Investment Pitches

Pitch Summary:
One of the highest concentrations of 411% to CRE market; bridge loan multiplied by x11 in 7 years; using brokered deposits to expand its loan book; 99% of the deposits have less than 1-year maturity;

BSD Analysis:
Merchants Bancorp lends in multifamily construction and warehouse financing. Bears emphasize CRE exposure, rate sensitivity, and credit deterioration risk. Warehouse lending is cyclical with origination volumes under pressure. Geographic/sector concentration heightens risk. Catalysts: delinquencies, CRE values, deposit betas, liquidity. Counterpoints: niche expertise exists, but CRE headwinds dominate.

Pitch Summary:
Latham Group is the leading manufacturer of fiberglass pools in the United States that we believe is set to increase earnings materially over the next 5 years. There are three types of pools: concrete, vinyl and fiberglass. Today fiberglass pools make up ~22% of new U.S. pool starts which has steadily increased from ~16% in 2019 and ~4% in 2000. Fiberglass pool penetration continues to take share from concrete and vinyl due to lower maintenance costs (i.e. from concrete cracking, or vinyl tearing), faster installation (a week versus months for concrete and vinyl), and nicer design and finish than vinyl and on par with concrete. Because of said benefits, over the next decade we believe U.S. fiberglass penetration will surpass 30% which has already been evidence in other countries where market adoption started earlier. Latham has three revenue growth drivers. Industry new pool starts, fiberglass pool penetration, and growing their penetration of ancillary products (either owned today such as automatic pool covers or acquired in the future). Combining these growth levers equates to a long-term revenue growth rate of low double digits and 15-20% earnings per share growth due to the operating leverage that is typical in manufacturing businesses such as Latham. Now what makes Latham especially interesting today is that the last two years have been a nightmare for the pool industry. As central banks raised interest rates from ~0% to ~5%, new pool starts collapsed 50%. Today the new pool market is near a multi decade low with expected new pool starts of ~60k for 2024. This is down from ~120k starts in 2021, ~80k in 2019, and comparable to the depths of the 2009 financial crisis where pool starts were ~53k. Over this 2–3-year market downturn Latham's trailing twelve month Adjusted EBITDA has declined a little over 50% and the share price went from a high of $30 to a low of $2 at the end of 2023. We started buying shares at the beginning of the year in the $2.50 range and have an average cost of ~$3.25. Over the next 5 years, we believe the new pool market will normalize, returning to atleast pre covid levels, fiberglass pool penetration will continue to grow, and Latham will maintain their share in the fiberglass market. Put together, we believe this will 4x their adjusted EBITDA and result in 2029 earnings per share of ~$2. Our 5-year price target is $50 equating to 25x 2029 earnings per share and a ~600% return from todays price of ~$7. We believe Latham is an attractive, asymmetric investment.

BSD Analysis:
The manager presents a compelling cyclical recovery and market share gain thesis for Latham Group, the leading U.S. fiberglass pool manufacturer. The investment case centers on fiberglass pools gaining market share from 22% currently to over 30% due to superior benefits including lower maintenance, faster installation, and better design. The pool industry is experiencing a severe cyclical downturn with new starts at multi-decade lows of ~60k versus 120k in 2021, creating an attractive entry point. The manager acquired shares at an average cost of $3.25 during maximum pessimism when the stock traded near $2.50. The thesis projects 4x EBITDA growth over five years driven by market normalization, continued fiberglass penetration gains, and ancillary product expansion. With a $50 price target representing 25x 2029 EPS of ~$2, the investment offers approximately 600% upside potential. The combination of cyclical recovery, structural market share gains, and operating leverage creates an asymmetric risk-reward profile with limited downside at current depressed levels.

Pitch Summary:
Lastly, in terms of notable portfolio changes in the quarter, we made a new investment in First Advantage, a leading provider of background checks. What makes First Advantage particularly interesting right now is the pending acquisition of their largest competitor that roughly doubles the size of the business. Based on our math, we think First Advantage is trading at an attractive valuation of 14x 2025 earnings per share for a business that should grow earnings over 20% annually for the foreseeable future. Should the position become a top 10 holding we will dive deeper into the investment thesis.

BSD Analysis:
The manager initiated a new position in First Advantage, attracted by a transformative acquisition opportunity that will approximately double the company's size. The investment thesis centers on the pending acquisition of their largest competitor, which should create significant scale advantages and market consolidation benefits. At 14x 2025 earnings per share, the valuation appears attractive for a business expected to grow earnings over 20% annually. This growth rate suggests strong underlying demand for background check services and the company's ability to capitalize on market opportunities. The acquisition should provide synergies, cost savings, and enhanced market positioning in the background screening industry. The manager's confidence is evident in considering this a potential top 10 holding, indicating high conviction in the investment case. The combination of reasonable valuation, strong growth prospects, and transformative acquisition creates compelling upside potential.

Pitch Summary:
After HelloFresh faced challenges earlier this year (that we outlined in our Q1 2024 letter), we began to see signs of stabilization in the summer, which drove us to materially increase our investment in the €4.50-€6 range. Shortly thereafter, the company reported better than expected profitability followed by a significant €10 million share purchase from CEO Dominik Richter. We now believe HelloFresh is at the beginning of a material improvement in free cash flow generation that will drive strong share price appreciation. Despite the shares appreciating 100% since the June lows, we believe HelloFresh remains materially undervalued at ~3x 2025 adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization).

BSD Analysis:
The manager demonstrates strong conviction in HelloFresh's turnaround story, having materially increased the position during the €4.50-€6 range after identifying stabilization signals. The investment thesis is reinforced by better-than-expected profitability and significant insider buying, with CEO Dominik Richter purchasing €10 million in shares. The manager believes the company is at an inflection point for material free cash flow improvement, which should drive substantial share price appreciation. Despite the stock's 100% rally from June lows, the valuation remains compelling at approximately 3x 2025 adjusted EBITDA. This low valuation multiple suggests significant upside potential if the company executes on its turnaround plan. The combination of operational improvements, insider confidence, and attractive valuation creates a compelling risk-reward profile. The manager's timing and conviction in increasing exposure during the stabilization phase demonstrates strong fundamental analysis.

Pitch Summary:
Carvana continues to perform well with unit growth accelerating from mid-teens in Q1 to over 30% in Q2, while achieving double the adjusted EBITDA margins of the automotive retail sector. It remains our largest position.

BSD Analysis:
The manager maintains a strong bullish stance on Carvana, highlighting accelerating unit growth momentum from mid-teens in Q1 to over 30% in Q2. The company is demonstrating operational excellence with adjusted EBITDA margins that are double the automotive retail sector average, indicating superior profitability and execution. Carvana's position as the fund's largest holding reflects high conviction in the investment thesis. The accelerating growth trajectory suggests the company is gaining market share in the used car e-commerce space. The superior margin profile indicates strong pricing power and operational efficiency. The manager's continued confidence is reinforced by maintaining it as the top position despite the stock's strong performance. This positioning suggests significant upside potential as the company scales its operations.

