Investment Pitches

Pitch Summary:
Albertsons – US grocery retailer Albertsons was a contributor for the quarter. Albertsons was a new purchase in 2024, after we had followed the company and its predecessors for years. In an otherwise turbulent quarter, Albertsons stands out as a stable business that remains undervalued because it had fallen off the radar during a protracted deal process with Kroger that ultimately failed. The company should grow at a moderate pace and has plenty of financial firepower to repurchase shares, all while it has multiple strategic options (such as unlocking its real estate value and/or selling non-core markets) to realize value per share.

BSD Analysis:
Longleaf Partners views Albertsons as an undervalued grocery retailer that has been overlooked following the failed Kroger merger. The fund emphasizes the company's stability in volatile markets and its strong financial position with significant cash generation capabilities. Management highlights multiple value creation levers including share repurchases, real estate monetization, and potential divestiture of non-core markets. The investment thesis centers on moderate organic growth combined with disciplined capital allocation. The fund believes the market has not fully recognized the company's intrinsic value following the merger uncertainty. Albertsons represents a defensive play with multiple paths to value realization through both operational improvements and strategic alternatives. The position reflects Longleaf's preference for stable, cash-generative businesses trading at attractive valuations.

Pitch Summary:
Park Hotels – Hotel owner and operator Park Hotels was a detractor for the quarter. As a stock that is sensitive to the macroeconomic environment, it traded lower as travel demand slowed even though the company reported solid results with 3%+ revenue per available room (RevPAR) growth. Park remains in a much better financial position than in recent years and will soon see debt related to former assets in San Francisco come off the books. The other positive is that we are finally beginning to see an uptick in hotel transaction activity, and we believe Park could be a compelling target.

Pitch Summary:
CNX Resources – Natural gas company CNX Resources was a detractor for the quarter. While CNX was one of our stronger performers in 2024, the company started the year with a disappointing outcome regarding government incentives for its coal mine methane gas capture program. The incentives were below our unrisked upside case that could have helped our value by $10-20+/share. While this was a disappointing few dollars per share hit to our risked value, the silver lining to the market's overreaction to this news is that both we and CNX were able to buy more shares at a price that, in our view, does not fully appreciate all the other good things going on at the company. CNX remains focused on what is within its control, leveraging its low-cost structure and disciplined hedging strategy to generate free cash flow (FCF) in a variety of price environments.

BSD Analysis:
The manager maintains strong conviction in CNX Resources despite recent disappointment regarding government incentives for the coal mine methane gas capture program. While the reduced incentives represented a $10-20+ per share hit to the unrisked upside case, the manager views the market's reaction as excessive relative to the actual impact on risked valuation. This market overreaction created an attractive buying opportunity, with both the fund and company management adding shares at depressed prices. The manager emphasizes CNX's strong operational fundamentals, including a low-cost structure that provides competitive advantages in the natural gas sector. The company's disciplined hedging strategy demonstrates prudent risk management and helps ensure consistent free cash flow generation across various commodity price environments. CNX's focus on controllable factors rather than external variables like government policy shows management discipline and operational excellence. The combination of strong 2024 performance, attractive valuation following the recent selloff, and solid operational execution makes CNX an compelling energy holding. The company's ability to generate free cash flow in multiple price scenarios provides downside protection while maintaining upside potential.

Pitch Summary:
Boston Beer Company – US beverage company Boston Beer detracted in the quarter. The stock price has been under pressure due to macro concerns around declining alcohol consumption trends, combined with concerns on the Truly brand's continued declines and overall company margins. Both we and the company believe these headwinds can be overcome, and the company has multiple drivers to grow in the next twelve months. Management is taking action to increase value per share in the meantime by being one of our larger share repurchasers in the portfolio currently. Expectations for growth have been reset to a flattish level, and from this lower base, we remain optimistic in the long-term opportunity.

BSD Analysis:
Despite recent underperformance, the manager maintains a bullish long-term view on Boston Beer Company, viewing current challenges as temporary headwinds rather than structural problems. The fund acknowledges legitimate near-term concerns including declining alcohol consumption trends and weakness in the Truly hard seltzer brand, which have pressured margins and stock performance. However, the manager expresses confidence that both the fund and company management believe these issues can be overcome through operational improvements and strategic initiatives. A key positive catalyst is management's aggressive share repurchase program, making Boston Beer one of the portfolio's largest share buyers, which should drive value per share accretion. The reset of growth expectations to flat levels provides a lower base from which the company can potentially exceed expectations going forward. The manager identifies multiple growth drivers expected to materialize over the next twelve months, though specific details aren't provided. The combination of depressed valuation, active capital allocation, and potential operational turnaround creates an attractive risk-reward opportunity for patient investors.

