Investment Pitches

Pitch Summary:
Broadcom (AVGO) was the largest contributor to our portfolio performance in the second quarter after reporting strong operating results and guidance. The stock benefited from continued investor enthusiasm for high growth momentum stocks, as well as from companies with exposure to artificial intelligence. Importantly, Broadcom has been growing its hyperscale and connectivity product portfolios, resulting in increasing revenue exposure to faster growing artificial intelligence applications and offsetting a slowdown in its legacy semiconductor business.

BSD Analysis:
Renaissance maintains a bullish stance on Broadcom following strong Q2 operating results and guidance that drove the stock to be their largest portfolio contributor. The manager highlights Broadcom's strategic pivot toward AI-focused growth, specifically through expanding hyperscale and connectivity product portfolios that provide increasing revenue exposure to artificial intelligence applications. This diversification strategy is effectively offsetting weakness in the company's legacy semiconductor operations. The investment thesis centers on Broadcom's positioning to capitalize on the AI infrastructure buildout, with the company benefiting from sustained investor enthusiasm for high-growth momentum stocks with AI exposure. Renaissance views this transformation as sustainable, given the structural demand drivers in AI and data center connectivity solutions.

Pitch Summary:
Around 18 months ago now we discovered Nu Holdings. Its low unit-costs, customer obsession and disruptor mindset in the lazy world of consumer banking immediately sparked our interest. Simply put Nu Holdings has the best unit costs in global full service banking (75% below peers and still falling). It uses these low costs not to boost profits but instead to offer customers better interest rates (e.g. Nu's 12% Mexican deposit rate vs c.5% offered by peers). Because of this and its high customer service focus, Nu is rightly loved by consumers. This can be seen in the speed with which 118m customers have flocked to it but also in its great Net Promoter Scores (NPS). The global banking industry consumer offering has not really changed much in 50 years. (Accounts, loans, branches, poor interest rates, little customer service or value for money and add-on digital apps). We think that might be about to change. Companies like Wise will tackle niches like foreign exchange, but Nu can offer a far more efficient full suite of banking products at great prices. Importantly its offering uses the Scale Economy Shared business model that we admire and seek out. We remind readers that it is this business model which has proven so powerful in retailing (Costco) and online (Amazon). Of course, there is a way to go before Nu can be included in such a rarified list of proven Gorilla businesses, but we think it has a good chance of success. We think Nu has the right building blocks and culture in place to challenge not just banks in Latin America, but globally. Nu has real dedication to low-units costs combined with a desire to innovate and share such cost efficiencies with its customers. It is also obsessed with delighting the customer. These traits when combined create a powerful flywheel model that has been super successful in other industries and geographies. No one (except Wise) is trying to take this model into financial services, until now. All this is symptomatic of the disruptor business models we seek out and what we look for in a business model with a long runway of growth. Indeed, when we wrote about 'Supernatural Compounders' in our Nirvana piece, Nu was at the forefront of our mind. In our recent investor meeting we listed six traits we look for in such a business (Nu possesses all six): • A visionary founder • Who re-thinks their industry – solving a hard problem • ...to give customers a more compelling offering • Is low unit-cost driven and customer obsessed • Has a huge runway of growth ahead • Makes good/great ROICs that enable self-funded growth Two further points interest us about Nu. The first is the giant scope of growth in front of it as arguably the whole global banking industry is ripe for this type of disruption. The second is how much the company's current earnings are depressed, suggesting the shares are not as expensive as they look. To compete with Nu, incumbent banks will need future cost bases that are c.75% lower than today's and more importantly a management mentality that passes much of that new efficiency on to customers. This would mean a re-basing of profits to much lower levels. From today's starting point of incumbent bank culture and customer/shareholder relations this will be almost impossible to achieve. Our confidence in this statement comes from our observations in so many other sectors that have been disrupted in this way (UK pubs, ecommerce, supermarkets, airlines, streaming). No matter how high the IQ is of incumbent banking CEO or how good the hired consultants are, the end result is so often the same. Readers may highlight differences between Brazilian/Mexican banking vs other countries, thus implying our simple extrapolation of Nu's model is maybe flawed. There are always regional and sector differences, but customer desire for 'value for money' is a philosophy that is both timeless and travels the world over – of that we are certain. We also note how powerful and well established the banks in Brazil Nu competed with to win its 100m customers were (e.g. Santander and Bank Itau). In short, we think Nu has the brand, customer service, culture and low unit cost base to win market share in many, many, countries. The company's recent commentary on its potential for global growth is interesting. They know they need global, not local IT systems to export their model worldwide. These take money and time to build. Nu are expensing such future growth costs today and tell us they should be ready by 2026/7. Not only do we think Nu has a long runway of growth ahead of it we think it is already the best banking business model in the world today. A recent Nu investor presentation showed the group's ROE of 27% (but this includes early stage set up costs in Mexico and Columbia). This 27% level is also calculated off a central capital base that is way in excess of the bank's long term needs. Adjusting for such excess capital (and start-up costs) Nu's ROE is c.60%. Remember this is a bank, a fully regulated and capitalised bank, not just a payment platform. The most recent Q1 25 net income reported by Nu was $557m, annualised $2.2bn. This is the figure used in the 27% ROE calculations above. It also suggests a headline valuation of 28x PE. Readers might therefore assume all future growth is fully priced in. We do not agree. The chart below shows the ARPU the company earns from each user of $11.2 (per month). It also shows that the average mature Brazilian bank has an APRU of $43. The longer customers have been with Nu the higher their ARPU (as they use more products). With super low and stable unit-costs each dollar increase in ARPU is highly profitable to the company. Particularly so, when such growth is just driven by existing customers maturing in their relationship with the company. At a c.60% incremental profit rate were the company's ARPU to be $15 not $11.2 its annual profits today would be $4.8bn not $2.2bn. Adjusting for this reduces the Dec24 PE from 28x to 13x. Remember this is a historic multiple for a company growing 25-40% pa. Also, one with a runway to keep growing at similar rates for many years into the future. Despite its rapid growth to date, the company still only has a tiny market share of banking gross profit pools in Brazil (5%) and Mexico (<1%). This provides a glimpse as to how big Nu's profit pool might be just by deepening its existing market positions. Future expansion in other geographies only expands its growth runway further. We think Nu a powerful future global business deploying a proven disruptor model. It is also led by its founder (David Velez). He is a perfect example of the sort of leader we wish to align our capital with. Visionary, ambitious and passionate about the right things. He always talks about: • Lowest unit costs • Outstanding customer service • Great product innovation • Developing an excellent culture Disruptor businesses like Nu are, by definition, hard to forecast and much can change along the way. But we are in the probability game, not the certainty game. How high a probability do we attach to the idea that Nu might be able to carry on growing at high rates for a long period? And what price might we pay for a chance of such an outcome? • Nu's look through PE (using a more mature ARPU) is c.13x we suggest. • Very prudently we could assume it will trade on a similar multiple 20y out (Likely more if it were still a dominant growing business with good products and ROE's) o If so, our investment return will match the compounding the company itself achieves • So how fast might the company grow? o Maybe today's ROE (of 30-50%) will moderate to 25% o If all of that were reinvested for growth at similar rates of return, then… o The entity we own a portion of could grow at c.25%pa • A quick glance of a compound interest table tells us… o That at a 25% growth rate each £100 invested in Nu Holdings today will be worth… o … £8,600 in twenty years' time We hope you can see why we are excited about our investment in Nu Holdings.