Pitch Summary:
Earlier this year we took a stake in Cinemark, the third largest movie theater chain in the U.S. We believe Cinemark is poised for underappreciated growth over the next few years as the supply of theatrical releases rebounds from pandemic- and strike-related headwinds. In addition, we believe Cinemark will gain share from undercapitalized competitors. There is no shortage of skeptics about the move theater business. In 2020 the outlook for domestic cinemas looked bleak: the rapid rise of streaming, combined with behavior changes from the pandemic, cast doubt on whether people would ever go to theaters again. Regal Cinemas filed for bankruptcy. AMC became a meme stock. Against this inauspicious backdrop, Cinemark has demonstrated resilient financial performance. Consider that in 2023, counterintuitively, Cinemark reported higher free cash flow than they did in the two years prior to the pandemic. Yet, Cinemark stock entered 2024 trading 70% below pre-pandemic levels (a mid-single digit multiple on trailing 12-month free cash flow), suggesting market participants feared free cash flow would drop precipitously and never recover. We disagree with this view and believe the multi-year outlook for Cinemark has never been more robust. Despite the recent success of films such as "Inside Out 2", 2024 industry revenues are expected to finish at approximately $8.5 billion, over 20% below pre-pandemic levels. While many in the market attribute this to changing consumer preferences, the data demonstrates theaters are a supply-driven industry (more films equal more foot traffic), and we believe the key driver of weak box office revenues has been a 20% decrease in widescreen theatrical releases since 2019. Importantly, we believe that this is driven by cyclical factors, namely labor stoppages from the pandemic and subsequently the strikes, rather than secular factors. Over the past three years, forays into exclusive streaming and day-and-date releases have proven too unprofitable, and the "event" aspect of a theatrical release has proven critical to securing top talent and creating franchise IP that can drive future earnings. As a result, all six major Hollywood studios have committed to ramp volume back up to pre-COVID levels, and even pureplay streamers like Amazon and Apple have begun releasing films exclusively in theaters. We expect supply to rebound next year and reach the pre-COVID level by 2026, which we expect to drive a full recovery in box office revenues as modestly lower per-film attendance is offset by price increases and growth in concession revenues. In our view, transient headwinds from the 2023 Hollywood strikes were masking this important secular shift in film supply, which gave us the opportunity to initiate the investment at a dislocated valuation. Cinemark's earnings outperformance versus its peers through the pandemic has not been an accident; while AMC and Regal have been closing screens and underinvesting to preserve liquidity, Cinemark used what we see as a strong balance sheet and relentless focus on cost efficiencies to sustain maintenance capex in their theaters despite the challenged operating backdrop. As a result, the company has taken over 100 bps of market share, a trend we see as sustainable as peers continue to rationalize their footprint despite an improving market. Given the significant recovery in box office, potential for continued share gain and high operating leverage of the business, we think Cinemark can generate over $4 of FCF/share in 2026, which is meaningfully higher than pre-pandemic levels and should grow in the following years. The company announced it will lay out its long-term capital allocation strategy in early 2025, including a re-introduction of a dividend, which should be supportive of a continued re-rating in the shares.

BSD Analysis:
Third Point invested in Cinemark, the third-largest U.S. movie theater chain, based on a contrarian thesis that theatrical exhibition will recover as film supply normalizes. The manager argues that weak box office performance reflects cyclical supply constraints rather than secular demand destruction, with theatrical releases down 20% since 2019 due to pandemic disruptions and Hollywood strikes. Third Point emphasizes that Cinemark demonstrated exceptional resilience, generating higher free cash flow in 2023 than pre-pandemic levels while trading at a mid-single-digit FCF multiple. The investment thesis hinges on film supply recovery, with all major studios committing to pre-COVID release volumes by 2026, supported by streaming platforms' return to exclusive theatrical windows. Cinemark's competitive positioning has strengthened through the downturn, gaining over 100 basis points of market share while competitors closed screens and reduced investments. The manager projects over $4 per share in free cash flow by 2026, significantly above pre-pandemic levels, driven by operating leverage, market share gains, and pricing power. The upcoming capital allocation strategy announcement, including dividend reinstatement, should catalyze multiple expansion from current depressed valuations.

Pitch Summary:
During the Third Quarter, we initiated a new position in the Danish freight forwarder DSV. DSV has come a long way from its origins as a Nordic road-hauler to become the world's third largest freight forwarder, with a formidable track record of consolidating the fragmented global freight forwarding industry. We believe the company has an impressive culture that is systems-driven and returns-focused. DSV has generated an approximately 20% EPS CAGR over the past 10 years and is widely recognized as the best-in-class operator, with industry-leading growth and profit margins. DSV emerged as the leading bidder in the auction of DB Schenker, a subsidiary of German state-owned Deutsche Bahn AG, and one of its largest competitors. DB Schenker is similar in size to DSV but only half as profitable. We believe the integration and synergy capture expected from this combination will follow a proven playbook and drive earnings accretion in excess of 30%. We have analyzed DSV's many acquisitions and observed that they follow a pattern of swiftly migrating the target onto DSV's IT system, culling low-margin business, and rightsizing the cost structure, resulting in the target's margins reaching DSV's best-in-class margins within two years. The DB Schenker acquisition is taking place at an interesting time. Following a period of post-COVID earnings normalization and a CEO change, DSV's stock was trading at an approximate 20% discount to both its lower-growth peers and its historical multiple. Following the deal, DSV will be the largest player in an industry in which scale brings tangible cost and network benefits. An example of this privileged competitive positioning is that DSV was selected as the exclusive logistics provider for Saudi Arabia's NEOM project. We believe the joint venture between DSV and Saudi Arabia will provide end-to-end supply chain management, develop transport and logistic assets, and grow the company's earnings power by about 15% by 2028. We have spent time with Jens Lund, DSV's long time COO/CFO who became CEO earlier this year and have found him to be laser-focused on creating shareholder value. Mr. Lund made a compelling case that rising complexity in global supply chains will benefit DSV, as it monetizes its unique network that guarantees capacity and on-time deliveries. In the freight forwarding industry, simple load, A-to-B transportation is barely profitable. The real money is made from value-added services such as customs clearance, load consolidation and intervention when problems occur, a core competency of DSV. We believe DSV can earn more than 100 DKK per share in 2027 and see significant upside for one of Europe's best companies.

