Investment Pitches

Pitch Summary:
Headquartered in Mountain View, California and founded by Larry Page and Sergey Brin, Alphabet is one of the world's most dominant and innovative technology companies. Best known as the parent company of Google, Alphabet generates most of its revenue from digital advertising, particularly search. Google currently holds an estimated 87% market share in U.S. search and nearly 90% globally, underpinning a highly profitable ad business that accounts for roughly 75% of Alphabet's total revenue. While Google was founded in 1998 and became public in 2004, Alphabet was created in 2015 to provide greater transparency and operational independence across its varied business lines. Beyond its core, the company has increasingly diversified into accelerating products, including Google Cloud and YouTube's suite of subscription services (YouTube Premium, YouTube TV and YouTube Music). Today, Google Services (Search, YouTube, Chrome, Android and the Play Store) makes up ~87% of total revenue, while Google Cloud represents ~13%. Alphabet also invests in longer-term innovation through its Other Bets segment, which includes autonomous driving (Waymo), life sciences (Verily) and advanced AI research (DeepMind).

BSD Analysis:
Aristotle Capital views Alphabet as significantly undervalued at less than 12x normalized earnings, emphasizing the company's dominant market position with 87% U.S. search share and nearly 90% globally. The manager highlights Alphabet's integrated ecosystem across Search, YouTube, Android, Chrome, and Gmail that supports user retention and advertising efficiency. Key growth drivers include Google Cloud's emerging profitability and meaningful scaling, YouTube's $45+ billion revenue run-rate expanding through both ad-supported and subscription models, and sustained leadership in digital advertising. The investment thesis centers on three primary catalysts: continued dominance in search reinforced by unmatched first-party data, improving Google Cloud profitability and market share gains against AWS and Microsoft Azure, and YouTube TV's trajectory to become the largest U.S. pay-TV provider by 2026. The manager views Alphabet's AI expertise through the Gemini model family as a potential 'free option' that could enhance monetization across Ads, Search, and Cloud, though this upside is not explicitly included in valuation estimates.

Pitch Summary:
Founded in 1940 and with headquarters in Pennsylvania, Air Products and Chemicals is a leading global supplier of industrial gases, including oxygen, nitrogen, helium, hydrogen and others. These essential gases serve critical roles across a wide range of industries, such as refining, chemicals, metals, electronics, manufacturing, healthcare, and food manufacturing and packaging. Air Products is the leading global supplier of hydrogen, with a robust distribution network across North America. Roughly 50% of the company's revenue is generated through onsite delivery. This method usually entails 15- to 20-year contracts where Air Products builds a facility at the customer's site or nearby (or delivers the gases through pipeline systems). These long-term contracts tend to include pass-through and take-or-pay provisions, which provide stability and predictability of cash flows. The company's merchant gases (roughly 35% of revenue) are delivered in bulk by tanker in either liquid or gas form, usually under five-year contracts, providing a steady but more variable revenue stream. Smaller quantities can also be delivered to customers, usually packaged in cylinders. (This business represents less than 15% of revenue.) Over the last several years, Air Products has pursued opportunities in clean hydrogen, including the construction of two megaprojects in Saudi Arabia (NEOM) and Louisiana. Unlike its traditional model, these projects were started without offtake agreements, a shift that raised concerns. Amid delays and rising costs, activist investor Mantle Ridge took a stake in the company, advocating for a more disciplined approach to capital allocation and succession planning. In response, Eduardo Menezes joined as CEO from Linde, where he led the company's EMEA operations. Mr. Menezes quickly refocused the company by divesting non-core assets and exiting three projects outside its industrial gases and hydrogen expertise. We view these changes positively, as they enhance strategic focus and align the company with its core strengths.

BSD Analysis:
Aristotle Capital initiated a position in Air Products following significant operational improvements under new CEO Eduardo Menezes, who joined from competitor Linde. The manager views the company as an attractive oligopoly with high barriers to entry, benefiting from mission-critical products and long-term contracts (15-20 years for onsite delivery with take-or-pay provisions). The investment thesis centers on Air Products' leading position in hydrogen supply and its robust North American distribution network, with 50% of revenue from stable onsite delivery contracts. Key catalysts include portfolio optimization through divestiture of non-core assets, refocused strategy on industrial gases and clean hydrogen, and completion of megaprojects in Saudi Arabia (NEOM) and Louisiana that should significantly enhance earnings. The manager estimates normalized capital expenditures at 18% of sales and projects 12% returns on contracted projects, purchasing shares at an attractive discount to intrinsic value. The 43-year dividend growth history demonstrates consistent cash flow generation capabilities.

Pitch Summary:
Sony, the global leader in video games, image sensors, music and movies, was the top contributor for the period. The company delivered strong quarterly results, driven primarily by its gaming and music businesses, and announced a new executive leadership structure. In gaming, Sony reported a record-high 129 million monthly active users, a 20% year-over-year increase in PlayStation Plus revenue and an expanding user base, as 40% of new PS5 console buyers were new to the platform. The Music segment also continued to benefit from global streaming tailwinds, delivering double-digit profit growth. In a significant leadership transition, Sony announced that, effective April 1, 2025, Hiroki Totoki, currently COO and CFO, would succeed Kenichiro Yoshida as CEO. Our original investment in Sony was grounded in the strategic transformation led by Yoshida-san, where Totoki-san was an instrumental partner in driving Sony's pivot away from commoditized businesses while spearheading investments in content IP and semiconductors. Looking ahead, we continue to see opportunity for Sony to capitalize on its unique position as both a content creator and platform owner. The company's ability to integrate gaming, music, anime and film and leverage IP across platforms (e.g., Crunchyroll and its recent partnership with Kadokawa) should position it well for long-term value creation.

