset-light model generates strong free cash flow with a proven track record of organic growth and margin expansion. French geopolitical uncertainty and cyclical IT spending weakness have created a compelling entry point at trough valuations. The combination of defensive characteristics and transformation upside offers attractive risk-adjusted returns.

Pitch Summary:
Campari is an Italian-based global spirits producer. Its diverse portfolio includes Aperol, Campari, Espolon, Wild Turkey, Grand Marnier and SKYY. We believe Campari is a strong marketer with a compelling portfolio that is well positioned to benefit from the growth in cocktail culture. In our view, Campari's geographic mix limits downside and offers upside optionality in China. We also see an opportunity for improved margins and cash flows as Campari leverages decades of route-to-market investments, recent commodity headwinds normalize, and as the company exits a period of elevated capital expenditure. Investor concerns regarding industry destocking and long-term demand have provided us the opportunity to purchase a highly attractive collection of assets in a defensible category with stock-specific opportunities at a seven-year low valuation.

BSD Analysis:
The manager views Campari as a premium spirits portfolio positioned to capitalize on cocktail culture trends globally. The brand portfolio including Aperol and Wild Turkey offers defensive characteristics with upside exposure to Chinese market recovery. Margin expansion opportunities exist through operational leverage on established distribution networks and normalization of commodity costs. The company is transitioning from a high-capex period, which should improve free cash flow generation. Industry destocking concerns have created temporary headwinds, allowing entry at seven-year low valuations. The defensive nature of premium spirits combined with specific operational improvements suggests attractive risk-adjusted returns as temporary headwinds subside.

Pitch Summary:
Auction Technologies Group (ATG) is an online marketplace business that connects auctioneers to millions of bidders online in the U.S. and Europe. The company owns the leading marketplaces in its core product categories with an unmatched database of bidders. ATG provides significant value to its auction house partners by enabling them to reach a much wider bidder base than they could on their own, generating more sales and better prices. We believe the company stands to benefit from secular tailwinds that favor e-commerce penetration in auctions, driven by the beneficial economic model of online auctions compared to in-person auctions. The company is also rolling out value-added services across marketing, payments and shipping that, in our view, will increase the value of its platform in the auction ecosystem as well as allow it to increase monetization over time. Recently, a post-Covid-19 normalization in online auction sales coupled with concerns over an increase in churn of larger auction houses to white-label platforms has weighed on the share price. We believe these fears are exaggerated as headwinds from post-Covid-19 normalization will slow and the company's core customer base of smaller auction houses is dependent on the bidders that ATG's marketplaces can bring to bear on an auction. As such, we were happy to recently purchase shares at a material discount to our estimate of intrinsic value.

BSD Analysis:
The manager identifies ATG as a dominant marketplace operator with network effects and secular growth drivers. The platform's value proposition centers on expanding bidder reach for auction houses, creating a win-win dynamic that drives pricing power. E-commerce penetration in auctions represents a structural tailwind, while value-added services offer multiple monetization levers. Post-COVID normalization concerns appear overblown given the dependency of smaller auction houses on ATG's bidder network. The competitive moat stems from the unmatched bidder database and leading market positions. Recent share price weakness has created an attractive entry point at a significant discount to intrinsic value, suggesting compelling risk-adjusted returns.

Pitch Summary:
SoftwareONE Holding was the top detractor during the quarter. The Switzerland-headquartered technology distributor's stock price declined after the company posted weak third-quarter results, reduced both short-term and mid-term revenue guidance, and announced the appointment of a new CEO. However, the company also announced a proposed merger with Crayon, which is another leading Microsoft reseller listed in Norway. We are working to evaluate the implications of the proposed merger and will make adjustments to our intrinsic value estimate as needed.

BSD Analysis:
SoftwareONE faced significant operational challenges in Q3 with weak results and reduced guidance across multiple time horizons, leading to CEO turnover. The proposed merger with Norwegian Microsoft reseller Crayon introduces strategic uncertainty but could create synergies in the Microsoft ecosystem. The manager is taking a measured approach, conducting thorough analysis of the merger implications before adjusting valuation assumptions. This suggests disciplined portfolio management during periods of corporate uncertainty. The technology distribution sector remains challenged by evolving software licensing models and cloud migration trends. The merger outcome will likely determine the investment thesis going forward.

