Investment Pitches

Pitch Summary:
During the quarter, two new positions were added. The fist new company added was CBIZ ("CBZ"), a provider of accounting, tax and advisory services to small and midsize businesses. The addition of CBIZ was funded with proceeds from the partial sale of BRO, which had grown to be the largest position in the portfolio. When looking at CBZ, I see a lot of similarities to BRO 4 years ago. Similar to BRO's P&C brokerage services, accounting and tax services are essential and required in any economic environment. High customer retention, ongoing new business wins and moderate pricing increases provide visibility into future revenue growth. CBZ also generates strong free cash flow, which will be utilized for M&A that can contribute more materially to results than for BRO. Valuation was also attractive with the stock trading down to a level not seen since July of 2019. CBZ's multiple compression was driven by a soft earnings report at the end of February when the company forecast lower revenue than expected from Marcum, its most recent acquisition. The sell-off was exacerbated by broader equity market weakness the following week, creating a temporary dislocation that HCM capitalized on. Speaking with management after the earnings call, I gained comfort in the outlook for the acquired Marcum business and increased conviction that the expense synergies associated with the deal are likely to exceed street expectations. Assuming the stock recovers back to its 14x EBITDA multiple, my price target of $114 on 2027 estimates represents +72% upside from our purchase price, or a +22% IRR.

BSD Analysis:
The manager sees CBIZ as an attractive opportunity similar to Brown & Brown four years ago, offering essential accounting and tax services with defensive characteristics. The business model features high customer retention, steady new business wins, and pricing power, providing revenue visibility in any economic environment. Strong free cash flow generation enables accretive M&A that can contribute more meaningfully to growth than larger competitors. The manager capitalized on temporary weakness following disappointing Marcum acquisition results and broader market volatility, with the stock trading at July 2019 levels. Management discussions provided comfort on the Marcum integration and potential for expense synergies to exceed expectations. With a $114 price target based on a 14x EBITDA multiple recovery, the position offers 72% upside and 22% IRR potential, representing compelling risk-adjusted returns for a defensive, cash-generative business.

Pitch Summary:
Shares of Avantor declined 17% in the second quarter and continued their decline into the third quarter after the company missed earnings and cut guidance. Uncertainty around budget cuts across academic research and commercial pharmaceuticals has created an increasingly competitive environment in the industry leading to market share losses at Avantor. Subsequent to quarter-end, we swapped a portion of our exposure into competitor Thermo Fisher Scientific as we continue to evaluate the dynamics at play. More recently, an activist investor reported a meaningful stake in Avantor and is advocating for a board overhaul, strategic review, or sale. We'd note that our fair value estimates are largely consistent with those disclosed in their letter and imply meaningfully higher levels. We continue to believe that Avantor reflects tremendous value at current levels, and we look forward to gaining a badly needed fresh perspective at the board level.

BSD Analysis:
Despite near-term operational challenges, Broyhill maintains a bullish long-term view on Avantor, viewing current levels as representing tremendous value. The company faces headwinds from budget cuts in academic research and commercial pharmaceuticals, leading to market share losses and guidance cuts. However, the manager's conviction is reinforced by activist investor involvement advocating for strategic alternatives, with fair value estimates aligning with Broyhill's internal analysis. The partial swap into Thermo Fisher Scientific demonstrates tactical portfolio management while maintaining sector exposure. The activist catalyst could unlock value through board changes, strategic review, or potential sale. Broyhill's continued ownership reflects their belief that current market pricing significantly undervalues the company's long-term prospects in the essential life sciences tools market.

Pitch Summary:
Top Detractor: Transcat ("TRNS") – 30%. TRNS delivered a disappointing quarter as results from their 2021 Nexa acquisition materially missed expectations. As a reminder, TRNS provides inspection and calibration services for test and measurement instruments in the life sciences and industrial industries. These calibration and testing services are highly regulated by governing bodies (FDA, etc) and are required to be performed on a regular schedule. NEXA provides more project-based consulting services and this part of NEXA's business saw a material decline in performance. Management appears to have ring fenced the issue and more importantly, the core calibration business for TRNS continues to perform well. Given the critical nature of Transcat's services, the continued trend toward outsourcing these services and ample M&A opportunities, I continue to believe in the long-term thesis for TRNS.