BSD Analysis:
Holland Advisors presents a compelling bull case for Nu Holdings as a 'supernatural compounder' that could disrupt global banking through its scale economy shared model. The manager's thesis centers on Nu's exceptional unit cost advantage (75% below peers) which it passes to customers via superior deposit rates, creating a powerful customer acquisition flywheel that has attracted 118 million users. The fund views Nu as possessing all six traits of exceptional growth companies: visionary founder leadership, industry disruption solving hard problems, compelling customer value proposition, low-cost obsession, massive growth runway, and strong self-funded ROICs. Holland argues that Nu's current 28x PE is misleading due to depressed earnings from global expansion investments and low customer ARPU maturity, suggesting a normalized 13x multiple when adjusting for mature customer monetization patterns. The manager sees significant market share expansion opportunities, noting Nu holds only 5% of Brazilian banking profits and less than 1% in Mexico, with global expansion capabilities being built for 2026-27 deployment. With founder David Velez leading the charge and ROE potential of 60% (adjusted for excess capital), Holland projects 25% annual growth rates that could generate 86x returns over twenty years, positioning Nu as a potential banking industry disruptor comparable to Amazon's retail transformation.

Pitch Summary:
During the market drawdown we also began to redeploy our cash. We added to our positions in Builders FirstSource (BLDR), Schlumberger, and Generac (GNRC). We also initiated a new investment in liquor producer Brown-Forman Company (BF.B). Over the past year and a half, the alcoholic beverage industry has lost favor with investors. Sales and unit volumes have fallen by 1-2% after booming during the COVID-19 pandemic, leading to concerns that alcohol usage may be in a new secular decline. The prevailing narrative supporting this view is three-fold: • Gen Z is "health conscious": This cohort is believed to drink less than previous generations. • GLP-1 weight loss drugs: These drugs are thought to be curbing alcohol usage. • Increasing cannabis usage: Legalization efforts in various states are perceived as taking market share from alcohol. While it's fair to acknowledge these factors may have some merit, we believe there's no strong evidence to suggest they are significant enough to cause a 5-6 point decline in liquor sales. For example, Gen Z consumers are experiencing a broad decline in spending. According to a Circana report, spending by 18-24 year-olds on video games, apparel, and beauty is down 24%, 12%, and 10% respectively. Frankly, Gen Z consumers are bearing the brunt of macro headwinds. Another study from Statista Consumer Insights found that 18% of Gen Z regularly consumes spirits, which is consistent with older generations: Baby Boomers (18%), Gen X (19%), and Millennials (22%). The lower alcohol consumption among Gen Z is entirely confined to beer and wine usage. Alternatively, we believe the pause in spirits growth is a normal cyclical slowdown driven by inflation and macroeconomic weakness, which particularly impacts consumers with less disposable income, such as the Gen Z cohort. This pause is also a healthy recalibration following the significant growth in alcohol, especially spirits volumes, during the 2021-2023 COVID-19 period. Looking at volume growth over a five-year period, spirits sales grew at a 4-5% compound annual growth rate (CAGR), which aligns with historical long-term growth rates. We believe the spirits industry could remain under pressure in 2025 due to continued economic weakness, changing tariff regimes, and elevated inventories in wholesale channels and personal at-home liquor cabinets. However, we expect the spirits industry to return to its long-run growth rate as the economy improves, spirits continue to gain market share from beer and wine, and the global population increases and ages. Over the next six years, approximately 600 million new legal-purchase-age consumers are expected to enter the global spirits market. Fears over the structural collapse of the spirits industry have created a tremendous opportunity for investors. We have long admired Brown-Forman as one of the top liquor companies with world-class brands. They hold a dominant position in the American Whiskey category with brands like Jack Daniel's and Woodford Reserve, as well as the Herradura label in the Premium Tequila category. The company is a compounder, delivering 32% operating margins over the last decade and a nearly 40% Return on Equity (ROE). They also boast an excellent balance sheet and a generous dividend policy with an attractive 3.5% yield. Amazingly, Brown-Forman's stock price has fallen by 62% in the last two years, while its price-to-earnings (P/E) ratio has dropped to 15x. The last time Brown-Forman traded this cheaply was during the depths of the great financial crisis in 2009. We have never had an opportunity to own the company, as it has consistently traded at rich valuations above 25x earnings. We ultimately believe the spirits industry will return to its long-run growth rate, with whiskey and tequila continuing to gain share in spirits and prices rising due to a shift toward premiumization. These tailwinds should drive 4-5% growth in Brown-Forman's U.S. business, while international sales accelerate at a 5-7% pace. Gross margins should expand back to pre-COVID levels of 63-67% from the post-COVID 60% level as the company increases international distribution, outsources barrel-making operations, rationalizes inventory, and increases its mix of premium sales. We believe this should boost operating margins to 32-36%, resulting in normal earnings power of $2.15-$2.50 per share. Given their brand portfolio, high returns on capital, and solid balance sheet, we believe an appropriate multiple for Brown-Forman is 18-23x normal earnings power, resulting in an intrinsic value of $39-$57 per share. We initiated our position at a price of $25.84 per share, representing a significant discount for a company of this quality.