BSD Analysis:
Aristotle Capital views Sony as a compelling investment driven by its unique position as both a content creator and platform owner across multiple entertainment verticals. The manager highlights strong operational momentum with record-high gaming metrics including 129 million monthly active users and 20% YoY PlayStation Plus revenue growth, while 40% of new PS5 buyers represent platform expansion. The music segment benefits from global streaming trends with double-digit profit growth. The upcoming CEO transition from Kenichiro Yoshida to Hiroki Totoki is viewed positively, as Totoki was instrumental in Sony's strategic transformation away from commoditized businesses toward content IP and semiconductors. Key catalysts include Sony's ability to leverage intellectual property across integrated platforms, including gaming, music, anime, and film. The manager emphasizes Sony's strategic partnerships with Crunchyroll and Kadokawa as examples of cross-platform IP monetization that should drive long-term value creation.

Pitch Summary:
Adobe, the leading provider of content creation and publishing software, was a notable detractor during the quarter. This came despite the company reporting record revenue of over $5.7 billion in the first quarter—a 10% year-over-year increase, with double-digit increases across both its Digital Media and Digital Experience segments. The disconnect between strong fundamentals and share price weakness reflects ongoing market concerns around intensifying competitive threats from generative AI and lower-cost design platforms. Market sentiment has remained cautious around the perceived disruption risk posed by new AI-driven entrants, including OpenAI's Sora for video generation and platforms like Canva, which cater to the broader prosumer and small and medium-sized business segment. However, we continue to view these as largely non-overlapping with Adobe's core base of creative professionals, enterprises and agencies—audiences that demand precision, control and integration within larger workflows. Canva, while expanding its feature set, remains limited in its enterprise readiness and depth. Sora, meanwhile, remains early-stage and experimental, with limited commercial application at this point. Crucially, Adobe is not standing still. The company is actively embedding generative AI across its ecosystem through Firefly, which is commercially safe (i.e., free of copyrighted sources to train its models) and integrated natively into Creative Cloud applications like Photoshop and Illustrator. Firefly has shown strong early traction, generating $125 million in annualized recurring revenue, with management expecting that figure to double by year-end. While modest in size relative to Adobe's total revenue, Firefly's monetization strategy is still in its early innings, with further potential through upselling, usage-based pricing and expanded use cases. Beyond monetization, AI integration enhances Adobe's long-term competitive moat through product functionality, stronger customer engagement and increased switching costs. Adobe's unique access to proprietary data, content workflows and creative content allows it to fine-tune models that serve the high-end needs of professionals—capabilities that generic AI models lack. Strategic partnerships with Microsoft (e.g., Firefly in Microsoft 365 Copilot) and ongoing momentum in Adobe Express further extend its reach into new user segments. Ultimately, we believe Adobe has a durable competitive advantage, underpinned by a large installed base, subscription-led business model, strong brand equity and a long track record of innovation. While short-term concerns over AI disruption have weighed on the stock price, we believe Adobe is well-positioned to harness AI as a driver of value rather than being displaced by it.

BSD Analysis:
Aristotle Capital maintains a bullish stance on Adobe despite recent share price weakness, viewing the disconnect between strong fundamentals and market concerns as a compelling opportunity. The manager emphasizes Adobe's record Q1 revenue of $5.7 billion (10% YoY growth) and dismisses competitive threats from AI-driven platforms like Canva and OpenAI's Sora as largely non-overlapping with Adobe's enterprise-focused customer base. The investment thesis centers on Adobe's successful AI integration through Firefly, which has generated $125 million in annualized recurring revenue and is expected to double by year-end. The manager highlights Adobe's competitive moat through proprietary data access, enterprise-grade workflows, and strategic partnerships with Microsoft. Key catalysts include AI monetization through upselling and usage-based pricing, enhanced customer engagement, and increased switching costs. The fund views Adobe's subscription model, large installed base, and innovation track record as durable competitive advantages that position the company to benefit from rather than be disrupted by AI trends.

Pitch Summary:
Flagstar Financial is the former New York Community Bank (a mashup of Flagstar Bank, New York Community Bank and assets from Signature Bank). Like our SHORT investments in Silicon Valley Bank and First Republic, FLG had a hole in their balance sheet (from soured multifamily and office real estate vs. long-duration securities). That is where the similarities end. FLG raised over $1BB in additional capital, led by former Treasury Secretary Steven Mnuchin. They revamped the management team and brought in a superstar CEO in Joseph Otting who successfully turned around OneWest Bank post GFC (formerly known as IndyMac Bank). In 12 months, the management team has accomplished more than most teams can do in 2+ years. They have reviewed nearly all the loans on the books, sold off non-core assets raising additional capital and are focused on delivering a narrowly-focused, well-capitalized boring regional bank. In this case boring is good. Importantly, they have taken a conservative view of their loan book and a large credit reserve. This contrasts with several bank/private credit lenders we are short who have taken minimal reserves. Mr. Otting and his team are my kind of managers – they are plain-spoken, hardworking and plan for the worst while hoping for the best. At quarter-end the bank was trading at ~67% of a conservatively marked balance sheet. This is in contrast with similar banks (who are NOT conservatively marked) trading at 140-160% of their tangible book value. FLG should complete working thru the bulk of their issues by the end of 2025 and approach "normal" during 2026. Given the conservative nature of the management team, I wouldn't be surprised if it happened sooner. At these prices the downside seems minimal and could see this business up 50-150% over the next 1-3 years as it is more appropriately valued.

