Investment Pitches

Pitch Summary:
Appier Group is positioned to capitalize on the shift away from third-party cookies, offering AI-driven marketing automation that enhances advertisers' return on ad spend. With a strong presence in Asia and a competitive edge over U.S. peers, Appier is poised for significant growth. The company's current valuation of 4.4x TTM sales/EV is attractive, with an anticipated 40% upside from valuation re-rating and additional intrinsic value growth through profit expansion.

BSD Analysis:
Appier's focus on first-party data positions it well amid industry shifts due to privacy changes by Apple and Google. The company's AI algorithms enable superior ROAS, particularly in Asia, where it generates the majority of its revenue. Despite customer concentration risks, with Coupang accounting for a significant portion of revenue, Appier's strong customer acquisition and retention metrics, including a net revenue retention rate of 120%, mitigate these concerns. The company's strategic R&D investments and occasional acquisitions bolster its product offerings, while a planned share repurchase indicates confidence in its growth trajectory. With projected revenue growth of 30% annually and a target EBIT margin of 15-20% by 2025, Appier is well-positioned to achieve its target price of Y2,200, representing a 40% upside.

Pitch Summary:
Murakami Corporation stands out due to its significant improvements in shareholder returns, marked by increased dividends and a notable uptick in stock buybacks. The company benefits from a strong market position in Japan's automobile rearview mirror sector and is poised for continued growth driven by regulatory demands for advanced driver assistance systems. Despite historical capital intensity, Murakami's operational performance is improving, supported by easing semiconductor shortages and a recovering automotive industry.

BSD Analysis:
Murakami's recent capital allocation improvements are likely influenced by Dalton Investments, a known activist investor with a 5% stake. This external pressure, combined with the CEO's substantial 13% ownership, suggests a commitment to enhancing shareholder value. The company's forward P/E of 10.1x and a dividend yield of 4% indicate an attractive valuation, especially given its 19% revenue CAGR since FY21. As the automotive industry rebounds, Murakami's focus on shareholder returns, coupled with its strategic market positioning, makes it a compelling investment opportunity. The potential for margin recovery to pre-pandemic levels further enhances its investment appeal.

Pitch Summary:
Roblox has firmly established itself as the dominant player in user-generated gaming within Western markets. At its recent investor day, Roblox set an ambitious target of reaching 10% of gaming content revenue, of which it estimates the total pool is around $180bn (for context, in the last twelve months, it made $4bn in bookings). We think this will be a challenging target, but it will be positive for the business directionally. The reason is that Roblox has spent the last three years heavily investing in re-engineering its game platform to be high fidelity, performant and widely available across platforms. They also share economics with their creators to the point now that the absolute numbers in highly engaged games are enough to support a small game studio. The result is that the quality of games has materially improved, attracting additional engagement – particularly from older users. For game developers, Roblox presents an increasingly attractive platform. Developers gain instant access to 79 million daily active users (4x that in quarterly active users). More importantly, their games become immediately accessible across iOS, Android, game consoles, PC, and VR without developing separate versions for each platform. This cross-platform accessibility dramatically shifts studio economics. Developers can avoid the costs of hiring infrastructure specialists or platform-specific engineers and sidestep common support issues on various devices. For example, content creators upload videos to YouTube without worrying about distribution logistics, and developers can focus solely on creating engaging games while Roblox handles the rest. This platform architecture has drawbacks. Roblox needs to continuously spend money to make its platform safe for its younger audience, upgrade its infrastructure, and improve its game engine. It also pays a significant portion of every dollar to the app platforms (Apple and Google). The next opportunity for Roblox is to monetise its vast user base with advertising. We expect this will be an increasingly important part of the investment thesis over the next few quarters to show that Roblox can generate the types of returns on capital that we think it can.

BSD Analysis:
SaltLight views Roblox as the dominant Western user-generated content gaming platform, positioned to benefit from the industry's shift toward UGC models. The manager acknowledges Roblox's ambitious target of capturing 10% of the $180 billion gaming content market as challenging but directionally positive. The investment thesis centers on Roblox's three-year platform re-engineering effort that has significantly improved game quality and attracted older users beyond its traditional younger demographic. With 79 million daily active users and cross-platform accessibility across iOS, Android, consoles, PC, and VR, Roblox offers developers immediate scale without platform-specific development costs. SaltLight compares this to YouTube's creator economy, where developers can focus on content creation while Roblox handles distribution infrastructure. The manager recognizes ongoing platform costs for safety, infrastructure, and app store fees as headwinds but sees advertising monetization as a key catalyst. The platform's network effects and creator revenue sharing have reached sufficient scale to support small game studios, creating a sustainable ecosystem. SaltLight expects advertising to become increasingly important for demonstrating the capital efficiency they believe Roblox can achieve.

Pitch Summary:
SEA Ltd, which is focused on Southeast Asia, has the wildly successful Free Fire game franchise, first launched in 2017. Free Fire has an astounding 648 million quarterly active users and 53 million paying players, spending an average of $42 a year. The company's large user base is due to its game design being playable on lower-spec phones, which are more prevalent in emerging markets. Nevertheless, the business makes good money overall. Over the last twelve months, SEA Ltd made $1bn EBITDA with 50% margins. This is a phenomenal business that doesn't require much capex to grow.

