Investment Pitches

Pitch Summary:
The share price is driven not just by high growth rates (30-40% in the US) but also by the hopeful anticipation of large projects from the technology-friendly Trump government. Together with Anduril, Palantir wants to compete for next-generation military contracts. The company has a very high valuation, but there seems to be little to stop the share price from rising higher.

BSD Analysis:
Palantir’s moat is workflow embedment in mission-critical environments where failure is unacceptable. Once Gotham or Foundry is wired into operations, ripping it out is politically and operationally risky. Government contracts provide durability but also cap growth optics. Commercial expansion is improving, yet scalability beyond bespoke deployments remains the test. Pricing power exists when value is existential; it weakens in standard enterprise pilots. Profitability has improved, but valuation assumes repeatable AI monetization at scale. Culture and narrative amplify volatility. The bull case is standardized AI platform adoption across industries. Palantir compounds only if it transitions from hero projects to infrastructure.

Pitch Summary:
In the fourth quarter of the year, we made a new investment in Just Eat Takeaway, one of the world's leading companies in food delivery, with a presence in key markets across Europe and North America. After several years of aggressive growth during which profitability had been sacrificed, the company embarked on a restructuring process and divested from several markets where it was not profitable (such as the United States and the United Kingdom). This process had begun to show results, with significant improvements in profitability and debt reduction in recent years. However, this progress was not reflected in the company’s stock price, which was trading at an attractive valuation below 7x EV/EBITDA. Shortly after we initiated our position, Just Eat announced the sale of its U.S. division, where the business had been unprofitable. Following this announcement, the stock experienced a revaluation of more than 30% within a few days, prompting us to sell our position. Since the position was still in the process of being built, it had not yet reached its target size.

BSD Analysis:
Just Eat Takeaway is prioritizing margin restoration over volume growth in 2026, successfully delivering a modest operating profit despite stagnant order volumes in saturated European markets. The company has largely moved past the heavy impairment losses associated with its Grubhub acquisition, focusing instead on its market-leading positions in Germany, the UK, and the Netherlands. Management is projecting adjusted EBITDA of approximately €225 million for the year, as delivery operations have become nearly 25% more profitable through logistics optimization and higher average order values. While the search for a Grubhub buyer continues to linger, the firm’s "Year of Recovery" has successfully stabilized its balance sheet against rising interest rates. For investors, Just Eat offers a deep-value play on the consolidation of the global food delivery sector, with significant potential for valuation re-rating once its U.S. exit is finalized.

Pitch Summary:
Next plc has also taken a more proactive approach, as despite its prominence in the UK retail sector, it has been one of the main counter-positioning businesses over the last ten years. It has embraced e-commerce, investing significantly in this area over recent years. This impacted its retail store sales in the short-term, but the investment created a more resilient business. By investing in its online platform and logistics, Next has managed to integrate digital sales with its physical stores, mitigating the threat posed by online competitors, who operate without the overheads associated with brick-and-mortar locations. Indeed, it has taken this further through the creation of a multi-channel shopping experience; and it is still the case that the majority of its returns bought online are taken back to stores—for the customer’s convenience.

BSD Analysis:
The manager sees Next as a rare traditional retailer that successfully counter-positioned against online-only rivals by building a sophisticated, integrated omni-channel platform. Heavy early investment in logistics and technology temporarily depressed store metrics but ultimately created a structurally advantaged, cash-generative model. Next’s strong balance sheet, disciplined inventory management, and robust free cash flow underpin ongoing shareholder returns via dividends and buybacks. Valuation has periodically lagged its operational quality, offering entry points when sentiment toward UK retail weakens. Key catalysts include continued growth of its platform services, improved consumer confidence, and further efficiency gains in fulfilment and returns.

Pitch Summary:
As a major consumer goods company, Unilever has encountered competition from direct-to-consumer (DTC) brands that leverage online platforms to reach customers directly. This is called ‘disintermediation’, where the traditional distribution platform, of say a supermarket, is replaced with internet orders sent directly to the customer. These DTC brands often offer personalised products and experiences, bypassing traditional retail channels. Unilever has responded by acquiring several DTC brands to adapt to this change, acknowledging the impact of counter-positioning in the consumer goods sector. Along with our other consumer goods companies, like Colgate-Palmolive and Reckitt, Unilever have also invested heavily in digital marketing. Unlike Blockbuster, they don’t have their heads buried in the sand and they are aware of the competitive threats.

BSD Analysis:
Unilever is framed as an incumbent that is actively adapting to digital disruption through acquisitions and stronger digital and DTC capabilities, rather than defending legacy channels. Its diversified portfolio across beauty, personal care, home care, and foods provides resilience and cash generation to fund these strategic pivots. While top-line growth has been modest in recent years, pricing power and productivity initiatives have supported margin recovery. The stock often trades at a reasonable valuation relative to staples peers, with a solid dividend yield and scope for buybacks enhancing total return. Success will depend on execution in premium segments and DTC, but the balance sheet and brand portfolio provide a solid foundation.