BSD Analysis:
The manager presents a compelling turnaround story for Flagstar Financial, emphasizing the stark contrast between this situation and failed banks like Silicon Valley Bank and First Republic. The investment thesis centers on exceptional management execution under CEO Joseph Otting, who successfully turned around OneWest Bank post-GFC, backed by over $1 billion in fresh capital led by Steven Mnuchin. The manager highlights the team's remarkable progress in just 12 months, including comprehensive loan reviews, non-core asset sales, and conservative provisioning that contrasts sharply with competitors. The valuation opportunity appears significant, with FLG trading at only 67% of conservatively marked tangible book value while similar banks trade at 140-160% of less conservative marks. The manager projects 50-150% upside over 1-3 years as the bank normalizes operations by 2025-2026, with minimal downside risk given the conservative balance sheet marking and strong capitalization. The combination of proven turnaround management, conservative accounting, and attractive valuation creates a compelling risk-adjusted opportunity.

Pitch Summary:
Please reference the met coal discussion above, as it applies to Warrior Met Coal. Currently the bulk of HCC's FCF is being invested in a capital project that will be concluding this year. Once the business winds down their investment period they will gush cash. I will disclose my updated valuation at a later date. I am travelling to Alabama next week to meet with management and should learn a lot more about their prospects. This is one of the most compelling ideas in our portfolio. As a reminder this is a Company with a fortress balance sheet and is one of the cheapest producers in the market. While short-term pain hurts all Companies, they can be major long-term beneficiaries.

BSD Analysis:
The manager expresses extremely high conviction in Warrior Met Coal, describing it as "one of the most compelling ideas" in the portfolio while benefiting from the same structural metallurgical coal dynamics outlined for Core Natural Resources. The investment thesis centers on an imminent inflection point as the company completes a major capital project this year, transitioning from a capital-intensive phase to significant free cash flow generation. The manager's planned management meeting in Alabama demonstrates hands-on due diligence and suggests potential catalysts or developments warrant closer examination. Similar to Core Natural Resources, Warrior Met benefits from a fortress balance sheet and low-cost producer status in a supply-constrained market facing long-term Asian demand growth. The timing appears particularly attractive as the company emerges from its investment cycle just as metallurgical coal fundamentals are expected to tighten. The manager's decision to withhold specific valuation targets while expressing such strong conviction suggests substantial upside potential once the capital project concludes.

Pitch Summary:
I am not going to explain the business model, because there's plenty of writeups around. Suffice to know that the stock has performed poorly due to a regulatory (hackers might be government agents too?) crackdown on their black markets activity (which is the most profitable). In Q1 they reported negative EBITDA YoY growth for the first time, margin compression and signaled that Q2 would be bad, but recovery would come in the second half (I know, the second half thing). I personally think that only revenue in developed markets is worth a normal multiple (the EBITDA margin here is way lower, and loss making in the US probably) and black market revenue is worth a low single digits multiple on cash earnings. You are paying around 10 times sales for the white markets if you give a multiple of 4 to the black/grey market earnings. I guess the key is how big and profitable the US operations can get. In this chart, you can see when big (a few million dollars) purchases were made by the CEO: I would think they are not about to put out terrible news.

BSD Analysis:
The manager presents a contrarian bull case for Evolution Gaming despite recent regulatory headwinds affecting their higher-margin black market operations. The thesis acknowledges significant near-term challenges including first-time negative EBITDA growth and margin compression in Q1, with management guiding for continued weakness in Q2. The valuation framework separates legitimate developed market revenue (deserving normal multiples) from black/grey market revenue (warranting low single-digit multiples), suggesting the white market business trades at approximately 10x sales. The investment rationale hinges on the potential scale and profitability of US operations as a key value driver. Insider buying activity by the CEO, involving several million dollars in purchases, provides additional conviction that management doesn't anticipate further negative developments. The manager views the current dislocation as a buying opportunity, betting on regulatory stabilization and US market expansion. However, the thesis carries significant regulatory and execution risks given the company's exposure to uncertain gaming markets.

Pitch Summary:
Core is the result of the merger between Consol and Arch Resources. As a combined entity they are one of the leading producers of metallurgical coal (steel) and thermal coal (energy). The Company is heavily dependent on exports so retaliatory tariffs would be damaging. At the same time, there has been a reduction in global capacity so many countries may not have much choice, especially if they need higher quality coal. Met coal demand is projected to climb for the next 25 years, driven by the economic development and urbanization in India and the rest of Southeast Asia. ~60% of the world's population lives in Asia, where met coal demand is centered and where local sources are limited. Over the coming years demand will likely outstrip supply, leading to higher prices. There has been a severe lack of investment in met coal due to ESG concerns with investment peaking in 2014. I will disclose my updated valuation thoughts at a later date as I find the investment extremely compelling and am hoping the Company can buy back ever cheaper stock. As a reminder this is a Company with a fortress balance sheet and is one of the cheapest producers in the market. While short-term pain hurts all Companies, they can be major long-term beneficiaries.