BSD Analysis:
Pelican Bay initiated a position in Brown-Forman at $25.84 per share, viewing the 62% stock decline over two years as creating an exceptional opportunity in a quality spirits company. The manager argues that current industry headwinds are cyclical rather than structural, driven by inflation and macro weakness rather than permanent shifts in consumer behavior. They dismiss concerns about Gen Z drinking habits, GLP-1 drugs, and cannabis competition as insufficient to justify the industry's decline. Brown-Forman's dominant position in American whiskey (Jack Daniel's, Woodford Reserve) and premium tequila (Herradura) provides durable competitive advantages. The company has demonstrated strong fundamentals with 32% operating margins, nearly 40% ROE, and a solid balance sheet with 3.5% dividend yield. Trading at 15x P/E (lowest since 2009 financial crisis), the manager expects margin expansion to 32-36% and earnings power of $2.15-$2.50 per share as the industry normalizes. With an 18-23x target multiple, intrinsic value is estimated at $39-$57 per share, representing 51-121% upside from the entry price.

Pitch Summary:
Sidetrade SA has taken a decisive step forward in enterprise finance with the launch of the world's first autonomous AI Cash Collection Agent. This isn't incremental innovation – it's a structural shift in how working capital is managed. The agent, Aimie, operates live and independently, orchestrating the full Order-to-Cash (O2C) cycle: initiating outbound calls, engaging with debtors, qualifying outcomes, escalating risks, and continuously learning from real-time interactions. What makes this launch particularly compelling is the scale and depth of Sidetrade's data advantage. Aimie is trained on trillions of dollars in payment experiences across millions of buyers, powered by Sidetrade's proprietary data lake – the largest real-time behavioural database in the O2C space. This enables precision decision-making and adaptive outreach strategies that go far beyond traditional rule-based automation. Thereby, Sidetrade is positioning itself as a category leader in intelligent cash flow management. Early adopters are already reporting meaningful reductions in DSO and improved consistency in execution – two metrics that directly impact liquidity and margin. Moreover, the agentic model allows enterprises to redeploy finance teams from repetitive tasks to strategic initiatives, unlocking both cost efficiencies and human capital leverage. Imagine a collections department of 40 people. With Aimie, much of the repetitive, manual work is automated – freeing teams to focus on strategic, high-impact tasks. The result? Lower costs, higher margins, and a more human finance function – ironically, powered by AI. Sidetrade's long-term investment in domain-specific AI models (dating back to 2015) and its unified enterprise platform and data lake give it a defensible moat as well as a first mover advantage. With Aimie now capable of making thousands of outbound calls daily in multiple languages, the company is well-positioned to further scale across Europe and North America.

BSD Analysis:
The manager presents Sidetrade as a transformational AI-powered fintech company that has achieved a breakthrough with its autonomous cash collection agent, Aimie. The investment thesis centers on Sidetrade's proprietary data advantage, with the largest real-time behavioral database in the Order-to-Cash space trained on trillions of dollars in payment experiences. The manager views this as a structural shift rather than incremental innovation, positioning Sidetrade as a category leader in intelligent cash flow management. Early customer adoption is already demonstrating measurable improvements in Days Sales Outstanding (DSO) and execution consistency, directly impacting client liquidity and margins. The agentic AI model creates significant operational leverage by automating repetitive tasks and allowing finance teams to focus on strategic initiatives. The manager emphasizes Sidetrade's first-mover advantage and defensible moat through its decade-long investment in domain-specific AI models since 2015. The scalability potential across Europe and North America, combined with multi-language capabilities, suggests significant growth runway ahead.

Pitch Summary:
In the last Letter to Partners, I outlined my conviction in Fortnox AB – a Swedish leader in enterprise resource planning (ERP) software with monopoly-like economics. Shortly after I initiated the position, private equity firm EQT and the company's Chairman proposed a take-private transaction. The deal has now closed at SEK 89.75 per share. I paid SEK 64.80 per share and received a dividend of SEK 0.25, resulting in a return of +38.89%. While it's gratifying to see this thesis validated so quickly, the real story lies in what the transaction signals: private markets are increasingly recognizing the long-term compounding power of mission-critical Software-as-a-Service (SaaS) businesses with embedded workflows and robust data access. Fortnox's ability to expand into adjacent financial services beyond accounting, drive progressively higher margins, and innovate relentlessly made it a natural target. I wouldn't be surprised if, within a few years, the company returns to public markets at a multiple of its current size and scope.

BSD Analysis:
The manager's thesis on Fortnox AB was validated through a successful take-private transaction by EQT, generating a 38.89% return in a short timeframe. The investment was predicated on Fortnox's monopoly-like economics in Swedish ERP software and its mission-critical SaaS platform with embedded workflows. The manager emphasizes the company's ability to expand into adjacent financial services beyond core accounting functions, suggesting strong cross-selling opportunities and revenue diversification. The take-private at a significant premium validates the manager's view that private markets recognize the compounding power of data-rich, workflow-embedded software businesses. The manager expects Fortnox to continue scaling under private ownership, potentially returning to public markets at a much larger scale. This successful exit demonstrates the manager's ability to identify undervalued software assets with defensive moats and expansion potential. The transaction also signals broader market recognition of the value creation potential in mission-critical enterprise software platforms.