BSD Analysis:
Despite a disappointing quarter with the stock declining 30%, the manager maintains conviction in Transcat's long-term thesis. The underperformance was driven by weakness in the project-based consulting services from the 2021 Nexa acquisition, while the core calibration business continues performing well. The manager emphasizes the defensive characteristics of the business model - calibration services are highly regulated by the FDA and other bodies, creating recurring revenue streams that are essential and non-discretionary. The secular trend toward outsourcing these specialized services provides a tailwind, while the fragmented market offers ample M&A opportunities for growth. Management appears to have isolated the Nexa issues, suggesting the core business remains intact. This represents a classic value opportunity where temporary execution issues have created an attractive entry point in a quality, mission-critical business.

Pitch Summary:
Shares of Philip Morris gained 16% in the second quarter. The story remains largely the same, with growth driven by its smoke-free portfolio, most notably ZYN (nicotine pouches) and IQOS (heated tobacco). What has changed is the general acceptance among investors of our initial thesis. Consequently, PM's valuation has expanded meaningfully since our initial purchases, with shares trading around 20x forward earnings today. Even after this move higher, the stock still trades below a market multiple, despite what we see as one of the most attractive organic growth runways in the consumer staples sector. We further reduced our stake in the second quarter, but PM remains a core position and our largest holding in the portfolio.

BSD Analysis:
Broyhill's Philip Morris thesis has gained broad investor acceptance, driving meaningful valuation expansion from their initial purchase levels. The investment case centers on the company's smoke-free portfolio transformation, particularly ZYN nicotine pouches and IQOS heated tobacco products. Despite trading at 20x forward earnings, the manager believes PM offers one of the most compelling organic growth trajectories in consumer staples while still trading below market multiples. The position management demonstrates disciplined profit-taking while maintaining conviction, as they reduced exposure but kept PM as their largest holding. The 16% quarterly gain reflects both fundamental execution and multiple re-rating. Broyhill's early recognition of the smoke-free transition has proven prescient, though they're now balancing valuation expansion against continued growth potential.

Pitch Summary:
Top Contributor: Brown and Brown ("BRO") +22%. BRO was a stand-out performer during the quarter and is a perfect example of the market rotation that occurred in Q1. Fundamental results remained strong, but were largely in line with expectations. However, the stock was a beneficiary of multiple expansion as investors viewed BRO's P&C brokerage business as a safe haven in a tumultuous market. BRO's multiple expanded from 18x EBITDA at the beginning of the quarter to 21x by the end of the quarter. While I continue to expect BRO to post strong results from a combination of pricing, volume and M&A, the stock is trading at a peak multiple on what is likely near peak P&C rates given the prolonged strong pricing environment over the last 4 years. Given the significant outperformance during the quarter and elevated valuation, I significantly reduced the position size as I saw better opportunities in other parts of the market.

BSD Analysis:
The manager views Brown & Brown as a quality business that benefited from a flight-to-safety trade during Q1's market volatility. While fundamentals remain strong with continued growth from pricing, volume, and M&A, the manager is concerned about valuation expansion. The stock's EBITDA multiple expanded from 18x to 21x during the quarter, reaching peak levels. The manager believes P&C insurance rates are near cyclical highs after four years of strong pricing, suggesting limited upside from current levels. Despite expecting continued strong operational performance, the elevated valuation prompted significant position reduction to redeploy capital into more attractive opportunities. This represents a disciplined approach to portfolio management, taking profits on a successful long-term holding when risk-reward becomes less favorable.

Pitch Summary:
Shares of Dollar Tree gained 32% in the quarter, with gains following our significant increase in the position after a sharp Liberation Day sell-off. We see higher price points on its products and the spin-off of Family Dollar as fundamental drivers of the thesis. However, market fears around tariffs provided the opportunity to buy shares at a price we believed provided a significant margin of safety. Our background in the dollar stores and deep knowledge of their supply chains allowed us to quickly assess the actual impact tariffs were likely to have and take advantage as shares fell following the initial announcement.

BSD Analysis:
Broyhill capitalized on market overreaction to tariff concerns, leveraging their deep sector expertise to assess the actual impact on Dollar Tree's supply chain. The manager's bullish thesis centers on two key value drivers: higher price points on products and the strategic spin-off of Family Dollar. Their specialized knowledge of dollar store operations provided a competitive advantage in quickly evaluating the tariff impact, allowing them to increase their position at what they viewed as a significant discount to intrinsic value. The 32% quarterly gain validates their contrarian approach and sector expertise. The position benefited from both fundamental improvements and multiple expansion as market fears subsided. Broyhill's ability to act decisively during the Liberation Day sell-off demonstrates their opportunistic investment approach and conviction in their analytical framework.