Pitch Summary:
PotlatchDeltic – Timberland and mill company PotlatchDeltic was a contributor for the quarter. The company performed fine in the quarter even though housing demand remains below trend. We slightly trimmed our position as the company was viewed as a potential tariff winner. While not the most exciting company, PotlatchDeltic remains an undervalued, reliable dividend payer with a disciplined management team.

BSD Analysis:
The manager maintains a cautiously bullish view on PotlatchDeltic, recognizing it as an undervalued timberland and mill operator with attractive defensive characteristics. Despite challenging housing market conditions with demand below trend levels, the company demonstrated resilience and delivered solid quarterly performance. The fund's decision to trim the position reflects tactical portfolio management as the stock gained recognition as a potential tariff beneficiary, suggesting the manager is taking profits at higher valuations. PotlatchDeltic's appeal lies in its reliable dividend payments and disciplined management team, providing steady income generation for the portfolio. The company's timberland assets offer inflation protection and long-term value appreciation potential, while the mill operations provide current cash flow generation. Although the manager acknowledges it's not the most exciting investment, the combination of undervaluation, dividend reliability, and quality management makes it a solid portfolio holding. The tariff tailwinds could provide additional upside as trade policies potentially benefit domestic timber and lumber producers.

Pitch Summary:
Gruma – The world leader in tortillas and corn flour, Gruma was a contributor in the quarter. The company delivered another quarter of solid growth and execution, with its core US business finishing 2024 with 5% annual earnings before interest, taxes, depreciation and amortization (EBITDA) growth. During the quarter, we published our first Research Perspectives note, which provides more details on our investment case for Gruma.

BSD Analysis:
The manager expresses strong conviction in Gruma as the global leader in tortillas and corn flour, emphasizing the company's dominant market position in a stable consumer staples category. The fund highlights consistent operational execution with solid quarterly growth, demonstrating management's ability to deliver results across market cycles. The core US business showed healthy 5% annual EBITDA growth in 2024, indicating strong fundamentals in Gruma's most important geographic market. The manager's decision to publish a dedicated Research Perspectives note on Gruma signals high conviction and suggests this is a significant portfolio holding with a compelling long-term thesis. As a consumer staples company with essential food products, Gruma benefits from defensive characteristics and steady demand patterns. The company's market leadership position provides pricing power and economies of scale advantages over competitors. The combination of market dominance, consistent growth, and defensive end markets makes Gruma an attractive core holding for the portfolio.

Pitch Summary:
Graham Holdings (GHC) – Diversified education, healthcare and media company Graham Holdings contributed for the quarter. The company reported a solid quarter of low-mid single-digit percentage value growth and continues to position itself well for tougher times with its net cash balance sheet. For a deeper dive into Graham, please listen to our podcast with CEO Tim O'Shaughnessy that we recorded in March.

BSD Analysis:
The manager maintains a bullish stance on Graham Holdings, highlighting the company's diversified business model across education, healthcare, and media sectors. The fund appreciates GHC's solid quarterly performance with low-to-mid single-digit value growth, demonstrating consistent operational execution. A key strength emphasized is the company's net cash balance sheet, which provides financial flexibility and defensive positioning during uncertain market conditions. The manager's confidence is further evidenced by their direct engagement with CEO Tim O'Shaughnessy through a podcast interview, suggesting deep fundamental research and management access. The diversified revenue streams across defensive sectors like education and healthcare provide stability during economic volatility. Graham Holdings appears positioned as a quality defensive holding that can generate steady returns while maintaining downside protection. The company's strong balance sheet and diversified operations make it well-suited for the current uncertain macroeconomic environment.