Pitch Summary:
Nike: is the iconic American sportswear brand and global leader in athletic footwear, apparel, and equipment. With unparalleled brand equity, Nike has built a dominant presence across international markets and continues to set industry standards through relentless innovation in product design and technology. The company's direct-to-consumer strategy, driven by its digital platforms and flagship stores, enhances customer engagement and profitability. While Nike faces short-term challenges, we believe its strong brand loyalty, continuous innovation, and ability to adapt to shifting consumer trends position it as a compelling long-term investment.

BSD Analysis:
Mayar Capital initiated a position in Nike, viewing the iconic sportswear giant as a compelling long-term value opportunity despite near-term headwinds. The manager emphasizes Nike's unparalleled brand equity and global market leadership in athletic footwear and apparel, highlighting the company's ability to consistently set industry standards through product innovation and technology advancement. The investment thesis centers on Nike's successful direct-to-consumer transformation, with digital platforms and flagship stores driving enhanced customer engagement and improved profitability margins. While acknowledging current short-term challenges likely related to inventory management, supply chain disruptions, or competitive pressures in key markets like China, Mayar maintains conviction in Nike's fundamental strengths. The fund views Nike's brand loyalty as a durable competitive moat, supported by continuous innovation capabilities and proven adaptability to evolving consumer preferences. The manager appears to be taking advantage of temporary weakness to establish a position in what they consider a high-quality franchise with sustainable long-term growth prospects in the global athletic wear market.

Pitch Summary:
Novo Nordisk: is a Danish pharmaceutical giant and the global leader in diabetes care and obesity treatments. The company is renowned for its groundbreaking GLP-1 drugs, including Ozempic (for diabetes) and Wegovy (for weight management), which have seen growing global demand. Beyond diabetes and obesity, Novo Nordisk also develops treatments for hemophilia, growth hormone disorders, and other chronic conditions. With a robust pipeline of innovative therapies and a strong focus on improving patient outcomes, Novo Nordisk is well-positioned for sustainable growth in addressing some of the world's most pressing health challenges.

BSD Analysis:
Mayar Capital initiated a position in Novo Nordisk, recognizing the Danish pharmaceutical giant's dominant position in the rapidly expanding GLP-1 market for diabetes and obesity treatments. The manager highlights Novo Nordisk's market-leading drugs Ozempic and Wegovy, which have experienced explosive global demand as obesity treatments gain mainstream acceptance. The investment thesis centers on the company's first-mover advantage and manufacturing scale in GLP-1 therapies, addressing massive and growing global health epidemics. Beyond the headline GLP-1 franchise, Mayar appreciates the company's diversified therapeutic portfolio spanning hemophilia, growth hormone disorders, and other chronic conditions. The fund views Novo Nordisk's robust pipeline and focus on patient outcomes as sustainable competitive advantages. With obesity affecting over 650 million adults globally and diabetes prevalence continuing to rise, Novo Nordisk appears well-positioned to benefit from secular tailwinds in metabolic health treatments. The company's strong R&D capabilities and established global distribution network provide additional moats in this high-barrier pharmaceutical market.

Pitch Summary:
Capgemini's journey began in 1967 in a modest two-room apartment in provincial Grenoble, France, thanks to the vision of Serge Kampf, a career salesman. Despite not having a background as an engineer or computing expert, Kampf astutely recognized the future need for businesses and institutions worldwide to seek guidance on emerging technologies and their practical application. Over fifty years later, this core insight remains central to the company's operations, though Capgemini has expanded significantly. It now boasts a presence in over 50 countries and employs more than 350,000 individuals globally. While its initial focus was on traditional IT and organizational consulting, Capgemini today offers a comprehensive suite of services, encompassing digital transformation, cloud infrastructure, software development, and engineering services. This broad portfolio enables the company to provide clients with end-to-end solutions, from initial strategic planning to final technical implementation. The company's operations are structured around three core areas: Strategy & Transformation, Applications & Technology, and Operations & Engineering. This diversified approach provides Capgemini with exposure across a wide range of sectors. However, its particular strength lies in application services, which includes critical areas such as systems integration, software engineering, and enterprise application management. Looking ahead, the development of generative AI applications across various industries presents a significant long-term tailwind for the company. In the final quarter of 2024, Capgemini reported that 5% of its bookings were related to generative AI, a notable increase from approximately 2% earlier in the year. For the full year, AI-related bookings accounted for around 4% of the total. This clearly indicates a growing area of focus, and management anticipates a substantial increase in demand over time as enterprises transition from initial exploration to practical implementation. Generative AI is considered a truly transformative technology with the potential to revolutionize every industry globally, akin to the impact of the first industrial revolution. As a large, well-established technology consulting firm, Capgemini is, in our view, exceptionally well-positioned to serve as industry's key technology partner in realizing the benefits of AI for businesses worldwide. Capgemini's global delivery model allows it to efficiently serve multinational clients through a strategic blend of onshore and offshore resources. The company has a particularly extensive delivery presence in India, which supports its margins and provides pricing flexibility. As more clients engage Capgemini across different geographies and service lines, the value of its integrated delivery model is amplified, fostering stronger client retention and facilitating effective cross-selling. This combination of scale and deep client integration contributes to consistently strong mid-teens returns on capital. Another compelling aspect of Capgemini's business is its strong cash generation. In 2024, the company generated over EUR 2 billion in organic free cash flow, comfortably covering its investment needs and enabling significant shareholder distributions through dividends and share buybacks. Its asset-light business model, coupled with a relatively predictable revenue stream, allows Capgemini to convert a high proportion of its accounting profit into free cash flow. However, the past year or two have seen a deceleration in Capgemini's business growth. The company reported a 2% revenue decline in 2024, reflecting a broader slowdown in client spending and decision-making delays. These pressures were most pronounced in Europe, particularly France, and within the manufacturing sector—both areas where Capgemini has historically had a strong presence. Manufacturing clients have been reducing their investment in transformation programs amid broader economic uncertainty, and European clients, in general, have adopted a more cautious approach. While this has dampened recent growth, there is reason to believe that these areas could transition from headwinds to tailwinds in the future. A structural shift towards reindustrialization, especially in continental Europe, may drive increased demand for digital supply chain transformation, smart factory initiatives, and cloud modernization—all areas where Capgemini possesses relevant and robust capabilities. Overall, Capgemini presents a stable and cash-generative business model with significant potential to capitalize on medium-term growth trends such as the proliferation of AI, continued digitalization across industries, and the evolving industrial landscape in Europe. While the near-term outlook is tempered by macroeconomic uncertainty and softer spending in key sectors, the company's structural positioning is strong, poised to benefit from a broader expansion of digital investment across various industries.

