Investment Pitches

Pitch Summary:
Heico is a leading manufacturer of Federal Aviation Administration (FAA) approved jet engine and aircraft component replacement parts. Its Flight Support Group (FSG) provides FAA-approved aircraft and engine replacement parts, while the Electronics Technologies Group (ETG) serves industries such as aerospace, defense, homeland security, space, and medical with specialized electronic components. We believe the company is well-positioned to benefit from the steady aging of the global commercial aerospace fleet, resulting in increased consumption of aftermarket parts. Additionally, ongoing production issues from two major aircraft manufacturers have reduced the projected new plane deliveries, further supporting our view that the average age of the global fleet is likely to remain elevated over the next few years. During the quarter, shares contributed positively to performance after the company reported strong fiscal first-quarter results, driven by continued strength in the FSG segment as commercial flight hours remained robust. Furthermore, management highlighted a recovery within the ETG segment, supported by increased demand from the U.S. Department of Defense.

BSD Analysis:
Alger presents a compelling bull case for HEICO based on structural tailwinds in the aerospace aftermarket. The manager's thesis centers on the aging global commercial fleet driving increased demand for replacement parts, a trend amplified by production delays from major aircraft manufacturers that extend fleet replacement cycles. HEICO's dual-segment model provides diversification, with the Flight Support Group benefiting from robust commercial flight activity and the Electronics Technologies Group recovering through increased defense spending. The company's FAA-approved parts position it as a critical supplier in a market with high barriers to entry. Recent strong fiscal results validate the investment thesis, with both segments showing momentum. The secular nature of fleet aging and defense modernization provides a multi-year growth runway. HEICO's specialized manufacturing capabilities and regulatory approvals create sustainable competitive advantages in the aerospace supply chain.

Pitch Summary:
FTAI Aviation is a global aviation company specializing in the acquisition, leasing, and sales of aircraft and aircraft engines, particularly focused on CFM56 and V2500 engines. The company operates through two main segments: Aviation Leasing, which manages and leases aviation assets generating rental income, and Aerospace Products, which develops, manufactures, repairs, and sells aircraft engines and aftermarket components. FTAI primarily earns revenue from leasing fees, equipment sales, and maintenance services. We believe FTAI has established a differentiated business model that maximizes profits from a highly attractive niche within the aerospace aftermarket—used CFM56 jet engines, which dominate short- to medium haul flights globally. During the quarter, shares detracted from performance following a short-seller report alleging that actual maintenance revenue and individual engine module sales were materially lower than reported, claiming FTAI inflated Aerospace Products revenues by categorizing one-time engine sales as Maintenance, Repair, and Overhaul (MRO) revenue, and suggesting profitability was driven more by asset sales than genuine value-added services. In response, FTAI's board commissioned an independent audit, which cleared the company of all allegations, allowing FTAI to file its annual report on time. Aside from the short-seller impact, shares were also pressured by broader market trends as investors rotated away from last year's strong performers. Despite these near-term challenges, we remain confident in FTAI's fundamentals and believe it represents one of the best investment opportunities to capitalize on the multi-year commercial aerospace cycle.

BSD Analysis:
FTAI Aviation operates a differentiated business model focused on the highly attractive niche of used CFM56 jet engines, which dominate short- to medium-haul flights globally. The company's dual-segment approach combines Aviation Leasing for steady rental income with Aerospace Products for higher-margin aftermarket services. Despite facing a short-seller attack alleging revenue inflation and misclassification of MRO revenues, an independent board-commissioned audit cleared FTAI of all allegations. The company successfully filed its annual report on time, demonstrating operational continuity despite the controversy. The fund managers maintain confidence in FTAI's fundamentals, viewing it as positioned to capitalize on the multi-year commercial aerospace cycle. The CFM56 engine focus provides exposure to a large installed base with ongoing maintenance and replacement needs. While near-term performance was impacted by the short-seller report and broader market rotation away from 2024 winners, the long-term aerospace aftermarket opportunity remains compelling.