BSD Analysis:
SaltLight presents Sea Limited as a compelling emerging markets gaming franchise play, centered on the Free Fire mobile game launched in 2017. The manager emphasizes the massive scale with 648 million quarterly active users and 53 million paying players generating $42 average annual revenue per user. The investment thesis highlights Sea's strategic advantage in emerging markets through game design optimized for lower-specification smartphones, which are prevalent in Southeast Asia. This accessibility has enabled Sea to capture a large addressable market that competitors with more resource-intensive games cannot effectively reach. The financial metrics are impressive, with $1 billion EBITDA and 50% margins over the trailing twelve months, demonstrating the high-margin, capital-light nature of the franchise gaming model. SaltLight views this as a "phenomenal business" that requires minimal capital expenditure for growth, fitting their preference for asset-light, high-return businesses. The manager positions Sea as benefiting from the same evergreen franchise dynamics as Tencent but with specific exposure to the high-growth Southeast Asian gaming market.

Pitch Summary:
Tencent is the global leader in the arena of franchise games. Today, it has eight franchise games earning over US$500m in gross receipts annually. China is, perhaps, one of the most competitive game markets, and many lessons are being conveyed to Western markets. Some of Tencent's older games are half a decade old, yet millions of daily active players are still playing. Tencent is also getting very good at creating new evergreen games. How do they elongate a game's franchise? Social mechanics are introduced that allow players to interact, compete, and collaborate, driving network effects and lowering acquisition costs. Content is frequently upgraded with new characters, maps or game modes to keep the game fresh. Time-limited events are introduced to coincide with holidays or special occasions. An in-game economy encouraging player investment without exploitation. Lastly, many games are integrated with e-sports, where professional game teams play at events that bring like-minded gamers into a physical space. Our view is that the market has underappreciated the annuity-like nature of these evergreen game franchise businesses. Tencent, in particular, is valued at a multiple that doesn't appreciate the nature of the game business. Meanwhile, Tencent has developed a similar ecosystem in China with its WeChat Mini-games platform.

BSD Analysis:
SaltLight positions Tencent as the global leader in evergreen gaming franchises, emphasizing the company's transition from volatile hit-driven revenues to more predictable annuity-like cash flows. The manager highlights Tencent's impressive portfolio of eight franchise games each generating over $500 million annually, demonstrating the company's ability to create and maintain long-term player engagement. The investment thesis centers on Tencent's mastery of franchise elongation through social mechanics, regular content updates, time-limited events, balanced in-game economies, and e-sports integration. SaltLight views the Chinese gaming market as highly competitive and sees Tencent's success there as transferable to Western markets. The manager believes the market significantly undervalues Tencent's gaming business, failing to recognize the predictable, high-margin nature of established franchises. Additionally, SaltLight notes Tencent's WeChat Mini-games platform as a user-generated content ecosystem similar to Roblox, providing exposure to the emerging UGC gaming trend. The valuation disconnect presents an attractive opportunity given the business quality transformation from hit-driven to franchise-based revenues.

Pitch Summary:
AppLovin is one of these intermediaries strategically positioned in the middle of the Bucket 3 segment. AppLovin has been a standout performer in our fund this quarter. In our 4Q 2023 letter, we highlighted the business, noting how it has built an exceptionally profitable AI-driven business by solving the abovementioned challenges for the game sector. It's worth restating the problem: growth in total engagement time has plateaued. The industry's fight now is to claim a share of that time. But, what if, within this fixed engagement time, there was a scenario where gamers were discovering more relevant games, and, as a result, they might spend more money per hour of engagement – the game studios could still prosper? An analogy would be a scenario in which every employee was matched to their perfect job. They would be more productive, and everyone would be wealthier. AppLovin is instrumental in this 'matchmaking' dynamic (or targeting in industry parlance). With access to 1.4 billion active mobile users, it has an unparalleled global reach. It also holds the largest market share among advertisers (primarily other game studios) seeking to acquire users. How did they obtain this reach? The gaming advertising industry is peculiar because an advertising buyer can also be an advertising seller. In the case of FTP games, developers need to monetise their "free" users somehow by offering digital space to show ads. So, on the one hand, they're buying ads to find 'whales'; on the other, they are selling the engagement time of their free users. AppLovin's position as a matchmaker is precious because it obtains unique data from both sides. This data is continually ingested to train and optimise its AI model called Axon 2. This reinforces a competitive moat: more game studios, more advertisers equals data and better targeting and –as a result - more revenue. And by improving the targeting, AppLovin doesn't just benefit individual studios. Because of the peculiar dynamics of the industry, they have the potential to grow the industry as a whole. Like our optimal jobs analogy, optimising targeting creates wealth for everyone. Here is why: the game industry has zero marginal costs, and advertisers can be both producers and consumers of advertising. Digital goods inherently boast a zero marginal cost, starkly contrasting with physical goods, which invariably incur some marginal expense. In the physical world, advertisers are usually confined to a fixed media budget that needs to be allocated across TV, print and internet advertising. As long as the revenue from an acquired user exceeds the cost of acquiring the user, the advertiser is incentivised to continue spending on user acquisition. Remember that acquiring a non-payer user can also be valuable because these eyeballs can be sold as ad inventory. The attractive selling point for advertisers who use AppLovin's platform is that they only pay when they achieve their targeted results. This performance-based model creates a win-win situation, incentivising AppLovin to improve its AI algorithms to ensure better incremental targeting. We elaborated on the source of effectiveness in our 4Q23 letter, praising its ability to leverage contextual data for ad matching. In the last two quarters, AppLovin management has hinted that the Axon 2 AI model could also be applied to performance-based e-commerce advertising. If this pans out, the e-commerce market will be orders of magnitude larger than the game sector. For advertisers, AppLovin would be a welcome addition to the cosy online advertising duopoly of Google and Meta Platforms. We don't know how the economics will work with e-commerce advertisers. For one, advertisers will now sell a physical good with marginal costs. We suspect that the most attractive feature for advertisers who use performance-based marketing is that a new supply of ad inventory (new eyeballs) will mean lower advertising costs. With users spending substantial time in mobile apps—averaging nine apps and four hours per day—there's a vast, underutilised audience not fully reached by traditional platforms like Google Search or Meta's social media. In-app advertisements offer unique engagement opportunities. They occupy the whole device screen without competing content - commanding user attention. Interactive ad formats, such as videos (called playables in the industry), introduce user participation—like jumping over obstacles or navigating a vehicle—which can be particularly engaging. Extending this interactivity to e-commerce, users could, for instance, scroll through clothing items within an app, seamlessly blending shopping experiences into their daily app usage. This potential expansion offers AppLovin a new opportunity vector and promises advertisers a more diverse and cost-effective platform for reaching consumers.