BSD Analysis:
Mayar Capital presents a compelling bull case for Capgemini, viewing the French IT consulting giant as exceptionally well-positioned to capitalize on the generative AI revolution. The manager highlights Capgemini's transformation from a modest startup to a global technology services powerhouse with over 350,000 employees across 50+ countries, emphasizing its comprehensive end-to-end solution capabilities. The investment thesis centers on AI as a transformative catalyst, with management noting AI-related bookings growing from 2% to 5% in Q4 2024, representing 4% of total annual bookings. Mayar views this as early evidence of substantial future demand as enterprises move from AI exploration to implementation. The fund appreciates Capgemini's global delivery model, particularly its extensive Indian operations that provide margin support and pricing flexibility, contributing to consistent mid-teens returns on capital. Strong cash generation of over EUR 2 billion in organic free cash flow demonstrates the asset-light model's effectiveness. While acknowledging near-term headwinds from European manufacturing sector weakness and reduced client spending, Mayar sees potential for these challenges to become tailwinds through European reindustrialization trends driving demand for digital transformation services.

Pitch Summary:
Analog Devices is a global semiconductor leader dedicated to solving customers' most complex engineering challenges. The company delivers innovations that connect technology to human breakthroughs and play a critical role at the intersection of the physical and digital worlds by providing the building blocks to sense, measure, interpret, connect and power. Analog designs, manufactures, tests and markets a broad portfolio of solutions. These solutions include integrated circuits, software and subsystems that leverage high-performance analog, mixed-signal and digital signal processing technologies. Its comprehensive product portfolio, deep domain expertise and advanced manufacturing span high-performance precision and high-speed mixed-signal, power management and processing technologies, including data converters, amplifiers, power management, radio frequency, integrated circuits, edge processors and other sensors. The company's customers include original equipment manufacturers and customers that build electronic subsystems for integration into larger systems. We see the company's analog products providing exposure to high-growth trends, including automotive electrification and driver assistance systems, factory intelligence and automation, the Intelligent Edge, Internet of Things device proliferation and sustainable energy. We expect the company to return excess free cash flow, benefiting shareholders.

BSD Analysis:
Aristotle Atlantic initiated a position in Analog Devices, viewing the semiconductor company as well-positioned to capitalize on multiple secular growth trends. The manager highlights ADI's comprehensive product portfolio spanning high-performance analog, mixed-signal, and digital signal processing technologies, which positions the company at the intersection of physical and digital worlds. The investment thesis centers on ADI's exposure to high-growth end markets including automotive electrification, driver assistance systems, factory automation, IoT device proliferation, and sustainable energy infrastructure. The manager appreciates the company's diversified customer base of OEMs and subsystem builders, which provides stability across economic cycles. ADI's strong free cash flow generation and shareholder-friendly capital allocation policy through excess cash returns further supports the bullish stance. The timing of this purchase during a semiconductor downturn suggests the manager sees attractive entry valuation for a quality franchise with secular tailwinds.

Pitch Summary:
Back in 2019, we pitched US big-box specialist hard-surface flooring retailer, Floor & Decor, as our stock pick at the Sohn Conference. Since Sohn, Floor & Decor has grown its business through the pandemic, subsequent years of record low housing turnover and the recent tariff announcements. We believe these external challenges have been extrapolated by the market; meanwhile, Floor & Decor exhibits an even stronger business case than it did in 2019 and is poised to accelerate its growth over the coming years. The US hard surface flooring industry is valued at about US$40 billion annually. The market has a mix of a few large, well-known retailers and thousands of smaller, independent stores. As the only player that's consistently gaining market share, Floor & Decor is the standout winner. They're the second largest player in the market. Home Depot, while still the biggest, has seen its share remain flat over the past five years. And Lowes has experienced a slight decline in its share. It is the thousands of smaller independent retailers that have felt the real pain. Unlike Floor & Decor, who have the scale to source direct from manufacturers, the independents typically buy inventory from distributors, which drives up their costs. They therefore can't match Floor & Decor's everyday low pricing strategy, and their product range is much smaller. Floor & Decor even offers the same design and installation services that helped independents compete with Home Depot and Lowes. As a result, the independents are steadily losing market share. We expect this trend to continue, and frankly, the longer the current market downturn lasts, the tougher it will be for these independents, which will only accelerate Floor & Decor's market share gains. We wouldn't be surprised to see Floor & Decor overtake Home Depot in market share by 2030. Floor & Decor's competitive advantages are deeply rooted in its 'flywheel' business model, which continually reinforces the strength of the business over time: First, specialisation and economies of scale are key. Unlike general big-box retailers, such as Home Depot and Lowe's, which dedicate a small fraction of their space to flooring, Floor & Decor specialises entirely in hard surface flooring. This gives them unmatched purchasing power with their over 240 global suppliers. As they grow and their market share increases, this scale advantage only gets stronger, and gives them even more bargaining power with manufacturers who rely on Floor and Decor as an increasingly important customer. Second, the customer value proposition and experience are central. Floor and Decor pass on those reduced costs to customers through consistently lower prices. When combined with an enormous selection (around 4,400 unique inventory pieces per store) and excellent in-store customer service, this drives adoption, trust and greater market share. Their ability to maintain and expand competitive price gaps is crucial. Finally, their store rollout strategy and the maturation of their store base are evolving advantages. With 254 stores and a long-term target of 500+ in the US, Floor and Decor have a substantial runway for growth. In its first year, a new store typically operates at a negative profit margin because sales are low while fixed costs and initial setup expenditures are high. By year three, however, the store has typically ramped up and generates mid- to high-single-digit operating profit margins. By then, the store is generating 50% cash-on-cash returns from the initial outlay. Beyond that, as they fully mature, individual stores can achieve impressive operating profit margins in the mid- to high teens. Currently, almost half of their 254 stores are three years old or younger. This means a significant portion of their business is still marginally profitable at best, clouding the aggregate profitability. Floor & Decor's 500+ store rollout program is a continuous growth engine. Despite this challenging market, they're still opening another 20 new stores this year. And these stores are truly enormous – the newly opened warehouse serving NYC spans 1.2 hectares. Although the ongoing rollout masks the underlying profitability of the mature store base, it will shine through over the coming years as stores mature and the market rebounds. The US import tariffs are affecting the entire industry; however, Floor & Decor's structural advantages allow them to manage the changing situation more effectively than smaller competitors. Their scale and direct purchasing relationships with over 240 suppliers across 26 countries gives them leverage and flexibility to mitigate increased costs. Since the 2018 tariffs, Floor & Decor has shifted sourcing from China, dropping from 50% to under 5% of sales by the end of this year. The US is now their largest supplier and, remarkably, gross margins increased throughout this transition. Smaller independents rely on distributors to source product, who hold the bargaining power to pass on tariff costs to retailers, adding to their already higher cost base. Interestingly, as tariffs are forcing competitors to raise prices, Floor & Decor has flexibility to expand the price difference between their products and competitors', a key feature of their flywheel model. This builds trust with customers and could accelerate their market share gains. So, while tariffs present a challenge for the industry, they actually reinforce Floor & Decor's competitive position. Recent conditions have masked the strength of Floor and Decor's flywheel business model and underlying earnings power, creating a highly attractive investment opportunity. Putting everything together, here's what it means for the company's financial future: Revenue: Currently US$4.5 billion, revenue is poised for significant growth from new store openings, the maturation of its large cohort of young locations, and an eventual market rebound. Profit Margins: The 6-7% operating margin is temporarily depressed by market weakness and the costs of the maturing store base. However, gross margins have risen throughout this period, proving strong cost management. As conditions improve, we expect operating margins could double. Overall Earnings Power: Current profitability is not indicative of the business' true potential. The underlying tailwinds discussed could drive Floor & Decor to US$1 billion in annual operating profit by 2030. Given Floor & Decor's market cap is just US$8 billion today, we have a significant margin of safety in a high quality, growing business and expect to realise a home run investment over the long term.

