Investment Pitches

Pitch Summary:
While our primary interest in Arbutus is its exposure to the LNP litigation, much of this remains in Roivant's hands. Although there were no major developments this quarter, positive commentary from Roivant's management and favorable sell-side research have had a positive impact on Arbutus's share price. Additionally, Arbutus discontinued its at-the-market offering during the quarter, signaling a shift in focus toward advancing its HepB assets internally.

BSD Analysis:
Tourlite's investment in Arbutus Biopharma is primarily driven by exposure to lipid nanoparticle (LNP) litigation, with much of the value tied to Roivant's involvement. While no major litigation developments occurred in Q3, positive management commentary from Roivant and favorable sell-side research supported the stock price. The discontinuation of Arbutus's at-the-market offering signals management's confidence and strategic shift toward internal development of hepatitis B assets. This represents a special situation investment where the primary value driver is intellectual property litigation rather than traditional drug development metrics. The connection to Roivant provides additional strategic value and potential catalysts for value realization.

Pitch Summary:
Roivant saw several positive developments during the quarter, with the most exciting being the launch of its new pipeline program, Mosliciguat. Roivant anticipates significant opportunities from future indications for this program, and we believe the acquisition of Mosliciguat has the potential to demonstrate the true value of Roivant's platform and its disciplined capital allocation strategy. Additionally, positive updates from Immunovant and progress on 1402 further benefited Roivant's share price.

BSD Analysis:
Tourlite views Roivant Sciences favorably based on multiple positive pipeline developments during Q3. The launch of the Mosliciguat program represents a significant catalyst, with management highlighting substantial opportunities across future indications. The fund believes this acquisition showcases Roivant's platform value and disciplined capital allocation approach. Additional positive updates from subsidiary Immunovant and progress on the 1402 program provided further validation of the investment thesis. Roivant's unique Vant structure allows for diversified exposure to multiple drug development programs while maintaining operational efficiency. The company's track record of value creation through strategic acquisitions and development continues to support the long position.

Pitch Summary:
FTAI continues to benefit from strong aerospace aftermarket tailwinds, with recent issues at Boeing presenting additional upside to both its short- and long-term business prospects. As noted in our second quarter letter, FTAI's Q2 results exceeded expectations, beating consensus estimates and prompting management to raise its guidance. Notably, FTAI increased its 2026 EBITDA target by 25%, from $1 billion to $1.25 billion. At the upper end of the newly raised Aerospace EBITDA guidance, FTAI has already achieved 46% of the $325-$350 million target, with this segment delivering approximately 30% quarter-over-quarter growth for the past four quarters. While we believe strong financial performance will continue to support the stock price, we also see significant upside potential from narrowing the valuation gap between FTAI and its aerospace aftermarket peers. Despite the stock's recent appreciation, we remain confident in FTAI's outlook, with multiple catalysts expected to drive further growth through the remainder of the year.

BSD Analysis:
Tourlite maintains a bullish stance on FTAI Aviation, viewing it as a beneficiary of strong aerospace aftermarket trends and Boeing's operational challenges. The company demonstrated exceptional execution with Q2 results beating consensus and management raising 2026 EBITDA guidance by 25% to $1.25 billion. The aerospace segment has delivered consistent 30% quarter-over-quarter growth for four consecutive quarters, already achieving 46% of the raised guidance target. The fund sees a compelling valuation opportunity as FTAI trades at a discount to aerospace aftermarket peers despite superior growth metrics. Multiple growth catalysts are expected through year-end, supporting continued outperformance. This represents a high-conviction growth position in a structurally attractive industry with strong secular tailwinds.

Pitch Summary:
We initiated a long position in Sable Offshore ahead of a key catalyst. Sable is an exploration and production (E&P) company that acquired an offshore asset from Exxon, located off the coast of California. The asset had been shut down following a pipeline spill. In July, SOC received approval from the California State Fire Marshall to restart the pipeline, but it still required permits from Santa Barbara County to install new safety valves. While there was market uncertainty about whether Sable would secure these permits, our research indicated that a settlement was likely, as Santa Barbara lacked the legal grounds to block the installation and the resources to contest a lawsuit from Sable. We will likely provide further updates on Sable in our fourth quarter letter.

BSD Analysis:
Tourlite initiated a long position in Sable Offshore as a catalyst-driven special situation play. The fund identified an asymmetric opportunity around regulatory approval for restarting an offshore California asset previously shut down due to a pipeline spill. While the market was uncertain about permit approval from Santa Barbara County, Tourlite's research suggested the county lacked legal grounds to block the installation and resources to fight litigation. The investment thesis centered on the high probability of regulatory resolution and asset restart. This represents a classic event-driven strategy where thorough due diligence on regulatory processes provided an informational edge. The position generated strong returns as the catalyst played out favorably during Q3 2024.