Pitch Summary:
The classic case of Counter-positioning is Netflix's disruption of Blockbuster. In most cases a dominant incumbent will be able to fight off the advances of a new, smaller business. The fact that some disruptors are successful makes this ‘Power’ all the more interesting. Netflix introduced an innovative subscription-based DVD rental service in 1999. This model offered several appealing features. Firstly, no late fees were charged by Netflix—unlike Blockbuster who made a lot of revenues charging customers for returning rentals late to the store. Secondly, Netflix allowed customers to keep DVDs for as long as they wanted without accruing penalties. Thirdly, Netflix delivered DVDs directly to customers' homes, eliminating the need to visit physical stores. This helped with better inventory control and greater choice—Netflix offered a much larger catalogue of DVDs compared to the limited shelf space of Blockbuster stores. It is easy to look back in hindsight and criticise the Blockbuster management team, but it’s clear Netflix adapted better to changing technology (Video to DVD) as well as providing a better service for customers. Despite all this, following the bursting of the tech bubble, in 2000, Netflix founders Reed Hastings and Marc Randolph offered to sell Netflix to Blockbuster for $50 million. At the time, Netflix was struggling financially and the bursting of the dot-com bubble had made it much harder for companies to secure funding. Blockbuster’s decision to decline this offer is now widely regarded as a critical missed opportunity, especially as Netflix went on to disrupt the home entertainment industry. As of January 2025, Netflix's market capitalisation exceeds $350bn, while Blockbuster filed for bankruptcy in 2010.

BSD Analysis:
Netflix exemplifies counter-positioning by embracing a subscription, direct-to-consumer model and then pivoting aggressively into streaming and original content, leaving legacy distributors behind. Its scale gives it substantial content-spend firepower, data advantages, and global reach, which underpin a durable competitive moat despite rising competition. While growth has matured, Netflix still generates healthy revenue expansion and expanding operating margins, with free cash flow inflecting positively as content amortization normalizes. The stock often trades at a premium multiple relative to traditional media, reflecting its superior growth and asset-light distribution economics. Key risks include saturation in developed markets, content hit-dependence, and regulatory scrutiny, but its strong brand and pricing power provide flexibility.

Pitch Summary:
McKesson, and its direct competitor Cencora, both had a very good operating year, growing EPS 10-15% with an outlook for more of the same in FY25. Extreme share price volatility midyear allowed us to initiate a position in Cencora alongside McKesson. The business is very similar and #2 in market share to McKesson in US drug distribution. US drug distributors are truly an oligopoly of just three companies but one weakness in the model is that customer concentration is high. The biggest risk is therefore a loss of contract for distributors. We believe that McKesson and Cencora are also meaningfully better than Cardinal Health, the third competitor, so if Cencora were to lose a large client it would highly likely be to McKesson and vice versa. Hence owning two shares in this attractive space should result in additional diversification for shareholders. The US prescription market should continue to grow in real terms at 1% driven by new drugs (GLPs) and, with some inflation, the underlying market should compound at 4-6%. Cencora and McKesson have made investments to grow in the more promising parts of healthcare distribution, that is biosimilars and cancer related drugs, which should propel their growth above the market, towards 6-7% per year. On top of this, margins remain at cyclical lows and could see a meaningful improvement and the companies are committed to material 5% annual share buybacks. All together, we could see these two companies compound their earnings at a 14-15% rate for a very long time to come which, from a starting valuation of 14-15x earnings and almost no cyclicality, offers potential for substantial gains ahead.

BSD Analysis:
Cencora is a high-quality partner to McKesson in the concentrated U.S. drug distribution oligopoly, with similar long-term economics but somewhat higher leverage to specialty and international growth. The company has been repositioning toward higher-margin oncology, biosimilars and services, which should gradually lift profitability and reduce reliance on any single large customer. As with McKesson, modest underlying market growth, operating leverage from higher-value segments and disciplined buybacks can drive mid-teens EPS compounding over time. Valuation remains reasonable for a business with resilient cash flows and limited cyclicality, especially given the potential for margin normalisation from currently depressed levels. We see a favourable risk/reward, acknowledging that contract retention and regulatory scrutiny are ongoing areas to monitor.

Pitch Summary:
United Health was a new position added during the fourth quarter. United Health provides health insurance to companies and individuals, claims management services and care delivery through its subsidiary Optum Health. It benefits from the secular trends of ageing demographics in the US, the expansion of treatment offerings and the trend towards the outsourcing of US government health programs to companies such as United who can offer greater value to members, as well as savings to the government. We expect all three to continue. The sector has underperformed for two years, principally due to higher than forecast treatment utilisation following the bounce back of procedures delayed by COVID-19. This trend saw margins contract materially, especially for United Health’s weaker competitors. Over the coming two years government contracts will reprice13 while capacity will be withdrawn from the industry leading to market share growth and normalising margins at United Healthcare, given their position as the largest and lowest cost provider. Moreover, we observe that utilisation has been returning toward trend since the summer, implying lower future treatment costs for the company. Over the longer term, United Healthcare is uniquely positioned to benefit from the transition to value-based care (VBC) through its Optum Health care provision business. VBC prioritises earlier intervention and the use of more preventative measures to deliver better health outcomes in lower cost settings, delivering savings to members and the government. Ultimately, VBC will be the key to delivering more effective and affordable healthcare in the US.

