Investment Pitches

Pitch Summary:
Another example of such opportunity is Crayon Group Holding ASA (Crayon), a Norwegian software and IT services company we invested in earlier this year. Crayon serves as a key reseller of Microsoft's products, benefiting from major long-term trends like Cloud computing and AI. Leveraging its strong relationship with Microsoft, Crayon was among the first to introduce Microsoft Copilot to its clients. At the time, the sentiment around this structurally sound company was overly pessimistic — just the way we like it. Since then, Crayon has shown impressive progress, with management improving cash flow, working capital, and continuing to grow even in a tough macro environment. In September, it was reported that U.S. private equity firm Apax Partners and Swiss competitor SoftwareOne were closing in on Crayon, reaffirming our confidence. It's a reminder that value in contrarian situations is sometimes revealed through external validation, but patient investors are positioned to benefit when this happens.

BSD Analysis:
The manager presents a compelling contrarian investment in Crayon, a Norwegian IT services company positioned to benefit from secular trends in cloud computing and AI adoption. The investment thesis centers on Crayon's strategic relationship with Microsoft as a key reseller, particularly their early adoption of Microsoft Copilot services. The manager capitalized on overly pessimistic market sentiment to establish the position at attractive valuations. Operational improvements have validated the thesis, with management successfully enhancing cash flow and working capital while maintaining growth despite challenging macroeconomic conditions. The emergence of takeover interest from Apax Partners and SoftwareOne provides external validation of the company's intrinsic value. This represents a classic value investing approach where patient capital benefits from market inefficiencies and eventual recognition of fundamental worth.

Pitch Summary:
Another company with a CEO who truly gets the mission and culture of the company that he leads (he is a cofounder, after all) is Brian Chesky of Airbnb, Inc. (NASDAQ: ABNB). Chesky spoke last month at the Goldman Sachs Communacopia + Technology Conference, along with Airbnb CFO Ellie Mertz. A recorded webcast of the session is available here. This was a fascinating glimpse inside not just the standard financial outlook but also the strategic vision of Airbnb. GDS Investments owns Airbnb because it is a textbook example of the type of company we like. Yes, there's been a smattering of anti-Airbnb legislation on the local level limiting the ability of property owners to rent out rooms or units), but even then, Airbnb still enjoys plentiful, often-untapped opportunities for growth, especially internationally. Based on their presentation, the management team is clearly focused on those opportunities. We have always had a lot of respect for Chesky. He wants to build something at Airbnb that's durable with a two-way, win-win value proposition. Chesky also makes it clear he understands how his business is serving multiple different customers and providing value to all of them. Plus, Airbnb has a huge net cash position on the balance sheet and little debt ($2.3 billion in debt versus $9 billion in net cash), creating the ideal situation where they can experiment internally, with an approach that seems equally analytical and purpose-driven. In this sense, it's not unlike Nike, albeit at a fundamentally different stage of the maturity curve. Notably, for an asset-lite business model like Airbnb's, the hard boundaries that exist for other companies don't exist in the same way. Who's to say they can't export their brand to other regions, for example, given that they don't need capital to expand? As Mertz said in sharing her own long-term vision: "What gets me continually excited in my second decade at this company is the untapped opportunity we have to offer more than our core offering. So in the last 15 years, we've built this really material scaled global business, over $70 billion of gross booking value. And yet that $70-plus billion of gross booking value is fundamentally one offering. And we haven't even begun to tap either side of the marketplace in terms of the incremental products and services that we can bring to both guests and host to - one, make their experience with Airbnb better; but two, fundamentally increase the scale of this business by multiple revenue streams and businesses."

BSD Analysis:
The manager presents a strong growth thesis for Airbnb built around exceptional leadership, financial strength, and untapped expansion opportunities. CEO Brian Chesky, as cofounder, deeply understands the company's mission and maintains a balanced approach serving both hosts and guests effectively. The company's fortress balance sheet with $9 billion net cash versus only $2.3 billion debt provides significant strategic flexibility for experimentation and expansion. Despite some local regulatory headwinds, the manager sees substantial international growth potential largely untapped. The asset-light business model removes traditional capital constraints on geographic expansion. CFO Ellie Mertz highlighted the massive opportunity beyond their core $70+ billion gross booking value business, suggesting multiple revenue streams and additional marketplace services remain undeveloped. The manager views this as a textbook example of their preferred investment profile, combining strong leadership with durable competitive advantages and significant runway for growth.

Pitch Summary:
Last month, we highlighted sports retailer Nike (NYSE: NKE) as an exciting recent acquisition thanks to its fundamental underlying strengths combined with a low price relative to value. Having its worst trading day ever earlier this summer simply brought the price of the company well below its intrinsic value, making the buy attractive. We discussed the economics of the position in detail in August, writing: "The company has been down at multi-year lows but continues to show long-term staying power." Since that letter, a major change has hit the company: John Donahoe is being replaced by former Nike alum Elliott Hill as CEO. Hill previously worked at Nike from 1988 to 2020, retiring after Donahoe was picked to replace then-CEO Mark Parker. Before that, Hill had worked at Nike for 31 years in a variety of roles. By all accounts, he is incredibly humble and very well-respected by the Nike community. We are legitimately excited by this leadership change! In our view, this transition makes a strong position even stronger. To be fair, every indication at the time of his hiring suggested that Donahoe would perform well in the role, and not all of Nike's recent volatility and underperformance can be laid directly at his feet. He brought an enormous amount of blue-chip experience, having led companies like eBay and Bain & Company. However, it appears he never quite gelled culturally with the mission- and value-driven culture at Nike. The result? Well, Bloomberg was unsparing in its own assessment: "He flopped." This is where Hill comes in: given his prior experience at Nike, he likely understands the essence of the company in a way Donahoe never could. In turn, that understanding could translate into positive impacts on employee morale, the glue that ties great brands together. Nike attracts people committed to a mission; in other words, these are people for whom it's not just a job. When they feel that mission has collapsed or is being under-served, they're more likely to leave. Perhaps Hill's return might even serve as a catalyst for bringing back talent that had already left the company. As Fast Company wrote in its analysis of the changeover, "Hill is a relatively unknown name to the public…. But to some Nike employees, he's not only recognized; he's venerated."