Pitch Summary:
Xometry is a leading two-sided marketplace for on-demand manufacturing services. The company provides real-time access to global manufacturing demand and capacity, with sourcing and pricing available across a network of buyers and sellers. In our view, this marketplace enables buyers (e.g., engineers and product designers) to efficiently source manufacturing processes and sellers of manufacturing services to grow their businesses. Xometry's AI-enabled technology platform is powered by proprietary machine learning algorithms, resulting in a sophisticated marketplace for manufacturing. Although the company reported strong fiscal fourth-quarter results that exceeded analyst estimates, shares fell after management guided to a modest loss for fiscal 2025 on an earnings-before-interest-taxes-depreciation-and-amortization (EBITDA) basis. Additionally, we believe shares detracted from performance amid a broader sell-off affecting high-growth, unprofitable companies, as investors rotated away from stocks that performed strongly in 2024.

BSD Analysis:
Xometry operates a sophisticated two-sided marketplace connecting manufacturing buyers and sellers through AI-enabled technology and proprietary machine learning algorithms. Despite reporting strong fiscal fourth-quarter results that exceeded analyst estimates, the stock declined due to management's guidance for a modest EBITDA loss in fiscal 2025. The company's marketplace model enables efficient sourcing for engineers and product designers while helping manufacturing service providers grow their businesses. However, the path to profitability remains uncertain, with management projecting continued losses despite revenue growth. The broader market rotation away from high-growth, unprofitable companies particularly impacted Xometry, as investors moved away from 2024's strong performers. The AI-powered platform represents a competitive advantage, but execution challenges around achieving profitability weigh on investor sentiment. The stock's underperformance reflects concerns about the timeline to sustainable profitability in the on-demand manufacturing space.

Pitch Summary:
Agilysys provides innovative software solutions for the hospitality industry, including point-of-sale (POS) systems, payment gateways, reservation and table management, guest offers management, property management, inventory and procurement, analytics, document management, and mobile and wireless services. During the quarter, shares detracted from performance after the company reported lower-than-expected fiscal third quarter revenues. The revenue shortfall was primarily due to weaker-than-expected POS software sales, particularly within the Managed Food Service segment, and softer international sales. As a result, management lowered their full-year revenue guidance, citing near-term challenges associated with transitioning their POS product to a new version.

BSD Analysis:
Agilysys faced significant headwinds during the quarter with fiscal third-quarter revenues falling short of expectations, primarily driven by weakness in POS software sales. The Managed Food Service segment underperformed, while international sales also disappointed, indicating broader demand challenges across key markets. Management's decision to lower full-year revenue guidance reflects near-term execution challenges, particularly around the transition to a new POS product version. This product transition risk suggests potential customer disruption and competitive vulnerability during the migration period. The hospitality software market remains competitive, and Agilysys appears to be losing momentum in key segments. The combination of revenue shortfalls and reduced guidance created negative sentiment that detracted from the fund's quarterly performance. The company needs to successfully execute its product transition to regain growth momentum.

Pitch Summary:
Guidewire is the market leader in providing SaaS and software solutions for the property and casualty (PnC) insurance segment, serving major customers throughout the industry. The company offers a comprehensive suite of solutions covering policy, billing, and claims, and is recognized as the most advanced cloud technology provider among its competitors. We believe that new customer adoption of cloud solutions, combined with the ongoing migration of existing clients to the cloud, represents a key long-term growth driver, positioning the company for continued cross-selling and upselling opportunities. During the quarter, Guidewire reported strong fiscal second-quarter results, driven by better-than-expected growth in annual recurring revenue (ARR). Additionally, the company secured several new cloud contracts, including five with major insurers, underscoring strong market demand for its offerings. Given the strong operating results, shares contributed to performance during the quarter.