BSD Analysis:
Third Point initiated a position in DSV, the world's third-largest freight forwarder, citing its exceptional track record of industry consolidation and operational excellence. The manager highlights DSV's impressive 20% EPS CAGR over the past decade and best-in-class margins as evidence of superior execution capabilities. The investment thesis centers on DSV's pending acquisition of DB Schenker, a similarly-sized but half-as-profitable competitor, which Third Point believes will drive earnings accretion exceeding 30% through proven integration strategies. The manager emphasizes DSV's systematic approach to acquisitions, including swift IT migration, margin optimization, and cost structure rightsizing that historically achieves target margins within two years. Third Point views the timing as opportunistic, with DSV trading at a 20% discount to peers despite superior fundamentals. The scale benefits from becoming the industry's largest player, exemplified by exclusive partnerships like the Saudi NEOM project, should drive 15% earnings growth by 2028. Management's focus on value-added services over commodity transportation aligns with Third Point's thesis that complexity in global supply chains will benefit DSV's premium network capabilities.

Pitch Summary:
The last of the over earners from the Covid period - EBITDA to fall over 20%; $330mil undisclosed funds from Covid; up to 40% of the total students are fake & 'ghost' students; undisclosed churn; overbilling and fraudulent claims;

BSD Analysis:
Stride Inc. (formerly K12) operates online schools and learning programs. The bear thesis centers on regulatory oversight, enrollment volatility, and reliance on state funding. Stride’s revenue is tied to per-pupil state payments, leaving it exposed to political shifts and funding constraints. Quality-of-education concerns and uneven outcomes generate reputational risk that may hinder expansion. Bears also flag margin pressure from tech/content investments and cyclicality if states tighten budgets. Catalysts/risk checks: state budget cycles, enrollment data, retention rates, and lobbying activity. Counterpoints: digital education adoption is secular, but skeptics argue LRN is structurally dependent on government funding flows.

Pitch Summary:
This quarter I will discuss an investment we made in Medpace (NASDAQ:MEDP). We initiated a small position in Medpace during the fourth quarter of 2023, but we increased our investment after the company's stock price declined following its Q2 earnings miss. I will provide an overview of the Company and discuss why I believe the issues weighing on the stock are likely temporary and provide a buying opportunity for investors. Medpace was founded in 1992 by August Troendle who remains the CEO and largest shareholder today. The Company operates as a contract research organization ("CRO"). CROs manage the clinical trials for pharmaceutical companies through an outsourced relationship. The scope of work for a CRO can include everything from designing the clinical study, recruiting study patients, monitoring patients, collecting study data, analyzing data, performing lab work, writing medical documentation, submitting findings to the FDA, and more. In exchange for managing the clinical trial, CROs are paid fixed contract fees and are reimbursed for any out-of-pocket expenses related to the studies. Taking a drug through all four phases of the FDA clinical trial can take as long as 10 years and any given phase can last multiple years. Therefore, as a CRO, Medpace's revenue is recurring and predictable. Most contract research organizations operate under a functional service provider ("FSP") model where a CRO will assist with aspects of a clinical trial, but the pharmaceutical company insources much of the work. Medpace exclusively operates under a full-service outsourcing ("FSO") model where it handles the entire clinical phase study end-to-end. The FSO model lends itself to smaller biotech companies that do not have the internal resources or experience to run their own clinical trials. For these customers, Medpace is a high-value-add partner and takes on projects that often entail technical consulting and a degree of hand-holding. In other words, a customer chooses to work with Medpace for reasons that extend beyond just saving money. As a result, the FSO product is less commoditized than the FSP product and tends to be more profitable. CROs that are accustomed to working with large pharma companies are not well-equipped to offer the tailored solutions smaller biotechs need. Medpace also has a low-cost advantage because it is vertically integrated (it owns its own labs, technology, recruitment capabilities, etc.). One of the more impressive aspects of the Medpace story is that while its competition has focused on acquisition-driven growth strategies, Medpace has built out its platform organically. Even if larger CROs like IQVIA or Icon wanted to service smaller customers, they would have trouble matching Medpace's price and quality of service. For these reasons, Medpace has limited competition in the niche CRO market for serving small biotech companies. The US pharmaceutical industry spends approximately $125 billion per year on research and development. Of that spend, $65 billion is outsourced to CROs. The small- and mid-sized biotech segment of the market is sized around $28bn. Medpace has just a 5% share of the small and mid-sized CRO market today, providing an attractive growth runway for the Company. The overall addressable market for CROs is estimated to grow at a 5% rate over the next 3 years (source: Fortrea investor presentation); however, the small- and mid-sized segment is expected to grow at a faster 8% rate (source: Icon Plc 2024 Analyst day). The most significant driver of industry growth is the continued expansion of US pharma R&D. The total number of clinical trials has increased over time driven by innovation in drug discovery (artificial intelligence, precision medicine, virtual and decentralized clinical trials, etc.) and therapeutic areas (cell and gene-based therapeutics, nuclear medicine). Over the past 10 years, the Company's revenue has grown organically at a 20%+ rate. Earnings have grown faster than revenue. Free cash flow converts at over 100% of GAAP earnings. Finally, Medpace's return on invested capital (ROIC) clocks in at over 50% and continues to expand every year. At this point, it should be obvious why I am excited about Medpace. The company is a niche leader in an attractive industry and has a large remaining opportunity to reinvest capital at attractive rates. This should lead to outstanding results for shareholder holders over time if the future looks anything like the past. Medpace's stock price is nearly over 20% below its recent highs due to a temporary slowdown in biotech R&D spending driven by a sluggish fundraising environment. For context, biotech companies rely on funding from the venture market and public stock offerings to fund drug development and clinical trials. Biotech funding hit peak levels during the 2020/2021 period and investors have since taken a step back due to the need to digest high valuations and the increased opportunity cost from high interest rates. Biotech funding has been soft since 2022 which has led to a number of rationalizations in the industry. Several clinical trials have been streamlined or canceled. This has led to a ~5% drop in the total number of ongoing clinical trials and has impacted the overall growth rate of the CRO industry. Blaming industry conditions, Medpace recently lowered its expected 2024 revenue growth from 15.4% to 14.0%. While 14% expected growth is still healthy, many investors are concerned that the industry's operating environment could continue to disappoint and lead to further reductions in expected financial results. I am not particularly worried about the near-term uncertainty in the industry. I believe the long-term drivers of the industry (innovation in drug discovery) are still intact and could even be accelerated by the adoption of artificial intelligence. Furthermore, pharmaceutical companies will need to continue to invest in R&D to replenish drug portfolios that will be impacted by patent expirations. Finally, the recent funding environment data is backward looking and does not incorporate a potential for the environment to improve in a lower interest rate environment. With the recent tumble in Medpace's stock price, the company is now trading for an earnings multiple in the low 20s. This is in-line with the company's historic valuation multiple and is a small premium vs. the average public company. I believe this represents an attractive bargain because Medpace's business has superior growth prospects and cash flow generation potential vs. the average company. The business has a healthy balance sheet, is extremely well run, and has a track record of shareholder-friendly capital allocation. There are certainly near-term risks due to the industry's ongoing slowdown but the facts overwhelming suggest that over the longer term, Medpace will prosper.