Pitch Summary:
St. James's Place was the top contributor during the quarter. After a strong decline from the third quarter of 2023 to the first quarter of 2024 due to regulatory reviews that forced a management fee cut and business fine, the U.K.-headquartered wealth management company's stock price rose strongly during the second and third quarters of 2024 as management revealed a compelling multi-year strategy to double earnings in the business by 2030. We believe management's plan is credible based on multiple conversations with competitors, U.K. wealth management advisors and St. James's Place senior executives. We continue to see the U.K. wealth management industry as an attractive and growing market and see St. James's Place as best positioned competitively to capture a strong share of asset flows. Healthy asset flows combined with a reasonable cost-cutting plan should drive strong earnings growth momentum for St. James's Place in the coming years. We believe the stock looks inexpensive on our view of normalized earnings.

BSD Analysis:
The manager presents a compelling turnaround thesis for St. James's Place following regulatory headwinds in 2023-2024. Management's strategy to double earnings by 2030 appears credible based on extensive due diligence with industry participants. The fund views the UK wealth management sector as structurally attractive with growth tailwinds. St. James's Place is positioned as the market leader with competitive advantages in capturing asset flows. The combination of healthy inflows and cost optimization should drive earnings momentum. The stock trades at attractive levels relative to normalized earnings power, suggesting significant upside potential as the turnaround materializes.

Pitch Summary:
Of these positions, Corpay is worth revisiting. We last discussed the company in our September 2022 commentary when it was known as Fleetcor, and it has since become the Strategy's second-largest holding. Chairman and CEO Ron Clarke, who built the company over the last 20+ years, owns about 5% of the shares, and we have high conviction that he is very much a top 1% CEO. Put simply, Corpay helps other companies manage their expenses and pay their vendors. The company today operates three major lines of business: Vehicle Payments, which facilitates payment for fuel, tolls, and parking, Corporate Payments, which enables accounts payable automation and cross border payments, and Lodging Payments, which helps businesses manage travel accommodation for customers and employees. While these lines of business may appear disconnected on the surface, the critical common foundation for each business is a powerful two-sided network of merchants and business customers that creates a significant competitive moat and enables Corpay to offer compelling value to customers while also earning attractive economics. These attractive unit economics are another important similarity across Corpay's different businesses. In financial terms, Corpay spends about 50 cents in sales and marketing to acquire a dollar of recurring revenue that sticks around for 10 to 12 years and drops through to operating income with around 60-70% incremental margin. This basic formula has been remarkably consistent over the long term, even as the underlying mix of revenue has evolved away from the company's roots in fuel cards. With great visibility into these attractive and consistent unit economics, Ron seeks to manage the company to produce a steady growth algorithm of approximately 10% revenue growth and low teens EBITDA (earnings before interest, taxes, depreciation, and amortisation) growth. Moreover, very high returns on organic reinvestment have allowed Corpay to grow at an attractive rate while simultaneously generating substantial free cash flow, which Ron has astutely reinvested into high-return acquisitions, further enhancing value for shareholders. Long-term results under Ron's leadership have been stunning, with 10%+ revenue growth, 50%+ EBITDA margins, 30% returns on equity, and 20% earnings per share growth. These metrics put Corpay in a rarified group—only a small handful of well-loved, celebrated businesses like Microsoft, Nvidia, and Visa have achieved similar results over the last decade. Despite these impressive attributes and track record of shareholder value creation, Corpay shares have lagged in recent years due to a confluence of short-term headwinds and investor fears about potential disruption in the company's fuel card business. Since 2021, shares have derated from about 22x forward earnings to about 15x, while the S&P 500's multiple has risen to 28x forward earnings. Meanwhile, the likes of Microsoft, Nvidia, and Visa currently trade at 31x, 31x, and 27x forward earnings, respectively. We believe this creates an unusually attractive opportunity. Indeed, not only do we expect recent headwinds to abate, but we see potential for revenue growth to accelerate above 10% over the next three to five years. For example, we believe Corporate Payments has a durable growth rate of 15-20%, and will soon represent more than 35% of revenue, compared to about 20% of revenue in 2019. At the same time Corpay's Fleet business—which has grown more slowly—will fall to just over 30% of revenue compared to nearly half in 2019. The net effect of this evolving mix should be a higher blended organic growth rate, even without any improvement in the Fleet business. Additionally, as with all great entrepreneurs, Ron is not simply drifting along with the tide but is instead continuously exploring new potential avenues of value creation. We see several such initiatives that have the potential to accelerate growth beyond the positive mix benefit. It's not often that we can find a business with Corpay's superior fundamentals trading at a meaningful discount to the US market. It is even more unusual to find one that is also run by a top 1% owner-CEO like Ron Clarke.