BSD Analysis:
The manager presents a compelling turnaround thesis for Nike centered on new leadership dynamics. The fund acquired Nike at multi-year lows following significant underperformance, viewing the market dislocation as creating an attractive entry point below intrinsic value. The key catalyst is the CEO transition from John Donahoe to Elliott Hill, a 31-year Nike veteran who previously retired in 2020. The manager believes Hill's deep cultural understanding of Nike's mission-driven environment will restore employee morale and operational effectiveness where Donahoe failed to connect. This leadership change is viewed as strengthening an already strong fundamental position. The thesis emphasizes Nike's enduring brand strength and the potential for Hill to re-energize the organization and possibly attract back departed talent. The manager expresses genuine excitement about this development, suggesting high conviction in the turnaround potential.

Pitch Summary:
In this letter, I will be exploring our holding in Wesco International, an electric infrastructure, component, and communication equipment distributor. These distributors are another indirect way to profit from the ongoing boom in solar technology, electric vehicles, and AI technology. Despite the big boost that these technology trends should provide to these distributor businesses, these distributors are not trading at the expensive multiples of AI-related stocks. While most electric component distributors are benefitting from these trends, Wesco is still realizing the integration benefits from a major 2020 merger and is more levered than peers. Wesco originated in the Westinghouse Electric and Manufacturing Company in 1922, where it was originally the distribution arm of Westinghouse's electrical and industrial products. On February 1, 1994, private equity firm Clayton, Dubilier & Rice (CD&R) purchased Wesco from Westinghouse in a $340M leveraged buyout. Wesco was again sold just 4 years later to The Cypress Group which created the holding company Wesco International. In 1999, the company went public. Over the past 20 years, Wesco engaged in over a dozen acquisitions, growing the scale and geographic scope of the company. In 2020, Wesco completed its largest acquisition with the takeover of Anixter International when it used a combination of cash, Wesco shares, and preferred stock to beat out an offer from CD&R. The company is headquartered in Pittsburgh, PA and is focused on supplying the US market and generating 85% of their business revenue coming from the USA and Canada. They are a business-to-business distributor and provide services related to logistics and supply chain management. Their business is organized into three operating segments: Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS) and Utility & Broadband Solutions (UBS). Sales for the company have seasonality with reduced activity in Q4 and Q1 due to weather affecting customer projects. This kind of distribution business is attractive for several reasons. The company has a fragmented suppliers (over 50,000 suppliers in 2023) and a fragmented customer base. These customers range from large Fortune 500 corporations to local small businesses. Acting as the distributor in a fragmented marketplace like this gives Wesco considerable pricing power as it limits the bargaining power of both their suppliers and customers against them. From their 2023 10-K: "We have a large base of nearly 150,000 active customers across commercial and industrial businesses, contractors, government agencies, educational institutions, telecommunications providers, and utilities. Our top ten customers accounted for approximately 11% of our sales in 2023. No one customer accounted for more than 2% of our sales in 2023." Distributors have lower capex requirements compared to manufacturers and can turnover their inventory quickly. This fast turnover is important for adapting to changes in technology and industrial demands. Wesco's asset turnover and inventory turnover ratios are roughly in line with other distributor businesses but declined from their pre-Covid averages. We believe this is likely due to the company carrying extra inventory to avoid any potential supply chain disruptions like what the industry experienced during Covid-19. Wesco announced a $500 million investment program to develop various digital projects. Initially, this will focus on upgrading their ecommerce platform, modernizing their supply chain, automating internal processes such as order fulfillment, and hiring tech talent. Their 2022 purchase of Rahi, a data center services company, also was part of this digital transformation strategy. Despite these investments the company is making in software and their digital sales channels, it normally has limited capex requirements. As a result, the company announced a target of achieving free cash flow of 100% of adjusted net income. Due to the recent supply chain disruptions starting in 2020, many corporations are resourcing parts of their supply chain from North America. This reshoring of the supply chain will act as a tailwind for distributors like Wesco. Wesco is focused on forecasting the needs of their customer base and adjusts their inventory accordingly. As a result, their cash flow generation tends to be counter-cyclical in a recession as they will reduce inventory in the face of falling demand, thereby also reducing their working capital requirement. The increasing scale of Wesco affords it economies of scale, operational leverage, and cross-selling opportunities. The business sector of industrial, electrical and utility distributors is still unconsolidated and as Wesco grows its competitive advantages grow with it. Due to their operational leverage, the company has guided that they believe EBITDA growth will be twice the rate of their sales growth. There are huge secular growth drivers for electrical equipment distribution. While many other companies exposed to these tailwinds are trading at lofty valuations, the distributors are still trading at relatively cheap valuations despite them standing to benefit even more than other businesses due to their inherent operational leverage. Electric vehicle adoption will lead to new opportunities in charging infrastructure and components. Solar energy is the fastest growing renewable energy source. Wesco is well suited for the rapid expansion of solar installations as it partners with leading solar manufacturers to offer photovoltaic modules, inverters, racking systems, and load balancing equipment. Data centers are still rapidly growing in number. A Goldman Sachs Research estimate projects data center power consumption will increase 160% from current levels by 2030. Wesco is poised to capitalize on the need for reliable power infrastructure and energy-efficient technologies. AI will serve as a further accelerant to this growth as AI workloads require significantly more energy than traditional computing tasks. Management has guided that they believe the company will be able to expand margins through operational leverage, gross margin expansion, digital transformation software projects, and further acquisitions. The current 2024 outlook for EBITDA margin is 7.0-7.3% but the company is guiding to a future target of 10%. Long-term sales growth rates will be 5-8% with 4-6% coming from organic growth and 1-2% from acquisitions. Their leverage target is 1.5x-2.5x net debt / EBITDA and they've rapidly moved towards this range since integrating Anixter. While Wesco pays a small dividend, it is also deploying significant amounts of capital on buybacks and has accelerated these buybacks this year. In Q1 and Q2 2024, it purchased $350 million of stock, retiring over 4% of outstanding shares. This is part of the $1 billion share repurchase program the company announced on June 1st, 2022. The company intends to opportunistically repurchase stock and preferred shares depending on market conditions and the company's financial resources. Roughly half of the debt of the company is in variable rate borrowings. Their fixed rate debt has maturities ranging from 2025 to 2032. According to the most recent 10-k: "A 100 basis point rise or decline in interest rates would result in an increase or decrease to interest expense of $25.2 million under our current capital structure." Therefore, falling rates will have a significant benefit for the company. For investment ideas predicated on a company compounding through predictable, steady growth, I believe it makes more sense to evaluate the companies as providing a forward rate of return rather than a specific price target. Wesco's recent revenue growth has been largely from acquisitions and it is unlikely they can continue this growth going forward as can be seen in growth guidance from management. Using management's guidance (their guidance appears reasonable), Wesco provides a forward rate of return of 17.5%, with 9.5% from its forward free cash flow yield (using the low end of FCF guidance) and 4% from its organic growth of revenues and 4% from the management's guidance of margin expansion.