BSD Analysis:
Montaka presents a compelling bull case for Floor & Decor, positioning it as a market share winner in the $40 billion US hard surface flooring industry. The manager's thesis centers on the company's flywheel business model, which combines specialization, economies of scale, and superior customer value proposition to drive sustainable competitive advantages. With 254 stores currently and a target of 500+, Floor & Decor has significant expansion runway while benefiting from store maturation economics that improve from negative margins in year one to mid-to-high teens operating margins at maturity. The company's ability to source directly from 240+ suppliers across 26 countries provides pricing power and supply chain flexibility, particularly advantageous during the current tariff environment where competitors face higher costs. Montaka expects the cyclical housing downturn to create pent-up demand that will benefit Floor & Decor disproportionately, with potential for operating margins to double from current 6-7% levels and reach $1 billion in annual operating profit by 2030. At an $8 billion market cap, the manager sees significant upside potential as the market currently undervalues the company's true earnings power.

Pitch Summary:
Additionally, we purchased Schlumberger NV (SLB), the largest oilfield services company in the world by revenue. SLB provides equipment, services and digital tools to help oil and gas producers operate more efficiently, including reservoir characterization, rig and well construction and production enhancement. We believe the company's scale and technical expertise are key differentiators. Weak near-term demand, an oil glut, falling commodity prices and concerns about future spending amid a global shift to renewable energies presented an attractive entry point. We believe there are tailwinds supporting rising demand over the medium-term, as national oil companies invest in long-cycle projects to grow capacity and address the natural decline of production. Additionally, we expect SLB will continue to evolve their capabilities to help clients with rising energy needs going forward.

BSD Analysis:
Ariel initiated a position in Schlumberger, viewing current energy sector weakness as an attractive entry opportunity for the world's largest oilfield services company. The fund acknowledges near-term headwinds including weak demand, oil oversupply, falling commodity prices, and concerns about the renewable energy transition, but sees these as creating an attractive valuation entry point. Ariel's investment thesis centers on SLB's competitive advantages including unmatched scale and technical expertise that differentiate it from competitors. The fund identifies medium-term tailwinds from national oil companies investing in long-cycle projects to grow capacity and offset natural production decline. Additionally, Ariel expects SLB to continue evolving its capabilities to serve clients' rising energy needs, potentially including energy transition services. The combination of market-leading position, technical capabilities, and attractive valuation following sector weakness supports the fund's bullish long-term outlook despite near-term challenges.

Pitch Summary:
We initiated two positions in the leisure and travel industry, cruise ship operator, Norwegian Cruise Line Holdings Ltd. (NCLH) and global health and wellness provider onboard cruise ships and destination resorts, OneSpaWorld Holdings Ltd. (OSW). Shares of both companies traded meaningfully lower on investor concerns around a deterioration in consumer sentiment and related softening in discretionary spend due to the economic slowdown. A potential new tax on cruise lines also weighed on NCLH's shares. In our view, these risks are currently priced in and present an attractive entry point. Notably, consumer demand and booking trends remain strong and both companies continue to deliver robust earnings growth. OSW's management continues to work to strengthen its balance sheet by paying down debt and returning capital to shareholders through buybacks and dividends.