BSD Analysis:
Guidewire maintains market leadership in property and casualty insurance software, with a comprehensive suite covering policy, billing, and claims management. The company's cloud migration strategy is driving strong annual recurring revenue growth, exceeding expectations in the fiscal second quarter. New customer adoption combined with existing client migrations to cloud solutions creates multiple expansion opportunities through cross-selling and upselling. The securing of five new cloud contracts with major insurers during the quarter demonstrates robust market demand for Guidewire's advanced technology platform. The company's recognized position as the most advanced cloud provider in the P&C insurance space provides competitive advantages. The ongoing digital transformation in insurance creates a multi-year growth runway for cloud-based solutions. Strong operating results and contract wins contributed positively to the fund's quarterly performance.

Pitch Summary:
GeneDx is a specialty laboratory focused on genetic testing for the diagnosis of rare diseases, primarily targeting pediatric patients in neonatal intensive care units and those with developmental disorders. Currently, GeneDx offers three primary categories of testing: (1) whole exome/genome sequencing, (2) hereditary cancer screening, and (3) individual gene tests and smaller genetic panels. Shares contributed positively to performance during the quarter after the company reported strong fiscal fourth-quarter results, driven by robust customer demand. Additionally, management raised their fiscal 2025 revenue guidance, exceeding analyst estimates.

BSD Analysis:
GeneDx delivered strong fiscal fourth-quarter results that exceeded expectations, driven by robust demand for genetic testing services in rare disease diagnosis. The company's focus on pediatric patients in NICUs and developmental disorders represents a specialized niche with significant medical need. Their comprehensive testing portfolio spans whole exome/genome sequencing, hereditary cancer screening, and targeted gene panels, providing multiple revenue streams. Management's decision to raise fiscal 2025 revenue guidance above analyst estimates signals confidence in continued growth momentum. The rare disease genetic testing market benefits from increasing awareness and adoption of precision medicine approaches. GeneDx's specialty laboratory model positions it well to capture market share in this growing segment. The positive quarterly performance and raised guidance contributed to strong stock performance during the period.

Pitch Summary:
Inari Medical is a medical device company that develops and sells innovative solutions for venous diseases, such as venous thromboembolism. The company generates revenue primarily through sales of its minimally invasive clot-removal devices, including the ClotTriever and FlowTriever systems. On January 6, 2025, Stryker Corporation announced a definitive agreement to acquire Inari Medical for $80 per share in cash, representing a total transaction value of approximately $4.7 billion. The acquisition was successfully completed on February 19, 2025, after the expiration of the tender offer and fulfillment of standard closing conditions. As a result, shares contributed positively to performance during the quarter.

BSD Analysis:
The fund benefited from Stryker's acquisition of Inari Medical at $80 per share, representing a $4.7 billion transaction that closed in February 2025. Inari's focus on minimally invasive clot-removal devices for venous thromboembolism positioned it as an attractive acquisition target in the medical device space. The ClotTriever and FlowTriever systems represent innovative solutions in the venous disease treatment market. The successful completion of the tender offer and fulfillment of closing conditions demonstrates the strategic value Stryker saw in Inari's technology platform. The acquisition premium provided significant returns for the fund during the quarter. This transaction highlights the consolidation trend in medical devices as larger players seek innovative technologies. The fund's position was fully monetized through the cash acquisition, contributing positively to quarterly performance.

Pitch Summary:
Agilysys provides innovative software solutions for the hospitality industry, including point-of-sale (POS) systems, payment gateways, reservation and table management, guest offers management, property management, inventory and procurement, analytics, document management, and mobile and wireless services. During the quarter, shares detracted from performance after the company reported lower-than-expected fiscal third quarter revenues. The revenue shortfall was primarily due to weaker-than-expected POS software sales, particularly within the Managed Food Service segment, and softer international sales. As a result, management lowered their full-year revenue guidance, citing near-term challenges associated with transitioning their POS product to a new version.