BSD Analysis:
The manager presents a compelling bull case for Wesco International as an indirect play on secular growth trends in electric vehicles, solar energy, and AI infrastructure. The thesis centers on Wesco's position as a distributor benefiting from massive infrastructure buildout while trading at reasonable valuations compared to direct AI plays. Key strengths include significant pricing power from operating in a fragmented supplier/customer market with 150,000 active customers and no single customer representing more than 2% of sales. The company is realizing integration benefits from the 2020 Anixter acquisition while targeting EBITDA margin expansion from 7.0-7.3% currently to 10% long-term through operational leverage and digital transformation initiatives. Management's aggressive capital allocation includes $350 million in share buybacks in the first half of 2024, retiring over 4% of shares outstanding. The manager calculates an attractive 17.5% forward return comprising 9.5% free cash flow yield, 4% organic growth, and 4% margin expansion. Rate sensitivity provides additional upside as roughly half the debt is variable rate, with each 100bp rate decline reducing interest expense by $25.2 million.

Pitch Summary:
Another company with a CEO who truly gets the mission and culture of the company that he leads (he is a cofounder, after all) is Brian Chesky of Airbnb, Inc. (NASDAQ: ABNB). Chesky spoke last month at the Goldman Sachs Communacopia + Technology Conference, along with Airbnb CFO Ellie Mertz. A recorded webcast of the session is available here. This was a fascinating glimpse inside not just the standard financial outlook but also the strategic vision of Airbnb. GDS Investments owns Airbnb because it is a textbook example of the type of company we like. Yes, there's been a smattering of anti-Airbnb legislation on the local level limiting the ability of property owners to rent out rooms or units), but even then, Airbnb still enjoys plentiful, often-untapped opportunities for growth, especially internationally. Based on their presentation, the management team is clearly focused on those opportunities. We have always had a lot of respect for Chesky. He wants to build something at Airbnb that's durable with a two-way, win-win value proposition. Chesky also makes it clear he understands how his business is serving multiple different customers and providing value to all of them. Plus, Airbnb has a huge net cash position on the balance sheet and little debt ($2.3 billion in debt versus $9 billion in net cash), creating the ideal situation where they can experiment internally, with an approach that seems equally analytical and purpose-driven. In this sense, it's not unlike Nike, albeit at a fundamentally different stage of the maturity curve. Notably, for an asset-lite business model like Airbnb's, the hard boundaries that exist for other companies don't exist in the same way. Who's to say they can't export their brand to other regions, for example, given that they don't need capital to expand? As Mertz said in sharing her own long-term vision: "What gets me continually excited in my second decade at this company is the untapped opportunity we have to offer more than our core offering. So in the last 15 years, we've built this really material scaled global business, over $70 billion of gross booking value. And yet that $70-plus billion of gross booking value is fundamentally one offering. And we haven't even begun to tap either side of the marketplace in terms of the incremental products and services that we can bring to both guests and host to - one, make their experience with Airbnb better; but two, fundamentally increase the scale of this business by multiple revenue streams and businesses."

BSD Analysis:
GDS Investments presents Airbnb as an exemplary growth story led by founder-CEO Brian Chesky, who deeply understands the company's mission and culture. The fund views Airbnb as a "textbook example" of their preferred investment profile, emphasizing the platform's significant untapped growth opportunities, particularly in international markets. Despite some regulatory headwinds from local anti-Airbnb legislation, management remains focused on expansion opportunities. The company's financial position is exceptionally strong with $9 billion in net cash against only $2.3 billion in debt, providing substantial flexibility for experimentation and growth initiatives. The asset-light business model creates scalability advantages without capital constraints, enabling geographic expansion and product diversification. CFO Ellie Mertz highlighted the massive opportunity beyond their core offering, noting that their $70+ billion gross booking value represents "fundamentally one offering" with significant potential for additional revenue streams. The thesis centers on Airbnb's early-stage maturity relative to its long-term potential and management's analytical yet purpose-driven approach to growth.