BSD Analysis:
Orbis positions Corpay as their second-largest holding, emphasizing CEO Ron Clarke's exceptional 20+ year track record and 5% ownership stake as key differentiators. The company's three-pronged business model spanning Vehicle, Corporate, and Lodging Payments benefits from powerful network effects and compelling unit economics. Corpay's financial profile is exceptional, with 50 cents of sales/marketing investment generating $1 of recurring revenue lasting 10-12 years at 60-70% incremental margins. Historical performance metrics rival technology leaders like Microsoft and Nvidia, delivering 10%+ revenue growth, 50%+ EBITDA margins, and 20% EPS growth. The current valuation disconnect presents significant opportunity, with shares trading at 15x forward earnings versus 28x for the S&P 500. Revenue mix evolution toward higher-growth Corporate Payments (15-20% growth rate) should drive acceleration beyond the targeted 10% baseline. Clarke's entrepreneurial approach and continuous value creation initiatives position the company for sustained outperformance in an attractive secular growth market.

Pitch Summary:
We first invested in Alcoa, as Howmet was then known, with a belief that the business was substantially undervalued. While most investors were focused on its legacy aluminium operations, we believed the real crown jewel—its mission-critical aerospace parts business—was both underappreciated and underperforming its potential. Unfortunately, for the first five years of our investment, the market's pessimistic view prevailed. The company languished and badly underperformed the market, suffering from lack of price and cost discipline, terrible capital allocation, poor investor communication, corporate governance challenges, and a revolving door of CEOs. Finally, in early 2019, following a failed attempt to sell the company, Howmet installed John Plant, the recently named board chair, as CEO. John came to Howmet following a distinguished tenure running the auto supplier TRW. Upon taking the helm at Howmet, John moved with breakneck speed, spinning off and selling non-core businesses, instilling commercial discipline across the organisation to ensure the company was fairly compensated for the value it delivered to customers, simplifying the organisational structure and eliminating layers of management, removing structural costs, driving operational focus, and reinvesting in those areas where the company was most competitively advantaged. Now, nearly six years later, the results have been extraordinary. Howmet shares have outperformed their aerospace peers and the US market by a wide margin—and John's transformation of the company will rightly go down in the annals of corporate history as one of the greatest industrial turnarounds of the last several decades. What is most notable about this example, however, and why it is such a striking illustration of the power of a top 1% CEO, is that John achieved these results during a period of unprecedented challenges in the commercial aerospace market and with the same assets as his predecessors—he simply was much more effective.

BSD Analysis:
Orbis presents Howmet Aerospace as a compelling case study of exceptional CEO leadership driving extraordinary shareholder returns. The fund initially invested in the undervalued aerospace parts business when it was still part of Alcoa, recognizing the mission-critical nature of the operations despite market pessimism. CEO John Plant's appointment in 2019 marked a dramatic transformation through aggressive portfolio rationalization, commercial discipline implementation, and operational restructuring. The turnaround delivered exceptional outperformance versus aerospace peers and broader markets during challenging industry conditions. Plant's unique compensation structure, featuring restricted stock tied to ambitious price targets rather than traditional incentives, exemplifies optimal CEO-shareholder alignment. His current $400 million ownership stake demonstrates the power of principal-led management. The investment thesis validates Orbis's preference for backing top-tier owner-operators who can leverage their skills across large organizations for exponential value creation.

Pitch Summary:
As a final example, we have followed Irish/European paper products company Smurfit Kappa for many years and have been impressed by management, in particular their emphasis on efficiency and shareholder returns. Smurfit Kappa's recent merger with WestRock piqued our interest once again. WestRock's assets have historically been undermanaged, and we believe there is an opportunity for Smurfit Kappa's team to create meaningful value through synergies and improved execution. If we are right, newly formed Smurfit Westrock could offer mid-double-digit returns from current levels—and importantly, we believe much of this will be driven by factors that are under management's control.

BSD Analysis:
The manager presents Smurfit Kappa as a merger arbitrage and operational improvement opportunity following its combination with WestRock. The investment thesis is built on the manager's long-term familiarity with Smurfit Kappa's management team and their proven track record of operational efficiency and shareholder value creation. The core catalyst is the integration of historically undermanaged WestRock assets, which the manager believes will unlock significant value through synergies and improved execution under Smurfit Kappa's leadership. The manager projects "mid-double-digit returns" from current levels, indicating expected returns of 15-20%+ annually. Importantly, the manager emphasizes that value creation will be driven by controllable factors rather than market conditions, suggesting lower execution risk. The thesis combines elements of special situations investing with operational turnaround potential, leveraging proven management capabilities to extract value from underperforming assets. The manager's multi-year relationship with the company provides confidence in management's ability to execute the integration successfully and deliver projected returns.