BSD Analysis:
The manager presents a compelling bull case for Medpace, a contract research organization specializing in full-service outsourcing for small and mid-sized biotech companies. The investment thesis centers on Medpace's differentiated business model, which provides end-to-end clinical trial management rather than the fragmented functional services offered by larger competitors. The company's niche focus on smaller biotechs creates a less commoditized, higher-margin business with limited competition from industry giants like IQVIA and Icon. Medpace's financial performance is exceptional, with 20%+ organic revenue growth over the past decade, ROIC exceeding 50%, and free cash flow conversion above 100% of earnings. The manager views the recent 20%+ stock decline as a temporary buying opportunity driven by biotech funding headwinds rather than fundamental deterioration. With only 5% market share in a $28 billion addressable market growing at 8% annually, Medpace has substantial runway for continued expansion. The valuation at low-20s earnings multiple appears attractive given the company's superior growth profile and cash generation capabilities.

Pitch Summary:
This quarter I will discuss an investment we made in Medpace (NASDAQ:MEDP). We initiated a small position in Medpace during the fourth quarter of 2023, but we increased our investment after the company's stock price declined following its Q2 earnings miss. I will provide an overview of the Company and discuss why I believe the issues weighing on the stock are likely temporary and provide a buying opportunity for investors. Medpace was founded in 1992 by August Troendle who remains the CEO and largest shareholder today. The Company operates as a contract research organization ("CRO"). CROs manage the clinical trials for pharmaceutical companies through an outsourced relationship. The scope of work for a CRO can include everything from designing the clinical study, recruiting study patients, monitoring patients, collecting study data, analyzing data, performing lab work, writing medical documentation, submitting findings to the FDA, and more. In exchange for managing the clinical trial, CROs are paid fixed contract fees and are reimbursed for any out-of-pocket expenses related to the studies. Taking a drug through all four phases of the FDA clinical trial can take as long as 10 years and any given phase can last multiple years. Therefore, as a CRO, Medpace's revenue is recurring and predictable. Most contract research organizations operate under a functional service provider ("FSP") model where a CRO will assist with aspects of a clinical trial, but the pharmaceutical company insources much of the work. Medpace exclusively operates under a full-service outsourcing ("FSO") model where it handles the entire clinical phase study end-to-end. The FSO model lends itself to smaller biotech companies that do not have the internal resources or experience to run their own clinical trials. For these customers, Medpace is a high-value-add partner and takes on projects that often entail technical consulting and a degree of hand-holding. In other words, a customer chooses to work with Medpace for reasons that extend beyond just saving money. As a result, the FSO product is less commoditized than the FSP product and tends to be more profitable. CROs that are accustomed to working with large pharma companies are not well-equipped to offer the tailored solutions smaller biotechs need. Medpace also has a low-cost advantage because it is vertically integrated (it owns its own labs, technology, recruitment capabilities, etc.). One of the more impressive aspects of the Medpace story is that while its competition has focused on acquisition-driven growth strategies, Medpace has built out its platform organically. Even if larger CROs like IQVIA or Icon wanted to service smaller customers, they would have trouble matching Medpace's price and quality of service. For these reasons, Medpace has limited competition in the niche CRO market for serving small biotech companies. The US pharmaceutical industry spends approximately $125 billion per year on research and development. Of that spend, $65 billion is outsourced to CROs. The small- and mid-sized biotech segment of the market is sized around $28bn. Medpace has just a 5% share of the small and mid-sized CRO market today, providing an attractive growth runway for the Company. The overall addressable market for CROs is estimated to grow at a 5% rate over the next 3 years (source: Fortrea investor presentation); however, the small- and mid-sized segment is expected to grow at a faster 8% rate (source: Icon Plc 2024 Analyst day). The most significant driver of industry growth is the continued expansion of US pharma R&D. The total number of clinical trials has increased over time driven by innovation in drug discovery (artificial intelligence, precision medicine, virtual and decentralized clinical trials, etc.) and therapeutic areas (cell and gene-based therapeutics, nuclear medicine). Over the past 10 years, the Company's revenue has grown organically at a 20%+ rate. Earnings have grown faster than revenue. Free cash flow converts at over 100% of GAAP earnings. Finally, Medpace's return on invested capital (ROIC) clocks in at over 50% and continues to expand every year. At this point, it should be obvious why I am excited about Medpace. The company is a niche leader in an attractive industry and has a large remaining opportunity to reinvest capital at attractive rates. This should lead to outstanding results for shareholder holders over time if the future looks anything like the past. Medpace's stock price is nearly over 20% below its recent highs due to a temporary slowdown in biotech R&D spending driven by a sluggish fundraising environment. For context, biotech companies rely on funding from the venture market and public stock offerings to fund drug development and clinical trials. Biotech funding hit peak levels during the 2020/2021 period and investors have since taken a step back due to the need to digest high valuations and the increased opportunity cost from high interest rates. Biotech funding has been soft since 2022 which has led to a number of rationalizations in the industry. Several clinical trials have been streamlined or canceled. This has led to a ~5% drop in the total number of ongoing clinical trials and has impacted the overall growth rate of the CRO industry. Blaming industry conditions, Medpace recently lowered its expected 2024 revenue growth from 15.4% to 14.0%. While 14% expected growth is still healthy, many investors are concerned that the industry's operating environment could continue to disappoint and lead to further reductions in expected financial results. I am not particularly worried about the near-term uncertainty in the industry. I believe the long-term drivers of the industry (innovation in drug discovery) are still intact and could even be accelerated by the adoption of artificial intelligence. Furthermore, pharmaceutical companies will need to continue to invest in R&D to replenish drug portfolios that will be impacted by patent expirations. Finally, the recent funding environment data is backward looking and does not incorporate a potential for the environment to improve in a lower interest rate environment. With the recent tumble in Medpace's stock price, the company is now trading for an earnings multiple in the low 20s. This is in-line with the company's historic valuation multiple and is a small premium vs. the average public company. I believe this represents an attractive bargain because Medpace's business has superior growth prospects and cash flow generation potential vs. the average company. The business has a healthy balance sheet, is extremely well run, and has a track record of shareholder-friendly capital allocation. There are certainly near-term risks due to the industry's ongoing slowdown but the facts overwhelming suggest that over the longer term, Medpace will prosper.