Pitch Summary:
Last month, we highlighted sports retailer Nike (NYSE: NKE) as an exciting recent acquisition thanks to its fundamental underlying strengths combined with a low price relative to value. Having its worst trading day ever earlier this summer simply brought the price of the company well below its intrinsic value, making the buy attractive. We discussed the economics of the position in detail in August, writing: "The company has been down at multi-year lows but continues to show long-term staying power." Since that letter, a major change has hit the company: John Donahoe is being replaced by former Nike alum Elliott Hill as CEO. Hill previously worked at Nike from 1988 to 2020, retiring after Donahoe was picked to replace then-CEO Mark Parker. Before that, Hill had worked at Nike for 31 years in a variety of roles. By all accounts, he is incredibly humble and very well-respected by the Nike community. We are legitimately excited by this leadership change! In our view, this transition makes a strong position even stronger. To be fair, every indication at the time of his hiring suggested that Donahoe would perform well in the role, and not all of Nike's recent volatility and underperformance can be laid directly at his feet. He brought an enormous amount of blue-chip experience, having led companies like eBay and Bain & Company. However, it appears he never quite gelled culturally with the mission- and value-driven culture at Nike. The result? Well, Bloomberg was unsparing in its own assessment: "He flopped." This is where Hill comes in: given his prior experience at Nike, he likely understands the essence of the company in a way Donahoe never could. In turn, that understanding could translate into positive impacts on employee morale, the glue that ties great brands together. Nike attracts people committed to a mission; in other words, these are people for whom it's not just a job. When they feel that mission has collapsed or is being under-served, they're more likely to leave. Perhaps Hill's return might even serve as a catalyst for bringing back talent that had already left the company. As Fast Company wrote in its analysis of the changeover, "Hill is a relatively unknown name to the public…. But to some Nike employees, he's not only recognized; he's venerated."

BSD Analysis:
GDS Investments presents a compelling turnaround thesis for Nike centered on new leadership dynamics. The fund acquired Nike at multi-year lows following significant underperformance, viewing the market dislocation as an opportunity to purchase the company below intrinsic value. The key catalyst is the CEO transition from John Donahoe to Elliott Hill, a 31-year Nike veteran who retired in 2020. The manager argues that Donahoe, despite his blue-chip credentials from eBay and Bain, failed to connect with Nike's mission-driven culture, leading to employee morale issues and talent exodus. Hill's return is positioned as a cultural reset that could restore employee engagement and potentially attract back departed talent. The thesis emphasizes Nike's fundamental strengths and brand durability, suggesting the recent volatility was primarily leadership-driven rather than structural. This represents a classic value play where temporary operational challenges have created an attractive entry point for a high-quality franchise.

Pitch Summary:
Another company with a CEO who truly gets the mission and culture of the company that he leads (he is a cofounder, after all) is Brian Chesky of Airbnb, Inc. (NASDAQ: ABNB). Chesky spoke last month at the Goldman Sachs Communacopia + Technology Conference, along with Airbnb CFO Ellie Mertz. A recorded webcast of the session is available here. This was a fascinating glimpse inside not just the standard financial outlook but also the strategic vision of Airbnb. GDS Investments owns Airbnb because it is a textbook example of the type of company we like. Yes, there's been a smattering of anti-Airbnb legislation on the local level limiting the ability of property owners to rent out rooms or units), but even then, Airbnb still enjoys plentiful, often-untapped opportunities for growth, especially internationally. Based on their presentation, the management team is clearly focused on those opportunities. We have always had a lot of respect for Chesky. He wants to build something at Airbnb that's durable with a two-way, win-win value proposition. Chesky also makes it clear he understands how his business is serving multiple different customers and providing value to all of them. Plus, Airbnb has a huge net cash position on the balance sheet and little debt ($2.3 billion in debt versus $9 billion in net cash), creating the ideal situation where they can experiment internally, with an approach that seems equally analytical and purpose-driven. In this sense, it's not unlike Nike, albeit at a fundamentally different stage of the maturity curve. Notably, for an asset-lite business model like Airbnb's, the hard boundaries that exist for other companies don't exist in the same way. Who's to say they can't export their brand to other regions, for example, given that they don't need capital to expand? As Mertz said in sharing her own long-term vision: "What gets me continually excited in my second decade at this company is the untapped opportunity we have to offer more than our core offering. So in the last 15 years, we've built this really material scaled global business, over $70 billion of gross booking value. And yet that $70-plus billion of gross booking value is fundamentally one offering. And we haven't even begun to tap either side of the marketplace in terms of the incremental products and services that we can bring to both guests and host to - one, make their experience with Airbnb better; but two, fundamentally increase the scale of this business by multiple revenue streams and businesses."

BSD Analysis:
GDS Investments presents Airbnb as an exemplary growth story led by founder-CEO Brian Chesky, who deeply understands the company's mission and culture. The fund views Airbnb as a "textbook example" of their preferred investment profile, emphasizing the platform's significant untapped growth opportunities, particularly in international markets. Despite some regulatory headwinds from local anti-Airbnb legislation, management remains focused on expansion opportunities. The company's financial position is exceptionally strong with $9 billion in net cash against only $2.3 billion in debt, providing substantial flexibility for experimentation and growth initiatives. The asset-light business model creates scalability advantages without capital constraints, enabling geographic expansion and product diversification. CFO Ellie Mertz highlighted the massive opportunity beyond their core offering, noting that their $70+ billion gross booking value represents "fundamentally one offering" with significant potential for additional revenue streams. The thesis centers on Airbnb's early-stage maturity relative to its long-term potential and management's analytical yet purpose-driven approach to growth.

Pitch Summary:
Last month, we highlighted sports retailer Nike (NYSE: NKE) as an exciting recent acquisition thanks to its fundamental underlying strengths combined with a low price relative to value. Having its worst trading day ever earlier this summer simply brought the price of the company well below its intrinsic value, making the buy attractive. We discussed the economics of the position in detail in August, writing: "The company has been down at multi-year lows but continues to show long-term staying power." Since that letter, a major change has hit the company: John Donahoe is being replaced by former Nike alum Elliott Hill as CEO. Hill previously worked at Nike from 1988 to 2020, retiring after Donahoe was picked to replace then-CEO Mark Parker. Before that, Hill had worked at Nike for 31 years in a variety of roles. By all accounts, he is incredibly humble and very well-respected by the Nike community. We are legitimately excited by this leadership change! In our view, this transition makes a strong position even stronger. To be fair, every indication at the time of his hiring suggested that Donahoe would perform well in the role, and not all of Nike's recent volatility and underperformance can be laid directly at his feet. He brought an enormous amount of blue-chip experience, having led companies like eBay and Bain & Company. However, it appears he never quite gelled culturally with the mission- and value-driven culture at Nike. The result? Well, Bloomberg was unsparing in its own assessment: "He flopped." This is where Hill comes in: given his prior experience at Nike, he likely understands the essence of the company in a way Donahoe never could. In turn, that understanding could translate into positive impacts on employee morale, the glue that ties great brands together. Nike attracts people committed to a mission; in other words, these are people for whom it's not just a job. When they feel that mission has collapsed or is being under-served, they're more likely to leave. Perhaps Hill's return might even serve as a catalyst for bringing back talent that had already left the company. As Fast Company wrote in its analysis of the changeover, "Hill is a relatively unknown name to the public…. But to some Nike employees, he's not only recognized; he's venerated."