BSD Analysis:
The manager presents a compelling long-term bull case for Core Natural Resources based on structural supply-demand dynamics in metallurgical coal markets. The investment thesis centers on projected 25-year demand growth driven by urbanization and economic development in Asia, where 60% of global population resides but local coal sources are limited. The manager highlights a critical supply constraint stemming from underinvestment since 2014 due to ESG concerns, creating a favorable setup for existing low-cost producers. Despite acknowledging near-term tariff risks given the company's export dependence, the manager emphasizes Core's competitive advantages including a fortress balance sheet and position as one of the cheapest producers globally. The combination of rising demand, constrained supply, and the company's low-cost structure positions it as a potential major beneficiary once short-term macro headwinds subside. The manager's decision to withhold specific valuation targets while expressing extreme conviction suggests significant upside potential.

Pitch Summary:
BLDR is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 40%+ of the topline. The company has modest leverage and has been using their abundant free-cash-flow to buy in over 45% of the stock in the last 33 months. Our long-term thesis remains intact as there is a structural shortage of housing in the USA. Higher mortgage rates reduce the supply of existing home supply as homeowners are locked into low-rate mortgages. As we have seen in recent history, the overall pie of housing activity may shrink, with new homebuilders capturing an increasing share of home sales. Homebuilders can buy-down the mortgage to a lower rate and accept a lower, yet still healthy margin on the home sale. Past letters have commented that the coming 6-12 months could be rocky and BLDR (the stock) has not disappointed. The business continues to perform well, and management continues to reduce the share count thereby increasing our ownership. The company has sustained higher gross margins as they have gained scale. I estimate normalized free-cash-flow per share to be $10-$15 per year implying a free-cash-flow yield of 8-12% with no growth priced in.

BSD Analysis:
The manager maintains a bullish stance on Builders FirstSource despite acknowledging near-term cyclical headwinds in residential construction. The investment thesis centers on the company's successful transformation from a commodity lumber supplier to a value-added building materials provider, with 40%+ of revenue now coming from higher-margin products. Management's aggressive capital allocation strategy has been particularly compelling, with over 45% of shares repurchased in the past 33 months using abundant free cash flow. The structural housing shortage in the US provides a long-term tailwind, while higher mortgage rates paradoxically benefit new construction by reducing existing home supply. The manager calculates normalized free cash flow of $10-15 per share, implying an attractive 8-12% yield with no growth assumptions. The combination of scale-driven margin expansion, disciplined capital allocation, and structural market dynamics supports the bullish thesis despite short-term volatility.