BSD Analysis:
UnitedHealth is the best-positioned integrated healthcare player in the U.S., with scale advantages in insurance, data and care delivery that underpin durable mid-teens earnings growth. Near-term margin pressure from elevated utilisation should fade as contracts reprice and the industry rationalises capacity, allowing profitability to normalise from a position of strength. Optum’s analytics, pharmacy benefit and care-delivery platforms give UnitedHealth a central role in the shift to value-based care, where managing total cost of care is rewarded. The balance sheet is robust and cash conversion strong, supporting continued dividends, buybacks and bolt-on acquisitions that deepen the ecosystem. Political and regulatory risk is ever-present, but the company’s ability to demonstrate cost savings to payers and government should keep it at the heart of U.S. healthcare reform.

Pitch Summary:
Coca-Cola delivered relatively solid operating results and upgraded its organic growth rate twice during the year (led by inflationary pricing). Unfortunately, much of the growth was eaten away by a very strong US dollar, resulting in flat US Dollar earnings growth. Since the election of President Trump and the new Health Secretary Robert Kennedy Jr, the stock de-rated back to close to 20x forward earnings on fears that the new administration would somehow crackdown on fizzy drinks. Most of Coca-Cola’s growth has been driven by its own healthier portfolio of products (“Zero”) and the company is well diversified globally and by business line to confront any such threat. Going forward we expect Coca-Cola to sell down incremental stakes in their bottlers, releasing capital and returning this to shareholders. After this, the business will be driven simply by concentrate sales and with this renewed focus, we expect the company to continue to gain market share from competitors PepsiCo and Keurig. This will support many years of 10% profit growth in US Dollars and a continued increase in its dividend, from a starting yield of 3.3%. Given fully franchised businesses trade in the stock market for mouthwatering multiples of more than 30x earnings we believe the margin of safety at current levels is high.

BSD Analysis:
Coca-Cola continues to demonstrate the resilience of a truly global consumer franchise, delivering solid organic growth this year despite meaningful FX headwinds that flattened reported U.S. dollar earnings. Much of the company’s momentum has come from its expanding “Zero” and low-sugar portfolio, which is now a major driver of volume and pricing gains and helps mitigate political noise around sugary drinks. The stock’s de-rating to around twenty times forward earnings reflects fears of regulatory pressure under the Trump–Kennedy administration, but Coca-Cola’s geographic and product diversification make any broad crackdown highly unlikely to impair its long-term economics. Strategically, the company is steadily reducing its ownership in bottlers, a process that frees up capital for buybacks and dividends while shifting the business mix further toward high-margin concentrate sales. This transition should enhance both profitability and capital efficiency, giving Coca-Cola a clearer path to sustained U.S. dollar profit growth of roughly ten percent per year. With a 3.3 percent dividend yield and a long history of annual increases, shareholder returns remain highly attractive. Fully franchised consumer brands often command premium valuations above thirty times earnings, so Coca-Cola’s current multiple leaves a comfortable margin of safety for a business of its quality and predictability.

Pitch Summary:
Going deeper into the stocks, Unilever performed well in 2024. What was considered, only twelve months ago, a business that had lost its way is now squarely back in form thanks to the diet suggested by chairman Ian Meakins, the prior CEO responsible for all the good work done at Ferguson after the Great Financial Crisis. Also, the new CEO and CFO, both of whom joined after an investment from the activist investor Nelson Peltz of Trian, have done an admirable job refocusing the business towards the faster growing areas of cosmetics and body care and bringing incentives back in line with driving volume and total revenue growth, while cutting wasteful spending. What should result from the spin-off of the remaining food division is a Unilever whose Euro denominated earnings growth could easily be top quartile, in excess of 8% per annum, on top of which shareholders receive an attractive dividend yield of 3.5%, trading today at a valuation of just c.17x PE, 30% below historic averages.

BSD Analysis:
Unilever is emerging from a period of strategic drift with sharper portfolio focus, better cost discipline and activist-driven urgency at the top. Reorienting toward higher-growth beauty and personal care while separating slower-growth foods should lift the group’s organic growth and margin profile over time. With strong brands in emerging markets and scale advantages in marketing and distribution, the company is well placed to compound earnings at high-single-digit rates while maintaining a healthy dividend. The shares still trade at a discount to their own history and to premium staples peers, despite improving fundamentals, leaving room for a valuation catch-up. Successful execution on the food spin-off and sustained volume-led growth would likely drive both earnings and multiple expansion.