BSD Analysis:
SaltLight presents a compelling bull case for AppLovin as a critical intermediary in the mobile gaming advertising ecosystem. The manager highlights AppLovin's dominant position with 1.4 billion active mobile users and the largest market share among gaming advertisers. The core thesis centers on AppLovin's AI-driven Axon 2 platform, which creates a powerful data flywheel by serving both sides of the advertising marketplace - game studios buying ads to acquire users and selling ad inventory from their free players. This dual-sided network effect generates superior targeting capabilities and reinforces competitive moats as more participants join the platform. The performance-based pricing model aligns incentives and drives continuous AI improvement. SaltLight sees significant expansion potential as AppLovin explores e-commerce advertising, which would represent a vastly larger addressable market than gaming. The manager emphasizes AppLovin's ability to access underutilized mobile app inventory that traditional platforms like Google and Meta cannot fully reach. The investment thesis relies on AppLovin's capacity to grow the overall gaming advertising pie through better targeting efficiency rather than just capturing market share.

Pitch Summary:
Barclays shares have also performed well this year. The bank is returning at least £10bn to shareholders over the next three years, which is 40% of its market cap, and management say it will do so without weakening its capital ratios. This commitment follows the £9bn returned to shareholders since 2019, which has resulted in a 13% decline in the shares in issue. Barclays has proven to be effective in cutting costs in the retail business, which is exemplified by the number of UK branches declining from 666 in 2021 to 306 today. This focus is why Barclays UK business is currently making a 20% return on equity, which justifies the entire market cap by itself. The shares remain undervalued and are very attractive from both a capital growth and an income perspective.

BSD Analysis:
The manager presents a strong bull case for Barclays centered on aggressive capital return and operational efficiency. The bank plans to return £10bn to shareholders over three years, representing 40% of market capitalization, while maintaining capital strength. This follows £9bn already returned since 2019, reducing share count by 13%. The cost-cutting strategy is evident in the dramatic branch reduction from 666 to 306 locations between 2021 and today. The UK retail business alone generates a 20% return on equity, which the manager argues justifies the entire market valuation. This suggests significant value in the investment banking and international operations. The combination of substantial capital returns, operational improvements, and attractive valuation makes Barclays compelling for both growth and income investors.

Pitch Summary:
Take NatWest for example. In the last three years, NatWest has done everything that we could have hoped for operationally. Pre-tax profits have grown from £4bn to £6bn, return on equity has increased, the cost-income ratio has decreased, the only thing that had been lacking is an improvement in the share price. Earlier this year, we wrote that if we aggregate the dividends and the buybacks, over the past three years NatWest has distributed £12.5bn to shareholders. This was equal to half its prevailing market capitalisation! We felt patience, and the continued judicious use of share buybacks should deliver next leg of recovery for shareholders. Year-to-date, the share price has increased by almost 70%.

BSD Analysis:
The manager presents a compelling bull case for NatWest based on exceptional operational performance over the past three years. Pre-tax profits have grown 50% from £4bn to £6bn while return on equity has increased and the cost-income ratio has improved. The most striking metric is the £12.5bn returned to shareholders through dividends and buybacks over three years, representing 50% of the market capitalization at the time. This massive capital return program demonstrates management's commitment to shareholder value creation. The manager's patience has been rewarded with a 70% year-to-date share price increase, validating their thesis that operational excellence would eventually translate to share price appreciation. The continued share buyback program provides ongoing support for the stock price while reducing the share count.