BSD Analysis:
The manager takes a neutral stance on Agilysys following the company's disappointing fiscal third-quarter results and reduced full-year guidance. While Agilysys maintains a comprehensive suite of hospitality software solutions spanning POS systems, property management, and analytics, near-term execution challenges have emerged. The revenue shortfall was primarily driven by weaker-than-expected POS software sales in the Managed Food Service segment and softer international performance. Management's decision to lower full-year revenue guidance reflects challenges associated with transitioning their POS product to a new version, suggesting temporary disruption during the upgrade cycle. The manager appears to view this as an execution issue rather than a fundamental market problem, given the company's broad hospitality software platform. However, the transition challenges and international softness indicate near-term headwinds that may persist until the new POS version is successfully deployed and adopted by customers.

Pitch Summary:
Upstart is a leading AI-powered lending platform that partners with banks and credit unions to improve access to affordable credit. By leveraging machine learning algorithms, the company evaluates non-traditional risk factors to provide more accurate credit assessments, enabling better loan approvals and pricing. Upstart aims to make the lending process more inclusive and efficient while helping its financial institution partners drive growth and manage risk effectively. After delivering impressive share price performance throughout 2024, shares detracted from performance this quarter. While the company reported solid fiscal fourth-quarter operating results with all three major product lines showing considerable growth, we believe shares were under pressure due in large part to macroeconomic concerns. Specifically, escalating trade tensions and potential recession fears pressured financial technology stocks, making investors wary of the company's consumer credit exposure.

BSD Analysis:
The manager maintains a neutral stance on Upstart Holdings despite the company's strong operational performance and innovative AI-powered lending platform. Upstart's differentiated approach using machine learning algorithms to evaluate non-traditional risk factors enables more accurate credit assessments and inclusive lending practices. The company reported solid fiscal fourth-quarter results with considerable growth across all three major product lines, indicating strong execution of its business model. However, the manager attributes the stock's underperformance to broader macroeconomic headwinds rather than company-specific issues. Escalating trade tensions and recession fears have pressured fintech stocks, with investors particularly concerned about consumer credit exposure in a potentially weakening economic environment. The manager appears to view the current weakness as macro-driven rather than fundamental, suggesting the underlying AI-powered lending platform remains compelling despite near-term market sentiment challenges.

Pitch Summary:
Semtech Corporation designs and manufactures analog and mixed-signal semiconductors for a wide range of applications, including Internet of Things (IoT), data centers, industrial equipment, and consumer electronics. The company is a global leader in low-power, high-performance solutions, with a focus on enabling connectivity, energy efficiency, and miniaturization across its target markets. Semtech operates in three business segments: Protection, Signal Integrity, and Wireless & Sensing. In February 2025, the company lowered revenue projections for its core data center product, Advanced Copper Cable (ACC), which connects GPUs at a lower power consumption while preserving signal integrity. Management attributed the revised guidance to architectural changes in GPUs from a major supplier, rather than issues with Semtech's product or execution. Consequently, shares declined due to delayed ACC revenues, negatively impacting performance during the quarter.

BSD Analysis:
The manager takes a neutral stance on Semtech Corporation following the company's revenue guidance reduction for its Advanced Copper Cable (ACC) product. While Semtech maintains leadership in low-power, high-performance semiconductor solutions across IoT, data centers, and industrial applications, near-term headwinds have emerged. The company's ACC product, which enables GPU connectivity with lower power consumption while preserving signal integrity, faces delayed revenues due to architectural changes from a major supplier. Management's attribution of the guidance reduction to external factors rather than product or execution issues suggests the underlying technology remains sound. The diversified business model across Protection, Signal Integrity, and Wireless & Sensing segments provides some stability. However, the dependence on major suppliers for data center products creates vulnerability to architectural shifts. The manager appears to view this as a temporary setback rather than a fundamental business issue.