BSD Analysis:
GDS Investments presents a compelling turnaround thesis for Nike centered on new leadership dynamics. The fund acquired Nike at multi-year lows following significant underperformance, viewing the market dislocation as an opportunity to purchase the company below intrinsic value. The key catalyst is the CEO transition from John Donahoe to Elliott Hill, a 31-year Nike veteran who retired in 2020. The manager argues that Donahoe, despite his blue-chip credentials from eBay and Bain, failed to connect with Nike's mission-driven culture, leading to employee morale issues and talent exodus. Hill's return is positioned as a cultural reset that could restore employee engagement and potentially attract back departed talent. The thesis emphasizes Nike's fundamental strengths and brand durability, suggesting the recent volatility was primarily leadership-driven rather than structural. This represents a classic value play where temporary operational challenges have created an attractive entry point for a high-quality franchise.

Pitch Summary:
In previous commentaries, we discussed some of the team's more meaningful alpha bucket positions, including Dish Networks 2026 (stock symbol - SATS) convertible debt. The investment thesis in Dish converts has incorporated our view the asset value protection provided by the company's wireless telecom license value far exceeds the company's debt. Positive developments provided the catalyst for the Dish bonds to trade up to 80 cents on the dollar at the time of writing from 60 cents at the beginning of August. The most recent catalyst was that a cohesive group of bondholders, including Purpose Investment Partners, agreed to exchange the 2026 bonds into longer-dated instruments with a direct security interest in wireless telecom license collateral. The same group of bondholders has also agreed to finance the company further with attractively priced debt using the same security interest. The company has also entered into an agreement to sell its legacy satellite television operations to DirecTV, the other duopoly satellite TV provider in the U.S., that will lower its debt. Dish bonds continue to be a core Fund position, and we believe recent developments have lowered credit risk meaningfully due to a stronger position in its capital structure, while yield has increased due to a higher coupon rate.

BSD Analysis:
The manager presents a compelling bull case for Dish Network's convertible bonds based on asset-backed value protection and strategic restructuring. The core thesis centers on the wireless telecom license value significantly exceeding the company's debt obligations, providing substantial downside protection. Recent positive catalysts have driven the bonds from 60 cents to 80 cents on the dollar, representing a 33% gain in just two months. The restructuring involves exchanging 2026 bonds for longer-dated instruments with direct security interest in valuable wireless spectrum collateral, improving the credit profile. The sale of legacy satellite TV operations to DirecTV will reduce debt burden while allowing focus on the higher-value wireless business. The manager views these developments as meaningfully reducing credit risk while maintaining attractive yield through higher coupon rates. This appears to be a core conviction position where the team sees asymmetric risk-reward favoring bondholders.

Pitch Summary:
The company serves as a middleman for collecting data; a heavy reliance on a single, third-party data collection tool; off-the-books employees in India; email marketing positions are being marketed as software job; Update 10/16/24 - Follow-up report. Update 10/25/24 - Follow-up report: Disclosed manipulated revenue guidance. Update 11/22/24 - Management lying on their recent media tour.

BSD Analysis:
Zeta Global offers AI-driven marketing automation and data analytics. Bears argue that customer churn, aggressive capitalization of costs, and crowded competition from Salesforce, Adobe, and HubSpot threaten growth. Revenue growth relies heavily on acquisitions, and organic momentum appears limited. With high leverage and limited free cash flow, skeptics expect dilution or refinancing pressure.

Pitch Summary:
Merck & Co. (MRK) was our second-largest detractor this quarter, declining -8.3%. MRK's leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company's $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.

BSD Analysis:
GreensKeeper maintains a constructive view on Merck despite the 8.3% quarterly decline that made it the second-largest portfolio detractor. The manager identifies the primary headwind as temporary inventory issues with GARDASIL 9's Chinese distributor, which will impact shipments through 2024 but doesn't alter the vaccine's fundamental long-term prospects. The fund emphasizes that this HPV vaccine disruption represents a short-term operational challenge rather than a structural competitive threat. More importantly, GreensKeeper highlights the continued strength of Keytruda, Merck's $27 billion cancer immunotherapy franchise that continues robust growth and drives overall earnings expansion. The manager's tone suggests confidence that Keytruda's momentum can offset near-term GARDASIL headwinds while the vaccine business normalizes. This balanced perspective reflects appreciation for MRK's diversified pharmaceutical portfolio and the temporary nature of current challenges. The fund appears to view the current weakness as potentially creating attractive accumulation opportunities in a high-quality pharmaceutical franchise.

Pitch Summary:
Alphabet Inc. (GOOGL) was our largest detractor this quarter, declining by -8.8%. Global antitrust pressures have intensified, with the U.S. Department of Justice and the European Commission targeting several dominant technology companies, including Alphabet. Historically, Alphabet has signed agreements with Apple to serve as the exclusive default search engine for the Safari browser—a practice that a US court recently ruled violated antitrust law. Despite the growing possibility that Alphabet will be required to end its exclusive distribution agreements with Apple, we believe that when faced with a choice screen, the vast majority of users will continue to select Google as their preferred search engine due to its quality advantage over competitors. In EU countries where Google was previously compelled to terminate similar agreements, 97% of users opted to retain Google as their default search engine when given a choice. A similar outcome in the United States would likely have an immaterial impact on GOOGL's earnings power. Alphabet is also facing other regulatory cases, which we monitor closely.