Pitch Summary:
Northeast Bank is a Maine state-chartered bank with $3.9 billion of assets and $393 million of equity as of September 30th. Led by industry veteran Rick Wayne, Northeast Bank originates and purchases commercial real estate loans nationwide. Wayne executed a similar strategy for nearly two decades as CEO of Capital Crossing Bank, a bank he founded with a partner in 1988, took public in 1996, and sold to Lehman Brothers in 2007 for nearly ten times its IPO price. There were two favorable developments at Northeast Bank during the third quarter. First, Northeast Bank closed an unusually large volume of loan purchases. The Bank purchased 191 loans with a total unpaid principal balance of $808 million in 7 transactions. Northeast Bank paid $733 million for those loans, amounting to 90.7% of the unpaid principal balance. That is the Bank's second-highest-ever quarterly loan purchase volume, trailing only the massive $1.15 billion of unpaid principal balance the Bank purchased in the fourth calendar quarter of 2022. It is almost double the volume of loans Northeast Bank purchased for its entire fiscal year ended June 30, 2024. The loan purchases were funded primarily with brokered deposits and Federal Home Loan Bank advances at a net interest spread of around 4%. The loans purchased during the third quarter should add roughly $30 million to annual net interest income. With limited incremental costs to service the loans, the purchased loans should add meaningfully to Northeast Bank's net income. Second, Northeast Bank disclosed that its partnership with Newity to originate small balance SBA 7(a) loans is gaining meaningful traction. Although it has taken longer than originally hoped for that partnership to hit its stride, it has most certainly hit its stride. The volume of SBA 7(a) loans originated through the partnership has steadily accelerated over the past several quarters. In the third quarter, Northeast Bank & Newity originated 766 SBA 7(a) loans with a total principal balance of $82.4 million, almost matching the partnership's total origination volume for the entire prior fiscal year. The Newity partnership is starting to contribute meaningfully to Northeast Bank's financial results. In the third quarter, Northeast Bank generated just over $3 million of income from gains on sales of SBA loans and likely nearly $2 million of net interest income from SBA loans held on its balance sheet. Income from Northeast Bank's partnership with Newity now accounts for more than 10% of combined net interest income and non-interest income. Data from the SBA suggests that the volume of originations through the partnership between Northeast Bank and Newity has continued to grow thus far in the fourth quarter. Since October 1st, Northeast Bank has been the fifth largest originator of SBA loans by principal amount, one position ahead of a little bank called JPMorgan Chase. While not all approved loans end up being closed and funded, it seems as though Northeast Bank and Newity originated a similar volume of SBA 7(a) loans in the first month of the fourth quarter as they did for the entire third quarter. If Northeast Bank simply maintains its rate of SBA originations thus far in the fourth quarter going forward, the benefit to the Bank's net income could be significant. NBN ended the third quarter at $77.13. Through the end of the third quarter, our investment in NBN has delivered a 20.8% IRR over our more than 7-year holding period. Moreover, NBN is off to a great start in the fourth quarter thus far, reaching over $100. I continue to be optimistic about the outlook for Northeast Bank and our investment in its shares.

BSD Analysis:
The manager presents a compelling bull case for Northeast Bank based on two key operational catalysts driving earnings growth. The bank's massive Q3 loan purchase volume of $808 million represents nearly double their entire prior fiscal year activity, funded at attractive 4% net interest spreads that should contribute $30 million annually to net interest income with minimal incremental servicing costs. The partnership with Newity for SBA 7(a) loan originations has reached an inflection point, with Q3 originations of $82.4 million nearly matching the entire prior year's volume. This partnership now contributes over 10% of combined net interest and non-interest income, generating $3+ million in gains on sales plus ~$2 million in net interest income quarterly. The bank's position as the fifth-largest SBA originator nationally, ahead of JPMorgan Chase, demonstrates significant market share gains in this high-margin business. With the stock advancing from $77.13 to over $100 in Q4 and delivering a 20.8% IRR over seven years, the manager's long-term thesis appears to be materializing through operational execution and market leadership in specialized lending niches.

Pitch Summary:
Cipher Pharmaceuticals has experienced a significant drawdown, but its fundamentals remain strong. The recent acquisition of Natroba is expected to drive growth and improve margins, despite initial concerns over increased operating expenses. The company's capital-light model and potential for market share expansion in the US make it an attractive investment at current valuations.

BSD Analysis:
Cipher's acquisition of Natroba has been accretive to gross margins, increasing them from 64% to 79%. Despite a temporary spike in operating expenses due to acquisition-related costs, the company's normalized EBITDA margin is expected to stabilize around 45%. With Natroba's potential to capture additional US market share and expand internationally, Cipher's EBITDA could grow to $35 million in a few years, reducing its EV/EBITDA multiple to 8x. The company's strategy to leverage operating efficiencies and pursue further acquisitions could significantly enhance shareholder value. Additionally, the appreciation of the USD against the CAD could provide further financial benefits.

Pitch Summary:
I have been following Qurate since we exited our investment. Let me get the obvious out of the way: the business is clearly challenged and there is a not-insignificant risk of the equity being worth $0. So why invest? I will address this both at the level of the individual investment and from the perspective of the portfolio. At the company level, I believe that there is a good probability that the business has stabilized, especially among existing customers, and may even be moving in the right direction. We can see that in metrics such as retention of the company's "best" customers that buy 20+ items per year, and the quantity purchased by existing customers. I have also done research calls with former employees that have led me to better understand the company and gain incremental comfort that there is a valuable and largely stable core to what the company does. Let me also be clear – there are both cyclical and secular challenges facing the company. Despite the stabilization that I have observed as well as the new CEO's cost-cutting efforts, it may still fail under external pressures and its substantial debt load. However, at the recent price for the equity of around 50c, it is basically trading as a call option without a fixed expiration date. I estimate the upside to a successful turnaround to be about 15x from these levels. The market is implying a 90%+ chance of the business going zero, which my analysis suggests is much too high. With that said, even if I am correct that we have a positive expected value at these levels, there are still many scenarios where we lose all our money on this investment. Because of that, I sized the position in the "Very Small" category (think low single-digit percent of the portfolio) and do not intend to add to the position beyond this point. The portfolio-at-risk (PaR) for this position is similar to that of some of the other positions where the size is bigger, but the percentage downside is much smaller. Furthermore, this is one of the very few investments that we have with such large downside. Much of the portfolio is in investments with low downside and strong balance sheets. We also have equity hedges on the market which could pay off in some of the scenarios, such as a recession, which would cause Qurate to fail. I would not want to have a meaningful part of the portfolio in investments similar to Qurate. However, in the context of our overall portfolio a very small position with high positive expected value but a large possibility of a small loss to the portfolio makes sense.