Pitch Summary:
Progyny is a leading benefits management company specializing in fertility and family building solutions. It serves a significant but underserved market through unique plan designs, coordinated clinical care, and a carefully selected provider network, resulting in superior clinical outcomes and cost savings. Infertility is a widespread issue, affecting one in eight U.S. couples, according to the Centers for Disease Control and Prevention. In our view, the company has successfully broken the pattern of weaker performance seen throughout 2024, which was partly driven by an Alabama state ruling to suspend in vitro fertilization (IVF) procedures—a restriction that was subsequently lifted. Shares contributed positively to performance during the quarter, following solid fiscal fourth-quarter operating results driven by an expanding client base and improving utilization trends. Additionally, management raised both fiscal first-quarter and full-year 2025 revenue guidance above analyst estimates, citing member engagement trending back toward historical levels.

BSD Analysis:
The manager presents a bullish thesis on Progyny based on the company's leadership position in the large and underserved fertility benefits market. With infertility affecting one in eight U.S. couples, the addressable market opportunity is substantial and growing. The company's differentiated approach through unique plan designs, coordinated clinical care, and a curated provider network delivers superior clinical outcomes while generating cost savings for employers. The manager notes that Progyny has overcome the regulatory headwinds from 2024, including the temporary Alabama IVF suspension. Strong fiscal fourth-quarter results driven by client base expansion and improving utilization trends indicate recovering demand. Management's upward revision of both quarterly and full-year 2025 revenue guidance above analyst estimates reflects confidence in the business recovery. The return of member engagement to historical levels suggests normalized demand patterns are resuming.

Pitch Summary:
Palomar Holdings is a specialty insurance company providing property and casualty coverage focused on risks such as earthquakes, hurricanes, and floods, primarily serving residential and commercial clients in the United States. The company generates revenue by underwriting specialized insurance policies and collecting premiums from policyholders. We believe Palomar's targeted focus on underserved markets and strategic growth initiatives positions the company favorably to capture opportunities within niche insurance segments, supporting sustained profitability and growth. During the quarter, shares contributed positively to performance after the company reported strong fiscal fourth-quarter operating results, beating analyst earnings estimates for the ninth consecutive quarter. This performance was driven by robust premium growth and effective loss management. Additionally, management raised its fiscal 2025 earnings guidance above consensus expectations.

BSD Analysis:
The manager maintains a bullish stance on Palomar Holdings based on the company's specialized focus on underserved catastrophe insurance markets. The consistent execution is evidenced by nine consecutive quarters of beating analyst earnings estimates, demonstrating management's ability to effectively underwrite risk and manage losses. Robust premium growth indicates strong demand for the company's specialized coverage in earthquake, hurricane, and flood markets. The manager views Palomar's niche positioning as a competitive advantage that enables sustained profitability in underserved segments. Management's decision to raise fiscal 2025 earnings guidance above consensus reflects confidence in the business trajectory. The combination of effective loss management and premium growth in specialized markets positions Palomar to capitalize on opportunities in catastrophe insurance.

Pitch Summary:
VSE provides repair services, parts distribution, logistics, supply chain management, and consulting for commercial and government transportation assets across land, sea, and air. Historically operating in two primary segments—Aviation and Fleet—the company recently announced the planned divestiture of its Fleet operations. During the quarter, shares positively contributed to performance following the announcement of the planned sale of its Fleet segment, Wheeler Fleet Solutions, to a private equity firm, enabling VSE to concentrate further on its core aviation business. Additionally, VSE reported strong fiscal fourth-quarter results, exceeding analyst earnings estimates. Organic revenue growth in the Aviation segment accelerated to 17%, compared to 14% in the prior quarter. Further, management noted that they anticipate continued growth in 2025, driven by successful integration of recent acquisitions, a robust pipeline of organic opportunities, and potential future acquisitions. We believe management is effectively executing its strategic plan, forecasting sustained organic growth through 2025 and into 2026, which could potentially support further margin improvement.