Pitch Summary:
In our view, another top holding—FirstService—carries similarly underappreciated growth prospects, but that's where the comparison ends. Roughly half of the business is focused on residential property management, where it is the leading provider in North America. The other half is a collection of businesses that provide essential property-related services such as restoration, fire prevention, home inspections, and painting to both residential and commercial customers. It's a durable, resilient business with predictable recurring revenue streams, a long growth runway, and a unique shareholder-centric culture. It's a particularly good example of astute "game selection", having positioned itself in markets where it has an edge over much smaller and less sophisticated local competitors. The Founder/Chairman and the CEO both have meaningful skin in the game, increasing incentives to align the company's interests with those of shareholders. What's especially exciting to us is that FirstService operates in a niche and is not widely followed. Although most of its revenue comes from the US, the company is listed and headquartered in Canada. They do not have a dedicated Investor Relations contact, are rarely seen on the conference circuit, and you won't find the stock in any bloated US indices. As such, we believe the valuation is modest given the company's long-term prospects, and we have an opportunity to build a strong relationship with management over time.

BSD Analysis:
The manager presents FirstService as an undervalued market leader in North American residential property management with significant competitive advantages. The investment thesis centers on the company's dominant market position and diversified revenue streams across essential property services including restoration, fire prevention, and inspections. The manager emphasizes the business quality characteristics including predictable recurring revenues, long growth runway, and strong competitive moats against smaller local competitors. Management alignment is highlighted through meaningful insider ownership by both the Founder/Chairman and CEO, creating strong shareholder-centric incentives. The manager identifies a classic "hidden gem" opportunity, noting the company's limited analyst coverage, absence from major indices, and minimal investor relations presence despite generating most revenue from the US market. This combination of business quality, management alignment, and market inefficiency creates an attractive risk-adjusted opportunity. The manager's confidence in building a direct relationship with management suggests potential for enhanced returns through active engagement and superior information flow.

Pitch Summary:
Nintendo remains a core holding. It's instructive to compare it to Disney, noting that the number of "core enthusiasts" for both brands is broadly similar across the world. Despite this, Nintendo's enterprise value is only about a fifth of Disney's. This isn't a function of Disney trading too high—it looks fairly reasonable for a US company. The dislocation is due to Disney's substantially higher revenue base, an outcome of relentless focus on the monetisation of its core intellectual property (IP). Historically, Disney has spent decades extending its brand to theme parks, merchandise, movies, and more. Indeed, this was all part of founder Walt Disney's vision dating back to the 1950s. Nintendo, on the other hand, has been much more conservative, preferring to carefully nurture its key franchises. Nintendo intentionally extracts far less revenue from its legions of hardcore fans. Indeed, Disney's streaming businesses alone generate more revenue than Nintendo's entire business. And streaming is less than 30% of Disney's revenue! We don't expect Nintendo to close this gap anytime soon—it's hard to argue that their approach to building enduring IP has been wrongheaded—but it's clear that they are moving to meet Disney somewhere in the middle. Examples include last year's blockbuster Mario movie—which cracked the top 20 highest grossing films of all time with a $1.3 billion box office—and theme park partnerships with Universal Studios. The result should be a gradual inflection in profit while carefully preserving the brand.

BSD Analysis:
The manager presents a compelling valuation arbitrage thesis for Nintendo, highlighting a significant enterprise value discount to Disney despite comparable global brand enthusiasm. The core argument centers on Nintendo's historically conservative approach to IP monetization, which has left substantial revenue expansion opportunities untapped. The manager identifies concrete catalysts including the successful Mario movie ($1.3 billion box office) and Universal Studios theme park partnerships as evidence of Nintendo's strategic shift toward broader IP exploitation. This represents a classic value unlock scenario where management is beginning to bridge the monetization gap with peers like Disney. The thesis suggests Nintendo can achieve meaningful profit growth while maintaining brand integrity, positioning it for multiple expansion as revenue diversification accelerates. The manager's confidence in holding Nintendo as a "core holding" indicates strong conviction in this transformation story. The risk-reward profile appears attractive given the substantial valuation discount and clear pathway to enhanced profitability through expanded IP utilization.