Pitch Summary:
Sanuwave continues on with the theme of rapid growth and an imminent Nasdaq uplisting. In March, SNWV announced its uplisting to the Nasdaq and was added to the Russell 2000 index at the end of June. For the first half of the year, Sanuwave has grown revenue 51%. Even more impressive, this growth was achieved without a national sales presence. Following the first half of the year, the company now has a national sales force along with a key account manager focused on pursuing large accounts that have several hundred locations across the country. Management reaffirmed guidance for the year, which appears to be on the conservative side as it doesn't include the potential for any new large accounts. Additionally, management indicated that they have been pursuing options to refinance their debt and have received several options with very attractive terms, removing the fear of a potential equity offering. With a large account manager and their first ever targeted outbound marketing campaign I expect Sanuwave to continue to execute. Gross margins should continue to expand beyond the current 78% through manufacturing improvements. Shares continue to represent an attractive investment as the company trades at a discount to similar medical device companies with less attractive growth prospects.

BSD Analysis:
The manager presents a compelling growth story for SNWV based on impressive operational momentum and expanding market reach. The company achieved 51% revenue growth in H1 2025 without a national sales presence, suggesting significant untapped potential. Recent NASDAQ uplisting and Russell 2000 inclusion provide enhanced visibility and liquidity. The buildout of national sales infrastructure, including dedicated key account management for large multi-location customers, positions SNWV for accelerated growth. Management's conservative guidance excludes potential large account wins, creating upside optionality. Debt refinancing at attractive terms eliminates dilution concerns from equity offerings. With 78% gross margins and further expansion potential through manufacturing improvements, SNWV trades at a discount to medical device peers despite superior growth prospects. The thesis centers on scaling a proven product through enhanced distribution capabilities.

Pitch Summary:
Solésence (SLSN), formerly Nanophase Technologies (NANX), manufactures zinc oxide, a crucial mineral for sunscreens that protects against both UVA and UVB rays. The company caught my attention during the first half of 2024 as an intriguing investment due to its stock price being under pressure despite its rapid growth and attractive product offering. This was due to manufacturing issues that squeezed profit margins and a lawsuit with a long-term customer. However, management's commentary suggested these problems were likely to be resolved favorably in the near term along with continued rapid growth and a potential uplisting to the Nasdaq. The company resolved the litigation favorably last April and continues to do business with the customer, removing an overhang on the stock price. Revenue for the first six months of this year have grown 53%, but the company is still struggling with lower margins due to one-time costs to onboard new large customers. In April, the company uplisted to the Nasdaq and was added to the Russell 2000 index in the most recent reconstitution, this has seemingly led to increased volume and momentum in the stock price. With the stock, at one point, up over 100% for the year and above my estimate of fair value, I chose to exit the majority of our position at favorable prices.

BSD Analysis:
The manager executed a successful turnaround play in SLSN, capitalizing on temporary headwinds that created an attractive entry point. The company manufactures zinc oxide for sunscreens, experiencing rapid 53% revenue growth despite margin pressures from manufacturing issues and customer litigation. Key catalysts materialized as expected: favorable litigation resolution, NASDAQ uplisting, and Russell 2000 inclusion. The thesis proved correct with the stock gaining over 100% year-to-date. However, the manager prudently exited most of the position as shares exceeded fair value estimates. The investment demonstrates disciplined value realization, buying during temporary distress and selling into momentum. SLSN's business fundamentals remain solid with strong growth, but valuation no longer provides adequate margin of safety at current levels.

Pitch Summary:
ImmuCell's thesis remains intact following record first quarter results. The highlight of the quarter was the expansion in gross margins to 42%, resulting in record net income and cash flow. Management is targeting further expansion of gross margins to 45% and it appears this is within sight as there hasn't been a contamination issue since last April and production has been operating at full capacity for two quarters in a row now. With production stabilized, the sales team is now able to pivot to bringing in new business from both existing products and the expansion into the new bulk powder First Defense product line. This new scours product will be targeted at large calf raising ranches that don't individually dose calves for scours prevention, introducing a new market that the company historically has not served. On the mastitis side of the business, Re-Tain's FDA license is still in limbo pending a facility inspection approval at their contract manufacturer. Although the continued delay is frustrating, the company has received authorization for investigational use of Re-Tain. This will allow ImmuCell to market the product for use and receive valuable customer feedback and data. Results of this investigational use should be available around year-end, providing valuable information to bring on a potential strategic partner for a full-scale commercial launch. Additionally, the company brought in a dedicated CFO with an impressive background and industry expertise. Sadly, this was followed with news that our CEO Micael Brigham intends to retire by early 2026. Michael has done a praiseworthy job stewarding the company for more than 25 years as CEO and will be sorely missed, luckily, he still plans to serve on the board of directors. I believe that ImmuCell is at a major inflection point, with scours production finally stabilized and the impending FDA approval of Re-Tain, there is a prime opportunity for any talented executive to take over the reigns with a clear path to create immense value for themselves and shareholders in the immediate future. Clearly, I am still very optimistic about the upside for ICCC as it currently is valued at a single digit multiple of earnings with near term optionality to unlock significant value through the eventual FDA approval of Re-Tain and continued growth of First Defense.