BSD Analysis:
The manager presents a high-risk, high-reward investment in Qurate Retail that functions as an asymmetric bet within the portfolio context. The investment thesis acknowledges significant business challenges while identifying potential stabilization signals, particularly in customer retention metrics for high-value customers purchasing 20+ items annually and increased purchasing by existing customers. Primary research through former employee interviews has provided additional confidence in the company's stable core business operations. The manager's disciplined approach to position sizing is evident, limiting exposure to a "Very Small" category representing low single-digit portfolio percentage due to the substantial downside risk. At approximately $0.50 per share, the stock trades like a call option with estimated 15x upside potential if the turnaround succeeds, while the market appears to price in a 90%+ probability of total loss. The investment rationale relies on the manager's assessment that market pessimism is excessive relative to actual business stabilization prospects. Risk management is carefully considered through portfolio construction, with this high-risk position balanced by other investments with strong balance sheets and low downside, plus equity hedges that could offset losses in recessionary scenarios where Qurate might fail.

Pitch Summary:
We owned Pediatrix Medical Group in the past. Since we exited, the company has been going through a simplification and turnaround process that I have been following. As you may recall, decades of experience have taught me that the best way to invest in turnarounds is to wait for indications that the business is turning, even if that means foregoing the initial move in the stock price. The reason is simple: most turnaround attempts don't succeed, and those that begin to turn usually continue to do so. That's what we have here with Pediatrix. The company has simplified its business to the core business of staffing NICU physicians and related specialists for hospitals. It has a strong competitive advantage in this niche with a very sticky business with high switching costs. Prior management also stumbled in switching to an external revenue cycle management provider, which led to internal billing issues. That has now been addressed via a combination of a new external provider and an internal back-up solution and appears to be functioning smoothly. The company has been recently exceeding earnings expectations, and I believe that estimates of earnings are still too low. Management is solid and has been promoted from within with a long history of experience at the company. The balance sheet is clean with Net Debt/EBITDA of around 2X for a business with low cyclicality. We bought the stock slightly below 10x earnings, which I believe represents a good margin of safety for a competitively advantaged, moderately growing business.

BSD Analysis:
The manager presents a disciplined turnaround investment in Pediatrix Medical Group, demonstrating patience by waiting for clear signs of business improvement before re-entering the position. The investment thesis centers on the company's successful simplification to its core competency of staffing NICU physicians and related specialists for hospitals, creating a highly defensible niche business with strong competitive moats. The sticky nature of the business model with high switching costs provides revenue stability and pricing power in the specialized healthcare services market. Management has successfully resolved previous operational challenges, particularly the revenue cycle management issues that plagued prior leadership, through implementing both external and internal backup solutions. Recent financial performance shows the turnaround gaining traction with the company consistently exceeding earnings expectations, while the manager believes consensus estimates remain conservative. The combination of experienced internal management, clean balance sheet with modest 2x Net Debt/EBITDA leverage, and low business cyclicality supports the investment case. At slightly below 10x earnings, the valuation provides an attractive margin of safety for a competitively advantaged business in a growing healthcare market.

Pitch Summary:
Jazz Pharmaceuticals is a specialty pharma company that fits the investment pattern of "high uncertainty with low risk." While it has several important products on the market, its biggest is the sleep franchise. Within it the first-generation drug, Xyrem, has gone off patent, and the company is transitioning patients to the improved version, Xywav. The latter is a low-sodium version which has lower cardiac risks but similar efficacy. While the adoption of Xywav has been good, there is uncertainty around competition and the sustainability of that transition. For example, a competitor has a competitive drug to Xyrem which is taken once a night as opposed to Xyrem's twice a night regimen, which is more convenient for patients. However, that drug is still the high-sodium version and therefore carries similar cardiovascular risks. Management is strong in my view, with CEO/Co-Founder Bruce Cozadd owning $50M+ in shares and presiding over a history of value creation over the course of his 13+ years at the helm. The balance sheet is solid, with Net Debt/EBITDA at under 3x and only $1B due between now and 2029, which is less than one year of the company's Free Cash Flow. Capital allocation has been a combination of acquisitions and share buybacks. Given the management's track record I am happy for that mix to continue and believe that the company will exercise discipline in the price it pays for both. While there is some uncertainty facing the company, I believe the price we paid makes the risk low. I bought the stock at what I estimate to be well under 50% of my Base Case net present value which assumes some share loss for Xywav. Even more importantly, given the low price we paid the downside to a Worst Case scenario in which Xywav falls off a cliff in the next couple of years and the pipeline doesn't generate any revenue was very modest. Since I made the investment the company has reported strong financial results with good sales growth for the key drugs and had some promising study data released on its key pipeline product. While the stock has moved up some since our purchase it remains deeply undervalued at these levels and I am happy to continue to own our shares.

BSD Analysis:
The manager presents a compelling value opportunity in Jazz Pharmaceuticals, emphasizing the "high uncertainty with low risk" investment thesis. The core investment rationale centers on the successful transition from off-patent Xyrem to the improved Xywav formulation, which offers similar efficacy with reduced cardiovascular risks due to its low-sodium composition. Management quality appears strong with CEO Bruce Cozadd's significant $50M+ ownership stake and 13+ year track record of value creation providing alignment with shareholders. The balance sheet demonstrates financial strength with Net Debt/EBITDA under 3x and manageable debt maturities. The manager's disciplined valuation approach is evident in purchasing shares at well under 50% of estimated intrinsic value, providing substantial downside protection even in worst-case scenarios. Recent positive developments including strong financial results, good sales growth for key drugs, and promising pipeline data support the investment thesis. The combination of deep undervaluation, strong management, solid balance sheet, and improving fundamentals creates an attractive risk-adjusted opportunity in the specialty pharmaceutical space.