Pitch Summary:
Tom looked at his watch. If time could go backwards, it certainly would happen here. Working away at a public accounting firm, the days filled with audits, annual returns and paper-shuffling were monotonous and seemed endless. He was more interested in dollars than the numbers, as he would like to say; his mind was on other things than accounting. He was more interested in investing, strategy and business-building – it was the eighties after all. He had read in Fortune magazine about this investor out of Omaha, Nebraska named Warren Buffett, who had built himself a resilient capital compounding machine. Away from the typical financial bedlam of New York and from the quiet, middle-class New Jersey life he grew up in, Tom Gayner saw Buffett constructing the world's best value creation machine in Berkshire Hathaway, built upon the 'float' of insurance. Buffett could take the excess underwriting profits from the insurance operations and invest those proceeds at high rates of return in the equity market. The returns were consistent and, over time as the result of compounding, astonishing. Fast forward two years and Tom jumped ship from the stale world of accounting to enter the lively world of investment banking. In 1986, he found himself at Davenport & Company, a small mergers & acquisitions outfit based in Virginia. Time stopped going backwards. He was assigned to cover banks and insurance companies and shortly after arriving at Davenport, he was assigned a small insurance company named Markel, based not far away in Richmond, Virginia. It was an extraordinary time to be covering financial businesses, with the benchmark interest rate in the U.S rapidly approaching double-digit levels. High inflation was raging and most insurance companies weren't generating profitable underwriting results, relying on high interest rates to generate enough income to boost the overall profitability of the organization. Markel was different. It was able to churn out both stellar investment returns and underwriting profitability. What, or who, was this company and how did they do it? In the depths of the Great Depression, a bold Samuel Markel founded a small insurance outfit geared towards servicing the growing bus and trucking industries. The mighty automobile was quickly ingratiating itself into the American way of life at the turn of the century and so too was the subsequent logistics and transportation industries. Markel was making a name for itself – Samuel's four sons joined the business and influence and growth followed. So active was the firm in the efforts of developing safety and service standards for the transportation industry that it provided input to Congress in the formation of the National Motor Carrier Act of 1935. It would be the evolution from focusing solely on motor vehicle insurance to broadening out to specialty lines of insurance that would propel Markel into its next phase of growth. Specialty lines of insurance are those that are harder to underwrite but tend to have wider margins and increased customer stickiness. In a commoditized world, Markel was sharpening its competitive advantage. Staring at him on his desk was Markel's initial public offering documents, with an offering price of $8.33 and a market capitalization of $32 million—a far cry from today's share price of $1,750 and market capitalization of $22 billion. The Fortune magazine article from a couple years prior popped into Tom's mind; his admiration for Buffett, the power of compounding and the world of insurance was an irresistible draw for him. He would last a few more years at Davenport but by 1990, he was working at Markel. An outsider in a firm that had been family-run for three generations, Gayner's affable character and financial acumen saw him quickly rise to the upper ranks of management. The firm he was assigned to cover in his first year as a young associate would become the firm that he would run as its chief executive in the years to come. Insurance may seem like an odd choice for someone bored with the monotony of accounting and spreadsheets and looking for a change. However, as Gayner correctly ascertained, it is an area that can be very exciting. An insurance executive needs to make a number of crucial decisions, founded upon risk tolerances, circles of competence and informed opinions on economics, society and geopolitics. Firstly, an insurance company must determine the type of risks it wishes to underwrite. These risks can be straightforward (ie. car insurance) or complicated (ie. insuring a chemical plant's operational liabilities). Markel focuses on the latter type, known in industry parlance as 'specialty' or 'excess and surplus' lines of insurance. Risks in these areas are more 'hard to place', where premiums are not regulated and insurance companies do not compete solely based on price but rather on availability, service and expertise. Specialty insurance affords the ability to create competitive advantages, defensible 'moats' and ultimately, recurring profits. Secondly, an insurance company must make investment decisions regarding excess capital on its balance sheet. This capital may be invested into areas such stocks and bonds. Investment returns may comprise the majority of net income in a year for an insurance company and therefore is just as important as underwriting profitability. Gayner saw an opportunity to oversee an entity similar to what Warren Buffett had masterfully crafted with Berkshire Hathaway – a strong insurance operation built upon consistent underwriting profitability, with excess profits compounded into other businesses. Insurance Markel is the third largest excess and surplus underwriter in the U.S, as measured by direct premiums written. The assets and industries the Company has exposure to in its insurance lines is vast – from general commercial liability to personal lines and everything in between, on operations that spans industries including construction, energy, life sciences, professional services, healthcare, shipping and more. Markel insures everything