BSD Analysis:
The manager maintains a strong bull thesis on ICCC based on operational improvements and significant catalysts ahead. The company achieved record Q1 results with gross margins expanding to 42% and targeting 45%, driven by production stabilization after resolving contamination issues. ImmuCell is expanding into new markets with bulk powder First Defense for large calf ranches, addressing previously untapped segments. The key catalyst is Re-Tain's pending FDA approval for mastitis treatment, currently in investigational use phase with results expected year-end. Management transition presents both risk and opportunity as longtime CEO Michael Brigham retires in early 2026. The manager views this as an inflection point with clear value creation opportunities for new leadership. Trading at single-digit earnings multiples with FDA approval optionality and First Defense growth provides compelling risk-reward.

Pitch Summary:
ISSC was the largest contributor to our half-year performance. Record results for their fiscal second quarter released in May have propelled the stock significantly higher year to date. I believe the quarter proved what the company is capable of as they continue to expand their business through strategic acquisitions. Revenue increased 104%, gross margins improved sequentially to 51.4%, and most importantly Ebitda margins reached a high of 35% showing the benefits of operating leverage. ISSC's acquisition strategy has been successful to date and has a large runway for continued growth from their ability to bring products in house and fully manufacturing them at their facility in Pennsylvania to increase product margins and company operating leverage. This strategy has continued runway due to their recent facility expansion which has increased capacity by more than threefold. To further this acquisition strategy, the company just recently announced a new $100 million credit facility. Although I'm optimistic about the company's future, I've decided to take advantage of the momentum and volume in the stock to reduce our position significantly prior to the release of their fiscal third quarter results to add to our cash reserves. The current share price offers a smaller margin of safety compared to when shares traded near our average purchase price of $6.50 per share.

BSD Analysis:
The manager presents a compelling bull case for ISSC based on exceptional operational performance and strategic execution. The company delivered record Q2 results with 104% revenue growth, 51.4% gross margins, and impressive 35% EBITDA margins, demonstrating significant operating leverage. ISSC's acquisition strategy focuses on bringing products in-house to their Pennsylvania facility, which recently expanded capacity threefold. The $100 million credit facility provides ample capital for continued acquisitions. However, the manager prudently reduced the position due to valuation concerns, noting reduced margin of safety compared to their $6.50 average cost basis. The thesis centers on ISSC's ability to scale through strategic acquisitions while improving margins through vertical integration. The company appears well-positioned for continued growth given expanded manufacturing capacity and acquisition firepower.

Pitch Summary:
Cellnex Telecom is the other recent investment in our portfolio where a shift in ownership prompted our entry. The company operates independent mobile tower networks across European markets including Italy, France, the UK, Spain, and Poland. These assets have infrastructure-like characteristics: high upfront fixed costs, low marginal costs, and very sticky customers operating on long-term contracts. Mobile network operators (MNOs) depend on tower access to deliver reliable service, and co-locating on shared infrastructure is the most efficient solution – making the economics attractive for both towercos and their customers. After years of debt-fuelled expansion, the company's strategy began to unravel in 2022 as interest rates rose. The portfolio was a patchwork of dominant and subscale positions, the balance sheet was stretched, capital commitments were heavy, and central functions needed streamlining. The share price fell 57% from peak as investors reappraised the business under a new cost-of-capital regime. The turning point came in March 2023, when TCI disclosed a significant stake and then secured board representation a few weeks later. A new CEO was appointed in June and, with TCI's backing, Cellnex undertook a thorough strategic reset. The company has since pivoted from aggressive growth to rationalisation – selling assets such as Austria and Ireland, scaling back capital commitments, cutting operating expenses, and improving capital discipline. Cellnex may be slimming down, but shareholders wallets should be getting fatter in future. With the balance sheet stabilised, Cellnex has begun returning capital to shareholders, buying back a little over 3% of the company in the first half of 2025. We expect a sharp inflection in free cash flow over the next three years. In 2024, the company generated around EUR 2bn in operating cash flow but spent EUR 1.3bn on its Build-to-Suit (BTS) programme – network expansion projects built in partnership with major customers – which after other maintenance and expansion capex left little for shareholders. By 2028, we expect BTS spend to fall to EUR 200–300m p.a. whilst operating cash flow rises to c. EUR 2.5bn. Net of required reinvestment, we forecast free cash flow of around EUR 2bn. With a current market cap of EUR 23bn, and allowing for further buy backs in the interim, that implies a 2028 free cash flow yield of c. 10% — a compelling valuation given the tower industry's structural strengths and predictability, and ongoing prospects for high single digit growth in free cash flow from that point. Private market benchmarks also point to undervaluation. Tower assets have recently transacted at EV/EBITDA multiples in the low-to-mid 20s, whereas Cellnex trades at 16–17x 2025 EBITDA. On an EV-per-site basis, Cellnex trades at a ~30% discount to peers such as INWIT and Vantage Towers. We see Cellnex as a classic controlledco inflection: a high-quality infrastructure asset mismanaged during an era of cheap capital, now undergoing a disciplined transformation under aligned, long-term ownership.