BSD Analysis:
The manager presents a compelling bull case for Medpace, emphasizing the company's differentiated full-service outsourcing model that targets smaller biotech companies with limited internal resources. The investment thesis centers on Medpace's competitive moat through vertical integration, organic growth strategy, and specialized focus on a less commoditized market segment. The manager highlights exceptional financial metrics including 20%+ organic revenue growth over 10 years, 50%+ ROIC, and over 100% free cash flow conversion. The current opportunity stems from temporary biotech funding headwinds that have pressured the stock 20% below recent highs, creating an attractive entry point at low-20s P/E multiples. The manager views the current industry slowdown as cyclical rather than structural, expecting long-term growth drivers including AI-driven drug discovery innovation and patent cliff pressures to sustain demand. With only 5% market share in the $28 billion small-to-mid biotech CRO segment, Medpace offers significant runway for continued expansion. The combination of defensive recurring revenue characteristics, superior profitability metrics, and temporary valuation compression creates an asymmetric risk-reward profile for patient investors.

Pitch Summary:
On the losing side, ODP Corporation (ODP) reported a second consecutive disappointing quarter. Sales and profits came in well below expectations and the shares reacted by falling from $39.27 to $29.75.

BSD Analysis:
Greenlight Capital expresses disappointment with ODP Corporation's performance, citing two consecutive quarters of underwhelming results. The company failed to meet sales and profit expectations, indicating operational challenges and potential structural headwinds in the office supplies and business services sector. The significant 24% stock decline from $39.27 to $29.75 during the quarter reflects market concern about the company's trajectory. While the commentary is brief, the pattern of consecutive disappointing quarters suggests fundamental issues rather than temporary setbacks. The underperformance may be related to ongoing shifts in workplace dynamics, digital transformation trends, and changing business spending patterns. Greenlight's position appears to be under pressure as the investment thesis faces execution challenges. The manager's tone suggests continued concern about the company's ability to deliver consistent financial performance.

Pitch Summary:
In addition to gold, Green Brick Partners (GRBK) was the other significant winner during the quarter. GRBK reported quarterly earnings of $2.32 per share, which beat analyst estimates of $1.77 per share. The company continues to lead the industry in gross margins and has distinguished itself from its peers, who are increasingly focused on appearing to be "land light." GRBK believes that being land light is very expensive at the gross margin level. Rather than pay high rates to third-party off-balance sheet land bankers, GRBK owns most of its land and lots while maintaining a very low-leveraged investment-grade balance sheet. As a result, it earns all of the development profits in addition to the homebuilding profits. Despite being "land heavy," the result is a return on equity that is near the top of the industry. Even more exciting, GRBK has had a very successful period of land acquisition, and as a result the prospects for it to continue delivering industry-leading margins remain promising. This quarter, GRBK shares advanced from $57.24 to $83.52.

BSD Analysis:
Greenlight Capital maintains a bullish stance on Green Brick Partners, highlighting the company's contrarian "land heavy" strategy that differentiates it from industry peers. The manager emphasizes GRBK's superior gross margins and industry-leading return on equity, achieved by owning land directly rather than relying on expensive third-party land banking arrangements. The company's recent earnings beat of $2.32 per share versus $1.77 estimates demonstrates strong operational execution. GRBK's investment-grade balance sheet with low leverage provides financial flexibility while capturing both development and homebuilding profits. The successful land acquisition period positions the company well for continued margin leadership. The 46% quarterly stock appreciation from $57.24 to $83.52 reflects market recognition of the company's differentiated business model. Greenlight views the land ownership strategy as a sustainable competitive advantage in the homebuilding sector.

Pitch Summary:
PBF operates a portfolio of geographically diverse refineries, which is a business not directly linked to commodity prices per se, but rather to spreads and differentials among commodity prices and refined product prices. In other words, refinery spreads and, in turn, margins, profitability, and cash flows are driven by a wide variety of factors that are not directly linked to oil and gas prices. What does link the two companies together, at least in our minds, is ostensible cheapness as measured by cash flows and replacement value of the assets, as well as the exceptional condition of both companies' balance sheets. PBF Energy is a U.S.-listed independent refiner that owns and operates a geographically diversified, high-complexity refining system, with a 1 million barrels per day of capacity. The company closed on a large, unfortunately timed, debt-financed acquisition in February 2020. The COVID pandemic followed immediately thereafter. In response, PBF was forced to cut its dividend and subsequently took actions to reduce its debt position by $3.5bn. Yet, in response to challenging operating conditions at the onset of Covid, capacity closures across the industry led to a 1 million barrel per day reduction of U.S. refining capacity. Reduced capacity contributed to a sharp, industrywide improvement in refining margins as conditions quickly recovered. In addition, the company took in its externally managed, midstream logistics vehicle in 2022 and sold a 50% JV interest in a recently converted renewable diesel facility to Eni in 2023, raising $846mn of proceeds. With a much stronger financial position, the company eventually reinstated its dividend and has spent approximately $1 billion repurchasing 16% of shares outstanding since year-end 2022. After a significant drawdown in the share price due to a softening near-term outlook, the Fund initiated a position in PBF at a deep discount to our conservative estimate of net asset value, a low multiple to midcycle earnings, and less than one times peak free cash flow. Should operating conditions soften further, PBF's net cash balance sheet and depressed implied valuation could provide the potential for an asymmetric return profile going forward as the near-term outlook eventually improves, the company returns capital to shareholders, or other corporate developments surface value.

BSD Analysis:
Third Avenue established a position in PBF Energy, an independent refiner with 1 million barrels per day of geographically diversified, high-complexity refining capacity. The manager's investment thesis focuses on the company's dramatically improved balance sheet following aggressive deleveraging and asset sales that raised $846 million. PBF has transformed from a highly leveraged company during COVID to one with a net cash position and strong capital allocation track record, having repurchased 16% of shares since 2022. The fund initiated the position at what it considers a deep discount to net asset value and less than one times peak free cash flow. The investment case centers on the asymmetric risk-reward profile, where the strong balance sheet provides downside protection while potential margin recovery, continued capital returns, or corporate developments could drive significant upside. The manager views refining spreads as less directly correlated to commodity prices than traditional energy investments.