BSD Analysis:
The manager presents a bullish thesis on VSE Corporation based on strategic portfolio optimization and strong operational execution. The planned divestiture of the Fleet segment allows management to focus resources on the higher-growth Aviation business, which demonstrated accelerating organic revenue growth of 17% versus 14% in the prior quarter. The company's ability to consistently beat analyst earnings estimates while executing successful acquisitions indicates strong management capabilities. The manager highlights a robust pipeline of organic opportunities and potential future acquisitions as growth drivers. With sustained organic growth forecasted through 2026, the concentrated focus on aviation services positions VSE to benefit from continued demand in commercial and government transportation markets. The strategic refocusing should enable margin improvement as the company optimizes its operations around its core competency.

Pitch Summary:
Compass Minerals (Full report here) – High-quality assets trading at attractive prices stemming from recent management mistakes, removal from the S&P 600 index, and warmer winters resulted in this stock trading down to 6x our estimated normalized earnings. Salt road de-icing does not care whether the market is up or down, consumer preferences, or AI; salt must be bought if it snows. Compass is a high-quality business with a new management team and a back-to-basics agenda. Several side projects, including a fire retardant and a lithium extraction project, distracted their core salt and Sulfate of Potash (SOP) business. With these projects eliminated, combined with a typical winter, it will demonstrate the normalized earnings power of their business.

BSD Analysis:
The manager views Compass Minerals as a high-quality business trading at distressed valuations due to temporary factors rather than fundamental deterioration. At 6x estimated normalized earnings, the stock appears significantly undervalued following management missteps, index removal, and weather-related headwinds. The investment thesis centers on the non-discretionary nature of road salt demand, which provides recession-resistant cash flows regardless of economic conditions or technological disruption. New management has implemented a back-to-basics strategy, eliminating distracting side projects like fire retardant and lithium extraction that diverted resources from the core salt and Sulfate of Potash operations. The manager expects normalized winter weather patterns to demonstrate the company's true earnings power, with the combination of operational focus and typical seasonal demand driving significant multiple expansion. The investment represents a classic value opportunity where temporary operational and weather-related issues have created an attractive entry point into a defensive, cash-generative business model.

Pitch Summary:
During the quarter, we initiated three new positions: BMW (Ticker: BMWKY), Mercedes-Benz (Ticker: MBGYY), and Compass Minerals (Ticker: CMP). Our investment theses for BMW and Mercedes-Benz share many similarities. Both companies currently face headwinds from heightened competition, which has led to softer demand. However, they trade at highly attractive valuations and maintain low leverage—key attributes that position them well to navigate near-term challenges. Investors benefit from robust dividend yields, while ongoing share repurchase programs at discounted prices enhance long-term return potential.

BSD Analysis:
Mercedes-Benz represents the second component of the manager's German automotive investment strategy, sharing similar characteristics with BMW in terms of valuation attractiveness and financial strength. The thesis acknowledges current competitive headwinds and softer demand but views these as temporary market conditions rather than permanent structural challenges. The company's low leverage profile provides crucial financial flexibility during this challenging period while maintaining the ability to return capital to shareholders. Mercedes-Benz's robust dividend yield offers immediate income while the company's share repurchase program at discounted valuations creates additional value for long-term shareholders. The manager appears to be betting on the cyclical nature of automotive demand and the eventual market recognition of these companies' strong fundamentals. The investment represents a contrarian play on premium automotive manufacturers, with the expectation that current competitive pressures will subside and allow these well-capitalized companies to demonstrate their underlying earnings power.

Pitch Summary:
During the quarter, we initiated three new positions: BMW (Ticker: BMWKY), Mercedes-Benz (Ticker: MBGYY), and Compass Minerals (Ticker: CMP). Our investment theses for BMW and Mercedes-Benz share many similarities. Both companies currently face headwinds from heightened competition, which has led to softer demand. However, they trade at highly attractive valuations and maintain low leverage—key attributes that position them well to navigate near-term challenges. Investors benefit from robust dividend yields, while ongoing share repurchase programs at discounted prices enhance long-term return potential.