Pitch Summary:
In addition, we also purchased shares of Sprott Physical Uranium Trust (SRUUF), a Canadian physical trust that simply owns physical uranium; SRUUF allows shareholders to benefit directly from changes in spot prices from uranium without bearing equity risk.

BSD Analysis:
The managers view SRUUF as a pure-play investment vehicle to capitalize on their uranium bull thesis without taking on operational mining risks. This physical uranium trust provides direct exposure to spot uranium price appreciation, which the managers expect to be substantial given the structural supply deficit they've identified. By owning physical uranium rather than mining equities, SRUUF eliminates company-specific risks like operational challenges, cost overruns, and execution issues that can plague individual mining companies. The investment aligns with their broader thesis that uranium prices must rise materially from current levels to incentivize new supply, and that nuclear power plant operators will pay any price necessary to keep reactors running given uranium's small percentage of total operating costs. SRUUF represents a direct bet on the commodity itself, positioning investors to benefit from what the managers believe will be dramatic uranium price increases as the supply-demand imbalance becomes increasingly evident. The trust structure provides liquidity and accessibility for investors seeking uranium exposure without the complexities of physical commodity ownership.

Pitch Summary:
Accordingly, Appleseed Fund took a position in Canada-based Cameco Corporation (CCJ), the largest uranium supplier in North America and the second largest supplier in the world behind Kazatomprom. Cameco offers deep uranium reserves without significant financial, operational, political, and exploration risks.

BSD Analysis:
The fund managers present a compelling bull case for Cameco Corporation based on the structural uranium supply deficit and nuclear renaissance thesis. They position CCJ as the premier way to gain exposure to rising uranium prices, highlighting the company's status as North America's largest uranium supplier and second globally behind Kazatomprom. The managers emphasize Cameco's competitive advantages including deep uranium reserves and lower risk profile compared to peers, avoiding the financial, operational, political, and exploration risks that plague other uranium miners. With uranium demand expected to triple by 2050 driven by data centers, electric vehicles, and climate goals, while supply remains constrained by years of underinvestment, Cameco is positioned to benefit from what the managers expect to be dramatically higher uranium prices. The investment thesis is strengthened by uranium representing only 14% of nuclear plant operating costs, suggesting price inelasticity that should drive outsized profits for producers like Cameco when uranium prices inevitably rise to incentivize new supply.

Pitch Summary:
Round-tripping scheme (signing 'two-way' contracts for flatter revenues); quietly spun its own network of consent farms, which brings almost the entirety of the company's growth; potentially devastating regulatory action;

BSD Analysis:
Zeta Global positions itself as an AI-driven marketing automation platform, but skeptics see structural disadvantages versus Salesforce, Adobe, and HubSpot. Growth is bolstered by acquisitions and aggressive cost capitalization, masking weak organic trends. Short reports highlight elevated churn, opaque ARR reporting, and high debt leverage. Catalysts: disclosure on organic vs. inorganic growth, churn in large enterprise contracts, leverage ratios, cash flow coverage. Counterpoints: AI tailwinds may support demand, but bears argue ZETA’s tech stack lacks defensibility.