Pitch Summary:
We used the proceeds of these sales to establish a new 2.5% position in Medpace Holdings, a clinical research organization, or CRO, based in Cincinnati. Medpace conducts clinical drug trials for early stage biopharma companies. When young companies develop promising drug compounds, they need to conduct multiple stages of clinical trials over several years to prove the efficacy of the new drug before the Food & Drug Administration will approve it for use in people. Start-up companies do not have the expertise to conduct these trials, which are expensive and often go on for years. Medpace was founded in 1992 by August Troendle, a former medical review officer for the Food & Drug Administration. He owns 17% of the company. The company has distinguished itself both for the quality of its scientific work and its ability to identify start-ups with the most promising compounds and the financial backing to complete years of trials before their drug gets to market. The company's focus on good relationships with promising biotech companies has led to high returns on capital, profit margins and free cash flow margin. Biotech funding is, essentially, a speculative venture as many new compounds fail in trials. But biotech funding has been healthy in recent years and rate cuts could be a further positive, making it easier to finance trials. Medpace is respected by the market and never trades for a cheap price. Our partners at Giverny Capital Inc. in Montreal bought some in 2023 for about 25 times the forward earnings estimate. I felt at the time that I did not understand the business well enough to buy it for us. We've spent a fair amount of time since then learning about the company and when the stock once again dropped to 25 times earnings, we began buying.

BSD Analysis:
Giverny Capital initiated a 2.5% position in Medpace Holdings, a clinical research organization specializing in drug trials for early-stage biotech companies. The manager highlights the company's founder-led structure with August Troendle owning 17% and his FDA background providing credibility. Medpace's competitive advantage lies in its ability to identify promising biotech startups with adequate funding to complete multi-year trials, leading to strong client relationships and superior financial metrics including high returns on capital and profit margins. The investment thesis benefits from healthy biotech funding trends and potential rate cuts that could facilitate trial financing. The manager purchased shares at 25x forward earnings, a valuation previously considered but passed on due to insufficient understanding of the business model. This disciplined approach demonstrates thorough due diligence before establishing the position.

Pitch Summary:
Lifecore had a transformational year last year. It divested its non-core businesses and put itself up for sale. Unfortunately, that sales process coincided with an extended restatement delay and, eventually, a change in auditors. The restatement was related to their divested businesses, but rightfully caused concern among potential buyers. Earlier this year, the company withdrew its attempts to sell itself. While unconfirmed, I understand that there were offers, but they were too low for the company to accept. At the time, shares were measurably higher than where they are now and conceivably higher than the potential offers. Investors were obviously disappointed and shares sold off to where they trade today. An activist investor eventually got more involved and had several representatives appointed to the board. Management has also changed, with more experienced leadership in charge, and the financial restatement was completed. Earlier this month, the company completed a smallish capital raise at $4.10 per share. Shares have rallied a bit since then and now trade higher than where they did at the end of the 3rd quarter. The company believes they have enough cash to last them the next several years when their operations should support positive free cash flow. I still believe in the story long term. Lifecore has dramatically increased its fill/finish capacity in an industry where the lead time to increase capacity is long. Fill/finish is the process of filling vials and needles with drug substances and packaging them for distribution. There appears to also be demand, especially among companies that sell weight loss drugs. The problem is that there are long lead times for these contracts. For Lifecore, the capacity is there , but they still require signed contracts to fill that capacity. I believe that they will get them and, longer term, the outcome for the company is an outright sale. However, I am pessimistic on the timing. We have recently largely exited in the interim. I may decide to re-enter once execution improves, but in the meantime I am finding better opportunities to allocate to. Our average sale price is slightly above our average purchase price.

BSD Analysis:
The manager takes a neutral stance on Lifecore, acknowledging long-term potential while expressing near-term pessimism about execution timing. The investment thesis centers on Lifecore's expanded fill/finish capacity in a supply-constrained industry with long lead times for capacity additions. The company has positioned itself to benefit from growing demand, particularly from weight loss drug manufacturers, but faces challenges in converting capacity to signed contracts. Recent corporate developments include a failed sale process due to financial restatement issues, activist investor involvement, management changes, and a $4.10 per share capital raise. While the manager believes the company has sufficient cash runway and expects eventual positive free cash flow, execution risks and contract timing uncertainties have led to a largely exited position. The manager maintains conviction in the long-term value proposition and potential acquisition outcome but prefers to redeploy capital to opportunities with better near-term catalysts. The neutral stance reflects a 'wait and see' approach pending improved operational execution.