BSD Analysis:
The manager initiated a position in BMW as part of a broader German automotive thesis, viewing current headwinds as temporary rather than structural. The investment case centers on attractive valuations created by heightened competition and softer demand, which the manager believes has created an opportunity in high-quality automotive names. BMW's low leverage profile provides financial flexibility to navigate near-term challenges while maintaining capital returns to shareholders. The combination of robust dividend yields and ongoing share repurchase programs at discounted valuations creates multiple return drivers for patient investors. The manager appears to be taking a contrarian stance on German automotive manufacturers, betting that current competitive pressures are cyclical and that strong balance sheets will enable these companies to emerge stronger. The thesis relies on mean reversion in automotive demand and the market's eventual recognition of the companies' financial strength and shareholder-friendly capital allocation policies.

Pitch Summary:
Our Q4 2023 letter stated that Five Point Holdings was a top pick for 2024. While it performed well, gaining 23% on the year, how a month makes such a difference. In January, Five Point reported robust Q4 results and guided 2025 to be equally as strong, guiding to $200m of Net Income, putting them in a net cash position. On this news, the stock rose 50% on the day following. Only a few years ago, we were increasingly worried about their upcoming debt maturity. Now, having the discussion 180 and moving to how they will deploy excess free cash flow in the coming years is a turnaround timeline we couldn't have fathomed. In Q4, we visited California to tour the properties and wrote up our reaction to Q1 results on our Substack. While the stock has pulled back during the recent market selloff, we continue to be bullish on the businesses future. San Francisco (Candlestick Park) should begin progressing towards the end of 2025/beginning of 2026, which is the next leg of the story. At just 0.5x our fair value estimate, the stock remains very compelling. A healthy balance sheet, an A+ management team, and strong demand for their properties equating to significant free cash flow should lead to strong stock performance in the future.

BSD Analysis:
The manager presents Five Point Holdings as a successful turnaround story, highlighting the dramatic transformation from debt concerns to net cash generation. The company guided to $200 million in net income for 2025, representing a significant inflection point that drove a 50% single-day stock surge following earnings. The investment thesis centers on the company's transition from financial distress to free cash flow generation, with management now focused on capital deployment rather than debt refinancing. The San Francisco Candlestick Park development represents the next major catalyst, expected to commence by late 2025/early 2026. At 0.5x the manager's fair value estimate, the stock appears significantly undervalued despite recent market pullbacks. The combination of a strengthened balance sheet, highly regarded management team, and strong property demand creates multiple drivers for future outperformance. The manager's on-site property visits demonstrate thorough due diligence and conviction in the underlying real estate assets.

Pitch Summary:
In our portfolio, Donnelley Financial (DFIN) recently declined approximately 20% following disappointing Q4 results and soft guidance for Q1. The miss was driven primarily by a steeper-than-expected decline in their legacy paper and printing segment, as well as continued weakness in capital markets activity—particularly IPOs and M&A. However, our investment thesis centers on the company's recurring software solutions segment, which grew organically by 11.6% in Q4. This growth signals underlying strength in the core business. We believe the market has misread this temporary weakness as a permanent impairment, creating a compelling mispricing. 2025 forward estimates were revised down approximately 9%, and 2026 down 7%—the stock's decline implies a permanent reduction of more than 10% in its terminal valuation multiple. This seems unjustifiably pessimistic. Should any stock, regardless of valuation, balance sheet quality, or industry context, be expected to decline 20%+ on a single earnings miss?