Pitch Summary:
This company sells intraocular lenses (IOLs). When you get eye surgery to fix your vision, normally you get your cornea sliced to adjust your dioptres and compensate for the crystalline deformation. When it comes to IOLs (widely used in cataracts as slicing the cornea won't help) they get your natural lens out and put in a new artificial one. You won't believe me, but cataracts were being treated in the early antiquity. Back then, the only solution was to push the crystalline down into the eye, basically getting rid of the cloudy lens and allowing some kind of vision (the lens is there for a reason, a lot myopia is the normal outcome, and many times, zero vision). Of course, the intervention was only considered when the cataract was very very advanced, basically making those people as good as blind. Anyhow, come modernity, we now replace the lens. Thanks innovation, we have plenty to choose from as the replacement: Conventional (monofocal IOL): Our natural lens is partly the tool that allows us to focus so we can see things that are 1 meter away as well as things that are 20 meters away, despite the light having a different angle. With monofocal IOL, that ability is "lost" and you rely on glasses to adjust to short and long term ranges. These lenses don't correct presbyopia or astigmatism. These are the cheaper ones. Multifocal IOLs: These are more advanced lenses implanted during cataract or refractive surgery that provide vision at multiple distances, reducing or eliminating the need for glasses. Your ability to "focus" is still lost, but the lenses use concentric rings or segmented zones with different focal powers to allow the brain to adapt and select the appropriate focus depending on the visual task. While many patients achieve good spectacle independence, some may experience halos, glare, or reduced contrast sensitivity, especially at night. Astigmatism-Correcting or Toric Intraocular Lenses (IOLs): Toric IOLs are specially designed to correct pre-existing corneal astigmatism. Unlike standard monofocal lenses, toric IOLs have different optical powers in different meridians of the lens to neutralize the uneven curvature of the cornea. They must be precisely aligned during surgery to be effective. By correcting astigmatism at the time of lens implantation, they often reduce or eliminate the need for glasses or contact lenses for distance vision. Patients would still require glasses unless combined with multifocal technology. The last two, fix different problems, multifocal IOLs allow for a reduced or nil use of glasses, but sometimes create halos and need replacement (yes another surgery) and the Toric lenses fix an existing vision problem, these technologies can be combined. That gets us to what we can call the "premium IOL" market, of which RxSight has 10% share with their solution, the Light Adjustable Lens (LAL), from the 10K: RxSight's LAL system enables precise, non-invasive post-surgical customization of the intraocular lens (IOL) using UV light. The LAL is made from a proprietary silicone polymer containing photo-reactive macromers that can be reshaped after implantation. Following cataract surgery, a doctor uses the Light Delivery Device (LDD) to project UV light patterns that adjust lens shape and power in-office, based on the patient's visual preferences. This iterative process allows up to three adjustments for optimal vision without additional surgery. The LAL offers superior accuracy in correcting refractive errors, including astigmatism, with minimal glare or halos—common drawbacks of multifocal IOLs. For surgeons, it reduces reliance on preoperative measurements and enhances practice profitability. For patients, it delivers customized, high-quality visual outcomes with broad distance coverage and high satisfaction. Clinical studies show LALs outperform conventional IOLs in uncorrected vision, making RxSight a disruptive solution in premium cataract care. The LALs offer two advantages over other premium IOLs. First, you don't rely on a previous measurement of a vision problem to correct it, you can adjust post implantation and most importantly, can adjust further if the vision problem evolves without a new surgery, basically buying insurance in case your vision changes. Second, the halo effect and glare typical of the multifocal IOLs is less prevalent. The LALs work as a plain monofocal, it has no rings that split light and cause halos. What makes it special is the silicone matrix that can be reshaped with the LDD weeks after the eye has healed. Adjustments with the LDD replace the "extra focal points" of multifocals: instead of sending part of the light to near, the lens refocuses all of the light where the patient wants it. Some patients still need glasses for long night drives or really small print. All that text wall just to justify the belief that they have a premium product, that it is probably the best option in the market, but the extra cost might not be worth it for everyone. What I mean is that this product is worth something. Maybe the final penetration rate is today's 10%, maybe it goes up to 20% or higher. I don't know, but the uniqueness of the product is there. We can see someone got excited in 2024 and the company raised $110mm at $53 per share in may 2024. The company has almost $230mm in cash for a $530mm market cap. I know that the savvy readers are pointing at that Q1 revenue drop and asking, what's going on. Let me tell you, it's not only that Q1 revenues dropped, a metric that shows the health of the product, which is LALs installed per LDD machine dropped YoY (I like to think of that metric as the LFL for retail companies, it's good to grow opening new stores, but the sales per store going down is a sign of trouble. Thank god RXST fixed costs don't depend on the number of LDDs around though). I want to turn you off a bit more, showing you how the company approached the missed Q1 guidance. 25th of February they reaffirm guidance, then just after the end of the quarter they pull this: How bad was March that they had to cut guidance by 15%? Why did that decel in March happen? Those are the questions the thesis boils down to. The company says that the macro uncertainty made their clients pull out of the market, as well as launches by two competitors of premium IOLs (not LALs) that went aggressively to market in a non economical way that, according to management, is not sustainable. The company has been to several Conferences after the Q1 earnings call and they don't sound upbeat about Q2. In fact, they are pointing out at the second half and are "hopeful". This company is however barely burning cash (the losses are mostly SBC) and they do have a premium product with 10% of the high end IOL market while trading at less than 2 times revenues. My bet is that this company is not going away, that growth might pick up (if fact, macro has gotten quite better since April), that the shareholders have stopped liquidating their holdings and the stock might go up again. The bear case is that Q2 is bad, they guide down the year and you start wondering whether the 2023 and 2024 growth was due to some other reason than the goodness of the product. Then the time to reevaluate will come and probably sell. Despite that, I own shares and I think at this valuation the risk reward is good. I am also short puts 12.5 strikes that I think given the cash pile makes them a nice bet. I have found that puts are not efficiently priced when companies have a big to huge percentage of the market cap in cash and no debt.

BSD Analysis:
The manager presents a detailed bull case for RxSight based on their proprietary Light Adjustable Lens technology, which holds a 10% market share in the premium IOL segment. The thesis centers on the LAL's superior post-surgical adjustability using UV light, eliminating the need for additional surgeries and reducing common side effects like halos compared to multifocal IOLs. Despite acknowledging recent Q1 revenue declines and guidance cuts attributed to macro uncertainty and aggressive competitor pricing, the manager views the current valuation as attractive at less than 2x revenues with $230mm cash against a $530mm market cap. The investment rationale emphasizes the product's technical superiority and defensive cash position, while acknowledging execution risks around sustained growth momentum. The manager maintains conviction despite recent underperformance, betting on a second-half recovery and improved market conditions. Risk management includes short put positions at $12.50 strikes, leveraging the company's strong balance sheet. The thesis balances product quality conviction against near-term operational headwinds.

Pitch Summary:
Asbury Group operates auto dealerships across the United States. The strength of the model comes from the back of the house in parts and services where more than 50% of the profits come from. Tariffs will increase the cost of an automobile, reducing the affordability for both new and used cars (holding all else equal). Some of this will be mitigated by a highly variable component to ABG's wage expense. Some damage may also be mitigated by increased activity in the Parts & Service division. Most dealers currently have 1-2 months of used inventory and 2-3 months of new inventory on their lots. The impact of tariffs could take some time to be felt and its uncertain if there will be tax credits/interest deductibility to lessen the pain on American consumers. ABG should be able to earn $20-$30 in free-cash flow per share in a "normal" year. I have reduced some of my estimates given the uncertain nature of the environment. At quarter-end pricing that implies a 9-14% annual yield.