BSD Analysis:
Ariel initiated a position in OneSpaWorld alongside Norwegian Cruise Line Holdings, viewing the travel and leisure sector weakness as an attractive entry opportunity. The fund acknowledges investor concerns about deteriorating consumer sentiment and potential softening in discretionary spending due to economic slowdown, but believes these risks are already reflected in current valuations. Ariel's investment thesis is supported by strong underlying fundamentals including robust consumer demand, strong booking trends, and continued earnings growth. The company's financial position is improving with management focused on balance sheet strengthening through debt reduction and capital returns via buybacks and dividends. As a provider of health and wellness services on cruise ships and destination resorts, OneSpaWorld benefits from the recovery in travel demand and the resilient spending patterns of cruise passengers. The fund appears confident that current market concerns are temporary and present an attractive entry point for a company with strong operational performance.

Pitch Summary:
Lastly, new holding, Norwegian Cruise Line Holdings Ltd. (NCLH) declined alongside the sector during the period, following investor concerns about a potential new tax on cruise lines. Although, we believe the risk of any potential exposure is currently priced in, we note cruise lines operate globally and determining taxable income on a jurisdiction basis can be extremely complex. Generally, operators benefit from exemptions under Section 883 of the IRS code and bilateral tax treaties that relieve them from paying corporate income tax on profits beyond the taxes already paid in their operating regions. The elimination of the carve-out would require a Congressional vote. Meanwhile, NCLH continues to deliver robust quarterly earnings, highlighted by strong consumer demand, healthy onboard spending, attractive pricing, solid cost containment and sustained progress on leverage reduction. Looking ahead, NCLH remains focused on right sizing its cost base and improving margins to further strengthen its foundation for sustainable and profitable growth. Notably, consumer demand and booking trends remain strong and both companies continue to deliver robust earnings growth. OSW's management continues to work to strengthen its balance sheet by paying down debt and returning capital to shareholders through buybacks and dividends.

BSD Analysis:
Ariel initiated a new position in Norwegian Cruise Line Holdings, viewing recent sector weakness as an attractive entry point. The fund acknowledges investor concerns about potential cruise line taxation but believes these risks are already reflected in current valuations. Ariel notes the complexity of implementing such taxes given cruise lines' global operations and existing tax treaty protections under Section 883 of the IRS code. The investment thesis is supported by NCLH's strong operational performance including robust quarterly earnings, strong consumer demand, healthy onboard spending, and attractive pricing power. Key financial improvements include solid cost containment and sustained progress on leverage reduction. Management's focus on right-sizing the cost base and improving margins should strengthen the foundation for sustainable growth. The combination of strong fundamentals, improving financial metrics, and attractive valuation following sector concerns supports Ariel's bullish outlook on this new holding.

Pitch Summary:
Leading provider of audio components and precision electrical devices, Knowles Corporation (KN), also traded lower following a quarterly earnings miss as slower than expected shipments of new specialty film products weighed on results. Meanwhile, demand from hearing aid companies for speakers/receivers is accelerating and management noted the industrial market appears to be stabilizing. Longer-term, we believe KN will benefit from a focus on niche and market leading positions in hearing health and precision devices, generating attractive revenue growth and free cash flows. At current levels, KN is trading at a meaningful discount to our estimate of private market value.

BSD Analysis:
Ariel maintains a bullish long-term view on Knowles despite recent earnings disappointment and share price weakness. The fund acknowledges near-term challenges from slower specialty film product shipments that impacted quarterly results. However, Ariel identifies positive trends including accelerating demand from hearing aid companies for speakers and receivers, and stabilization in the industrial market segment. The investment thesis centers on Knowles' strategic focus on niche, market-leading positions in hearing health and precision devices, which should drive attractive revenue growth and free cash flow generation over time. Ariel's conviction is reinforced by their valuation analysis showing the stock trading at a meaningful discount to estimated private market value. The fund appears to view current weakness as a buying opportunity for a company with strong competitive positions in specialized markets.

Pitch Summary:
Alternatively, manufacturer and developer of laboratory equipment and biological testing, Bio-Rad Laboratories Inc. (BIO), declined over the period after the National Institutes of Health (NIH) announced significant cuts to its internal funding structure. Management also issued disappointing guidance on continued softness in the biopharma and academic research segments as well as uncertainty in the funding environment. Despite the challenging backdrop, we believe the company offers a solid financial profile, including recurring revenue streams and rising operating profit margins.

BSD Analysis:
Ariel maintains a contrarian bullish stance on Bio-Rad despite near-term headwinds from NIH funding cuts and softness in key end markets. The fund acknowledges the challenging environment with disappointing management guidance reflecting continued weakness in biopharma and academic research segments, along with broader funding uncertainty. However, Ariel's investment thesis focuses on Bio-Rad's solid underlying financial profile, particularly its recurring revenue streams that provide stability and predictability. The company's rising operating profit margins demonstrate operational efficiency and pricing power despite market challenges. Ariel appears to view the current weakness as temporary, betting on Bio-Rad's strong market position in life sciences tools and services. The fund likely sees the current valuation as attractive given the company's fundamental strengths and long-term growth prospects in the life sciences sector.

Pitch Summary:
Leading provider of automated security solutions ADT, Inc. (ADT) also traded higher on solid earnings results. Despite the challenging macro backdrop, the company is demonstrating pricing power, a historically low attrition rate and growing free cash flow generation. Notably, ADT continues to improve its balance sheet through significant debt reduction. Management expects to maintain this momentum into 2025 with strong cash flow growth as well as a new share repurchase plan. With ADT's industry-leading brand and national presence, coupled with its Google and State Farm strategic partnerships, the company is well-positioned to be a prime beneficiary of growing demand for smart home technologies, including fully monitored residential security.

BSD Analysis:
Ariel maintains a bullish view on ADT based on strong operational execution and strategic positioning in the growing smart home market. The company demonstrated resilience during challenging macro conditions with solid earnings, pricing power, and historically low customer attrition rates. Key financial metrics show improvement with growing free cash flow generation and significant debt reduction strengthening the balance sheet. Management's confidence is reflected in the new share repurchase plan and optimistic 2025 guidance for continued cash flow growth. Strategic partnerships with Google and State Farm enhance ADT's competitive moat and position the company to capitalize on secular growth in smart home technologies. The combination of strong fundamentals, strategic partnerships, and favorable industry trends supports Ariel's positive outlook on the security services leader.