BSD Analysis:
Ennismore's Cellnex investment represents a classic turnaround story driven by activist involvement from TCI, which secured board representation and installed new management in 2023. The thesis centers on a strategic pivot from debt-fueled expansion to disciplined capital allocation and shareholder returns. Cellnex operates high-quality tower infrastructure with attractive economics: high fixed costs, low marginal costs, and sticky long-term customer contracts. The transformation is already underway, with asset sales, reduced capital commitments, and active share buybacks (3% in H1 2025). The key catalyst is a dramatic free cash flow inflection, with Build-to-Suit spending expected to decline from EUR 1.3bn to EUR 200-300m annually by 2028, while operating cash flow rises to EUR 2.5bn. This implies a compelling 10% free cash flow yield by 2028 on the current EUR 23bn market cap. Valuation appears attractive versus private market benchmarks, with Cellnex trading at 16-17x EBITDA compared to low-to-mid 20s for recent tower transactions, and at a 30% discount to peers on an EV-per-site basis.

Pitch Summary:
In February we initiated a position in Asseco Poland ("Asseco"), a leading Polish vertical market software (VMS) company with a market capitalisation of EUR 4.5bn. Founded in 1991 by Adam Goral – who remains CEO and the largest shareholder – Asseco has grown revenue and operating profit by 158x and 103x respectively since its 2004 IPO, partly through the execution of more than 150 acquisitions. The company now employs over 34,000 people across 60 countries. Asseco builds and operates highly specialised software for niche or regulated sectors. VMS, unlike horizontal tools such as Microsoft Office, is tailored to the workflows of a specific industry or function. VMS for a hotel might manage guest reservations, staff schedules and maintenance/repairs, for instance. In Asseco's case, ZUS, the largest IT system in Poland — covers social insurance payments for 2.8 million people and processes over 11% of the country's GDP across its 230 modules. We've long admired the VMS model for its economic defensibility: high switching costs, mission-critical functionality, and relatively limited market size — characteristics that deter new entrants (especially given that much of the market is already served by incumbents) and enable pricing power. These qualities are evident in Asseco's metrics: 78% of revenues come from proprietary software and services; nearly 60% of revenue is recurring; and customer retention exceeds 90%. Our interest in Asseco was catalysed by the acquisition in January of a substantial stake by Topicus, a listed subsidiary of Constellation Software — arguably the most successful capital allocator in software over the last three decades. Constellation's long-standing strategy is to acquire and hold VMS businesses. It has executed this with remarkable success, compounding value at 35%+ annualised rates since its IPO in 2006. We believe Topicus's involvement will drive a material shift in Asseco's strategy and financial profile – with greater pricing discipline, higher operating margins, and an even more ambitious, higher-return M&A strategy. We confirmed this during a recent visit to Warsaw where we spent the day with Asseco's management team. With mid-single-digit organic growth, rising margins, and increased capital productivity, we believe Asseco could be materially undervalued. The shares have appreciated substantially since we built the position, and currently trade at 33x 2024 earnings – a headline multiple that may appear full, but one that fails to capture the magnitude of the transition underway. This multiple reflects trailing margins and underutilised capital. If Topicus succeeds in driving Asseco toward the 25%+ EBITDA margins and reinvestment performance seen elsewhere in the Constellation network, the embedded value creation could be substantial.