BSD Analysis:
Despite Alphabet's 8.8% quarterly decline making it the largest portfolio detractor, GreensKeeper maintains conviction in the position amid intensifying antitrust pressures. The manager acknowledges regulatory challenges including DOJ and European Commission actions targeting the company's dominant market position, particularly the recent court ruling against exclusive Apple Safari agreements. However, the fund demonstrates confidence in Google's competitive moat, arguing that search quality advantages will retain user preference even without exclusive distribution deals. The compelling evidence from EU precedent shows 97% user retention when given choice screens, suggesting minimal earnings impact from potential US regulatory changes. GreensKeeper views the current regulatory overhang as temporary noise rather than fundamental business impairment. The manager's willingness to hold through volatility reflects confidence in Google's sustainable competitive advantages and long-term earnings power. While monitoring ongoing regulatory cases closely, the fund appears to view current weakness as potentially creating attractive entry points for a high-quality franchise.

Pitch Summary:
Fiserv (FI) was our third-largest contributor this quarter, returning +20.5%. Our initial investment in Fiserv followed its merger with First Data in 2020, and we subsequently increased our position after the stock sold off amid rising fintech competition in 2022. Since then, Fiserv has executed exceptionally well across multiple areas—strengthening its balance sheet, returning capital to shareholders, and entrenching its presence with merchants by adding integral software solutions to its payment processing and core banking solutions. The company is on track to achieve its 39th consecutive year of double-digit earnings per share growth, and we remain optimistic about our investment's potential to compound in the years ahead.

BSD Analysis:
GreensKeeper demonstrates conviction in Fiserv with a strong 20.5% quarterly return, highlighting their opportunistic approach to position sizing. The manager initially invested following the First Data merger in 2020, then strategically increased their position when fintech competition pressured the stock in 2022. This contrarian move has paid off as Fiserv executed exceptionally across multiple fronts including balance sheet optimization and shareholder capital returns. The fund emphasizes FI's successful strategy of deepening merchant relationships by integrating essential software solutions with their core payment processing and banking services, creating stickier customer relationships. The impressive track record of approaching 39 consecutive years of double-digit EPS growth demonstrates consistent execution and market positioning strength. GreensKeeper views this as validation of their patient, opportunistic investment approach and expects continued value compounding. The manager's confidence reflects appreciation for FI's ability to navigate competitive pressures while maintaining growth momentum through strategic execution.

Pitch Summary:
American Express (AXP) was our second-largest contributor this quarter, with a return of +17.1%. AXP continues to invest in its customers beyond traditional credit card rewards, recently enhancing its Global Dining Access to provide Platinum cardholders with exclusive reservations at premier restaurants worldwide. This focus on unique experiences has attracted a younger demographic, with millennials and Gen Z driving most of the customer acquisition and card spending growth in recent quarters. Exclusive events are more challenging to replicate than standard point reward systems, presenting a challenge for competing card issuers that lack AXP's scale and concentrated base of affluent consumers. AXP has fine-tuned its offerings over decades to strengthen its network effect and shows no signs of slowing down.

BSD Analysis:
GreensKeeper praises American Express for its strong 17.1% quarterly return and strategic evolution beyond traditional credit card rewards. The manager highlights AXP's innovative approach to customer engagement through exclusive experiences like Global Dining Access for Platinum cardholders, which provides premier restaurant reservations worldwide. This experiential strategy is successfully attracting younger demographics, with millennials and Gen Z driving both customer acquisition and spending growth. The fund emphasizes AXP's competitive moat, noting that exclusive experiences are significantly harder for competitors to replicate compared to standard point-based reward systems. This differentiation is particularly valuable given AXP's scale advantages and concentrated affluent customer base that competitors struggle to match. The manager appreciates how AXP has refined its value proposition over decades to strengthen network effects and customer loyalty. GreensKeeper views this as a sustainable competitive advantage that positions AXP well for continued growth and market share expansion.

Pitch Summary:
Our top contributor in the third quarter was portfolio stalwart Berkshire Hathaway (BRK.A/B), which returned +13.1%. Although the railroad and utilities segments continue to face headwinds, the insurance and manufacturing businesses are producing robust profits, with BRK delivering its highest quarterly operating profit in recent history. The company's remarkable cash generation allows BRK to reinvest capital into its individual businesses throughout the highs and lows of business cycles, a luxury many competitors cannot afford. Augmented by the sale of equity holdings, BRK ended the quarter with over $270 billion in cash on its balance sheet—proof that Buffett continually operates from a position of strength.

BSD Analysis:
GreensKeeper highlights Berkshire Hathaway as a portfolio stalwart that delivered strong quarterly performance with a 13.1% return. The manager emphasizes BRK's diversified business model resilience, noting that while railroad and utilities face challenges, the insurance and manufacturing segments are generating robust profits, leading to record quarterly operating earnings. The fund appreciates BRK's exceptional cash generation capabilities, which provide strategic flexibility to reinvest in businesses during various market cycles—a competitive advantage unavailable to many peers. The massive $270 billion cash position demonstrates Warren Buffett's conservative approach and positions the company to capitalize on opportunities from a position of financial strength. This substantial war chest, built through both operational cash flow and strategic equity sales, reinforces the manager's confidence in BRK's ability to compound value over time. The pitch reflects appreciation for BRK's counter-cyclical investment capacity and defensive characteristics. GreensKeeper views this as a core holding that exemplifies their patient, long-term investment philosophy.