Pitch Summary:
Dollar Tree was our worst performing stock in 2024, down 47%, two thirds of which came from a collapsing valuation multiple and one third from lower-than-expected profits. The key challenge has been a squeezed low-end consumer, who is buying less, without the same level of pressure on lower-middle income consumers. Ordinarily, a squeezed consumer drives customer traffic, as higher unemployment means customers seek out the deep value offered at dollar stores and the pickup in traffic offsets the smaller basket size. Absent an uptick in unemployment, the key trend has been a shift from higher margin discretionary items to lower margin consumables as low-income consumers prioritise everyday essentials. This has been a disappointing development which led to lower margins across the group. During the year, Dollar Tree put its Family Dollar banner into strategic review. Over the years we've been relatively sanguine on Family Dollar, viewing it as offering potential upside having been profit neutral to mildly loss-making, with the Dollar Tree banner being the sole driver of growth. We welcome the strategic review, as at this point, Family Dollar losses and cash consumption are being capitalised into the valuation of Dollar Tree, and it reflects a sound capital allocation decision to remove these. Dollar Tree is the unwelcome proof that we make mistakes. The principal errors here have been a failure to appreciate the degree of underinvestment in the Family Dollar banner and underestimating the scale of de-rating witnessed across the sector as the low-end consumer came under pressure. A small silver lining is our practice of never averaging down into positions without concrete evidence of operational improvement in the numbers, which means that today Dollar Tree represents a 2% holding. The second minor consolation is we've not lost money in absolute terms in Dollar Tree - the principal cost has been opportunity cost. As the reader might surmise, Dollar Tree's present valuation is well below our (reduced) estimate of its intrinsic value. In the third quarter of 2024 we saw early signs of operational trends stabilising and improving, both in terms of the improving performance of discretionary sales and the welcome reduction in 'shrink', or theft.

BSD Analysis:
Dollar Tree is a challenged but salvageable value retailer where current pessimism over Family Dollar and low-end consumer stress has driven the shares below a conservative estimate of intrinsic value. The core Dollar Tree banner retains strong unit economics and brand equity, and a credible strategic review of Family Dollar could unlock value either via divestiture, closure of structurally weak stores or a sharper repositioning. As mix shifts back toward higher-margin discretionary categories and shrink abates, there is meaningful margin recovery potential on top of modest square-footage growth. Management discipline around capital allocation and store returns will be critical, but if they execute, the equity offers substantial upside from today’s compressed multiple. We see this as a classic self-help turnaround with an asymmetric payoff for patient investors willing to tolerate volatility.

Pitch Summary:
Visa had a strong year, returning 22%. Recent years have seen Visa shrug off a number of investor concerns, the passing of which has highlighted the strength of the business model. Fintech disruption concerns have abated as the higher interest rate regime increased the cost of capital to finance the very high customer acquisition costs facing new entrants. More recently, concerns shifted to payment volume growth which has been falling, from 10-12% to 6-8% as the ‘cash to card’ shift of personal consumption expenditures matures. Offsetting this trend is the growing monetisation of its payment technology services business (c. 25% of revenues) growing >20% per annum, itself accounting for 4-5% of revenue growth per annum. These services span areas such as business-to-business payments, fraud and identification. The key observation here is that Visa's ubiquitous adoption is the result of decades of investment in payment technologies which has manifested in an enviable network; this network now offers the opportunity for further services to be gradually monetised, while cementing Visa’s competitive advantages. We look forward to Visa's February Investor Day which we believe will give investors much greater insight into the services businesses.

BSD Analysis:
Visa is a toll-collector on global commerce, with unmatched network scale, strong pricing power and secular tailwinds from cash displacement, e-commerce and digital wallets. While headline payment volume growth is maturing off very high levels, faster-growing value-added services and cross-border flows should sustain healthy double-digit EPS growth. The capital-light model supports high margins, robust free cash generation and consistent buybacks alongside a growing dividend. Competitive threats from fintechs have receded as challengers struggle with unit economics and often end up partnering with or riding on Visa’s rails. Although the stock commands a premium multiple, we think that is warranted by durable high returns on capital and multi-decade growth optionality.