Pitch Summary:
The saga at Liquidia continues. Everyone involved is deeply disappointed by recent developments delaying the release of their life-saving PAH and PH-ILD drug, Yutrepia, until May 2025. However, we now know when the FDA will give final approval and when Liquidia can launch. Our patience will be rewarded. Because the market is forward-looking, we should see share appreciation in advance of that launch date. In fact, there have been a variety of sell-side research reports from respected firms with price targets between $19 and $30. Shares currently trade for $11.14 after ending the third quarter at $10.00. We were expecting final FDA approval during the quarter, which would have allowed Liquidia to launch Yutrepia into the market. Shockingly, the FDA delayed approval until May 23, 2025, citing a three-year exclusivity period for Yutrepia's competitor drug, Tyvaso. This was not an outcome previously indicated as possible by the FDA and wholly unexpected by Liquidia and their competitor, United Therapeutics. The FDA based its decision on a study by United Therapeutics conducted in 2021 to evaluate the safety and tolerability of treprostinil (the generic drug underpinning Yutrepia and Tyvaso) inhalation powder in patients currently treated with a trepostinil inhalation solution. United Therapeutics had developed a dry powder formulation of Tyvaso which would allow some patients to switch to an inhaler from a nebulizer. United Therapeutics had received approval for its inhaler product in May 2022 based on this study. A three-year exclusivity would apply only if there was a "New Clinical Investigation." The FDA decided that essentially changing the delivery method applied. That is a big stretch and has far reaching negative effects across the industry if more widely applied. This finding was also contrary to the FDA's previous findings. It appears that political pressure was put on the FDA to change course to benefit United Therapeutics. Liquidia responded by suing the FDA. In order for a court to order that the FDA's decision be vacated, it must be shown that the FDA acted in an arbitrary and capricious manner. Liquidia's brief on the subject makes a compelling case. However, even if Liquidia is successful, there will undoubtedly be post-trial items that will delay enforcement until we approach the May 2025 FDA approval. So, while it is possible that a launch could happen sooner, I am not optimistic. Why continue to own shares in the interim? I do not believe this is dead money until May. First, as I mentioned, shares will begin to reflect the company's future potential prior to May. Second, there is a possibility, even if it is low, that FDA approval and Liquidia's launch could come sooner. And, third, a buyout of Liquidia prior to launch is not totally off the table. I would not expect it, but it is possible and if it came, it would be multiples of today's share price. We have owned the position for years with various starts and stops due to delay tactics from United Therapeutics. The reason why it is worth it is that I strongly believe that Liquidia has the superior product. United Therapeutics and their leadership also appear to believe this. And, the market for PAH and PH-ILD is large and growing relative to the size of Liquidia. I believe that Liquidia can capture market share of at least 50%. This is not like a typical new competitor coming onto the market. There is a 50% to 60% drop out rate for United Therapeutics' drug as patients are unable to tolerate it. Liquidia's drug has been shown to be easier for patients to tolerate. Liquidia has a patented manufacturing process that allows the drug to provide higher dosage and better titration, meaning that patients receive the maximum benefit of the drug with the lowest chance of adverse effects. Liquidia has a better chance of serving these patients who cannot tolerate the current medication from its competitor, and patients may stay on the Liquidia drug longer than their current medication because it is more effective. If Liquidia takes 50% market share, their annual profit potential in a static market is equal to their current enterprise value. Of course, the market is not static, it is growing significantly. Share would appreciate considerably even if they end up taking only a 10% or 20% market share. For context, Liquidia's CEO thinks they can take 80% to 90% of the market. This is why United Therapeutics has been so aggressive. And, it is why it is worth the wait to hold Liquidia shares until at least the launch. We owned a significant number of shares and call options that were negatively affected this quarter by the FDA. I have rolled many of the call options to later dates and lower strike prices. I will note that we first started buying shares at around $5 per share so though we had a drop for the quarter on the shares, our average purchase price is still far below today's price. It has been a frustrating wait, but the end is in sight. I continue to strongly believe that our patience will be rewarded.

BSD Analysis:
The manager maintains a bullish long-term view on Liquidia despite significant FDA regulatory setbacks that delayed Yutrepia's launch until May 2025. The investment thesis rests on Liquidia's superior drug formulation for PAH and PH-ILD treatment, with a patented manufacturing process enabling better dosage control and patient tolerability compared to United Therapeutics' Tyvaso. The manager believes Liquidia can capture at least 50% market share, citing the competitor's 50-60% patient dropout rate due to tolerability issues. With sell-side price targets ranging from $19-30 versus the current $11.14 price, the risk-reward appears favorable. The manager's average cost basis around $5 per share provides significant downside protection. The large addressable market for PAH/PH-ILD treatments, combined with Liquidia's technological advantages, supports the thesis that the company could achieve 80-90% market penetration according to management guidance. Despite regulatory delays and legal challenges with the FDA, the manager views this as a compelling value opportunity with multiple potential catalysts including early approval, market share gains, or acquisition interest.

Pitch Summary:
ENDI is our largest position. It ended the quarter at $8.25 per share. ENDI manages six mutual funds and has more than $3.2 billion in assets under management. The most recent fund was launched on September 30 with a focus on income producing bonds in the Nordic region: Denmark, Finland, Iceland, Norway, and Sweden. One year ago, assets under management stood at approximately $1.7 billion, so we have seen tremendous growth. I continue to be extremely optimistic on ENDI's future.

BSD Analysis:
The manager maintains a strong bullish stance on ENDI Corp., positioning it as the fund's largest holding. The investment thesis centers on exceptional growth in assets under management, which nearly doubled from $1.7 billion to $3.2 billion over the past year. The recent launch of a Nordic-focused income bond fund demonstrates the company's expansion into specialized regional markets. At $8.25 per share, the manager views ENDI as benefiting from the asset management industry's fee-based revenue model, where growth in AUM directly translates to increased revenues. The 88% AUM growth rate suggests strong client demand and effective fund management capabilities. The manager's continued optimism indicates expectations for further AUM growth and market share expansion. The Nordic bond fund launch represents diversification into fixed income products, potentially attracting yield-seeking investors in the current interest rate environment.