Pitch Summary:
Haivision offers infrastructure solutions for the video networking and streaming market, serving broadcasters, enterprises, and governments worldwide. Most of their revenue is derived from hardware-based products like video encoders, decoders, transcoders, and transmitters (~80% of revenue). Put simply, these products compress and transmit video signals into readable digital outputs. The products do this through the SRT (Secure Reliable Transport) protocol, which Haivision invented in 2013 and later open-sourced in 2017. Since SRT's open-sourcing, it has become one of the most widely adopted video transport protocols, continually taking share from the largest legacy protocol – RTMP (Invented in 2002 with its last official update in 2012). Haivision invented SRT to transition their business toward video transmission over the Internet protocol (IP) instead of satellite, cable, and purpose-built dedicated fiber networks. Around that same time (2013), and some time afterward, other protocols were also being invented and fighting for share. However, in 2017, Haivision decided to open-source their code, hoping to see increased adoption and faster development. That plan has proven very successful, with competitors now offering SRT in their own Encoders and several giants joining the SRT Alliance, a consortium of companies committed to the widespread adoption of the SRT protocol. Notable members of the SRT Alliance include YouTube, Microsoft, and Sony, all of whom have recognized the value of SRT. Despite SRT now being open source, Haivision still benefits from being at the forefront of this technology, leading the SRT Alliance, being closer to the tech than anyone else, and having immediate access to newer builds. While there are protocols that outperform SRT in some respects, they almost always lack in other vital areas. For example, while a protocol like WebRTC may be marginally faster, it falls short of the quality and reliability that SRT delivers. Moreover, the higher implementation costs of WebRTC limit its applicability to niche applications. As mentioned, there is an ongoing transition from legacy protocols like RTMP to modern IP-based protocols like SRT, and Haivision is poised to capitalize on this shift. For example, when organizations such as local news stations or sports arenas upgrade their video equipment (cameras, encoders, etc.), they are increasingly opting for modern IP-based transmission protocols over outdated solutions. And with SRT frequently chosen as the protocol of choice, there is a growing need for SRT-compatible products. This transition away from legacy systems is expected to intensify over the next 3-5 years, offering growth opportunities for Haivision. Our research shows that Haivision produces high-quality and reliable products, such as their Makito encoder, which is considered the industry standard. The brand has an incredibly strong reputation, with almost all video engineers and customers saying things like, "If you can afford Haivision, you go Haivision." - I am paraphrasing, but we heard this point reiterated by several industry experts we spoke with, and a quick Google search will also show that this same viewpoint is shared on several forums and websites. Further supporting this idea are Haivision's high gross margins of 70%+ (despite being primarily a hardware-based business). These high gross margins have persisted for over a decade, and Haivision was also able to pass on a ~10% price increase in 2022, offsetting inflation and supply-chain-related costs. They outsource the manufacturing of their products to select contract manufacturers in the U.S., Canada, and France, making the business incredibly capital-light (they have essentially zero capex). While any business with broadcasting exposure would generally be a cause for concern, in Haivision's case, I am not worried. Broadcasting (They classify it as "Media & Entertainment") makes up only a third of Haivision's business and consists primarily of live sports, which is growing, not shrinking like legacy news stations. It's important to clarify that Haivision focuses specifically on "mission critical" live video streams where latency, quality, and reliability are of the utmost importance. Here is a link if you'd like to read about how the NFL used SRT alongside Haivision encoders, decoders, and gateways to enable the virtual 2020 NFL draft (which had 600+ simultaneous live streams). Additionally, we think it's safe to say that live sports will use more cameras in the future, not less; thus, more Haivision products will also be needed. Haivision has two other segments that account for roughly a third each of their business. The first is Government & Defense, which includes customers like NASA, the U.S. Department of Defense, the U.S. Navy, and the Japanese Maritime Self-Defense Force. This segment is a focus area for Haivision, which was recently awarded a large defense contract with the U.S. Navy in September, amounting to CAD 82M over five years (Haivision's enterprise value is CAD 137M today). This contract is expected to ramp up in the back half of FY-2025 with a steady run rate starting in FY-2026. The last segment is Enterprise, which includes customers like Meta (Facebook), the New York Stock Exchange, and Microsoft. Here is a case study of Microsoft using SRT in conjunction with Haivision Makito encoders and Haivision's media platform to stream their annual Inspire conference. Haivision products are also used in control rooms, where Haivision provides Video Wall Solutions utilizing their Command 360 Software and related hardware (video processors, encoders, decoders, access points, etc.), which enable low-latency video feeds for critical operations. Here is a case study where Haivision helped the Cleveland Department of Public Safety upgrade their video wall solution for monitoring major public events (both planned and unplanned) like the Cleveland marathon and the 2022 NBA all-star game. Control rooms present a significant growth opportunity for Haivision, and they are in the process of shifting their existing integrator business to a channel partner model. Previously, CineMassive (acquired in 2021) operated as a full-service solutions provider, managing tasks like planning, installation, and selling several lower-margin third-party products (chairs, monitors, etc.). The new strategy, however, has Haivision providing their software and hardware to channel partners instead, leaving the execution—planning, installation, and more—in their hands. This model will have higher margins, stronger returns on capital, and much faster scalability. However, the transition has temporarily impacted topline revenue as the company sheds the previously mentioned lower-margin revenue streams and prepares for a full roll-out in 2025. Outside of selling hardware, the rest of their revenue comes from service/maintenance contracts and their software offerings (~20% of revenue, but a focus for the company as they want to increase high-margin recurring revenue streams). An example of their software offering would be their Haivision SRT Gateway -> Basically, the signal from a camera at a football game goes into an encoder, gets decoded at, say, ESPN's HQ, and the software/server can then format the video, and change the protocol as needed for delivery. For instance, websites like Twitch still only accept RTMP, so while SRT is superior, you need to convert it to RTMP to stream on Twitch. As a side note, YouTube recently joined the SRT alliance and plans on adopting the protocol for their live-streaming platform, which only accepts RTMP, HLS, and DASH today. The latter two, while offering higher-quality video than RTMP, come at the cost of high latency; SRT, on the other hand, provides the same high-quality video without sacrificing latency. Haivision was founded by CEO Mirko Wicha in 2004, and before their IPO, he grew revenues at a 22.7% CAGR for 16 years to $80M+ while being entirely self-funded off an initial investment of $8M. Prior to founding Haivision, Mirko worked at Silicon Graphics in a sales capacity, where he helped grow the business from $86M in revenue to $1B+ in five years. After Silicon Graphics, Mirko went to work for Alias Research and was tasked with turning around their unprofitable European business – the company would be sold two years later to his former employer, Silicon Graphics. Mirko was interviewed in 2013, covering his background, how Haivision was founded, and the importance of company culture. Mirko owns 13.5% of the company, with insiders owning 31% in total; he bought an additional ~$200k worth in the open market earlier this year, and his ownership is worth CAD 20M, representing ~20x his cash comp and ~10x his total comp. From my conversations with him and review of his past he appears to say and do the right things. I believe he has made several wise decisions over the years, including the creation and open-sourcing of SRT, walking away from lower margin/ROIC business, and the two post-IPO acquisitions are likely to prove significantly accretive. During his tenure, he has also successfully integrated eight acquisitions, which should help limit the possibility of poor outcomes from further M&A. Haivision has guided to $134-$136M in revenue for FY-2024 (ended in October) after two prior top-line guidance cuts with EBITDA margins in the mid-teens. The top-line cuts are mostly related to a much faster-than-expected transition of their control room business to the channel partner model. They have a long-term 20% EBITDA margin target and expect to be "knocking on the door" of that target this year. Based on their guidance, we can infer that FY-Q4 revenues will likely fall between $35M and $37M, with EBITDA margins of 16-19%. Operating expenses have fallen significantly over the past two years and have remained stable over the past four quarters. The sequential margin decline in the recent quarter is entirely attributable to operating deleverage, and we believe Haivision, once scaled, can have EBITDA margins north of 20%. As of writing, at $5.00/share, Haivision has a market cap of $145M, $13.9M in cash, and $6.2M in debt, so an EV of $137M. Their 2024 guide implies ~$21M in EBITDA and ~$13.5M in fully loaded UFCF (after leases, SBC, and capex), translating to a 6.5x EBITDA multiple and 10x EV/UFCF. Haivision expects to return to growth in 2025 and has guided to $140M+ in revenue. This growth will come from industry-wide growth, their pivot away from being an integrator to a solutions provider, their new long-term rental business (infancy stage, but grew 76% y/y), the continued growth of their 5G transmitter business, and the aforementioned CAD 82M U.S. Navy contract. Another exciting growth opportunity is a consortium with Airbus to help develop new technologies for rapid and secure communications (private 5G networks, etc.). All these initiatives set up FY-2026 and beyond to see double-digit growth per the company's guidance. If they can grow at HSD in 2026 with 18% EBITDA margins, this would result in ~$27M of EBITDA and around ~$18M in fully loaded UFCF, implying the business is trading at less than 5x EBITDA and 7.5x EV/UFCF before any credit for cash generation. These multiples are far too low for a business that should grow at attractive rates for the foreseeable future, has gross margins of 70%+, and should have EBITDA margins north of 20% with scale. Haivision has also been transitioning towards higher profitability over the past two years as they work to integrate their two post-IPO acquisitions further, wind down their low-margin house of worship business, and pivot their control room business to a channel partner model. These initiatives have led to permanent headcount reductions and a lower fixed-cost base. However, they have also obfuscated Haivision's organic growth (which we estimate to be HSD) as they have shed non-significant amounts of lower-margin revenue. We believe that as Haivision scales and margins expand, the market will begin to notice this small but high-quality business. Giving credit for cash generation (the company has been actively repurchasing shares since June) and applying a 10x EBITDA multiple (15x UFCF) on 2026 numbers gets me to $11.00/share, compared to just $5.00 today.