Pitch Summary:
Shares of leading food equipment manufacturer Middleby Corporation (MIDD) increased following management's announcement that the company is conducting a strategic review of its business portfolio. The news came shortly after activist firm, Garden Investments, acquired a minority stake in the company to gain board representation. They are seeking a potential divestiture of the Food Processing and Residential businesses to unlock value in the Commercial Foodservice segment. While the shares have been under pressure given the challenging macro backdrop and related concerns around new restaurant openings, we view these headwinds as transient. Longer term, MIDD's differentiated brands and focus on innovation should enable the company to benefit from secular demand for more automation and efficiency in the food service industry.

BSD Analysis:
Ariel views Middleby as a compelling value unlock story driven by activist involvement and strategic portfolio review. Garden Investments' minority stake acquisition and board representation has catalyzed management's strategic review, potentially leading to divestitures of the Food Processing and Residential segments to focus on the higher-value Commercial Foodservice business. The fund acknowledges near-term headwinds from challenging macro conditions and concerns about new restaurant openings but considers these temporary obstacles. Ariel's long-term thesis centers on Middleby's differentiated brand portfolio and innovation capabilities positioning the company to capitalize on secular trends toward automation and efficiency in foodservice. The combination of activist pressure, strategic focus, and favorable industry dynamics supports the fund's bullish outlook despite current market pressures.

Pitch Summary:
Toy manufacturer Mattel, Inc. (MAT) advanced over the quarter, following strong earnings results highlighted by solid sales growth, margin expansion and robust free cash flow generation. Management also provided full year 2025 guidance ahead of Wall Street expectations. With buyback activity expected to accelerate and the company poised to grow market share in 2025, we believe shares remain undervalued at current levels. Attractive opportunities to exploit its intellectual property through future film and TV projects only heighten our conviction.

BSD Analysis:
Ariel maintains a bullish stance on Mattel following strong Q1 2025 earnings that exceeded expectations with solid sales growth, margin expansion, and robust free cash flow generation. The fund views the company as undervalued despite recent gains, citing management's optimistic 2025 guidance that surpassed Wall Street estimates. Key catalysts include accelerating share buyback activity and expected market share growth in 2025. The investment thesis is further strengthened by Mattel's intellectual property monetization opportunities through film and TV projects, which could provide additional revenue streams. The fund's conviction appears high given the combination of strong operational performance and strategic growth initiatives. At current levels, Ariel believes the market has not fully recognized the company's intrinsic value and growth potential.

Pitch Summary:
Lastly, global leader in enterprise software, Oracle Corporation (ORCL), traded lower alongside the broader technology sector due to macroeconomic uncertainty and in particular, the near-term prospects for artificial intelligence investment (AI) spending. As a result, ORCL reported weaker than expected quarterly earnings results. Nonetheless, management expects double-digit growth for fiscal 2026 and 2027, citing significant demand for its cloud and AI capabilities. This supports our view that ORCL's positioning as the leading provider of database software and cloud-based infrastructure is entrenched, making it a key beneficiary of global demand for generative AI development.

BSD Analysis:
Ariel maintains strong conviction in Oracle despite recent earnings disappointment and sector-wide AI spending concerns. The fund views the current weakness as temporary, driven by macroeconomic uncertainty rather than fundamental deterioration in Oracle's competitive position. Management's guidance for double-digit growth in fiscal 2026 and 2027 demonstrates confidence in the company's strategic positioning and market opportunity. Ariel emphasizes Oracle's "entrenched" position as the leading provider of database software and cloud infrastructure, suggesting strong competitive moats and customer loyalty. The fund sees Oracle as a key beneficiary of the generative AI development trend, positioning the company to capture significant value from the AI infrastructure buildout. Strong demand for Oracle's cloud and AI capabilities indicates successful product positioning in high-growth markets. Ariel appears confident that Oracle's database leadership and cloud infrastructure capabilities will drive sustained growth as AI adoption accelerates across enterprises globally.

Pitch Summary:
IDEXX Labs is a global leader in pet diagnostics, offering in-clinic diagnostics (razor and razor blade consumables) and out-of-clinic reference labs. We have researched the business for two decades and admired its durable competitive advantages, highly recurring and profitable business model, attractive runway, supported by tailwinds from pet ownership and the "humanization of pets," and strong execution by its management team. IDEXX employs a successful "surround the customer" strategy by offering diagnostic tests across many modalities, along with imaging and veterinary practice management software. With a dominant market share in pet diagnostic tests, IDEXX continues to expand its addressable market by innovating new types of testing and creating additional revenue streams for its veterinary customers. We envision years of continued innovation and market expansion, with minimal competitive threats. Historically, we questioned IDEXX's persistently high valuation. However, the recent, transitory business slowdown—driven by fewer vet clinic visits as COVID-era pets remain relatively young—has made the valuation more attractive. We believe the company's long-term outlook remains largely unchanged. As these pets approach 6-7 years of age, their vet care needs will increase, supporting our expectation for sustained double-digit organic revenue growth and mid-to-high teens EPS growth. Even with EPS growth at least in line with the portfolio average, we expect IDEXX to also exhibit safety-like characteristics due to its unique competitive position, recurring revenues, and loyal shareholder base.

BSD Analysis:
Polen Capital's new position in IDEXX represents a classic quality compounder investment after two decades of research. The managers highlight IDEXX's dominant market position in pet diagnostics with a "razor and razor blade" recurring revenue model and comprehensive "surround the customer" strategy. The investment thesis centers on secular tailwinds from pet humanization trends and an aging COVID-era pet population that will drive increased veterinary visits. The fund capitalized on a temporary valuation compression caused by younger pets requiring fewer vet visits, viewing this as a transitory headwind. With minimal competitive threats and continuous innovation expanding the addressable market, IDEXX offers both growth (mid-to-high teens EPS growth expected) and defensive characteristics through its recurring revenue base. The 34% appreciation since purchase validates the timing of their entry at more attractive valuations.