from classic cars to container ships, fine art to workers' compensation programs, weather events to professional liability coverage—there's not much of the global economy Markel doesn't touch. Historically speaking, the Company's combined ratio (an industry metric where a number below 100 measures the degree of profitability) has historically trended in the low-90 percent range; an envious position. In the past year, strong areas of outperformance for Markel include its surety business, personal lines, management liability protection and environmental liability coverages. In the rare instances of miscalculating risk, management is quick to admit to mistakes and retreat from underwriting those exposures. For example, Markel ventured into the new area of collateralized intellectual property insurance, which did not perform to expectations. After realizing the initial product was not designed well as the share of risks between Markel and the buyers did not match up appropriately, the Company was quick to cut exposure and go back to the drawing board. Humble management that is quick to alter course if required is exactly the type of leadership you want running a global insurance operation. Markel remains an industry-leader in conservatively estimating its potential loss reserve (ie. required cash to have on hand given a probable future claim), resulting in a predictable bulwark with few surprises. It is no surprise that Markel has historically maintain peer-leading combined ratios and book value per share growth. Investments A shrewd investor from a young age, having cut his teeth in investing from gathering stock tips from his grandmother, Gayner joined the Markel in 1990 to aid its investments operations. Today, the Company stands out amongst its peers for being heavily tilted towards creating value from its investment 'float' (ie. excess capital on its balance sheet). The results have been outstanding. Under Gayner's leadership, the $10 billion investment portfolio has outperformed the S&P by approximately 3% per year over the past 10 years. At other moments in time, it's been even higher—in 2015, his 15-year compound annual growth rate was 7% higher than the index. Gayner runs a concentrated portfolio of businesses, with his top ten holdings accounting for over 40% of the portfolio value. Markel's investment philosophy aligns with ROCKLINC's own investment criteria for solid businesses: 1. Good returns on capital without using too much leverage 2. Ample reinvestment opportunities and capital discipline 3. Management teams with equal measures of talent and integrity 4. Pay a fair price for the business In keeping with their value investing philosophy, the Markel management team can often be spotted at the Berkshire Hathaway annual meeting. Besides being personal friends with Buffett and sharing a mutual love of Coca-Cola, Gayner has other credentials to be present—Markel owns over $1.2 billion in Berkshire Hathaway stock. Markel Ventures In 2005, Markel purchased its first private business, AMF Bakery Systems, an industrial bakery equipment producer. A purchase of a private business with an insurance company's float is exceptionally rare and sets Markel apart from the industry. Undeterred, the Company would go on to devote more capital to the purchase of more companies in the coming years, accumulating a variety of private businesses to what is known as today as Markel Ventures. Since inception, Markel has invested $3.7 billion into various businesses, ranging from manufactured home producers to ornamental plant nurseries and crane rental providers, among others. Since 2005, Markel has collected over $1.9 billion in dividends and currently the portfolio produces $628 million in EBITDA (a metric of profitability) on $5 billion in revenue. Markel Ventures is an opportunistic way to deploy capital in high-return companies, avoiding the insurance industry temptation of chasing premium growth when times are good—in effect, Markel Ventures instils disciplined growth across the organization. This 'multi-engine' (insurance, investments, Markel Ventures) system allows for resilience and durability, without dependence on any individual engine to provide growth for the overall company. As we allocate your capital prudently, seeking to invest in businesses with high returns on capital and letting consistent compounding take hold, we look to stand on the shoulders of those who are managing businesses whose objectives are the same. According to Markel, and in order of priority, capital will be used to fund internal organic growth opportunities, acquire controlling interests in businesses at fair prices, build a portfolio of equity securities and repurchase shares. As an insurance company, Markel is providing the grease of the global economy, underwriting prudent risks as it hones its competitive edge in various corners of the market and subsequently allocating those insurance profits into its currently highest returning opportunity. That compounding flywheel has manifested itself through Markel's financial results. In the past 10 years, the Company has grown its earnings per share at a compound annual growth rate of 21% and its book value per share at a compound annual growth rate of 18%. In 2025, earnings per share is forecasted to grow double-digits. And yet, despite these consistent results, the price you pay today for Markel's earnings is hovering at 15-year lows. To pay for one year of Markel's earnings today, you would have to shell out 18x earnings—a steal compared to the Company's 10-year median price to earnings multiple of nearly 28x. The valuation looks even more rosier when comparing Markel to its peers in the marketplace when examining the price to book value. Coming in at a hair under 1.4x book value coupled with a Return on Equity over 18%, the median price to pay for book value of competitors jumps to over 2.0x with similar returns on equity. We have taken advantage of this apparent market irrationality and used the opportunity to purchase shares in this fantastic business.