BSD Analysis:
Ennismore's investment in Asseco Poland represents a compelling transformation story driven by new ownership from Topicus, a Constellation Software subsidiary. The thesis centers on Constellation's proven ability to optimize vertical market software businesses, having compounded value at 35%+ annually since 2006. Asseco's defensive VMS model features high switching costs, mission-critical functionality, and strong recurring revenue (60% of total), with customer retention exceeding 90%. The catalyst is Topicus's involvement, which should drive margin expansion from current 15% EBITDA to 25%+ levels, matching Constellation's typical transformation playbook. The company's scale is impressive, processing over 11% of Poland's GDP through its ZUS system and operating across 60 countries with 34,000 employees. While shares trade at 33x earnings, this multiple reflects trailing margins and underutilized capital rather than the transformed business model. The combination of Constellation's disciplined capital allocation framework, higher hurdle rates, and proven margin expansion capabilities creates significant embedded value creation potential.

Pitch Summary:
Karnov is a high-quality, subscription-led business operating in a niche of legal and regulatory information services where customer retention is high, pricing power is strong, and barriers to entry are meaningful. In its core Nordic markets, it commands dominant market positions and 40%+ operating margins. The recent adoption of Karnov's AI tools – priced at a 30% premium to standard licences – is accelerating revenue growth, as legal professionals see clear ROI from improved efficiency; the cost of a licence is a fraction of a junior associate's salary. This makes Karnov one of the most compelling, tangible AI beneficiaries we have seen in public markets today. The company is also mid-way through integrating acquisitions in southern Europe that came with lower margins and slower growth. However, with clear synergy targets and group-wide cost savings, Karnov is on track to lift margins materially from 22% to 30%+. Product innovation, which had lagged in the new markets during integration, is set to accelerate over the next 12 months – supporting a recovery in revenue growth. Despite its stable cash flows and enjoying similar structural tailwinds, the shares trade at a steep discount to peers like Thomson Reuters – both on earnings and sales multiples – offering valuation upside as the benefits of AI monetisation and margin expansion become more visible.

BSD Analysis:
Ennismore presents a compelling bull case for Karnov Group, positioning it as a high-quality subscription business with dominant market positions in Nordic legal information services. The investment thesis centers on AI monetization, with the company's AI tools commanding 30% pricing premiums and delivering clear ROI to legal professionals. The manager highlights significant margin expansion potential from 22% to 30%+ as the company integrates Southern European acquisitions and realizes synergies. Karnov's defensive characteristics include high customer retention, strong pricing power, and meaningful barriers to entry in specialized legal markets. The valuation argument is particularly attractive, with shares trading at a steep discount to peers like Thomson Reuters despite similar structural tailwinds. The combination of AI-driven revenue acceleration, margin expansion from operational improvements, and valuation re-rating potential creates multiple drivers for outperformance. This represents a classic quality growth story with tangible AI benefits and clear operational leverage.

Pitch Summary:
Siemens Energy is a German power equipment and electrical equipment company. The company provides power generation equipment for the gas, wind and nuclear markets, and grid equipment including transformers and storage for the electricity transmission and distribution sector. These products are becoming increasingly critical in the US and Western Europe where there is insufficient power generation supply, and aging sub-scale electrical infrastructure. This robust demand dynamic is increasingly showing up in Siemens Energy's results with the company growing its orders at over 50% year on year at its latest earnings. Given the momentum in the end markets, we expect the company to formally lift its medium-term earnings growth guidance at its Capital Markets Day in November this year. We also note that with the financial health of the company improving (after difficulties with fixed priced contracts during Covid) it should be able to resume dividend payments in the medium term. In terms of the longer-term backdrop, we expect demand to remain robust. According to the International Energy Agency, less than 30% of global energy use is electrified. Yet we know that to decarbonise things like transport (via electric vehicles), and heating and cooling, we need to power them with low carbon electricity. So, the high voltage electrical equipment from companies like Siemens Energy has an increasingly important role, especially when the overall electricity demand has also increased through artificial intelligence usage. One issue the company needs to continue to work through is its wind segment, which has been challenged for many years. Despite ongoing global efforts to decarbonise electricity generation through adding renewables, equipment manufacturers have struggled to maintain profitability due to the unprecedented input cost inflation and supply chain issues absorbed throughout 2022-2023, which rendered many fixed price equipment and installation contracts unprofitable. Nonetheless, Siemens Energy (and peers) have since rationalised their pricing strategy and are targeting a return to profitability as this unprofitable component of the backlog is worked down. We are confident the industry has now consolidated and rationalised and that Siemens Energy and its major peers are through the worst of the problems.