Pitch Summary:
Glanbia - Irish nutrition and ingredients company Glanbia was a detractor in the quarter. The company was unable to price through enough input cost inflation due to various factors, which resulted in a 9% downgrade to consensus expectations. The share price fell over 3x that impact. At 9x price-to-earnings (PE), the whole company now trades well below comparators for each of its segments: Sports Nutrition Brands, Supplements & Ingredients, and Dairy/Cheese producers. We have impressed upon the Board and Management the need to take actions such as increasing share buybacks and exploring a strategic process to separate and sell certain divisions. We believe the company is considering such a strategy, having already announced a reorganisation into three divisions as a necessary precursor to a sale of the new Dairy Protein segment, which could be worth approximately 50% of the company's enterprise value (EV) today. This would leave high quality brand and ingredient businesses that can return to growth in aggregate in the years to come while being attractive acquisition targets themselves.

BSD Analysis:
Longleaf Partners views Glanbia's current valuation as severely disconnected from intrinsic value following the market's overreaction to margin pressure. The 9% earnings downgrade triggered a 27% stock decline, creating an attractive entry point at 9x P/E multiples. Each business segment trades below comparable companies despite quality assets and market positions. The fund is actively engaging with management to accelerate value realization through share buybacks and strategic restructuring. The announced three-division reorganization sets the stage for potential divestiture of the Dairy Protein segment, worth approximately 50% of current enterprise value. This would unlock significant value while leaving high-quality Sports Nutrition and Ingredients businesses with better growth prospects. The remaining entities would be attractive acquisition targets given their market-leading positions and brand portfolios. Management's willingness to consider strategic alternatives demonstrates alignment with shareholder value creation. Current pricing provides substantial margin of safety with multiple catalysts for value realization including buybacks, divestitures, and operational improvements.

Pitch Summary:
FedEx – Global logistics company FedEx was a detractor for the quarter. The company faced macro headwinds, including tariff threats and ongoing demand weakness in the US. The company is growing market share and margins in its formerly challenged European business, and this was a driver for the Express business to report low-single-digit topline growth that turned into double-digit cash flow growth. The Freight business saw a decline like its peers who are also wrestling with weak industrial conditions. FedEx remains on track to separate into two entities: Express and Freight. This split should provide both companies with greater financial flexibility and accountability, allowing them to be run more efficiently. The market has consistently undervalued FedEx's Freight operations, and a large discount to UPS is no longer warranted for the Express business. Tariff headwinds will be challenging to navigate, but we are glad the company is more on offense now than it has been in previous downturns.

BSD Analysis:
Despite macro headwinds, Longleaf Partners remains constructive on FedEx's strategic transformation and operational improvements. The European turnaround story is gaining traction with market share gains and margin expansion driving the Express segment's impressive cash flow conversion. Low-single-digit revenue growth translating to double-digit cash flow growth demonstrates operational leverage and efficiency gains. The planned separation into Express and Freight entities represents a key catalyst that should unlock value through improved focus and accountability. Management's more offensive posture compared to previous downturns suggests better positioning for the current cycle. The fund believes FedEx Freight trades at an unjustified discount while Express no longer deserves a significant discount to UPS given operational improvements. Tariff uncertainty creates near-term volatility but doesn't alter the long-term value proposition. The corporate restructuring should allow each business to optimize capital allocation and strategic focus. FedEx's global logistics network provides defensive moats with cyclical upside as conditions normalize.

Pitch Summary:
CNX Resources – Natural gas company CNX Resources was a detractor for the quarter. While CNX was one of our stronger performers in 2024, it started the year with a disappointing outcome regarding government incentives for its coal mine methane gas capture program. The incentives were below our unrisked upside case that could have helped our value by $10-20/share+. While this was a disappointing few dollars per share hit to our risked value, the silver lining is that both we and CNX were able to buy more shares at a price that, in our view, does not fully appreciate all the other good things going on at the company. CNX remains focused on what is within its control, leveraging its low-cost structure and disciplined hedging strategy to generate FCF in a variety of price environments.

BSD Analysis:
Longleaf Partners views the government incentive disappointment as a temporary setback that doesn't diminish CNX's fundamental value proposition. While the coal mine methane program incentives fell short of the $10-20 per share upside case, this represents only a few dollars impact to risked valuation. The fund emphasizes CNX's core competitive advantages including low-cost structure and disciplined hedging strategy that enable consistent free cash flow generation across commodity price cycles. Management's focus on controllable factors rather than external variables demonstrates operational discipline. The recent share price weakness has created attractive buying opportunities for both the company and Longleaf to add shares at compelling valuations. CNX's Appalachian Basin assets provide some of the lowest-cost natural gas production in North America. The company's hedging program provides cash flow visibility and downside protection. Despite the quarterly disappointment, the fund maintains confidence in CNX's ability to generate attractive returns through operational excellence and capital discipline.