BSD Analysis:
Rocklinc presents a compelling bull case for Markel Group, positioning it as a Berkshire Hathaway-style value creation machine led by CEO Tom Gayner. The fund highlights Markel's three-engine business model: specialty insurance with industry-leading combined ratios in the low-90s, a $10 billion investment portfolio that has outperformed the S&P 500 by 3% annually over 10 years, and Markel Ventures generating $628 million EBITDA on $5 billion revenue. The company's focus on specialty 'excess and surplus' insurance lines provides pricing power and competitive moats in hard-to-underwrite risks. Markel's disciplined capital allocation follows a clear hierarchy: organic growth, acquisitions at fair prices, equity investments, and share repurchases. The valuation case is particularly attractive, with shares trading at 18x earnings versus a 10-year median of 28x, and 1.4x book value compared to peers at 2.0x despite superior 18% ROE. The company has delivered exceptional growth with 21% EPS CAGR and 18% book value CAGR over the past decade, with double-digit earnings growth forecasted for 2025.

Pitch Summary:
Lastly, a long in Hewlett Packard Enterprise (HPE) was a detractor. This is another company in the AI hardware value chain; however, we exited this position as we reevaluated how much it was truly set to benefit relative to more attractive longs.

BSD Analysis:
Jackson Peak initially invested in HPE as part of their AI hardware value chain thesis but ultimately exited the position after reassessing the company's relative attractiveness. The fund recognized HPE's participation in AI infrastructure but determined the company's positioning was inferior compared to other opportunities in their portfolio. This decision reflects Jackson Peak's disciplined approach to capital allocation and willingness to exit positions when better alternatives emerge. The investment became a detractor, suggesting the market questioned HPE's ability to meaningfully benefit from AI spending relative to pure-play leaders. Jackson Peak's reevaluation process demonstrated active portfolio management and opportunity cost awareness. The exit decision likely freed up capital for higher-conviction positions with clearer AI exposure and competitive advantages. The fund's transparent discussion of this mistake shows their commitment to continuous improvement and objective position assessment.

Pitch Summary:
A long in Micron (MU), a company benefitting from the AI cycle due to its focus on memory and storage solutions, was a detractor. We held this position longer than we should have just as tech and semiconductors had a sharp drawdown in July/August due to the Yen carry trade unwind.

BSD Analysis:
Jackson Peak held a long position in Micron based on the company's exposure to AI-driven demand for memory and storage solutions, but the investment became a detractor due to poor timing and execution. The fund acknowledged holding the position too long during the July/August semiconductor selloff triggered by the Japanese Yen carry trade unwind. While the fundamental thesis around AI benefiting memory demand remained intact, Jackson Peak's risk management proved inadequate during the sharp sector rotation. The position highlighted the challenge of timing cyclical semiconductor investments even with sound fundamental reasoning. Micron's exposure to AI infrastructure provided the investment rationale, but macro factors and positioning dynamics overwhelmed company-specific fundamentals. Jackson Peak's candid assessment of holding too long demonstrates their commitment to learning from mistakes. The experience likely influenced their subsequent approach to position sizing and risk management in volatile technology names.

Pitch Summary:
Nvidia (NVDA) was a contributor as a long. We held NVDA as a long in varying weights throughout the year. As discussed in past letters, it's the leader of the AI capex cycle, which has underpinned much of the market rally since 2023.

BSD Analysis:
Jackson Peak maintained a long position in NVIDIA throughout 2024 with varying position sizes, recognizing the company's leadership position in the artificial intelligence capital expenditure cycle. The fund identified NVIDIA as the primary beneficiary of the AI infrastructure buildout that has driven significant market performance since 2023. Jackson Peak's flexible position sizing approach allowed them to capitalize on NVIDIA's volatility while maintaining core exposure to the AI theme. The investment contributed positively to 2024 performance as AI demand continued to accelerate across enterprise and cloud infrastructure. NVIDIA's dominant market position in AI chips provided sustainable competitive advantages and pricing power. The fund's continued conviction in the AI capex cycle through NVIDIA exposure demonstrated their ability to ride secular technology trends. Jackson Peak's reference to past letters suggests this has been a consistent theme in their investment approach.

Pitch Summary:
Pinduoduo (PDD), a Chinese ecommerce company, was a contributor as a long, as part of a basket of Chinese ADRs. The thesis was that Chinese ADRs were trading near all-time low valuations just as it started to look like the Chinese government was taking stimulus seriously (injecting capital throughout the country and directly into stocks in a variety of ways). PDD was trading at a mid-single digit P/E with a large portion of the market cap in cash. The view was not many things had to go right based on the initial conditions, and global investors were underinvested in Chinese stocks.

BSD Analysis:
Jackson Peak identified compelling value in PDD as part of a broader Chinese ADR strategy, capitalizing on extreme valuation dislocations and emerging government stimulus. The company traded at mid-single digit P/E multiples with substantial cash holdings, creating an attractive risk-adjusted entry point. The investment thesis centered on Chinese government stimulus gaining credibility through direct capital injection into markets and the broader economy. Jackson Peak recognized that global investors were significantly underweight Chinese equities, creating potential for meaningful reallocation flows. The fund's contrarian positioning proved successful as PDD contributed positively to 2024 performance. The low valuation provided substantial downside protection while government stimulus efforts offered multiple expansion potential. Jackson Peak's basket approach to Chinese ADRs demonstrated disciplined diversification within the theme while maintaining conviction in the broader reflation narrative.