BSD Analysis:
Munro Partners presents a strong bull case for Siemens Energy based on critical infrastructure demand drivers and improving operational fundamentals. The fund emphasizes the company's strategic positioning in power generation and grid equipment markets, particularly benefiting from insufficient power supply and aging infrastructure in the US and Western Europe. With orders growing over 50% year-over-year, Siemens Energy is capitalizing on robust demand dynamics driven by electrification trends and AI-related power consumption increases. The investment thesis highlights the massive opportunity ahead, noting that less than 30% of global energy use is currently electrified, creating substantial runway for growth as transport and heating systems transition to electric power. Munro expects the company to raise medium-term earnings guidance at its November Capital Markets Day and anticipates dividend resumption as financial health improves post-COVID contract difficulties. While acknowledging ongoing challenges in the wind segment due to historical fixed-price contract issues, the fund believes the industry has consolidated and rationalized pricing, positioning Siemens Energy to benefit from the global electrification and decarbonization megatrend.

Pitch Summary:
Microsoft is a global technology leader with a diversified suite of products spanning across enterprise software, cloud computing, personal computing, and gaming. The company is uniquely positioned to benefit from a strong presence across the infrastructure, platform and application layers of the AI stack (most notably through Azure AI and Copilot). Just two years into the AI era, its AI business has already surpassed an annual revenue run rate of US$13 billion. We believe Microsoft will play a pivotal role in enterprises moving decisively from experimenting with AI to wide-scale implementation of AI through providing leading AI infrastructure and transforming the way consumers and businesses use software to improve productivity. Despite its clear moat in AI, the company's share price came under pressure earlier in the year due to concerns about near-term customer demand, data centre lease cancellations, and uncertainties surrounding its evolving partnership with OpenAI. However, Microsoft shares soon rebounded to record highs after the company delivered better-than-expected earnings, with Azure growth reaccelerating to the mid-30% range. Investor sentiment reversed dramatically as management attributed the reacceleration to structural tailwinds including surging AI demand, expanded AI capacity, accelerating enterprise cloud migration, and large commitments from OpenAI for both AI and non-AI Azure services. With agentic AI adoption still in its early innings, M365 Copilot stands out as another growth driver, as enterprises look to expand usage and boost operational efficiency. Management's disciplined approach to cost control have also provided further upside, as evidenced in their ability to keep operating expense growth flat while revenue growth reaccelerated in the recent quarter. We believe Microsoft remains a highly compelling investment, underpinned by significant opportunities in AI-powered cloud computing and enterprise software, as well as its proven commitment to operational cost discipline. Ultimately, we can see a pathway for Microsoft's earnings to potentially double over the next 5 years.

BSD Analysis:
Munro Partners presents a compelling bull case for Microsoft centered on its dominant position in the artificial intelligence ecosystem. The fund highlights Microsoft's unique positioning across the entire AI stack through Azure AI and Copilot, with the AI business already generating $13 billion in annual revenue run rate just two years into the AI era. The investment thesis emphasizes Microsoft's role in facilitating enterprise AI adoption from experimentation to wide-scale implementation. Despite earlier concerns about customer demand and OpenAI partnership uncertainties, the company's recent earnings demonstrated Azure growth reaccelerating to the mid-30% range, driven by structural tailwinds including surging AI demand and expanded capacity. The fund particularly values Microsoft's operational discipline, noting management's ability to maintain flat operating expense growth while revenue accelerated. Munro sees significant runway ahead with M365 Copilot adoption still in early stages and believes Microsoft's earnings could potentially double over the next five years, making it a core holding in their high-conviction growth portfolio.

Pitch Summary:
Geron is a biotechnology company with a commercialized drug launching to treat blood cancer. Its product is newly entering a sizable market with broad applicability for patients who cycle through a variety of treatments throughout the course of the disease, allowing for a potentially larger revenue opportunity than currently appreciated by the market.

BSD Analysis:
ClearBridge initiated a position in Geron, viewing it as an undervalued biotechnology company with a newly commercialized blood cancer treatment. The investment thesis centers on the company's product entering a sizable addressable market with significant commercial potential. A key aspect of the opportunity is the broad applicability of Geron's treatment for patients who cycle through multiple therapies during their disease progression, creating multiple treatment opportunities per patient. The managers believe the market is underappreciating the revenue potential, suggesting the stock may be undervalued relative to the commercial opportunity. Blood cancer treatments often command premium pricing due to their life-saving nature and limited treatment options. The cycling nature of cancer treatments means patients may use Geron's product multiple times throughout their treatment journey, potentially creating recurring revenue streams. Given the specialized nature of oncology treatments and the regulatory barriers in biotechnology, Geron's commercialized product provides a competitive moat and significant revenue potential in the growing oncology market.