Pitch Summary:
SandRidge is a small-cap U.S. oil and gas exploration and production company, which operates a portfolio of producing assets, along with gathering and processing assets. While we believe the SandRidge story offers many interesting details, its business model is one that carries explicit risks and rewards of commodity price fluctuations. Today, SandRidge represents the only Fund holding that bears direct revenue exposure to oil and gas prices. SandRidge is an oil and gas exploration and production company focused on the Mid-Continent region of the U.S. The company's public market neglect appears to stem from several sources. Specifically, the company was in bankruptcy as of 2016, it is an oil and gas producer, it is a small-cap company with a market cap of less than $500 mm, and it is one of several companies held in the Fund with virtually no sell-side coverage. However, as an investment opportunity, SandRidge does have a number of very attractive things going for it. First, it was available for purchase at a discount to PV-10 valuation, which is a measure of the value of the company's forecasted cash flows from proven reserves, discounted back to present at a 10% discount rate. Furthermore, the company has a significant net cash balance sheet, as well as very large federal and state net operating loss carryforwards, stemming from its bankruptcy process, with which the company can utilize to shelter cash flows from taxes. Additionally, the combination of a net cash balance sheet and huge tax loss carryforwards puts the company in a position to potentially acquire additional Mid-Continent acreage, preferably in proximity to existing acreage, in order to produce attractive returns on the company's capital base as well as to accelerate the usage of its tax assets, enhancing their present value. SandRidge has pushed this plan forward with its recent acquisition of Upland Exploration for $144mm. As a going-concern, we estimate that the Fund established a position in Sandridge at a discount to PV-10 and a double-digit free cash flow yield. However, we believe that the conversion of its net cash balance sheet into a larger producing asset portfolio, and the utilization of its tax assets, puts the company in a strong position to further enhance shareholder returns. Sandridge also has a demonstrated history of returning significant portions of its cash flows to shareholders via regular and special dividends, a habit we expect to continue. Lastly, there is a reasonable case to be made that U.S. gas prices may not stay low forever, though we will leave that discussion for another time.

BSD Analysis:
Third Avenue initiated a position in SandRidge Energy, a small-cap oil and gas exploration and production company focused on the Mid-Continent region. The manager's thesis centers on the company's exceptional balance sheet strength, featuring significant net cash and substantial tax loss carryforwards from its 2016 bankruptcy. The fund purchased shares at a discount to PV-10 valuation and a double-digit free cash flow yield. The investment case is strengthened by SandRidge's ability to use its net cash and tax assets for strategic acquisitions, as demonstrated by the recent $144 million Upland Exploration purchase. The company has a proven track record of returning capital to shareholders through regular and special dividends. While acknowledging commodity price risks, the manager views the combination of cheap valuation, strong balance sheet, and potential for accretive acquisitions as creating an attractive risk-adjusted opportunity in the energy sector.

Pitch Summary:
Subaru is a Japanese-headquartered automobile manufacturer, which sold nearly one million cars worldwide last year. While headquartered in Japan, more than two-thirds of the Subarus the company sells are to car buyers in the U.S. and most cars it sells to U.S customers are delivered from Subaru's manufacturing plant in Indiana. The brand is especially popular in U.S. regions where its all-wheel-drive capabilities and high ground clearance come in handy, like the Northeast or the Pacific Northwest. Subaru also enjoys a loyal and relatively affluent U.S. customer base. When translated to US dollars, Subaru has more than $10 billion in net cash and short-term investments on its balance sheet, a figure nearly equivalent to its market capitalization, meaning its current market valuation assigns virtually zero value to Subaru's car making business. While there are other publicly-traded companies that trade at or below the value of their net cash, we are not aware of another company of Subaru's quality being assigned a market value that imputes a negative valuation to its operating business, which, in Subaru's case, has demonstrated a long history of profitability. In the last 12 months Subaru produced approximately USD 4.6 billion of operating cash flow from operations. Interestingly, Subaru is also not an obscure micro-cap company. With its USD 13 billion market cap, it is one of the larger companies in the Fund today. Cash and short-term investments on the balance sheet have grown considerably since 2020 when the company slashed the dividend by nearly two-thirds in order to fortify itself against the then unknown effects of the Covid-19 pandemic. Subaru remained very profitable in the ensuing period and has paid increasing annual dividends each of the past two years, though dividends per share are barely half of pre-Covid payouts despite profits hitting previous peaks. The company has also recently instituted a share buyback program for the first time in several years. As Subaru has been slower than some other car manufacturers to introduce electric vehicle models, there seems to be some fear that it will be expensive for Subaru to catch up, or that it will miss out on the "EV revolution" entirely. It appears to us that, on the contrary, Subaru is preserving the option to offer whatever propulsion system(s) customers want in the future through collaboration with both battery and automotive industry leaders, including Toyota Motor, which owns 21% of Subaru's shares. It also appears that Subaru's model rollouts have been well-measured responses to actual customer and dealer demand, rather than hoped-for demand or in response to government incentives. As evidence of that strategic success, Subaru's U.S. inventory position remains in a very healthy position today, notwithstanding slowing battery electric vehicle demand, softening U.S. consumer activity, and significant U.S. inventory issues for some notable global peers. Finally, it bears mentioning that Toyota Motor considers its ownership of Subaru, as well as smaller stakes in Mazda and Suzuki, as a loose alliance. Like many other companies in Japan, Toyota is being asked to reduce cross-shareholdings and improve capital efficiency. We acknowledge the possibility that, on the other hand, Toyota could acquire Subaru and its valuable niche brand to substantially enhance significant synergies already being capitalized upon through existing partnerships and collaboration.

BSD Analysis:
Third Avenue initiated a new position in Subaru Corporation, viewing it as an exceptional value opportunity trading at virtually zero enterprise value. The manager highlights that Subaru's $13 billion market cap is nearly matched by its $10+ billion net cash position, effectively pricing the profitable automotive business at zero. With $4.6 billion in operating cash flow over the last twelve months, the company demonstrates strong cash generation despite conservative dividend policies post-COVID. The fund sees Subaru's measured approach to electric vehicle adoption as strategic rather than problematic, leveraging partnerships with Toyota (21% owner) and other industry leaders to preserve optionality. The manager appreciates Subaru's disciplined inventory management and strong brand loyalty in key U.S. markets, particularly in regions where all-wheel-drive capabilities provide competitive advantages. A potential catalyst exists through Toyota's strategic review of cross-shareholdings, which could lead to a full acquisition at substantial premiums to current valuations.