BSD Analysis:
The manager presents a bullish case for Asbury Group based on the defensive characteristics of its parts and service business model, which generates over 50% of profits. Despite acknowledging tariff headwinds that could reduce vehicle affordability, the manager highlights several mitigating factors including variable wage structures and potential increased service activity. The investment thesis centers on the company's ability to generate $20-30 per share in free cash flow during normalized conditions. Even with reduced estimates due to macro uncertainty, the manager calculates an attractive 9-14% annual free cash flow yield at current prices. The pitch demonstrates confidence in the business model's resilience through economic cycles, particularly the higher-margin aftermarket services that provide recurring revenue streams. The manager's willingness to maintain estimates despite tariff concerns suggests strong conviction in the underlying business fundamentals.

Pitch Summary:
Upslope has owned FTI Consulting (leader in restructuring and dispute advisory) and Evercore (top independent M&A advisor) in the past. The Fund recently re-initiated positions in each of these companies. While they are bets on polar opposite outcomes (Evercore is very pro-cyclical, while FTI is the most counter-cyclical publicly traded company I follow), expectations for each appear modest. This was and remains especially true of FTI – although it's more understandable as the company is going through some turmoil (employee turnover/retention challenges) in one of its non-core segments. Nonetheless, the unique macro environment – on/off trade war, the very pro-cyclical "One Big Beautiful Bill," lingering inflation, massive regulatory and technological (e.g. AI) uncertainty and change – should ultimately provide significant opportunities for both businesses ahead.

BSD Analysis:
Upslope's re-entry into Evercore represents a pro-cyclical bet on the leading independent M&A advisory firm, positioned as the polar opposite of their FTI Consulting investment. The manager notes that expectations for Evercore have become relatively modest following several lackluster years, creating an attractive risk-reward setup. The investment thesis is predicated on signs of pent-up demand for M&A advisory services and a potential resurgence in corporate transaction activity. The current macro environment, characterized by policy uncertainty, regulatory changes, and technological disruption, should ultimately drive increased strategic activity as companies adapt to new conditions. Evercore's position as a top-tier independent advisor gives it significant operating leverage to any upturn in M&A volumes. The combination of depressed expectations, the firm's market-leading position, and potential catalysts from the evolving macro environment creates an asymmetric opportunity where modest improvements in transaction activity could drive outsized returns.

Pitch Summary:
Upslope has owned FTI Consulting (leader in restructuring and dispute advisory) and Evercore (top independent M&A advisor) in the past. The Fund recently re-initiated positions in each of these companies. While they are bets on polar opposite outcomes (Evercore is very pro-cyclical, while FTI is the most counter-cyclical publicly traded company I follow), expectations for each appear modest. This was and remains especially true of FTI – although it's more understandable as the company is going through some turmoil (employee turnover/retention challenges) in one of its non-core segments. Nonetheless, the unique macro environment – on/off trade war, the very pro-cyclical "One Big Beautiful Bill," lingering inflation, massive regulatory and technological (e.g. AI) uncertainty and change – should ultimately provide significant opportunities for both businesses ahead.

BSD Analysis:
Upslope's re-initiation of FTI Consulting represents a contrarian bet on the most counter-cyclical public company in the manager's coverage universe. The investment thesis centers on the current macro environment creating significant tailwinds for restructuring and dispute advisory services, driven by trade war volatility, regulatory uncertainty, and technological disruption from AI. While the company faces near-term headwinds from employee retention challenges in non-core segments, these issues have depressed expectations and created an attractive entry point. The manager emphasizes FTI's leadership position in restructuring advisory, a business that typically thrives during periods of economic stress and corporate distress. Given the current mix of policy uncertainty, inflation pressures, and potential economic volatility, FTI appears well-positioned to benefit from increased demand for its specialized advisory services. The modest expectations embedded in the current valuation provide downside protection while offering significant upside as macro conditions potentially deteriorate.

Pitch Summary:
Smiths is a UK-based industrial conglomerate operating four segments: John Crane (specialty seals/flow control solutions for energy/power and industrials, ~48% of op profit), Flex-Tek (HVAC and industrial specialty tubing, 24%), Smiths Detection (inspection/screening systems for airport and border security, 15%), and Smiths Interconnect (specialty connectors and electronics, 13%). Historically, Smiths has been perceived by markets as a sleepy, overly diversified conglomerate. Pressured by activist investors (including Elliott, according to the FT) management has committed to drastically simplifying its business by exiting the Interconnect and Detection units (the former to be announced by year-end, the latter next year). Key elements of Upslope's investment thesis include: • Attractive core businesses (John Crane + Flex-Tek) that benefit from the "low cost, high importance" nature of their products and strong competitive positions. Although each unit serves reasonably cyclical end markets, they both have a very high (70%+ in the case of John Crane) portion of sales coming from recurring maintenance/aftermarket business. These positive attributes contribute to consistent delivery of mid-20s ROCE and steady mid-single digit organic revenue growth. • Significant catalysts likely on the horizon with active portfolio reshaping. "Future Smiths" will be a far more nimble, focused business, retaining the company's most competitively advantaged units. • Strong capital return program – In recent years, Smiths has maintained an active and reasonably aggressive buyback program. From July 2021 (FYE) to Jan 2025 average shares outstanding declined by almost 15%. In January, Smiths added another £350mm (5% of current market cap) to its buyback authorization. • Reasonable valuation and strong balance sheet – despite near-term catalysts for unlocking value and a stronger-than-usual balance sheet (<0.5x net vs. ~1-2x historically), Smiths trades in-line with its average historical valuation multiples (11x NTM EBITDA, 17x P/E). Key risks include: delays or failure in portfolio restructuring, cyclical (energy/industrial) downturn, cyber security threats/liabilities (early 2025 incident), and FX (~3/4 of revenue from outside Europe – largely US).