BSD Analysis:
The manager presents a compelling bull case for Haivision based on the company's proprietary SRT video streaming protocol and strategic positioning in the video networking market. The thesis centers on Haivision's first-mover advantage with SRT technology, which has gained widespread adoption by major players like YouTube, Microsoft, and Sony, creating a sustainable competitive moat despite being open-sourced. The company operates across three diversified segments (Media & Entertainment, Government & Defense, Enterprise) with particularly strong growth prospects in defense contracts, evidenced by the recent $82M CAD Navy contract representing 60% of current enterprise value. Management's strategic pivot from low-margin integrator services to a higher-margin channel partner model should drive significant margin expansion, with EBITDA margins targeting 20%+ versus current mid-teens levels. The valuation appears attractive at 6.5x EBITDA and 10x free cash flow on 2024 guidance, with the manager's $11 price target implying 120% upside based on 10x EBITDA on 2026 projections. Strong insider ownership (31% total, CEO owns 13.5%) and recent share repurchases demonstrate management confidence. The combination of secular tailwinds from legacy protocol migration, margin expansion initiatives, and compelling valuation multiples supports the bullish investment thesis.

Pitch Summary:
Aecon Group is nearing the completion of legacy projects that have previously hindered profitability, suggesting a potential inflection point. The company is trading at a significant discount to peers, with a TTM EBITDA multiple of 6x compared to peers trading in the teens. This undervaluation presents a compelling opportunity for re-rating as the company moves past its legacy issues.

BSD Analysis:
Aecon Group's recent Q3 results indicate robust revenue and EBITDA growth, with stable margins suggesting that the post-COVID margin improvements are sustainable. The completion of legacy projects, particularly the Gordie Howe International Bridge, is expected to remove a significant drag on profitability. Despite a recent 20% stock price increase, Aecon remains undervalued relative to peers like Granite Construction (GVA) and Fluor Corporation (FLR), which trade at higher EBITDA multiples. The market's recognition of Aecon's improving fundamentals could drive further stock price appreciation. Additionally, management's assurance that potential future impairments will not exceed C$125m provides clarity and reduces uncertainty for investors.

Pitch Summary:
Cementos Argos SA is trading below its net asset value, presenting a significant investment opportunity. The company has recently sold its US assets to Summit Materials, receiving cash and shares, which it used to pay down debt. Cementos Argos's shares are valued less than its holding in Summit Materials alone, not accounting for its other substantial non-US operations. The company is committed to returning capital to shareholders, evidenced by its share repurchase and dividend payments. Additionally, Cementos Argos has taken steps to make its shares more investable by collapsing its dual share class structure and increasing liquidity. The Colombian stock market is undergoing reforms that could further enhance the company's valuation.

BSD Analysis:
Cementos Argos's strategic holding in Summit Materials is a key value driver, especially with the potential acquisition by Quikrete, which could result in a significant cash influx. The company's operating businesses in various Latin American countries are expected to generate substantial EBITDA, providing a stable revenue base. The reduction in debt following the asset sale has improved the company's financial position, reducing leverage risks. Cementos Argos's efforts to enhance share liquidity and its inclusion in global equity indexes are likely to attract more institutional investors. The ongoing structural changes in the Colombian stock market could lead to improved corporate governance and higher valuations for companies like Cementos Argos.