Pitch Summary:
PaySafe (PSFE) is a payment technology company catering to merchants in Online Gaming & Betting, Travel & Leisure, Retail & Hospitality industry verticals. It came public as a SPAC in 2020 and experienced shareholder abandonment and forced selling over the next 2 years – a proverbial baby thrown out with the "SPAC Crash" bathwater. Our knowledge of the payment and financial technology industry led us to form a differentiated opinion from those rushing to exit, and we were happy to purchase their shares in both the common equity and warrants. The underlying business of PSFE is growing, solidly profitable with high margins, and generates healthy amounts of free cash flow. Leverage is high, but the debt is covenant lite, and 90%+ of the principal value is not due until after 2027. The risk-reward proposition for both PSFE common equity and warrants is highly attractive. Given the revenue growth and margin expansion potential of the business, PSFE common equity, currently sized at ~3% of NAV, is conservatively worth ~$50+/share vs. our cost of ~$13.50/share. We also hold a small position in PSFE warrants, currently sized at 0.2% of NAV. These warrants are essentially very attractively priced inflation hedges for our portfolio. In a scenario where global price inflation is untamed, PSFE would experience a strong tailwind given its ad valorem revenue model (% of $ transaction volume), leading to topline growth, margin expansion, and much higher free cash flow generation. Its high debt load becomes easier to repay and would function as a compressed spring for the equity price to explode higher, bringing the $138/share warrant strike price within reach. $1-2/share in the money would equate to ~50 to 100X+ return on the warrant currently trading at ~$0.02/share, thus providing us with an extremely attractive inflation hedge.

BSD Analysis:
Marram presents a compelling contrarian thesis on PaySafe, viewing it as a quality fintech business unfairly punished during the SPAC crash. The manager highlights PSFE's strong fundamentals including profitable growth, high margins, and healthy free cash flow generation in attractive verticals like online gaming and travel. The investment thesis centers on significant valuation dislocation, with the manager targeting $50+ per share versus a $13.50 cost basis, representing nearly 4x upside potential. The company's ad valorem revenue model provides natural inflation protection through percentage-based transaction fees. While leverage is elevated, the covenant-lite structure and 2027+ maturity profile provide adequate runway. The warrant position adds asymmetric upside optionality, potentially delivering 50-100x returns if the stock reaches the $138 strike price. This represents a classic patient opportunism play on a fundamentally sound business trading at distressed valuations.

Pitch Summary:
Sprott is an asset manager that primarily manages exchange traded vehicles in various commodity sectors, with a focus on precious metals and uranium—two sectors that I'm quite bullish on. Sprott earns management fees based on the assets under management and in a virtuous cycle where they experience both inflows and asset appreciation, the fees should grow rapidly on a fixed cost basis, creating dramatic operating leverage. I should note that on an earnings basis, Sprott is a good deal more expensive than most businesses that we tend to invest in. That said, I believe that this valuation is deserved and likely to increase due to the quality of the business and its scarcity value. With gold having made a new all-time high in US Dollars, investors will continue to seek out ways to gain leverage to precious metals, without the risks of mining. In my universe of companies, only A-Mark and Sprott offer this sort of leverage with any amount of liquidity. As investors also discover this, I believe that they'll bid both of these companies higher. While we could have just bought more A-Mark, I felt that diversification was warranted, especially as this Fund already owns in excess of 5% of A-Mark. Besides, Sprott gets us added exposure to uranium, a sector that I'm also bullish on.

BSD Analysis:
Kupperman views Sprott as a high-quality asset manager with unique exposure to his favored precious metals and uranium sectors. The manager emphasizes the powerful operating leverage inherent in the fee-based model, where both asset appreciation and inflows drive rapid fee growth on a fixed cost base. While acknowledging higher valuation relative to typical investments, Kupperman believes this premium is justified by business quality and scarcity value. His thesis benefits from gold reaching new highs, driving investor demand for precious metals exposure without mining risks. The manager identifies only two liquid options (Sprott and A-Mark) for this exposure, creating scarcity value as more investors discover these vehicles. Sprott provides portfolio diversification from the large A-Mark position while adding uranium exposure, aligning with Kupperman's bullish view on both commodity sectors.