Pitch Summary:
Quad Graphics shares remained under pressure during the third quarter given ongoing revenue challenges from weaker print volumes possibly due to ongoing double-digit postage increases. While weaker print volumes will likely remain a near-term headwind, the marketplace seems to be overlooking the company's ongoing transformation to a marketing experience company. Leveraging their longstanding relationships with most Fortune 500 customers, Quad has expanded their traditional print offerings to provide customers data intelligence, creative, production media and technology solutions. These marketing solutions services have attractive margins and should continue to grow as a portion of the revenue mix, helping the company to return to annual revenue growth overtime. Quad also owns more than 13M square feet of manufacturing sites and surrounding land which is a significant "hidden" asset. The company has undertaken ongoing manufacturing site rationalization, which maintains higher utilization rates and supports strong margins and cash flow generation. Quad has four properties that are in the process of being sold which should provide additional proceeds to further accelerate debt reduction. We believe the current share discounts minimal success for Quad's multi-year transformation plan. In our estimation, the company has the potential to generate greater than $175M of free cash flow over the coming six quarters and, assuming non-core asset sale success, which suggests the shares are currently trading at less than three times 2025 EV/EBITDA. This represents a significant discount to the 2023 acquisition of peer RR Donnelley at 6.8 times EV/EBITDA and leading marketing/ad agencies currently trading between seven and nine times. Management is also increasing capital return to shareholders, repurchasing 11% of their shares since 2022 and initiating a 4% dividend yield. Success on their transformation should lead to accelerating growth of free cash flow, earnings, and valuation expansion overtime. We believe Quad's upside potential is multiples of current price levels. The greatest near-term risk would be an unexpected deep recession which would create greater pressure on the company's large print volumes. However, the company has in the past been able to offset short-term unexpected revenue pressures by quickly adjusting their variable cost base.

BSD Analysis:
Miller Value Partners sees substantial upside in Quad Graphics despite near-term print volume pressures from postage increases and secular headwinds. The investment thesis centers on an underappreciated transformation from traditional printing to a comprehensive marketing experience company, leveraging Fortune 500 relationships to expand into higher-margin data intelligence, creative, and technology solutions. The company's 13 million square feet of manufacturing assets represents significant hidden value, with ongoing rationalization driving improved utilization and cash flow generation. At less than 3x 2025 EV/EBITDA (assuming asset sales), Quad trades at a steep discount to the RR Donnelley acquisition (6.8x) and marketing agencies (7-9x). The manager projects over $175M in free cash flow over six quarters, supported by asset sales and operational improvements. Management's shareholder-friendly approach includes 11% share repurchases since 2022 and a 4% dividend yield, demonstrating confidence in the transformation. The primary risk involves recession-driven print volume declines, but the company's variable cost structure provides defensive characteristics. The transformation success should drive accelerating free cash flow growth and multiple expansion over time.

Pitch Summary:
Energy was the only sector with negative returns in the third quarter. With the recent pullback in commodity prices, there has been ongoing fear that Nabors will experience greater operational pressure on their global rig business. The recent industry consolidation may lead to some near-term choppiness in industry capital expenditures; however, we see this as temporary, as Nabors is well positioned to expand their working global rig count next year. Nabors has signed contracts for a greater than 20% increase in their international working rig fleet over the coming two years. In addition, their joint venture with Saudi Aramco ("SANAD") plans to expand from 7 to 50 rigs over the coming seven years and has the potential to generate EBITDA in excess of $500M. Leading drilling peers in the Middle East (ADNOC, Arabian Drilling, ADES Holding) have EV/EBITDA multiples between 8.3 times and 11.8 times, while Nabors is valued near 3.5 times EV/EBITDA. We believe SANAD has significant and growing embedded value! Nabors Drilling Solutions segment also has a growing global expansion opportunity. The segment has very low capital intensity and 90% cash conversion. Achieving management's 20-25% EBITDA contribution target would have a very positive impact on future free cash flow. At quarter end, Nabors' market share price is only trading at $1.30/share (pre reverse split), which is down 90% from its former highs. With the recent share price weakness, Nabors looks extremely attractive, at less than one times forward cash flow (only lower for a short time during the Covid 2020 outbreak). The greatest near-term risk would be pullback in oil prices under $60/barrel, which could create a global pullback in rig deployments and potentially pressure margins. In this scenario, Nabors share price might be under additional pressure but with a majority of capex dedicated to maintenance capex a falling rig count would also see a pullback in capital expenditures which should continue Nabors to generate free cash flow. We believe Nabors has the potential to generate greater than $1B in free cash flow over the next five years which will significantly reduce company debt and accrue to an equity holder overtime. The marketplace is overlooking the fact that Nabors has successfully reduced debt by $1.8B since the beginning of 2018 and has no debt maturities before 2027. We believe Nabors' long-term upside potential is multiples of the current share price.

BSD Analysis:
Miller Value Partners presents a contrarian bull case for Nabors Industries despite energy sector headwinds and recent commodity price weakness. The manager emphasizes strong contract visibility with a 20% increase in international working rigs over two years and the transformative SANAD joint venture with Saudi Aramco, which plans to expand from 7 to 50 rigs over seven years with potential EBITDA exceeding $500M. At 3.5x EV/EBITDA, Nabors trades at a significant discount to Middle Eastern drilling peers (8.3x-11.8x), suggesting substantial valuation upside. The Drilling Solutions segment offers attractive growth with low capital intensity and 90% cash conversion, targeting 20-25% EBITDA contribution. Trading at less than 1x forward cash flow and down 90% from highs, the stock appears extremely undervalued despite successful debt reduction of $1.8B since 2018 and no maturities until 2027. The manager projects over $1B in free cash flow generation over five years, providing significant debt reduction and shareholder value creation potential. Key risks include oil prices below $60/barrel, but the defensive capital structure and maintenance-focused capex should preserve cash generation even in downturns.