Pitch Summary:
It was another very strong year for our US bank stocks with Goldman Sachs delivering +52% total return, JP Morgan +44% and Bank of America +34%. During the year we sold our position in Goldman Sachs which we had held in our equity strategy since the launch of the firm in 2016. It had been a good stock for us, generating more than 20% annualised returns. The shares have re-rated significantly and today trade at 1.8x tangible book value and 14x PE. From this starting point we saw better relative opportunities elsewhere. Two years ago, when rates rose rapidly and Silicon Valley Bank failed, the sector was in crisis; it’s precisely in these moments of crisis when great businesses can thrive. JP Morgan saw the benefits of its opportunistic First Republic acquisition come through with incremental profits from the deal exceeding the initial target by 3x. Misplaced worries about Bank of America’s held-to-maturity securities portfolio (as discussed in our Q1 2023 Investor Letter6) have gradually faded and the rollover of those lower yielding treasuries at higher current yields now represents a strong tailwind to their revenue growth ahead. The US banking sector continues to consolidate from a fairly fragmented starting point: JP Morgan’s share of non-interest-bearing deposits in the US (think “current accounts”) now stands at nearly 16%, up from 12.5% pre-Covid (we estimate ~15% excluding the First Republic deposits). We expect JP Morgan’s share gains to continue not least thanks to its unmatched investment in technology which is also ideally positioning it to capture the benefits of increased automation over time. While the US banking system is willing and very able to lend, loan growth in recent years has been weak thanks to muted loan demand. Leverage for both households and corporates today is low. The economic expansion post-Covid has been income not credit driven (and therefore could not be more different to the expansion pre-financial crisis). This means credit risks to banks are lower. There are also tentative signs of a pickup in lending already and a more dramatic acceleration represents a notable positive opportunity in 2025. We continue to view JP Morgan and Bank of America as offering attractive long-term structural growth, inherently linked to the outperforming US economy, at attractive through-cycle returns on capital. Valuations are still acceptable for that growth and profitability. After a long difficult period of recovery and regulation post-GFC, the next 5-10 years could be much more favourable for the US banks. A new higher neutral rate of interest vs pre-Covid could see prolonged higher profitability from interest-free deposits and under the new Trump administration we are likely to see an improved regulatory environment benefiting capital returns as well as supporting M&A revenues.

BSD Analysis:
Bank of America is a scale U.S. retail and commercial bank whose earlier rate-sensitivity headwinds are turning into tailwinds as low-yielding securities roll into higher-yield assets. The franchise has a large base of granular, low-cost deposits and strong positions in consumer, small business and wealth management, supporting attractive through-cycle returns. Management has invested heavily in digital capabilities while maintaining conservative underwriting, leaving the bank well placed to benefit from any acceleration in loan demand without taking excessive risk. As fears around its securities portfolio fade and earnings power normalises, we see room for both multiple expansion and rising capital returns. Relative to global peers, Bank of America offers a compelling mix of quality, growth and income at a still-sensible valuation.

Pitch Summary:
It was another very strong year for our US bank stocks with Goldman Sachs delivering +52% total return, JP Morgan +44% and Bank of America +34%. During the year we sold our position in Goldman Sachs which we had held in our equity strategy since the launch of the firm in 2016. It had been a good stock for us, generating more than 20% annualised returns. The shares have re-rated significantly and today trade at 1.8x tangible book value and 14x PE. From this starting point we saw better relative opportunities elsewhere. Two years ago, when rates rose rapidly and Silicon Valley Bank failed, the sector was in crisis; it’s precisely in these moments of crisis when great businesses can thrive. JP Morgan saw the benefits of its opportunistic First Republic acquisition come through with incremental profits from the deal exceeding the initial target by 3x. Misplaced worries about Bank of America’s held-to-maturity securities portfolio (as discussed in our Q1 2023 Investor Letter6) have gradually faded and the rollover of those lower yielding treasuries at higher current yields now represents a strong tailwind to their revenue growth ahead. The US banking sector continues to consolidate from a fairly fragmented starting point: JP Morgan’s share of non-interest-bearing deposits in the US (think “current accounts”) now stands at nearly 16%, up from 12.5% pre-Covid (we estimate ~15% excluding the First Republic deposits). We expect JP Morgan’s share gains to continue not least thanks to its unmatched investment in technology which is also ideally positioning it to capture the benefits of increased automation over time. While the US banking system is willing and very able to lend, loan growth in recent years has been weak thanks to muted loan demand. Leverage for both households and corporates today is low. The economic expansion post-Covid has been income not credit driven (and therefore could not be more different to the expansion pre-financial crisis). This means credit risks to banks are lower. There are also tentative signs of a pickup in lending already and a more dramatic acceleration represents a notable positive opportunity in 2025. We continue to view JP Morgan and Bank of America as offering attractive long-term structural growth, inherently linked to the outperforming US economy, at attractive through-cycle returns on capital. Valuations are still acceptable for that growth and profitability. After a long difficult period of recovery and regulation post-GFC, the next 5-10 years could be much more favourable for the US banks. A new higher neutral rate of interest vs pre-Covid could see prolonged higher profitability from interest-free deposits and under the new Trump administration we are likely to see an improved regulatory environment benefiting capital returns as well as supporting M&A revenues.

BSD Analysis:
JPMorgan is the premier U.S. universal bank, combining dominant deposit franchises, leading investment banking and payments businesses, and best-in-class risk management. The First Republic acquisition has already proved value-accretive, boosting earnings and strengthening its affluent customer base, while technology spend underpins continued market-share gains. With capital levels comfortably above regulatory minima and credit losses benign, JPMorgan has ample room to grow dividends and buy back stock while still investing for growth. A backdrop of structurally higher rates versus the pre-COVID era should sustain attractive net interest margins on an expanding base of low-cost deposits. Despite this, the stock still trades at a reasonable earnings multiple and modest premium to book relative to its return profile, leaving upside as investors re-rate quality financials.