Pitch Summary:
JOE owns approximately 168,000 acres in the Florida Panhandle. It has been widely known that JOE traded for a tiny fraction of its liquidation value for years, but without a catalyst, it was always perceived to be "dead money." Over the past few years, the population of the Panhandle has hit a critical mass where the Panhandle now has a center of gravity that is attracting people who want to live in one of the prettiest places in the country, with zero state income taxes and few of the problems of large cities. The oddity of the current disdain for so-called "value investments" is that many of them are growing quite fast. I believe that JOE may grow recurring revenue at attractive rates for the foreseeable future, with earnings growing at a much faster clip. Meanwhile, I believe the shares trade at an attractive multiple on Adjusted Funds from Operations (AFFO), while substantial asset value is tossed in for free. Besides the valuation, growth, and high Return on Invested Capital (ROIC) of the business, why else do I like JOE? For starters, land tends to appreciate rapidly during periods of high inflation—particularly an inflationary period where interest rates are likely to remain suppressed by the Federal Reserve. More importantly, I believe we are about to witness a massive population migration as people with means choose to flee big cities for somewhere peaceful. I suspect that every convulsion of urban chaos and/or tax-the-rich scheming will launch JOE shares higher, and it will ultimately be seen as the way to "play" the stream of very wealthy refugees fleeing for somewhere better.

BSD Analysis:
Kupperman presents St. Joe as a compelling land bank play benefiting from demographic shifts and inflation protection. The manager emphasizes the transformation from "dead money" to active catalyst as the Florida Panhandle reaches critical population mass, attracting residents seeking attractive lifestyle with zero state income taxes. His thesis combines traditional value characteristics (trading below liquidation value) with accelerating growth in recurring revenue and earnings. Kupperman highlights the attractive AFFO multiple while substantial asset value remains unrecognized by the market. The investment benefits from multiple tailwinds: land appreciation during inflationary periods, population migration from urban areas, and wealthy individuals seeking tax-advantaged locations. The manager views urban chaos and tax increases as catalysts that will drive wealthy migration to St. Joe's properties, positioning the company as the primary beneficiary of this demographic trend.

Pitch Summary:
As the world gets increasingly crazy, I believe that people will come to realize that ownership of precious metals, in physical form, as opposed to in a brokerage account, is part of being financially prudent. They will mostly likely buy those coins from a coin dealer, either in person, or online. A-Mark supplies both of those markets as one of the largest players in online coin brokerage through their JM Bullion, LPM, Silver Gold Bull, Goldline, etc. verticals, along with serving as one of the largest wholesalers to local coin shops. A-Mark also has stakes in two mints (Silver Towne and Sunshine). A-Mark benefits from periods of chaos in two ways. They see transaction volumes increase, and they see the spreads that they can charge widen. During the three years from Fiscal 2021 to 2023, A-Mark earned approximately $7 a share per year on average, if you adjust for certain non-recurring items and remove non-cash intangible amortization. We acquired our shares for approximately four times this earnings level, which seems quite cheap for a business with such high returns on capital. That said, the business has seen reduced earnings over the past few quarters, as a result of declining transaction volumes and spreads. I believe that this decline in activity has created a unique opportunity to buy a high-quality business, with substantial insider ownership, at a bargain price. I naturally am enamored of the counter-cyclical nature of the business, which hopefully should help offset the risks to our portfolio in future periods of crisis. I believe that this business can earn as much as $10 a share in such a period of crisis, and get a healthy multiple applied to it. For years, I have sought out a way to play an increase in the prices of precious metals, without the risks of owning a mine. I believe that A-Mark is the ideal proxy for this view and as other investors discover it, the valuation will re-rate.

BSD Analysis:
Kupperman presents A-Mark as an ideal precious metals proxy that benefits from both volume and spread expansion during periods of financial stress. The manager emphasizes A-Mark's dominant market position across online retail (JM Bullion, LPM, Silver Gold Bull) and wholesale distribution to coin dealers, plus ownership stakes in mints. His thesis centers on increasing demand for physical precious metals ownership as financial prudence, driving both transaction volumes and pricing spreads during chaotic periods. Kupperman acquired shares at approximately 4x normalized earnings of $7 per share, representing attractive valuation for a high-ROIC business with substantial insider ownership. The manager views recent earnings weakness as creating an opportunistic entry point, projecting potential earnings of $10 per share during crisis periods. He values the counter-cyclical nature as portfolio protection and sees A-Mark as superior precious metals exposure without mining risks.

Pitch Summary:
It may take some time still, but I believe that society will eventually settle on nuclear power as a compromise solution for baseload power generation. This will come at a time when there is a deficit of uranium production, compared with growing demand. As aboveground stocks are consumed, uranium prices should appreciate. Additionally, there is currently an entity named Sprott Physical Uranium Trust (U-U – Canada) that is issuing shares through an At-The-Market offering, or ATM, in order to purchase uranium (we are long this entity). I believe that these uranium purchases will accelerate the price realization function by sequestering much of the available above-ground stockpile at a time when utilities have run down their inventories and need substantial purchases to re-stock. The combination of these factors ought to lead to a dramatic increase in the price of uranium as it will take multiple years for sufficient incremental supply to come online—even if the re-start decision were made today.

BSD Analysis:
Kupperman presents a compelling supply-demand imbalance thesis for uranium through Sprott Physical Uranium Trust. The manager believes nuclear power will gain acceptance as a baseload solution, creating sustained demand growth while uranium production remains constrained. His thesis emphasizes the structural supply deficit as above-ground inventories are depleted and utilities need to rebuild stockpiles. Kupperman views Sprott's ATM offering as a catalyst that accelerates price discovery by removing available uranium from the market at a critical time. The investment benefits from both the underlying uranium price appreciation and the trust structure that provides liquid exposure to physical uranium. The manager emphasizes the multi-year timeline required for new supply to come online, creating a sustained period of potential price appreciation even if restart decisions were made immediately.