BSD Analysis:
Upslope presents a compelling turnaround thesis for Smiths Group centered on activist-driven portfolio simplification and value unlocking. The manager highlights the company's transformation from a sleepy conglomerate to a focused industrial player retaining only its highest-quality segments (John Crane and Flex-Tek). The investment case is anchored by strong recurring revenue characteristics, with over 70% of John Crane's sales from aftermarket services, driving consistent mid-20s ROCE and steady growth. Management's commitment to exit lower-margin Detection and Interconnect divisions should create a more nimble, focused entity. The aggressive capital return program, including a recent £350mm buyback authorization representing 5% of market cap, demonstrates management's confidence and shareholder-friendly approach. Despite multiple near-term catalysts and an improved balance sheet, the stock trades at historical valuation multiples, suggesting limited downside risk with significant upside potential as the restructuring unfolds.

Pitch Summary:
Corpay (CPAY), a business-to-business (B2B) cross-border and truck-fleet payments processor, declined 4.9% during the quarter; this was due, we believe, to investor concern that tariffs will reduce cross-border transactions and trucking volumes. The founder & CEO, who owns $800M in stock (thus aligning our incentives), took advantage of reduced valuations by announcing two acquisitions. We held our position because the CEO has a successful track record of acquiring under-earning assets and improving their ROIC.

BSD Analysis:
The manager maintains a bullish stance on Corpay despite the 4.9% quarterly decline, viewing the weakness as a temporary reaction to tariff concerns rather than fundamental deterioration. The investment thesis is anchored by strong management alignment, with the founder-CEO holding $800 million in stock, creating significant incentive alignment with shareholders. The manager emphasizes the CEO's proven track record of value-accretive acquisitions, specifically targeting under-earning assets and improving their return on invested capital (ROIC). Recent acquisitions announced during the quarter's weakness demonstrate management's opportunistic capital allocation approach. The manager views tariff-related concerns about reduced cross-border transactions and trucking volumes as overblown or temporary headwinds. The core business model of B2B payments processing in cross-border and fleet segments remains attractive. This represents a conviction hold based on management quality, capital allocation discipline, and the CEO's history of successful value creation through strategic acquisitions.

Pitch Summary:
CACI International (CACI) provides information technology products and services, predominantly to the United States federal government. In its last fiscal year, the company received 74% of its revenues from the U.S. Department of Defense while another 21% of its revenues came from federal civilian institutions, including various intelligence agencies. The company currently benefits from bipartisan support for defense and security initiatives and is an important part of many mission-critical efforts. The share price has performed well recently as concerns over government efficiency efforts and possible funding cuts appear to have been overblown with respect to the capabilities and services CACI provides. We believe CACI should continue to create value for our shareholders as it executes on its customers' existing programs while benefiting from a growing set of future opportunities.

BSD Analysis:
The manager presents a bullish thesis on CACI International, emphasizing the company's strong positioning within the federal government IT services market. With 74% of revenues from the Department of Defense and 21% from federal civilian institutions, CACI benefits from stable, mission-critical government contracts backed by bipartisan political support. The manager views recent concerns about government efficiency initiatives and potential funding cuts as overblown, given CACI's essential role in defense and security operations. The investment thesis centers on the company's ability to execute existing programs while capitalizing on expanding opportunities in the growing federal IT services market. Recent share price performance has validated this view as market fears have subsided. The manager expects continued shareholder value creation through program execution and new contract wins. This represents a quality government contractor play with defensive characteristics and growth potential in an expanding addressable market.

Pitch Summary:
Palantir is a software-as-a-service provider with an AI-powered operating system that connects data to existing customer applications. Palantir's platform acts as a hub to improve business outcomes across government and commercial end markets, allowing users to synthesize diverse data sources into actionable insights in real time. The company is highly profitable and growing rapidly at scale with 80%+ gross margins. Given the stock's more elevated valuation we are being mindful of position size.

BSD Analysis:
The managers initiated a position in Palantir as an AI-powered data analytics platform play, though with measured position sizing due to valuation concerns. Palantir's SaaS platform serves as a critical data integration hub for both government and commercial customers, enabling real-time synthesis of diverse data sources into actionable insights. The company's AI-powered operating system differentiates it in the competitive data analytics market by connecting disparate data sources to existing customer applications. Strong profitability metrics with 80%+ gross margins demonstrate the scalability and efficiency of Palantir's software platform. The fund acknowledges rapid growth at scale, indicating successful commercial traction beyond its traditional government customer base. However, the managers exercise caution with position sizing given the stock's elevated valuation, suggesting disciplined risk management. This represents a conviction play on Palantir's unique data platform capabilities while managing valuation risk through position sizing.

Pitch Summary:
Synopsys is a leader in electronic design automation (EDA) software and custom chip designs, operating in a duopoly market with multiple avenues of growth driven by the increased complexity of semiconductor chips. The company's EDA software and tools are mission critical and difficult to replicate, providing defense to its high-margin business model.