Pitch Summary:
As we have mentioned in previous letters, we like stocks with volatile share prices, especially ones we don’t own yet! The greater the volatility, the greater the opportunity for patient investors to trade at truly excellent prices. So it was with some excitement that we entered this year with the threat of major interest rate cuts in the US creating an opportunity we’d been waiting for to invest in a business we had been following since around 2020: Interactive Brokers, itself a beneficiary of market volatility. As it happens the company was our best performing stock for the year, up c.110%. We are even more excited today than we were a year ago about the business’ prospects, although we have trimmed the position back post US election. As readers will know, the company operates an online stockbroker which is the fully automated, lowest cost provider4, with, by far, the best availability of financial instruments. The platform is so good that an increasing number of sophisticated hedge funds are using it for their trading rather than traditional brokers like Goldman Sachs and Morgan Stanley. 2024 was another extraordinary year for the company. The number of accounts grew almost 30% to 3.4m and the number of trades executed per account grew almost 20%, with a particularly strong development since the election of Donald Trump in November. As we highlighted in our first quarter letter in 20245, The company makes more than half of its profit from Net Interest Margin (NIM) and the fact that rate cuts were lower than expected helped profits comfortably beat expectations. We like the company’s simple and fair approach to paying interest on customer’s cash balances. Above a certain size per account, the company pays local base rates less 0.5% on all cash accounts, in stark contrast to competitors who pay close to nothing. The stock started the year on 13x earnings and ended it at 25x. 2025 will likely bring another year of 30% account growth, to close to 4m, and we believe that, over time, 10m or higher is easily achievable. The company also has a balance sheet sporting excess capital of $16bn, should they decide to start returning it to shareholders or use it productively, then the multiple paid would look very low.

BSD Analysis:
Interactive Brokers is a structurally advantaged electronic broker with a superior technology stack, ultra-low costs and a global footprint that continues to take share from legacy full-service firms. Account growth, higher activity per client and strong net interest income on customer balances provide multiple engines of earnings expansion with minimal credit risk on the balance sheet. The firm’s capital-light model throws off excess regulatory capital that can eventually be returned or redeployed, adding a further layer of optionality. While the multiple has already re-rated, we think a premium valuation is justified by high incremental margins, strong competitive moats and a long runway to scale from a few million to many millions more accounts. Key risks include regulatory scrutiny and pricing pressure, but to date management has navigated these well while maintaining industry-leading economics.

Pitch Summary:
Totenko has shown a remarkable turnaround in profitability following the COVID-19 pandemic. The company has streamlined operations, improved efficiency, and introduced new systems, which have led to a return to operating profit and the expectation of net income profitability for the first time since 2019. The resurgence in tourism, particularly from China, is expected to further benefit the company. Despite a history of mismanagement, structural improvements suggest a sustainable increase in profitability.

BSD Analysis:
Totenko's current P/E ratio of 5.3 and P/B ratio of 0.36 indicate a potentially undervalued stock, especially given the company's recent operational improvements. The tourism sector in Japan is experiencing a significant uptick, with Chinese tourists comprising a substantial portion of arrivals, which should bolster Totenko's revenue. The company's decision to reinstate dividends signals confidence in its financial health. However, the stock remains a small position in a broader basket of undervalued Japanese companies, suggesting that while the potential for upside exists, investors should remain cautious. The company's real estate holdings in Tokyo could also provide additional value, as these assets may be worth more than their book value. Despite insider ownership of approximately 32%, which limits activist influence, the company's strategic shifts appear to be internally driven and focused on long-term profitability.

Pitch Summary:
@marginofdanger presents a bullish, high-conviction thesis on Five Point Holdings, arguing the stock trades at a steep discount to underlying land NAV. The pitch centers on near-term catalysts including asset sales that significantly delever the balance sheet and enable refinancing of expensive debt. Management is credited with unlocking higher land values in Irvine through improved entitlements, materially lifting per-acre pricing. Additional upside is tied to potential joint ventures at Valencia and San Francisco that would reduce capital intensity and possibly enable shareholder returns. Governance improvement is highlighted via a new board member replacing a legacy institutional holder. While macro and interest-rate risk remain, the author believes balance sheet cleanup and asset quality will drive NAV realization.

BSD Analysis:
Large-scale land developers are often mispriced due to long-duration cash flows, opaque NAVs, and capital structure complexity. Five Point’s embedded land value in supply-constrained California markets provides meaningful asset backing, but realization depends on execution, financing, and entitlement discipline. Deleveraging materially improves equity optionality by reducing refinancing risk and increasing strategic flexibility. Joint venture structures are critical in this sector, as they can accelerate development while preserving balance sheet capacity. The key risk is that macro conditions or housing demand delays slow monetization, extending the NAV discount. If management continues to crystallize value through asset sales and partnerships, the equity could re-rate closer to private-market land values.