Pitch Summary:
Hims & Hers is a health care IT services company providing a consumer telehealth platform across a variety of men's and women's health categories, including weight loss, dermatology and mental health. With an integrated experience, strong brand recognition and a convenient stigma-free value proposition to consumers, the company is seeing robust revenue growth while improving profitability.

BSD Analysis:
ClearBridge added Hims & Hers as a new position, attracted by the company's comprehensive telehealth platform serving both men's and women's health needs. The investment thesis is built on the company's integrated experience across multiple health categories including weight loss, dermatology, and mental health. Key competitive advantages include strong brand recognition and a convenient, stigma-free value proposition that appeals to consumers seeking discreet healthcare solutions. The managers highlight the company's robust revenue growth trajectory while simultaneously improving profitability, indicating strong unit economics and operational leverage. The telehealth market has experienced significant growth, particularly in areas where consumers prefer privacy and convenience over traditional healthcare delivery. Hims & Hers' focus on sensitive health categories creates a defensible market position, as patients value the discretion and accessibility of the platform. The combination of revenue growth and improving profitability suggests the company is successfully scaling its business model and capturing market share in the expanding telehealth sector.

Pitch Summary:
Archrock is a production-driven compression service provider supporting natural gas production. There are multiple catalysts driving a secularly positive trajectory for natural gas demand and Archrock operates in a consolidated, capacity-constrained market providing critical services supporting production.

BSD Analysis:
ClearBridge initiated a position in Archrock, viewing it as a beneficiary of secular growth in natural gas demand with multiple positive catalysts. The investment thesis centers on Archrock's role as a production-driven compression service provider that supports natural gas production infrastructure. The managers identify multiple catalysts driving a secularly positive trajectory for natural gas demand, likely including LNG exports, industrial demand, and power generation needs. A key competitive advantage is Archrock's position in a consolidated, capacity-constrained market where the company provides critical services essential to natural gas production. This market structure suggests pricing power and stable demand for Archrock's services. The capacity constraints in the compression services market create barriers to entry and support favorable industry dynamics. Given the essential nature of compression services in natural gas production and the secular growth drivers for natural gas demand, Archrock appears well-positioned to benefit from increased utilization and potentially higher pricing for its services.

Pitch Summary:
Rocket Lab USA is a manufacturer of spacecraft and satellite components as well as a service provider for satellite launch services, primarily focused today on smaller payloads. With an innovative founder-led management team competing in an enormous market with significant growth in commercial, government and classified applications, we see significant growth potential.

BSD Analysis:
ClearBridge added Rocket Lab USA as a new position, attracted by the company's dual business model as both a spacecraft manufacturer and satellite launch service provider. The investment thesis is built on the company's focus on smaller payloads in the rapidly expanding space economy. The managers highlight the innovative founder-led management team as a key competitive advantage, suggesting strong execution capabilities and vision. The addressable market is described as enormous with significant growth opportunities across commercial, government, and classified applications, indicating multiple revenue streams and end markets. The space industry is experiencing unprecedented growth driven by satellite constellation deployments, government space initiatives, and commercial space applications. Rocket Lab's positioning in the small payload segment allows it to capture market share in a less competitive niche compared to heavy-lift launch providers. The company's integrated approach of manufacturing spacecraft components while also providing launch services creates potential synergies and recurring revenue opportunities.

Pitch Summary:
Glaukos is a medical device company focused primarily on treating ophthalmological conditions such as glaucoma and corneal health. With several commercialized products and an innovative track record, the company is in the process of launching a potential blockbuster product, iDose, which is a drug-device combination with a variety of administration/efficacy advantages in treating glaucoma.

BSD Analysis:
ClearBridge initiated a position in Glaukos, viewing it as an innovative medical device company with strong commercial potential in ophthalmology. The investment thesis centers on the company's pipeline of commercialized products and its track record of innovation in treating glaucoma and corneal health conditions. The key catalyst is the launch of iDose, described as a potential blockbuster product that combines drug and device technology. This drug-device combination offers significant administration and efficacy advantages over existing glaucoma treatments, positioning Glaukos to capture meaningful market share. The managers appear confident in the company's ability to execute on this product launch and capitalize on the large addressable market for glaucoma treatments. Given the specialized nature of ophthalmological devices and the regulatory barriers to entry, Glaukos appears well-positioned to benefit from its innovative product portfolio.