Pitch Summary:
For the contributors, the largest contributor came from an event-driven trade following the US election. We positioned long in Tesla (TSLA) and Coinbase (COIN) for an event-trade with a position into the election that we added to significantly following the election. We saw the opportunity for these highly debated, volatile names to reprice the right tail of distributions in the aftermath of an election in which the executive (Elon Musk) and industry (seemingly the entire crypto industry) saw their preferred candidate and party win. The prior administration took an adversarial approach to these companies, and as the market began to rethink the potential distribution of outcomes under a different regulatory regime, a big rally ensued.

BSD Analysis:
Jackson Peak executed a profitable event-driven strategy with Coinbase, positioning long before the 2024 election and adding significantly afterward. The investment thesis was predicated on regulatory regime change favoring the cryptocurrency industry under Republican leadership. The fund identified that the entire crypto industry supported the winning candidate, creating a favorable regulatory environment shift. Coinbase, as the leading US crypto exchange, stood to benefit substantially from reduced regulatory hostility compared to the prior administration's adversarial stance. The position capitalized on market repricing of regulatory risk and crypto industry prospects. Jackson Peak's conviction in adding to the position post-election demonstrated strong execution timing. The trade contributed meaningfully to 2024 performance as crypto-friendly policies became more probable under the new administration.

Pitch Summary:
For the contributors, the largest contributor came from an event-driven trade following the US election. We positioned long in Tesla (TSLA) and Coinbase (COIN) for an event-trade with a position into the election that we added to significantly following the election. We saw the opportunity for these highly debated, volatile names to reprice the right tail of distributions in the aftermath of an election in which the executive (Elon Musk) and industry (seemingly the entire crypto industry) saw their preferred candidate and party win. The prior administration took an adversarial approach to these companies, and as the market began to rethink the potential distribution of outcomes under a different regulatory regime, a big rally ensued.

BSD Analysis:
Jackson Peak executed a successful event-driven trade around Tesla, positioning long ahead of the 2024 US election and significantly adding to the position post-election. The thesis centered on regulatory regime change benefiting Tesla under a Republican administration, contrasting with the prior administration's adversarial stance. The fund recognized Tesla's potential for significant revaluation as markets repriced the probability distribution of outcomes under new leadership. Elon Musk's prominent support for the winning candidate created additional upside catalyst potential. The strategy proved highly successful as Tesla became the largest performance contributor for 2024. The trade exemplified opportunistic positioning around binary political events with asymmetric risk-reward profiles. Jackson Peak's timing and conviction in adding to the position post-election demonstrated strong execution of their event-driven investment approach.

Pitch Summary:
I also added one new position in Capri Holdings (CPRI). The company is in the affordable luxury business as the holding company for Michael Kors, Jimmy Choo and Versace. Capri is a business we've owned previously and sold in August 2023 immediately following the announcement of an $8.5B takeover offer by direct competitor Tapestry (TPR), the owner of Coach and Kate Spade brands. The Federal Trade Commission under Biden's influence sued in November 2023 to block the transaction and ultimately ended the takeover. Capri's share value during this period declined from $54/share in August 2023 to $19/share in October of 2024 when we re-purchased our position as the fundamentals of the underlying business were being ignored by selling holders of the shares. We're hopeful management will adjust their strategy and cost structure while also anticipating a new level of interest in the business will emerge under the new administration and their more friendly approach to mergers and acquisitions.

BSD Analysis:
The manager initiated a new position in Capri Holdings after a dramatic 65% decline from $54 to $19 per share following the collapse of Tapestry's $8.5B acquisition offer. The thesis centers on a classic value opportunity where regulatory interference created artificial selling pressure that disconnected the stock price from underlying business fundamentals. The manager believes the luxury goods holding company's portfolio of Michael Kors, Jimmy Choo, and Versace brands retains intrinsic value despite the failed merger. The investment appears to be a contrarian bet on both operational improvements through management's strategic adjustments and a more favorable M&A environment under the Trump administration. The manager's previous successful ownership experience with the company provides additional conviction. The significant discount to the failed takeover price suggests meaningful upside potential if either operational improvements materialize or renewed acquisition interest emerges. This represents a classic special situation investment where regulatory overhang created a compelling entry point.