Pitch Summary:
United Natural Foods' share price continues to recover from recent 20-year lows however is still down 60% from its former high. The company's new CFO recently highlighted a new three-year transformation plan focused on building market share in the natural foods sector, expanding higher margin digital services and rolling out six sigma/lean initiatives to improve operating efficiencies. UNFI is also rolling out a simplified contract structure with their clients which will eliminate layers of complexity positioning the company to achieve greater operating efficiencies overtime. There remains a wide gap between relatively low UNFI margins, and those some smaller distributors are able to achieve. Success on the transformation plan should allow the company to not only narrow that gap overtime but exceed their smaller peers due to their greater size, scale, and higher margin proprietary service offerings. The new transformation initiatives have potential to accelerate profit growth and significantly improve future free cash flow generation. UNFI also has an extensive asset base, and a distribution network across all 50 states and 10 Canadian providences. The company has an extensive distribution and warehouse network, providing a significant margin of safety. As the transformation plan progresses the company says it will focus on optimizing their distribution assets to further improve asset utilization and enhance company financial returns. We believe UNFI long-term upside potential may be multiples of the current share price given our estimation of their long-term earnings power, near 30% discount to book value and Enterprise Value to Revenue of only .1 times! The greatest near-term risk in the company transformation plan would be a delayed recovery in company margins due to the unexpected disruptions from consolidating the Firm's distribution network.

BSD Analysis:
Miller Value Partners sees significant upside in United Natural Foods following a dramatic decline from previous highs, with shares still down 60% despite recent recovery from 20-year lows. The investment thesis centers on a comprehensive three-year transformation plan led by a new CFO, focusing on market share expansion, higher-margin digital services, and Six Sigma operational improvements. The manager identifies a substantial margin gap between UNFI and smaller competitors, suggesting meaningful efficiency gains are achievable given UNFI's superior scale and proprietary service offerings. The company's extensive distribution network spanning all 50 states and 10 Canadian provinces provides both competitive advantages and asset optimization opportunities. At current valuations of 0.1x Enterprise Value to Revenue and a 30% discount to book value, the stock appears deeply undervalued relative to normalized earnings power. The primary risk involves potential margin recovery delays due to distribution network consolidation disruptions, but the manager believes the transformation initiatives position UNFI for accelerated profit growth and substantially improved free cash flow generation.

Pitch Summary:
Gannett continues to make progress with their long-term transformation to a digital media company. Management expects digital revenues to become more than 50% of company sales over the coming year which would support the company's return to annual revenue growth. In September, the DOJ presented a very strong case against Google for their Ad Tech business. Gannett's anti-trust case against Google is very similar to the DOJ case, and we believe it remains overlooked by the marketplace. Gannett is being represented by Kellogg Hansen who won the two largest anti-trust verdicts ($1.2B and $1.3B) and were also successful in defending the appeals of those verdicts. While it is impossible to know with certainty the outcome of Gannet's legal case, we find it interesting that Kellogg Hansen's only compensation is tied to Gannett having success in winning their case. This is an important indication of alignment to us. In a scenario where Gannett wins a verdict in the neighborhood of the amount they are seeking, it may mean a windfall greater than all the net debt on the balance sheet. Assuming, as we do, that the current share price has not priced in such a development, the result would be a share price below two times normalized Enterprise Value to EBITDA (EV/EBITDA). Compared with The New York Times, which currently trades at greater than nineteen times EV/EBITDA, a valuation at half of that multiple on normalized EBITDA would support an equity market cap more than $4B for Gannett. While there are risks of temporary setbacks with multi-year transformations, the current market valuation framework appears to remain focused on the company's historical secular growth challenges. The biggest near-term risk would be unexpected weaker trends in print advertising creating greater near-term secular revenue headwinds. A successful transformation, positive anti-trust case verdict, and potential non-core asset sale could lead to significant upside potential overtime. We believe the shares remain significantly mispriced at only .3 times revenue and greater than 40% normalized free cash flow yield.

BSD Analysis:
Miller Value Partners presents a compelling bull case for Gannett centered on digital transformation and potential antitrust litigation upside. The manager highlights that digital revenues are expected to exceed 50% of sales within a year, marking a critical inflection point toward sustainable growth. The antitrust case against Google represents a significant catalyst, with Gannett represented by Kellogg Hansen, the firm behind the two largest antitrust verdicts in history. The alignment of interests is notable, as the law firm's compensation is entirely success-based. At current valuations of 0.3x revenue and a 40% normalized free cash flow yield, the stock trades at a massive discount to peers like The New York Times (19x EV/EBITDA). A successful verdict could eliminate all net debt and drive the valuation to 2x normalized EV/EBITDA, implying substantial upside potential. The primary risk remains secular print advertising decline, but the digital transformation appears to be gaining meaningful traction.

Pitch Summary:
Additionally, I have increased my position in Sanlorenzo S.p.A. (SL), a luxury yacht manufacturer that presents substantial growth potential. Despite experiencing a slowdown in new orders, the company has demonstrated strong performance, achieving a 7% increase in revenue and a 10% growth in EBITDA. Sanlorenzo is also expanding its presence in the Asia-Pacific region, while the recent acquisition of Swan is expected to contribute an additional €12 million in annual EBITDA. In the face of ongoing macroeconomic uncertainties, Sanlorenzo continues to trade at attractive multiples and maintains a zero-debt balance sheet. Furthermore, the company is supported by a top-tier management team with a considerable equity stake in the business, indicating strong alignment with shareholder interests.

BSD Analysis:
The manager demonstrates conviction by increasing the Sanlorenzo position despite order slowdown concerns, focusing on the company's operational resilience and growth initiatives. Revenue growth of 7% and EBITDA expansion of 10% during challenging conditions highlight management's execution capabilities. The Asia-Pacific expansion strategy and Swan acquisition adding €12 million in annual EBITDA demonstrate clear growth catalysts beyond the current cycle. The zero-debt balance sheet provides financial flexibility during uncertain times, while attractive trading multiples suggest the market is overly pessimistic. Strong management ownership alignment reduces agency risk and supports long-term value creation. The manager appears to be betting on the luxury yacht market's eventual recovery while benefiting from current attractive valuations.