Pitch Summary:
Bio-Rad – Life sciences company Bio-Rad detracted for the quarter. The company remains a stable business with growth potential. The quarter was a story of two halves. Early on, industry trends showed improvement after a period of normalization post-Covid, prompting us to trim on the back of price appreciation. However, later in the quarter, news of government funding cuts and a disappointing quarter of results weighed on the stock price. Despite this, we remain optimistic about Bio-Rad's outlook. Academic and government spending in the US accounts for only a low-single-digit percentage of this company's revenue, even though public perception suggests otherwise. Meanwhile, the company has a net cash balance sheet, a large hidden asset in its Sartorius stake and a proven history of smart capital allocation.

BSD Analysis:
Despite quarterly underperformance, Longleaf Partners maintains conviction in Bio-Rad's long-term prospects and defensive characteristics. The fund emphasizes that government funding concerns are overblown, with academic and government spending representing only low-single-digit revenue exposure versus market perception. Bio-Rad's net cash balance sheet provides financial flexibility and downside protection in uncertain environments. The Sartorius stake represents a significant hidden asset that adds substantial value not reflected in current trading multiples. Management's proven track record of smart capital allocation gives confidence in future value creation initiatives. The post-Covid normalization period has created temporary headwinds, but underlying industry fundamentals remain intact. Bio-Rad's diversified life sciences platform serves both research and clinical diagnostic markets, providing multiple growth vectors. The fund views current weakness as a temporary setback rather than fundamental deterioration, maintaining optimism about the company's stable business model and growth potential.

Pitch Summary:
Millicom – Latin American telecommunications operator Millicom extended its strong 2024 performance into the first quarter of this year. The company reported solid results, exceeding its already twice-raised 2024 equity FCF guidance of approximately $650 million and guiding further growth to the $750 million range for 2025. The company implemented an improved dividend for a yield above 10%, finished listing solely in the US and also made progress on an accretive deal in Colombia. We are grateful for the work of our aligned partners at 40%-owner Iliad Group and believe that more upside remains with the stock still trading at a single-digit multiple of growing earnings.

BSD Analysis:
Longleaf Partners expresses strong confidence in Millicom's operational momentum and financial performance trajectory. The company has consistently exceeded free cash flow guidance, raising targets twice in 2024 before delivering $650 million and now guiding to $750 million for 2025. This represents impressive 15% year-over-year FCF growth, demonstrating the quality of Millicom's Latin American telecom assets. The dividend yield above 10% provides attractive income while the company trades at single-digit earnings multiples, suggesting significant undervaluation. The partnership with 40% owner Iliad Group provides strategic alignment and operational expertise. Recent corporate actions including US-only listing and Colombian deal progress indicate management's focus on value creation. The fund views current valuation as disconnected from the underlying business quality and growth prospects. Millicom's dominant market positions in Latin America provide defensive moats with growth upside as digital penetration increases.

Pitch Summary:
IAC – Digital holding company IAC was another solid contributor for the quarter. In January, the company announced that former CEO Joey Levin would be shifting his focus to become Executive Chairman at IAC portfolio business Angi. Barry Diller is taking on a larger role at IAC while continuing to be its Chairman. Initially, the market reacted cautiously, but as the quarter went on, the potential benefits became clearer, especially in conjunction with the recently completed spin-off of Angi. During the quarter, we published our first Research Perspectives note that provides more details on our investment case for IAC.

BSD Analysis:
Longleaf Partners maintains a bullish stance on IAC following management changes and the Angi spin-off completion. The fund views the leadership transition, with Joey Levin focusing on Angi as Executive Chairman while Barry Diller expands his IAC role, as strategically beneficial. Initial market skepticism has given way to recognition of the potential value creation from this restructuring. The Angi spin-off represents a key catalyst that should help unlock value within the IAC portfolio of digital assets. The fund's decision to publish a dedicated research note demonstrates high conviction in the investment thesis. IAC's holding company structure provides exposure to multiple digital businesses with distinct growth trajectories. The management changes are expected to drive more focused execution across the portfolio companies. Longleaf sees this as an opportune time to own IAC as the market begins to appreciate the strategic benefits of the recent corporate actions.