BSD Analysis:
The managers added Synopsys as a strategic play on the increasing complexity of semiconductor design, positioning it within a duopoly market structure. Synopsys benefits from the secular trend toward more complex chip architectures, which drives demand for sophisticated design automation tools. The company's mission-critical EDA software creates high switching costs and customer stickiness, supporting a defensible high-margin business model. The duopoly market structure with limited competition provides pricing power and market share stability. Multiple growth avenues from chip complexity increases suggest sustainable revenue expansion opportunities. The fund views Synopsys' tools as difficult to replicate, creating a strong competitive moat in the essential semiconductor design workflow. This investment captures the picks-and-shovels opportunity in the semiconductor industry's continued evolution toward more complex chip designs.

Pitch Summary:
We also added Alnylam Pharmaceuticals, a commercial stage biotechnology company and world leader in RNA interference, a technology that selectively shuts off the production of any protein at the genetic level. The company's platform of five approved drugs can be used to treat a broad array of rare and common diseases as well as consistently generate new drug candidates. We do not believe the market appreciates the potential value of Alnylam's core Amvuttra franchise to treat a liver condition that can lead to heart failure. It also has several early-stage pipeline assets, including opportunities in high blood pressure and Huntington's Disease.

BSD Analysis:
The managers initiated a position in Alnylam as a play on RNA interference technology leadership, viewing it as an undervalued platform company. Alnylam's position as the world leader in RNAi technology provides a differentiated approach to protein regulation at the genetic level, offering broad therapeutic applications. The company's commercial-stage status with five approved drugs demonstrates successful platform monetization and de-risks the investment compared to earlier-stage biotech companies. The fund believes the market undervalues Alnylam's core Amvuttra franchise for treating liver conditions that can progress to heart failure, suggesting significant revenue potential. The robust early-stage pipeline targeting high blood pressure and Huntington's Disease provides multiple shots on goal for future value creation. The managers see Alnylam's platform technology as capable of consistently generating new drug candidates, creating a sustainable competitive moat. This represents a bet on both current commercial assets and the long-term value of the RNAi platform technology.

Pitch Summary:
During the quarter we initiated a small position in United Rentals. Given the stock market's recent burgeoning bear market, we continued to build a position in the stock. The United Rental's story is one of simplicity. The Company was founded by entrepreneur Brad Jacob's in 1997 with a simple mission; create a dominate company with asset and geographic intensity, along with scale and scope, by strategic acquisition in the highly fragmented local industrial rental equipment industry. The Company's first decade was one of intense acquisition, rolling up over 250 mom-and-pop rental companies. Over the next ten years, the Company had the scale to offer services to national accounts. The success of that original mission continues to bear fruit today because United Rentals has become the industry's largest competitor, by far, within the industrial rental industry, which today remains quite fragmented. Circa-2025, as one might expect, ecommerce initiatives such as online ordering, mobile apps and online payments, will improve workflows, productivity – and ultimately generate more demand from stickier customers. Despite nearly 70% of this rental industry still being more fragmented than consolidated, over the past 35-plus years, the Company has amassed a competitively advantaged, highly profitable, geographic size-density similar to that of other of portfolio positions. Think of the structurally advantaged business models of Copart, Old Dominion Freight Line, O'Reilly Automotive and Poolcorp. Today, United Rentals commands the top market share position at 15% - the number two position is 11% and number three is just 4%. Headquartered in Stamford, Connecticut, as of 2005, the Company's $21 billion fleet of equipment is spread out over almost 1,700 branch locations – including a couple dozen locations in Australia/New Zealand and Europe. Almost 700 of these branch locations are of a more specialized, faster-growing service offering, which includes disparate equipment and services such as fluid treatments, portable storage, specialized power and HVAC, plus a literal congressional library-sized in tool offerings (too numerous to list). If a construction site needs scoop-to-nuts heavy equipment from aerial lifts, forklifts, power generators, compressors and much more, in nearly every industry sector, United Rentals is most likely your first call. One need drive just a few short miles to an airport, medical center, educational institution or sports facility, over potholed highways to see firsthand the condition of our nation's aged infrastructure. Depending on the innumerable studies – mostly cost-prohibit and dire - on our nation's infrastructure repair, replacement, and growth needs, the secular demand for heavy industrial equipment needs (most often rentals) is measured in decades, not quarters or years. Massive federal and non-immaterial funding is already in place to support more than GDP-plus growth for the industrial rental equipment industry.

BSD Analysis:
Wedgewood Partners presents a comprehensive bull case for United Rentals as a new portfolio addition, emphasizing the company's dominant market position and secular growth drivers. The manager highlights United Rentals' successful consolidation strategy since 1997, rolling up over 250 smaller competitors to achieve a commanding 15% market share versus 11% for the second-largest competitor. The investment thesis centers on the company's scale advantages, geographic density, and network effects similar to other successful Wedgewood holdings like Copart and Old Dominion Freight Line. With a $21 billion equipment fleet across 1,700 locations globally, United Rentals has built significant competitive moats through asset intensity and geographic coverage. The manager identifies powerful secular tailwinds from America's aging infrastructure, noting that decades of repair and replacement needs will drive sustained demand for rental equipment. Federal infrastructure funding provides additional support for above-GDP growth in the industrial rental sector. The company's digital initiatives in e-commerce, mobile apps, and online payments should enhance customer stickiness and operational efficiency. Despite the industry remaining 70% fragmented, United Rentals' scale and specialization across diverse equipment categories position it to continue gaining market share while benefiting from long-term infrastructure investment cycles.