Pitch Summary:
In 2020 when oil traded below zero, drilling activity ground to a halt and many energy service providers declared bankruptcy. Many of these businesses had teetered on the verge of bankruptcy for years due to reduced demand and over-leveraged balance sheets. The bankruptcies led to consolidation and reduced future industry capacity, removing future competition in the recovery. With oil prices now recovering, I believe that demand for drilling and other services will increase from subdued levels. While producers have been slow to increase spending on exploration despite recoveries in energy prices, I believe that this only extends the timing on the thesis. In the end, the only way to reduce future energy prices is to see a dramatic increase in global oilfield services spending. Any postponement of this spending only leads to higher prices and more wealth transfer from the global economy to the oil producers, which will likely end up resulting in an increase in spending on exploration and production. We purchased many of these positions at fractions of the equipment's replacement cost, despite restored balance sheets and positive operating cash flow. As spending in the sector recovers, I believe that the potential for cash flow will become more apparent, and this equipment will trade up to valuations closer to replacement cost. With the recent pullback in share prices, I've further increased our exposure to this sector.

BSD Analysis:
Kupperman's thesis for Tidewater mirrors his broader oilfield services strategy, focusing on the structural supply reduction created by the 2020 industry crisis. The manager believes Tidewater benefits from the same consolidation dynamics that eliminated weaker competitors and reduced future capacity. His investment rationale emphasizes purchasing offshore service vessel capacity at significant discounts to replacement cost while the company maintains improved financial health. The thesis relies on inevitable demand recovery as oil producers must eventually increase offshore exploration and production activities. Kupperman views current subdued spending as extending the timeline rather than invalidating the recovery thesis. The manager has increased exposure during recent price weakness, demonstrating confidence in the long-term structural advantages created by industry consolidation.

Pitch Summary:
In 2020 when oil traded below zero, drilling activity ground to a halt and many energy service providers declared bankruptcy. Many of these businesses had teetered on the verge of bankruptcy for years due to reduced demand and over-leveraged balance sheets. The bankruptcies led to consolidation and reduced future industry capacity, removing future competition in the recovery. With oil prices now recovering, I believe that demand for drilling and other services will increase from subdued levels. While producers have been slow to increase spending on exploration despite recoveries in energy prices, I believe that this only extends the timing on the thesis. In the end, the only way to reduce future energy prices is to see a dramatic increase in global oilfield services spending. Any postponement of this spending only leads to higher prices and more wealth transfer from the global economy to the oil producers, which will likely end up resulting in an increase in spending on exploration and production. We purchased many of these positions at fractions of the equipment's replacement cost, despite restored balance sheets and positive operating cash flow. As spending in the sector recovers, I believe that the potential for cash flow will become more apparent, and this equipment will trade up to valuations closer to replacement cost. With the recent pullback in share prices, I've further increased our exposure to this sector.

BSD Analysis:
Kupperman presents a compelling cyclical recovery thesis for Valaris and the broader oilfield services sector. The manager argues that the 2020 oil crisis created a supply-constrained environment through bankruptcies and consolidation, setting up favorable dynamics for survivors like Valaris. The thesis centers on inevitable demand recovery as producers must eventually increase exploration spending to maintain oil supply, creating pricing power for service providers. Kupperman emphasizes the attractive entry valuation, purchasing equipment at fractions of replacement cost while companies now maintain clean balance sheets and positive cash flow. The manager views current producer reluctance to spend as merely delaying the inevitable recovery rather than negating it. He has opportunistically added to positions during recent weakness, demonstrating conviction in the long-term thesis despite near-term headwinds.

Pitch Summary:
Everus Construction Group, a spin-off from MDU Resources, is poised to benefit from the growing trends of electrification and reshoring in the U.S. The company operates in two segments: electrical and mechanical services, and transmission and distribution services. With a history of strong EBITDA growth and a capex-light business model, Everus is well-positioned to capitalize on increasing infrastructure investments.

BSD Analysis:
Everus Construction Group's spin-off from MDU Resources is a strategic move to unlock value by focusing on regulated business operations. The company's impressive 17% EBITDA CAGR since 2018 highlights its robust growth potential. Its capex-light model, with low capital expenditures relative to revenue, suggests efficient operations and potential for high returns on invested capital. The positive trends in construction starts and transmission investments indicate a favorable market environment. As the U.S. continues to invest in infrastructure and energy transition, Everus could see significant demand for its services. Furthermore, the experienced leadership team, with over two decades at the company, provides stability and strategic direction. Investors should monitor how Everus leverages these trends to drive shareholder value post-spin-off.