Pitch Summary:
Having previously sold our Match Group position during the pandemic craze, when investors had pushed the shares to 70x forward earnings, we have re-entered the segment at less than a tenth of that valuation. Just as analysts had over-extrapolated user growth during the pandemic, we now believe that they are too heavily discounting their long term prospects. Instead of relying on viral news stories, we thankfully have access to hard data from third party agencies. We will focus on the US as it's the most important market in terms of revenue for all major dating apps. Although download growth has been negative for the past year and a half (and users and time spent per day have been declining), we believe that this is a temporary headwind primarily caused by the shift in society moving back to in person settings. From a longer term perspective, dating app downloads have actually remained remarkably stable over the past five years at 3.5 million per month. If we remove Grindr from the category (as it does not focus on heterosexual relationships), we note that the online dating market is essentially unchanged over the past five years with just Tinder, Bumble and Hinge increasingly dominant. Herd left Tinder after two years in 2014 to found Bumble; positioning it as a female friendly alternative to Tinder, with its initial growth hack of only allowing women to initiate the conversation after matching. The company went public in 2021, making Herd the youngest female self-made billionaire in history. It was a feel good story that everyone enjoyed, (except perhaps Tinder owner, Match Group, which had tried to both buy Bumble and also sue it for copying Tinder's design; the lawsuit has now been settled). Although revenue proceeded to double from its IPO to over a billion dollars today, growth has not lived up to the lofty expectations that pandemic investors expected. Herd stepped down as CEO in late 2023 and became executive chair as part of a larger senior leadership shakeup. In February 2024, the company took a page from Zuckerberg's year of efficiency and announced that they were laying off 30% of the workforce, wisely removing management layers to accelerate decision making. However, in order to execute on its long term objectives, Bumble had to get off the Wall Street guidance treadmill and in August slashed its 2024 revenue forecast from 8-11% to 1-2%. The stock, which was already down 89% from its all time high, fell by an additional 40% in the premarket. There is rarely enough liquidity in a small cap to trade premarket in any size, however as a small fund, Tidefall was able to acquire our position. At the time of our purchase we bought Bumble for ~6x 2024 GAAP earnings or a 16% earnings yield. At that valuation, we didn't need to know how fast the company would grow but rather how fast earnings would decline. That seemed like a far easier question to answer as we believe growth will actually continue. Bumble has net debt of $332m, with strong 8x interest coverage, allowing for large potential share repurchases when management is confident on their trajectory. Bumble is also trading at a large discount to its dating app peer, Match Group, which trades at 19x 2024 GAAP earnings. Although industry growth has slowed from its pandemic highs, we believe dating apps are in a far stronger position than the headlines and self reported surveys would suggest. With workplace romances increasingly taboo and Gen Z spending more time online than Millennials, dating apps are likely to adapt and remain the most common way that new relationships are formed.

BSD Analysis:
Tidefall Capital presents a compelling contrarian thesis on Bumble, acquired at an attractive 6x 2024 GAAP earnings multiple following an 89% decline from all-time highs. The manager argues that current pessimism around dating apps is overdone, noting that while download growth has been negative recently, this reflects temporary post-pandemic normalization rather than structural decline. The fund emphasizes Bumble's dominant market position alongside Tinder and Hinge, protected by strong network effects that prevent new entrants from gaining meaningful scale. Management's recent cost-cutting measures, including a 30% workforce reduction, demonstrate operational discipline and should improve margins going forward. The company's balance sheet remains solid with $332 million in net debt and 8x interest coverage, providing flexibility for share repurchases. At current valuations, Bumble trades at a significant discount to Match Group's 19x earnings multiple, suggesting potential for multiple expansion. The long-term demographic trends favor continued dating app adoption as Gen Z increasingly socializes online and workplace relationships become less common.

Pitch Summary:
Contrast this with Cogent, our second-largest position. Cogent is complex. It is in a notoriously terrible industry for equity value creation. It is idiosyncratically fascinating and has a lot of moving parts. The stock has done okay since we launched (+14% annualized total return, including dividends), but it's not (yet) up a lot. There have been lots of takers on Cogent. Since we started publishing content on our Insights page, I've fielded more than 40 inbound calls from other investment firms to discuss it. Major effort is required to understand why Cogent will not fall victim to the same poor outcomes as all other wireline telecom companies. Nonetheless, many investors are more interested in the harder path for various reasons that seem irrational. Nothing against Cogent, of course – it goes without saying that we believe it's an amazing opportunity and will be a great investment for many years to come. So, what makes investors double-click on Cogent but run away from Carvana? I suspect it's a principal/agent problem. Many analysts and investors managing capital are incentivized to stay in their seats. This means not looking stupid, not upsetting their portfolio manager, and not being too controversial. Cogent is a small cap company that is relatively unknown by most in the markets, so it feels like an uncovered gem. It has complexity which allows analysts to sound smart and diligent as they navigate the details. It is run by Dave Schaeffer, a founder/CEO/owner/operator that is the smartest guy in any room. In choosing to work on Cogent over ideas like Carvana, there is a large element of reputation management and, of course, a whiff of idiosyncratic/uncovered alpha. This combination of factors is preferable compared to their perception of Carvana, which most investors assume is a highly leveraged, high-beta bet on the interest rate environment. As much as I believe in Cogent being an amazing current and future investment, worthy of >20% of our capital, Carvana has significantly more runway to create more value for longer, and it will have a far easier time doing so as it disrupts a larger, more valuable, and more fragmented industry with terrible sub-scale competitors that deliver a dated and universally hated customer experience.

BSD Analysis:
The manager presents Cogent as a complex but compelling investment opportunity in the traditionally value-destructive wireline telecom industry. Despite operating in a notoriously difficult sector, the manager believes Cogent will avoid the poor outcomes that have plagued other telecom companies, though the specific differentiation factors require significant analytical effort to understand. The investment thesis is anchored by founder-CEO Dave Schaeffer, described as an exceptional owner-operator who provides strong leadership. The manager acknowledges Cogent's modest 14% annualized returns since launch but maintains long-term conviction, allocating over 20% of capital to the position. The complexity and relative obscurity of the small-cap company attracts significant institutional interest, with over 40 inbound calls from investment firms seeking discussion. While the manager views Cogent as an excellent long-term investment, they note that Carvana offers superior value creation potential due to its larger addressable market and clearer disruptive advantages. The position represents a contrarian bet on management's ability to execute in a challenging industry backdrop.

Pitch Summary:
When catching up with friends and contacts in the industry to compare notes on our research, I haven't been able to convince any of them to even look at Carvana – not even since it was clearly "de-risked" after its debt restructuring in the summer of 2023. I think I am facile with the facts and that I can explain why it deserves a look. Nonetheless, there have been no takers. The most common reasons why they won't spend time on the company? There are several flavors, but go something like this: "My PM was short this in 2022, I can't pitch it as a long." (One friend said this and then bought it in his personal account.) "I can't pitch something that's up this much/I can't pitch something that fell -99%. It's too much career risk." "They have to be over-earning. I can't tell you why and I haven't spent time on it, but they have to be." To me, the case for owning Carvana is now much easier to discern, and it is one of the best growth stories in the markets with no serious risk of competitive disruption on the horizon (quite the opposite – Carvana is the disruptor). It doesn't take a rocket scientist to study and appreciate the powerful flywheel effects of the business and the operating leverage generated from future growth, but the stock makes most professional investors uncomfortable. Even when they see Carvana disrupting the used auto industry in real time, they can't bring themselves to want to own or to put their capital or their name behind it professionally. They let all sorts of externalities cloud their judgment. We can find some interesting opportunities where others have behavioral biases, and it will always be a fruitful place to look for new ideas. Carvana isn't the easiest company to analyze due to the complexities of its vertical integration, but the workload required to build conviction in Cogent, done right, is multiples more than what's required to understand and build conviction in Carvana. As much as I believe in Cogent being an amazing current and future investment, worthy of >20% of our capital, Carvana has significantly more runway to create more value for longer, and it will have a far easier time doing so as it disrupts a larger, more valuable, and more fragmented industry with terrible sub-scale competitors that deliver a dated and universally hated customer experience. Perhaps one day investors will simplify Carvana down to one of the best long-term and disruptive growth stories in the market and spend some time on it. Thankfully, we get to capture the behavioral inefficiencies between here and there.