Pitch Summary:
Albertsons – US grocery retailer Albertsons was a contributor for the quarter. Albertsons was a new purchase in 2024, after we had followed the company and its predecessors for years. In an otherwise turbulent quarter, Albertsons stands out as a stable business that remains undervalued because it had fallen off the radar during a protracted deal process with Kroger that ultimately failed. The company should grow at a moderate pace and has plenty of financial firepower to repurchase shares, all while it has multiple strategic options (such as unlocking its real estate value and/or selling non-core markets) to realize value per share.

BSD Analysis:
Longleaf Partners views Albertsons as an undervalued stable grocery retailer that has been overlooked following the failed Kroger merger. The fund emphasizes the company's defensive characteristics in a turbulent market environment, highlighting its consistent cash generation capabilities. Management believes Albertsons offers multiple value creation levers including share repurchases supported by strong financial position, real estate monetization opportunities, and potential divestiture of non-core markets. The investment thesis centers on the company's ability to deliver moderate growth while returning capital to shareholders. The fund sees this as a classic value play where market neglect has created an attractive entry point. Albertsons' grocery retail model provides recession-resistant cash flows, making it an appealing defensive holding. The multiple strategic options available to management provide additional upside catalysts beyond the base case operational performance.

Pitch Summary:
Alphabet (GOOG) – We bought Alphabet (i.e. Google) in a few accounts. I've owned it before, but not for very long. I usually don't focus on buying the biggest tech companies, even as we have the one portfolio with the large AMZN / AAPL positions. One reason to do this is to give the portfolios with Alphabet exposure to large cap technology, a huge part of the market. But also, of the so-called Magnificent Seven or any other trend of huge tech stocks you want to name, Alphabet is the most attractive. At $170/share, where we bought it, it traded at 19x 2025 earnings estimates and 21x 2024 earnings results before crediting its balance sheet for its huge cash position. That is less than the S&P 500. Alphabet is supposedly threatened by the advent of ChatGPT and generational AI. It seems as likely to me that Alphabet wins or at least ties Microsoft and OpenAI in these battles as anything else. It also seems as likely to me that the generative AI trend slows down, and the incumbent, Google search, becomes the business winner. Alphabet is also facing regulatory and governmental pressure, and may be forced to break up. A break up would be fabulous for shareholders, in my view; owning YouTube as an independent company is not something I would complain about. Alphabet's Waymo unit is also the likeliest winner of self-driving, if that becomes a real market. (If it doesn't, Alphabet stops burning money on Waymo and becomes more profitable). Lastly, Alphabet is less directly exposed to the tariff issues than Apple or Amazon. While it may face more backlash from other governments, and faces regulatory scrutiny on a number of fronts, and reduced demand would affect advertising sales, it is in a relatively better spot compared to Magnificent 7 peers.

BSD Analysis:
The manager presents Alphabet as the most attractive opportunity within the Magnificent Seven, emphasizing compelling valuation at 19x 2025 earnings, below the S&P 500 multiple despite the company's dominant market position. The investment thesis rests on Google's entrenched search monopoly potentially benefiting if the generative AI trend moderates, while also positioning the company to compete effectively with Microsoft and OpenAI in AI development. The manager views potential regulatory breakup as value-accretive, particularly highlighting YouTube's standalone value. Waymo represents an asymmetric opportunity in autonomous vehicles with limited downside if the market fails to materialize. Compared to other mega-cap tech stocks, Alphabet offers superior tariff protection due to less direct exposure to physical goods and international supply chains. The combination of reasonable valuation, multiple growth optionalities, and defensive characteristics makes it the preferred large-cap tech exposure.

Pitch Summary:
Sonoco Products (SON) – This is not the oil and gas company (that's Sunoco). Sonoco produces consumer packaging for food and staples products, in both metal and paper, and industrial paper packaging. It is shuffling its business portfolio, acquiring Eviosys in Europe and selling its heat-safe packaging businesses. It is attractive because it should be able to pay off debt, leading to more value for the equity, and because the equity is cheap compared to earnings. This is – or should be – a boring business, levered to the sorts of things we buy in any environment. In that way it's similar to Crown Holdings (CCK), which we also added to this quarter after it had a good report. Crown Holdings is focused on beverages, but similar idea. The tariff risk here is mostly in metal coming into the United States. Both businesses have large international presences and source locally, which means that, again, demand may be the biggest factor.