Pitch Summary:
Bellway is a British small/mid cap that primarily builds single-family middle class homes. I first invested in the company in February 2023 and have since increased the investment further. I was especially attracted to the following facts: (i) the company's growth and return on capital since at least 2007 have been among the very best of the publicly traded homebuilders in the UK, (ii) the company performed much better than most of its competitors in the 2008-2009 downturn, and (iii) the balance sheet is very strong with almost zero net debt. Despite these qualities, we were able to buy the stock for only 0.77x book value in February 2023, which at the time was one of the lowest trading multiples of book value in the industry. Based on the company's historical average returns on capital in the low-to-mid teens, 150% cumulative revenue growth since the prior industry peak in 2007, and the company's historical trading multiples, I thought the stock should trade at a significant premium to book value (and not a 23% discount). However, unlike in the U.S., the industry was experiencing a downturn due to the rise in interest rates, which had resulted in the stocks being out of favor among investors. Also, I think Bellway was especially undervalued by investors due to its boring business and low trading liquidity. As of the end of Q3, we had earned a 47% unrealized gain on this investment (incl. dividends) due to an increase in the price-to-book multiple to 1.08x, dividends, and retained earnings. During the quarter, the company announced good preliminary financial results for the six months ended July 31. Moreover, certain data and comments made by the company's management indicated that it is relatively well positioned to increase sales when demand recovers from the slump, which is essentially due to the characteristics of its land position (incl. the stages of planning permission). Earlier this summer, Bellway had made an unsolicited, opportunistic low-ball offer to acquire its smaller and somewhat troubled competitor Crest Nicholson. A few days after Bellway's earnings announcement in August, it announced it was dropping its bid for Crest Nicholson. While the deal may well have made good financial sense for Bellway, the market did not like the uncertainty associated with a merger, so Bellway's stock price rose when the deal broke. It appears the demand for new homes in the UK has begun to recover. However, my investment thesis is not based on a quick recovery, and there is a possibility that the slump drags on or even worsens. Given the low debt and business model which generates positive cash flow in downturns (because "inventory", consisting of land and work in progress, declines and thus frees up cash), the company should survive almost any scenario. When demand eventually recovers, I estimate Bellway will earn a return on capital in the mid-teens, which implies that the stock is currently trading at only approx. 7x recovered earnings. Accordingly, the stock appears to have significant upside, and the downside is protected by the strong balance sheet, inherently valuable assets, and the modest 1.08x trading multiple of book value.

BSD Analysis:
Olesen identifies Bellway as an undervalued UK homebuilder with superior operational metrics and financial resilience trading at attractive valuations. The manager was drawn to Bellway's best-in-class growth and returns on capital since 2007, strong performance during the 2008-2009 downturn, and nearly debt-free balance sheet. Despite these quality characteristics, the stock was available at 0.77x book value in February 2023 due to UK housing market weakness and investor neglect of the boring, illiquid stock. The investment has generated 47% returns as the P/B multiple expanded to 1.08x, supported by good earnings results and management commentary indicating strong positioning for recovery. Bellway's land position and planning permissions provide competitive advantages for future sales growth. The company's cash-generative business model during downturns, combined with low debt, provides downside protection while the stock trades at approximately 7x normalized earnings. With historical mid-teens returns on capital and current modest valuation multiples, significant upside exists when housing demand eventually recovers.

Pitch Summary:
Hingham Savings is a growing micro/small cap bank headquartered in Hingham (a suburb of Boston) with $4.4 bn in total assets, which I think is a hidden gem. The stock has virtually no Wall Street or institutional investor following, in large part due to the still low liquidity of the stock (most institutional investors will only invest in stocks with a certain level of trading volume so they can very quickly buy or sell their investment). The Chairman and CEO, Robert Gaughen, who owns 15% of the shares, took control of the company in a contested shareholder vote in 1993. I believe most of his net worth is invested in the stock. Notably, the bank's lending practices are extremely careful and conservative, which has resulted in almost no loan losses since the CEO took over. Even in the peak year for loan losses in 2009, the bank's net charge-off ratio was only a minuscule 0.07%, which is exceptionally low. The bank consistently grew and performed very well from 1993 through 2021 (even during recessions), as the return on equity (ROE) increased from the low-mid teens in the 1990s to over 17% in 2021, due to highly efficient operations, increasing economies of scale, and an outstanding lending operation. The combination of a good ROE and a low dividend payout ratio resulted in very healthy growth, as ROE x (1 - dividend payout ratio) = growth rate (approximately). As a result of these economics, the stock price (incl. reinvested dividends) increased by 83x (8,300%) from 1993 through 2021 (vs. 17x for the S&P 500 Index and 10x for the S&P 500 Financials Index). After short-term interest rates began to increase rapidly in 2022, the bank's earnings declined significantly, because the cost of its liabilities changes very quickly when short-term interest rates change while most of its loans have interest rates that are fixed for 5+ years. However, as time goes on, the interest earned on the loans will gradually reflect the new level of interest rates, as loans are repaid and replaced with new loans and the interest rates on existing loans reach their reset dates. Also, note that the bank has virtually zero overdue loans. The stock price declined by approx. 50% from its peak as a result of the substantial drop in earnings that resulted from the big and rapid increase in short-term interest rates as well as bank stocks generally going out of favor among investors. We bought shares at only a single-digit multiple of my estimate of mid-cycle (normalized) earnings. During the second and third quarters of this year, the interest income earned on the bank's loan portfolio finally began to increase faster than the interest cost of its liabilities, and this process should simply continue as time goes on, thereby causing the currently very low but positive ROE to eventually reach similar levels as in the past. If the Fed continues to cut short-term interest rates, this process will be accelerated. The stock price rose by 36% in Q3, as investors "rediscovered" value stocks in July, and the recovery of the bank's earnings now seems to be finally under way. Since the stock still only trades at approx. 8x my estimate of mid-cycle (normalized) earnings, I think the stock price will likely rebound much more over the next couple of years or so, as earnings continue to normalize. I also think shareholders may do very well over the longer run, for two reasons: 1. Even at today's $4.4 bn in total assets, the bank is actually still a small player in its industry and probably has a lot of room to continue to grow. 2. In an unusually fortuitous circumstance, the CEO's 42-year-old son, Patrick Gaughen, who is the bank's President and heir apparent, to me seems at least as qualified as his father and poised to continue the bank's great success for many more years. Based on my observations and conversations with him, he appears to be exceptionally thoughtful, intelligent, and passionate about banking. He apparently shares his father's very careful and conservative approach to lending, and is credited with certain significant improvements in the business since he joined it 12 years ago.