Actual Post Content:
My highest conviction idea going into 2025 is $FPH, currently ~$3.60 vs. NAV of $10-15/sh. I believe that the stock could double in 2025. This name is cheap, WITH multiple catalysts that are likely to play out very shortly: Leverage profile is about to inflect significantly favorable. $FPH sold its last Irvine office building in December and they are also expected to close a large resi land sale in Irvine by year end or very early 1Q25. The proceeds of these sales will bring them very close to ZERO net debt, enabling them to refinance their expensive notes. Capital intensity is also likely to inflect significantly downward. $FPH's two long duration projects, Valencia & SF, are very likely to bring in financing partners who can reduce $FPH's share of the funding burden. These JVs could even allow the company to return cash to shareholders in the next year or two. Mgmt has unlocked significant value in Irvine, and market hasn't given them any credit for it. Earlier in 2024, the company was selling land in Irvine at $5-6mm/acre, but in its most recent sale, land has re-rated to $9-10mm/acre. The reason for this uplift is that mgmt has succeeded in modifying its entitlements to allow builders to generate a better return on their land purchases. There is a new board member (and key shareholder). The Glick family office took over Castlelake's position a few months ago and joined the board. With new blood in the boardroom, I am confident that the NAV discount will meaningfully close in 2025. The key risks here are macroeconomic in nature, namely the risk of higher interest rates and mortgage rates on the business.

URL: https://x.com/marginofdanger/status/1873793529635299583

Pitch Summary:
Texas Pacific Land Corporation has strategically acquired additional acreage in the Midland Basin, enhancing its royalty portfolio and positioning itself for increased cash flow. The acquisitions are expected to yield a double-digit cash flow return at a stable oil price of $70 per barrel. The company's inclusion in the S&P 500 and its diversified revenue streams, including water royalties, further strengthen its investment appeal.

BSD Analysis:
Texas Pacific Land Corporation's recent acquisitions are strategically located adjacent to its existing holdings, providing synergies and operational efficiencies. The company's ability to generate a 10% free cash flow yield on these acquisitions suggests robust financial health and prudent capital allocation. Despite a recent 33% stock price decline, likely influenced by technical factors and broader market conditions, TPL's fundamentals remain strong. The transition to the S&P 500 could introduce volatility due to passive fund flows, but it also enhances visibility and liquidity. TPL's diversified revenue streams, including significant water royalties, provide a buffer against oil price fluctuations, making it a resilient play in the energy sector.