BSD Analysis:
The manager identifies Sonoco as an attractive defensive play in essential consumer packaging, emphasizing its exposure to staple products that maintain demand across economic cycles. The investment thesis hinges on portfolio optimization through the Eviosys acquisition in Europe and divestiture of non-core heat-safe packaging businesses, which should improve operational focus. The key value driver is debt reduction capability, which will enhance equity value as leverage decreases. Trading at attractive earnings multiples, Sonoco represents a 'boring' but stable business model with predictable cash flows. The manager draws parallels to Crown Holdings, suggesting a broader thesis around essential packaging companies. While tariff risks exist for metal inputs, the company's international presence and local sourcing provide some protection, with demand fundamentals remaining the primary concern rather than input cost inflation.

Pitch Summary:
Everus Construction Group (ECG) – I mentioned this briefly last quarter. We had a small position in a spin-off from MDU Resources, a utility company, and sold that position not long into Q1 at $70/share. The stock dived after its earnings report underwhelmed the market, and then further due to sector worries. We bought between $39 and $48, and the stock finished the quarter at $37.09. Everus primarily builds power lines, pipelines, and similar infrastructure. It is based in North Dakota but operates everywhere in the U.S. except New England and Wisconsin. Providing construction services means it should be able to maintain decent gross margins, since it aligns its costs to each given project. It is levered to demand for power and energy infrastructure, which is needed in the United States. Its revenue backlog grew 38% in 2024 and is nearly equal to 2024 revenue (not all of that backlog will be realized in 2025, but also, 2024 revenue was 41% higher than 2023 year-end backlog). It has been a steady grower for the past five years. This is the sort of business that gets a good multiple, and in a stable environment is worth in the $60s or $70s (around where we first sold it). The earnings sell-off is attributable to ECG being a relatively small ($1.9B market cap) spin-off. It's newly public, and analysts and investors haven't decided on how to value it. Analyst estimates dropped .10 for 2025 earnings, or 3.8%, and the stock's multiple dropped 27% (from 26 to 19) in two days. This inefficiency is the attractive element. What worries me about Everus, and what has been reflected in the second leg of that sell-off, is that it may be benefitting from tailwinds that die off. Renewable energy (including electric vehicle network buildout), data centers, and grid hardening. A lot of this has been fueled by the AI boom and the Biden administration major bills. If these short-circuit, it would presumably affect ECG's business, and is why shares trade at only 14.66x 2025 earnings as of the end of the quarter. On the tariff front, I would expect Everus to be able to pass on increased costs to customers. The question is whether increased costs slow down the underlying demand.

BSD Analysis:
The manager presents a compelling value opportunity in Everus Construction Group, a spin-off from MDU Resources trading at a significant discount following earnings disappointment. The thesis centers on ECG's essential infrastructure construction services, particularly power lines and pipelines, which benefit from strong U.S. infrastructure demand. The company demonstrates solid fundamentals with 38% revenue backlog growth in 2024 and consistent five-year growth. Trading at only 14.66x 2025 earnings versus historical multiples in the mid-20s, the valuation appears attractive for a business with project-based cost alignment and decent gross margins. However, the manager acknowledges key risks including potential headwinds from reduced renewable energy investment and AI-driven infrastructure spending. The position represents a classic post-spin-off inefficiency play where analyst coverage and investor understanding remain limited, creating temporary mispricing opportunities.

Pitch Summary:
Sysco Corporation is one of the largest food service distribution companies globally. We appreciate that food service distribution is a stable industry that has historically grown slightly faster than food spending. This is because of a continued secular shift to food away from home and that scale-advantaged companies, like Sysco, benefit from better procurement terms from suppliers and demonstrate high operational efficiency. Recently, growth in the company's largest and most profitable customer segment, independent restaurants, has slowed, but Sysco is increasing headcount and changing compensation incentives in its salesforce, which we think will reinvigorate growth and prove beneficial for long-term shareholders. In our view, Sysco remains a high-quality company with a credible management team, so we were happy to purchase shares at a discount to peers and the company's own historical trading multiple.