BSD Analysis:
Olesen presents a compelling value thesis on Hingham Savings, a micro-cap bank trading at 8x normalized earnings with exceptional credit quality and management. The manager highlights the bank's extraordinary track record under CEO Robert Gaughen, who owns 15% of shares and has delivered 83x returns from 1993-2021 with virtually zero loan losses. The recent earnings decline due to asset-liability duration mismatch from rapid rate hikes created a buying opportunity, as the bank purchased shares at single-digit normalized earnings multiples. With interest income now rising faster than funding costs and potential Fed rate cuts accelerating normalization, earnings recovery appears underway. The succession plan with the CEO's qualified son Patrick provides continuity for long-term growth. At $4.4 billion in assets, the bank remains a small player with significant growth runway in its market. The combination of conservative underwriting, strong management alignment, and attractive valuation at 8x mid-cycle earnings offers substantial upside as ROE normalizes to historical mid-teens levels.

Pitch Summary:
One of our investments that best represents this focus is AutoZone, which is an aftermarket automotive retailer based in Memphis, Tennessee. When doing our initial research on AutoZone we concluded it was a stable business with a long track record of earning high returns on capital. AutoZone has stable demand for their products which is largely dependent on annual vehicle miles driven in the United States and the average age of used cars. They have a dominant position in their market, and they sell products that are essential for their customers day-to-day lives. They also have a strong brand loyalty and a very disciplined approach to capital allocation. The combination of all these characteristics led us to believe we were investing in a high-quality business. We purchased our investment for $1,120 in November 2020 and at the time the company had earned $73.62 per share over the previous year. We thus purchased our investment at 15x earnings. In the 4 years since our initial investment the company has earned a cumulative $15.8 billion in profits. $3.6 billion has been reinvested back into the business through capital expenditures, while $13.6 billion has been used to repurchase shares which benefits long term investors. The growth in profits per share from $73.62 to $153.82 over the past 4 years has been possible because of the characteristics of the business and because of the ongoing reinvestment they have made in their business. When a company such as AutoZone earns high returns on capital, we cheer on their reinvestment of profits back into the business. In this case we would prefer to not receive a dividend because each dollar of reinvested earnings has the potential to generate high returns through their reinvestment. What is remarkable about their results is how consistently high their return on capital has been over the past 20 years.

BSD Analysis:
Avenue Investment Management presents AutoZone as a compelling example of their quality investing philosophy, emphasizing the company's exceptional capital efficiency and market positioning. The manager highlights AutoZone's dominant market position in aftermarket automotive retail, supported by stable demand drivers including vehicle miles driven and aging car fleets. The investment thesis centers on the company's consistent high returns on capital over a 20-year period, demonstrating remarkable operational excellence. Avenue's entry at 15x earnings in November 2020 at $1,120 per share has proven successful, with earnings per share growing from $73.62 to $153.82 over four years. The manager particularly values AutoZone's disciplined capital allocation, noting that $13.6 billion of the $15.8 billion in cumulative profits was returned to shareholders through share repurchases rather than dividends. This approach aligns with Avenue's preference for reinvestment when companies can generate high returns on incremental capital. The pitch emphasizes AutoZone's essential product offerings and strong brand loyalty as sustainable competitive advantages in the automotive aftermarket space.

Pitch Summary:
Highly likely that the company's management fee will decline by over 20%; rating agencies are concerned with the situation; the share price only benefited from external events; large expected operating losses;

BSD Analysis:
Erie Indemnity manages Erie Insurance. Bears focus on valuation risk at premiums despite exposure to auto/home claims inflation. Rising costs and weather pressure combined ratios. Governance complexity adds opacity. Catalysts: loss ratios, rate hike approvals, auto claim severity. Counterpoints: strong underwriting history, but shorts argue margins peaking.