Pitch Summary:
Compagnie de l'Odet is an investment holding company controlled by the French billionaire industrial financier and corporate raider Vincent Bolloré, the 71-year-old patriarch of the Bolloré family. Vincent Bolloré started his career under Edmond de Rothchild and made a name for himself for making money by taking large stakes in listed companies. He utilized a complex structure and relatively little equity to ultimately take control of much larger corporations. This holding structure is extremely complex and very off-putting to most investors. We see compelling upside on a sum-of-parts basis which becomes significant when one takes into consideration the correct number of shares outstanding. Furthermore, recent developments involving many of the entities under the family umbrella indicate an attempt to unwind this complicated corporate structure, realize well-hidden value and align operations with Vincent Bolloré's succession strategy. We think Odet is the best way to realize this hidden value as it is the closest listed company to his own holding company. Odet operates as an investment holding company and is the main equity owner of Bolloré SE (BOL FP), with 70.0% of the shares (79.8% of voting rights) after the recent buybacks. Bolloré SE is a French investment vehicle that holds stakes in several listed companies including Vivendi (VIV FP) and Universal Music Group (UMG NA) as well as a large cash pile. In turn, Odet is indirectly controlled by Bolloré Participations SE, the top holding company through a chain of companies with Bolloré SE as a minority. This effectively controls a 93.1% stake, leaving only 6.9% for the minority shareholders in the listed company. This treasury control loop, among other crossholdings in the wider family-controlled structure, has puzzled investors for years. A book can be written about the history and exploits of the group, and we do not have the time or inclination to discuss it here. If you want further background information, we suggest reading East72 second quarter 2023 letter and Muddy Waters: Complexity Creating Arbitrage with over 95% Upside article from February 2015. What interests us is the simplification of the group, which we believe may finally unlock substantial value. The simplification exercise began in earnest in March 2020 when Vivendi decided to sell a 20% stake in Universal Music Group ("UMG") to a consortium led by Tencent (10% in March 2020 and 10% in January 2021). Having established a valuation, in March 2021 Vivendi decided to satisfy a growing group of institutional investors who were requesting a spin-off or distribution of UMG to fix the conglomerate discount. The board decided to distribute 60% of UMG share capital to the shareholders through a listing on Euronext Amsterdam in September 2021. Before listing, Pershing Square acquired a 10% stake with Vivendi retaining the other 10% for a minimum of two years. Over the same period, Bolloré SE worked on realizing the value of its operating businesses. In April 2022, Bolloré SE signed an agreement for the sale of 100% of Bolloré Africa Logistics, which grouped together Bolloré's Transport and Logistics activities in Africa, to the MSC Group for an enterprise value of €5.7 billion, which was a full multiple at the top of the cycle to a cash rich buyer. With the proceeds from the deal, in March 2023, Bolloré SE launched a tender offer at €5.75 per share for a maximum of 288.7 million shares or 9.78% of share capital (only 99.1 million shares were tendered or 3.36% of share capital). Subsequently, in July 2023 Bolloré SE signed an agreement for the disposal of the remaining logistics business to the CMA CGM Group for an enterprise value of €4.9 billion. Before year-end, in December 2023, Vivendi announced its intention to break up the group. Apparently, distributing Vivendi's crown jewel to shareholder wasn't enough to fix the persistent discount, hence management decided to act further. The plan became official in July 2024 with the announcement of the breakup of the group into four listed entities, Canal+ (CAN LN), Havas (HAVAS NA), Louis Hachette (ALHG FP - 63.5% stake in Lagardère and 100% stake in Prisma Media) and the remaining Vivendi comprised of a basket portfolio of listed stakes (including a 9.94% stake in UMG) and debt. In the same month, Bolloré SE announced the delisting of two passive holdings, by having them absorbed, respectively, by two listed entities that are >95% owned by Bolloré SE. Later, in September 2024, Bolloré SE decided to take these two private (plus a third Société Industrielle et Financiére de l'Artois) by announcing three buyout offers, which will be followed by mandatory squeeze-outs. Subsequently, in January 2025, Bolloré SE increased the offer prices for the announced buyouts to sweeten the deal for the minorities, after a court rejected the initial offers. Today, Bolloré SE holds a 18.8% stake in UMG directly, the world's largest record label, 31.0% of the shares and voting rights of Canal+, the leading pay-TV and SVOD operator in France and French-speaking Africa. 31.0% of the shares and voting rights of Louis Hachette, one of the largest book publishers and travel retailers globally, 31.0% shares and 40% voting rights in Havas, the sixth largest advertising agency worldwide, and 29.9% of post spin-off Vivendi, a portfolio of predominantly listed companies. Bolloré SE also holds a cash pile of €6 billion following the aforementioned disposals and Bolloré Energy, a business which generates €40 million EBITDA and could potentially follow the trajectory of the other two units. The key to understanding the significant discount is to appropriately account for Bolloré's stakes in its parent companies. We believe the most logical way to account for these stakes is not to value each parent company individually given they are only holding companies in Bolloré but rather to adjust the shares outstanding given they are more or less treasury shares. Bolloré built his empire by using a technique now called "the Breton Pulley", where the family effectively maintains voting control despite owning a minority economic stake. In essence, Odet holds 70% of Bolloré SE. In turn, Bolloré owns indirectly 35.6% of Odet while Odet's parent, Sofibol holds 56.1%, which in turn is owned by another parent and Bolloré SE directly. This continues for several layers (see Appendix). Hence, the stated shares outstanding fails to take into consideration these cross-holdings and materially overstates the real number of shares outstanding. There are several ways to calculate the treasury loop but the end effect by our calculation is that there are c. 1.2 billion shares outstanding versus the stated 2.8 billion. We do not know what Bolloré's plans are for the various entities but given his recent behavior it seems to be to unlock value and simplify the structure. We believe the most prudent place to be is as close to his holding company as possible and thus we are invested in Odet. We do realize there is a risk to be squeezed out at a suboptimal valuation or that the ongoing share repurchases further limit the free float. We keep these risks in mind. Without getting much into the messy details, at year end Odet traded at between a 21% and 33% discount to listed Bolloré (depending on your view of outstanding shares), which itself is trading at a 60% discount to the predominantly market valued sum-of-parts. As we like to take a view on the valuation of the individual parts, we think that the discount is even more intriguing.

BSD Analysis:
Palm Harbour Capital presents a compelling sum-of-the-parts arbitrage opportunity in Compagnie de l'Odet, the closest public vehicle to Vincent Bolloré's empire. The manager's thesis centers on the ongoing simplification of Bolloré's notoriously complex holding structure, which has historically deterred institutional investors and created significant valuation discounts. The fund identifies a critical accounting insight: adjusting for cross-holdings reduces the effective share count from 2.8 billion to approximately 1.2 billion shares, materially understating the per-share value. Recent corporate actions support the value realization thesis, including €10.6 billion in logistics asset sales, Vivendi's four-way breakup into separate listed entities, and multiple delisting/squeeze-out transactions. Odet trades at a 21-33% discount to Bolloré SE, which itself trades at a 60% discount to sum-of-parts, creating a double-layered arbitrage opportunity. The portfolio includes high-quality assets like Universal Music Group (18.8% stake), Canal+ pay-TV operations, and €6 billion in cash from recent disposals. While squeeze-out risk exists, the manager views proximity to Bolloré's holding company as the optimal positioning for value realization as the 71-year-old patriarch executes his succession strategy.