BSD Analysis:
The manager initiated a position in Sysco Corporation, attracted by the company's dominant position in the stable food service distribution industry. The investment thesis is built on secular tailwinds from the continued shift toward food away from home consumption, which historically drives industry growth above overall food spending. Sysco's scale advantages provide superior supplier procurement terms and operational efficiency compared to smaller competitors. While recent growth has decelerated in the key independent restaurant segment, management is proactively addressing this through increased sales force headcount and revised compensation structures to drive growth acceleration. The manager views these operational improvements as catalysts for long-term shareholder value creation. The entry valuation appears attractive, trading at a discount to both industry peers and Sysco's own historical multiples. The combination of industry leadership, secular growth drivers, management initiatives, and attractive valuation supports the bullish investment case for this high-quality food service distributor.

Pitch Summary:
We began building a position in Journey Medical in February. Journey is a dermatology-focused pharmaceutical company with products including Accutane for the treatment of acne and Qbrexza for excessive underarm sweating (hyperhidrosis). The company generated $55 million in revenue in 2024, with a modest operating loss. Journey is led by CEO Claude Marauoi, along with several senior members who previously worked at Medicis, a dermatology company acquired by Bausch Health for $2.6 billion in 2012. This group brings deep sector experience and holds a significant equity stake in the business. We were attracted to Journey ahead of the launch of Emrosi, a new oral treatment for rosacea approved by the FDA in November 2024. In Phase 3 trials, Emrosi was tested head-to-head against Oracea, the prior standard of care (with peak sales of over $300 million before going generic) and showed superior efficacy with a similar safety profile. With patent protection through 2039, we believe Emrosi is well positioned to become the new standard of care among oral rosacea therapies. Emrosi launched in April, and early prescription demand has been strong, with sales already annualizing over $15 million. Journey's cost structure — including thirty-five sales reps — is already in place, so revenue growth should scale efficiently. We believe Emrosi could reach $100 million in sales within a few years, making the company profitable and cash flow positive. We forecast untaxed earnings per share of $1.50 by 2027 and assign a price target of $20 per share.

BSD Analysis:
The manager presents a compelling bull case for Journey Medical centered on the commercial launch of Emrosi, a differentiated oral rosacea treatment with superior efficacy versus the previous standard of care. The investment thesis is anchored on experienced management with a proven track record from Medicis, which was acquired for $2.6 billion, providing credibility to execution capabilities. The drug's patent protection through 2039 creates a substantial competitive moat, while early prescription demand annualizing at $15 million demonstrates strong market acceptance. The manager's forecast of $100 million peak sales appears reasonable given Oracea's historical $300+ million peak before genericization. With the sales infrastructure already established, the company is positioned for efficient revenue scaling and margin expansion. The $1.50 EPS target by 2027 and $20 price target suggest significant upside from current levels. This represents a classic specialty pharma turnaround story with a de-risked product launch and clear path to profitability.

Pitch Summary:
Molina Healthcare is a leading managed care company. Molina is the fourth largest player in managed Medicaid but has consistently delivered industry-leading growth and margins. In our view, this is thanks to the company's exceptional management team and culture of operational excellence. We think Molina has a long runway for growth via continued share gains in Medicaid and untapped opportunities in their Medicare and Marketplace business segments. Recently, fundamentals have been pressured by an unprecedented redeterminations cycle in Medicaid, and valuations have compressed due to uncertainty around policy changes in a new political administration. We believe earnings pressure from redeterminations is temporary and that any Medicaid policy changes will prove manageable, providing us an opportunity to purchase shares at a meaningful discount to intrinsic value.

BSD Analysis:
The manager initiated a position in Molina Healthcare, viewing it as an attractive opportunity in the managed care space. As the fourth-largest Medicaid managed care provider, Molina has demonstrated consistent industry-leading growth and margin performance, attributed to exceptional management execution and operational excellence. The investment thesis centers on continued market share gains in Medicaid and expansion opportunities in Medicare and Marketplace segments, providing multiple growth avenues. Recent headwinds from Medicaid redeterminations and political uncertainty have created temporary earnings pressure and valuation compression. The manager views these challenges as transitory, believing the redeterminations cycle will normalize and policy changes will be manageable for well-positioned operators like Molina. This temporary dislocation has created an opportunity to acquire shares at a significant discount to intrinsic value. The combination of strong competitive positioning, multiple growth drivers, and attractive entry valuation supports the bullish investment case.