BSD Analysis:
The manager views DFIN's 20% post-earnings decline as an overreaction to temporary headwinds rather than permanent business impairment. The investment thesis focuses on the company's recurring software solutions segment, which demonstrated strong organic growth of 11.6% in Q4, indicating resilience in the core business model. The decline was primarily attributed to weakness in legacy paper/printing operations and reduced capital markets activity (IPOs/M&A), which are viewed as cyclical rather than structural issues. Forward estimates were reduced by 9% for 2025 and 7% for 2026, yet the stock's 20%+ decline suggests the market is pricing in a permanent 10%+ reduction in terminal valuation multiples. The manager believes this creates a compelling mispricing opportunity, arguing that the market's indiscriminate selling following earnings misses has become increasingly severe. The position represents a contrarian bet on the market's inability to distinguish between temporary setbacks and permanent value destruction.

Pitch Summary:
We added to Fiserv during the quarter. In May, Fiserv reported slower growth for its Clover payment processing business – Clover is one of several portable terminals that you may have seen restaurants use to process credit card payments. When Clover grew 8% during the first quarter rather than the expected 10%, the stock dropped by 30%. Again, Mr. Market gets hyper sometimes. Fiserv is one of the most durable growth stories of the past four decades, having grown earnings by at least 10% for 39 straight years. It acts as the primary technology provider to several thousand regional banks. In turn, the banks actively sell Fiserv products like Clover to their customers, allowing them to transmit credit card payments directly to their bank accounts with a full accounting of the day's receipts. Clover itself is only about 15% of Fiserv's total business – the company has a menu of other products that its bank partners sell to their own customers – but it has great potential. Even with temporarily slower growth from Clover, Fiserv should grow earnings about 15% this year, to roughly $10 per share. Wall Street analyst consensus calls for EPS of nearly $12 in 2026. We added to the position at about $169 in May and it closed the quarter a bit higher than that. The current price is just over 14x next year's earnings estimate in a market that trades for more than 20x forward estimates. There are certainly competing payment terminals that restaurants and small retailers can buy, but none have a massive installed base of regional banks that actively sell and support the product.

BSD Analysis:
The manager capitalized on market overreaction to Clover's modest growth deceleration, adding to Fiserv at attractive valuations. The 30% stock decline following Clover's 8% growth versus 10% expectations created a compelling opportunity given Clover represents only 15% of total business. Fiserv demonstrates exceptional consistency with 39 consecutive years of 10%+ earnings growth, serving as primary technology provider to thousands of regional banks. The company's competitive moat stems from its massive installed base of bank partners who actively sell and support Fiserv products like Clover to their customers. This distribution advantage is difficult to replicate for competing payment terminals. Despite Clover's temporary slowdown, Fiserv expects 15% earnings growth in 2025 to $10 per share, with analyst consensus projecting nearly $12 EPS in 2026. At 14x forward earnings versus 20x+ market multiples, the valuation appears attractive for a durable growth franchise with strong competitive positioning.

Pitch Summary:
In terms of additions, we purchased more shares of our insurer Kinsale Corp. during the quarter. Mr. Market is a volatile fellow and periodically he does weird things, such as sell great companies because they miss short-term growth targets. He did this in April when Kinsale reported slightly disappointing revenue growth and losses related to Southern California wildfires. We added to our position in late April at $419. Kinsale continues to have the lowest expense structure of its peer group, and among the highest growth rates and profit margins. Insurance is a commodity business, so players like Progressive in car insurance and Kinsale in commercial property and casualty are going to win over time by being efficient. Kinsale stock finished the quarter at $480.

BSD Analysis:
The manager opportunistically added to Kinsale during a market overreaction to temporary headwinds in April. The stock declined after slightly disappointing revenue growth and wildfire-related losses, creating an attractive entry point at $419. Kinsale maintains structural competitive advantages with the lowest expense structure among peers while delivering among the highest growth rates and profit margins in commercial property and casualty insurance. The manager views insurance as a commodity business where efficiency drives long-term success, positioning Kinsale similarly to Progressive's dominance in auto insurance. The company's specialized focus on excess and surplus lines provides pricing power in hard-to-place risks. The stock's recovery to $480 by quarter-end (+15% from purchase price) validates the manager's contrarian timing. Kinsale's operational excellence and market positioning support continued outperformance in the specialty insurance segment.