BSD Analysis:
The manager presents a compelling bull case for Carvana, emphasizing its position as a disruptor in the used auto industry with powerful flywheel effects and significant operating leverage potential. Despite the stock's remarkable 230% YTD performance and 45x increase from its lows, the manager maintains conviction that Carvana offers superior long-term value creation compared to other portfolio holdings. The thesis centers on Carvana's ability to disrupt a large, fragmented industry populated by sub-scale competitors delivering poor customer experiences. The manager highlights behavioral biases among institutional investors who avoid the stock due to career risk concerns and past negative experiences, creating ongoing opportunities for patient capital. The vertical integration complexity is acknowledged but viewed as manageable compared to other investments in the portfolio. The manager's confidence is reinforced by the company's debt restructuring in 2023, which significantly de-risked the investment profile while maintaining the disruptive growth trajectory.

Pitch Summary:
In January 2024, I established a 10% position in Renew Holdings. The company operates contracting of system critical maintenance services for the UK rail, infrastructure, energy, and environmental sectors across >240 framework agreements which last five years on average. They operate across twelve independently branded subsidiaries, all focused on government-backed multi-year investment programs which offer strong cycle-resilience and earnings visibility. Music to my ears! Their business is often misunderstood, being perceived as a cyclical construction player. In fact, more than ten years ago, they started repositioning the company into a pure maintenance and renewal player focused on small, low-risk, and system-critical contracts, which are particularly recession-resilient. I doubt the maintenance of UK railways will be any less relevant ten or even 20 years down the road. Renew sustained ROIC above 25% over the last ten years and CAGR'd EPS above 15% thanks to their well-established brand and track record of excellent execution, as well as their outstanding corporate culture and long-lasting government relationships. After having attended several railway and highway conferences in the UK, the business quality and culture of Renew's subsidiaries, such as QTS Group, AmcoGiffen, and Carnell, increasingly stood out. I have also become comfortable with their customer concentration risk, with Network Rail making up 40% of sales. Following my discussions with Network Rail senior executives at the Rail Infrastructure Conference (RIN) in London, they confirmed that all their decisions are fully decentralized and made independently across five different regions with independent procurement strategies and budget controls. All railway subsidiaries of Renew combined only make up for roughly 8% of Network Rail's total investment spent, so the risk is very much under control. Nevertheless, nobody expects further bolt-ons of Renew in the railway segment. The business is exceptionally well managed by CEO Paul Scott and CFO Sean Wyndham-Quin, who I consider conservative, humble, and diligent industry experts. They say what they do and then do it. I had the opportunity to sit down with management, and I would not hesitate a second to lend my wallet to them. Both have most of their net worth invested alongside us and act as business owners by making long-term decisions while eventually sacrificing short-term profits. When owning a serial acquirer in the infrastructure sector, it is particularly important to invest alongside sensible capital allocators seeking resilient, cheap, and value-accretive bolt-on M&A, of which Paul and Sean have a fantastic track record. Alan McLeish (on the left) founded QTS Group in 1992 with a single van and a few tools for tree surgery. Over three decades later, it has become one of the UK's leading multi-discipline railway contractors. He sold his business to Renew Holdings in 2018 for £80 million on 6.7x EV/EBITDA as he found a good steward in them, but until today, he remains the Chairman of QTS as a passionate entrepreneur. I really like him. Renew traded on an undemanding 14x trailing P/E, 8.2% eFCF yield, and 2.3% dividend yield, which I considered too cheap for their debt-free and highly cash-generative quality business. During my due diligence, I discovered no unexpected risks. Instead, I became increasingly convinced of their business quality. After the below checklist was satisfied and my work concluded, I pulled the trigger: 1. Within my circle of competence to forecast unit economics of infrastructure maintenance 2. Sustainable competitive advantage with >25% ROIC and durable cash generation 3. Excellent CEO and CFO with a sensible approach to capital allocation via M&A 4. Available to purchase on >7% eFCF yield, in line with Warren Buffett rule Given the ever-increasing pressure on the already challenged UK infrastructure from climate change and population growth, the UK government has committed to investing more than £600bn over the next five years in repairing existing infrastructure to support asset aging. Hence, I feel very comfortable compounding our capital alongside the team here for the next several years.

BSD Analysis:
Baumann presents a compelling bull case for Renew Holdings, emphasizing the company's transformation from cyclical construction to recession-resilient infrastructure maintenance. The manager's thesis centers on Renew's dominant position in UK rail and infrastructure maintenance through 240+ framework agreements averaging five years duration, providing exceptional earnings visibility. With sustained ROIC above 25% and EPS CAGR above 15% over the past decade, the company demonstrates strong operational execution and capital efficiency. Management quality appears exceptional, with CEO Paul Scott and CFO Sean Wyndham-Quin having significant personal investments aligned with shareholders and a proven M&A track record. The valuation appears attractive at 14x P/E and 8.2% free cash flow yield for a debt-free, cash-generative business. The UK government's £600bn infrastructure investment commitment over five years provides a substantial tailwind, while climate change and population growth create ongoing maintenance demand. Baumann's extensive primary research, including industry conferences and management meetings, reinforces his conviction in this defensive compounder.

Pitch Summary:
With Micron, we saw rising risks associated with competition and commoditization. Micron Technology’s products—such as DRAM (Dynamic Random Access Memory) and NAND flash memory—are considered commodities because they’re standardized, widely used across industries, and interchangeable with products from other manufacturers. Micron is a leader in the space, but they’re also facing increased competition from the likes of Samsung and SK Hynix. All three companies compete on price, performance, and capacity, with market dynamics influenced by supply-demand balance and customer needs. We saw this as a potential source of pressure on Micron’s future earnings.

BSD Analysis:
Micron is currently the primary beneficiary of a structural "super-cycle" in memory, recently announcing that its entire 2026 supply of High-Bandwidth Memory (HBM) is already sold out. For the 2026 fiscal year (ending August), analysts project revenue will double to $75.4 billion, with adjusted EPS potentially quadrupling to $33.38. The company’s data center gross margins have exploded to 51%, driven by an insatiable demand for HBM3E and HBM4 to pair with AI accelerators. Micron is currently investing $20 billion in 2026 CapEx to expand its "Mega-Fabs" in Idaho and New York, aiming to mitigate the chronic supply-demand imbalance. With a forward P/E of just 12, the stock is increasingly viewed by Wall Street as a "Stealth AI Winner" that offers a valuation hedge against more expensive compute-pureplays like NVIDIA.