Investment Pitches

Pitch Summary:
In 2Q25, we increased our position in Orthofix Medical, Inc. (OFIX) following a 45.6% decline from its February high and a 36.1% drop from its 2024 close. We view this as a compelling valuation opportunity, supported by recent insider purchases by its CEO and also by its top shareholder, a 13D filer. We believe Orthofix's strong financial position should continue to improve throughout 2025, as it is largely complete with the integration of its Seaspine merger. In November 2024, OFIX extended its credit agreement through 2029, with net debt to adjusted EBITDA at 1.2x and $115 million in undrawn capacity. On its 1Q25 call, management reaffirmed guidance for positive free cash flow in 2025, with further improvement expected in 2026 and 2027. We believe part of OFIX's 2Q25 share weakness stemmed from a $10 million reduction in annual revenue guidance given on its 1Q25 call, driven by one-time factors rather than a slowdown in long-term growth. This included a $5 million impact from a canceled U.S. AID contract and transitional effects from a new distributor and a merger between two customers. We view this as a temporary setback that has led to an overreaction by momentum and quant investors. We think OFIX should continue to gain share in its key markets, supported by its prolific new product introduction schedule across all three segments, Spine, Bone Growth Therapy (BGT), and Orthopedics. Over the past three years, it has launched 50+ new or refreshed products, fueling above-market growth in Spine, where it holds just a 4% share. Its innovative 7D FLASH navigation system, which reduces radiation by 97% and offers faster setup, is expanding into new applications, including cranial surgeries. Its Biologics portfolio further complements its spinal offerings. Orthofix's BGT segment promotes healing in spinal and fracture markets. We think the market overlooked the 1Q25 announcement that OFIX's AccelStim 2.0 offering was approved earlier than projected and thus is likely to drive revenue growth throughout 2025. Additionally, the Orthopedic segment should continue strong growth, driven by existing products and the recent FDA 510(k) clearance of Truelock Elevate, a first-of-its-kind device targeting the $1.2 billion diabetic amputation prevention market. We expect management to improve EBITDA margins to the mid-teens by 2027, up approximately 700 basis points from 2024. Since early 2024, the new leadership team (CEO appointed January, CFO February) has established strong operational momentum. Notably, they made the difficult but disciplined decision to discontinue the M6C cervical spine product due to low demand. Despite the 2025 exit charge, this should accelerate revenue and earnings growth by eliminating a loss-making product, which in our view demonstrates management's commitment to margin improvement. We think the 2025 sell-off in the shares has created a compelling valuation opportunity. Despite modestly lowering its 2025 expected revenue guidance, management affirmed its EBITDA and positive free cash flow targets for 2025, offsetting the revenue impact with accelerated cost reduction efforts. The street now projects adjusted 2025 EBITDA at $82.6 million, at the low end of its guided $82-$86 million range, but still up 22.5% over 2024. Using this street consensus EBITDA estimate, OFIX is trading at only 6.4x EBITDA, at the low-end of its 6x-20x EBITDA range for the last three years. Our AFV price target is $18.50, based on 10x 2025 EBITDA, representing a 65.9% upside from quarter-end levels. This target may be conservative if OFIX meets its 2027 margin goals. While our AFV price targets exclude external catalysts, several noteworthy developments merit consideration. On June 3, Hologic (HOLX), a fellow RAM Smid portfolio holding, reportedly received a $16 billion bid from Blackstone and TPG at 12x EBITDA, an offer it declined as too low. This offer underscores the broader neglect and undervaluation in the SMID-cap Medtech sector, which in our view faces less political risk than pharmaceutical, insurance and distribution healthcare sectors. Notably, the 12x EBITDA offer highlights the attractive valuation opportunity we see in OFIX. We do not appear to be alone in our conviction. In May, the CEO purchased $125,400 of stock, while board member Alan Bazaar acquired nearly $75,000 in May and June. Additionally, Engine Capital Management, the largest shareholder and a 13D filer, reported increasing its stake by over 500,000 shares in May, raising ownership to 10.85%.

BSD Analysis:
The manager presents a compelling contrarian opportunity in Orthofix Medical following a 45.6% decline from February highs. The sell-off appears driven by temporary factors including a $10 million revenue guidance reduction from one-time items rather than fundamental deterioration. The company's strong balance sheet with 1.2x net debt/EBITDA and $115 million undrawn capacity provides financial flexibility during the turnaround. Management's prolific innovation pipeline with 50+ new products over three years positions OFIX for market share gains in spine (4% current share), bone growth therapy, and orthopedics. The 7D FLASH navigation system and AccelStim 2.0 approval represent significant technological advantages driving growth. New leadership since early 2024 has demonstrated operational discipline by discontinuing unprofitable products and targeting 700 basis points of EBITDA margin expansion by 2027. At 6.4x 2025 EBITDA, the valuation appears compelling relative to the 6x-20x historical range and recent medtech M&A activity. Insider buying by the CEO and largest shareholder Engine Capital validates the investment thesis and suggests significant upside potential.

Pitch Summary:
So we bought a new holding in DraftKings. So DraftKings is an online sports betting and iGaming company in the US. Now, it might be quite difficult for us to think about this being based in the UK, where something like betting has been established for quite a long period of time. But the idea of online sports betting is a relatively new phenomenon in the US. It's only relatively recently that gambling has been allowed outside a very specific number of states. So at the moment, DraftKings covers 25 states plus Washington DC. That gives them access to around about 49 per cent of the population. So they have an opportunity to expand within that 49 per cent, but they also have the opportunity to grow as sports betting or betting more generally is rolled out to more states. iGaming, they're even earlier. So, they're in about five states at the moment, and that represents around about 11 per cent of the population. And our hypothesis here is that if you look at most other geographies worldwide, betting has tended to evolve into a very profitable duopoly online. And that's our hypothesis that DraftKings will be one of those two players in the US.

BSD Analysis:
Baillie Gifford initiated a new position in DraftKings, viewing it as a beneficiary of the nascent online sports betting market in the US. The fund's thesis centers on DraftKings' early-mover advantage in a market that has only recently begun legalizing online gambling beyond a handful of states. Currently operating in 25 states plus Washington DC, DraftKings has access to approximately 49% of the US population for sports betting, with significant room for geographic expansion as more states legalize the activity. The iGaming opportunity is even more compelling, with DraftKings present in only five states representing 11% of the population. The managers believe the US market will consolidate into a profitable duopoly similar to other global markets, positioning DraftKings as one of the two dominant players. This structural growth opportunity, combined with the company's market-leading position, supports their bullish investment case. The timing appears strategic, as the regulatory environment continues to evolve favorably for online gambling operators.

Pitch Summary:
Lakeland Industries was our weakest performer in 2Q25, declining 31.40% following a soft FY1Q26 report with revenue and earnings below expectations due to delayed orders and tariff disruptions. We believe the market overreacted and remain optimistic about LAKE's prospects. The company is in the early stages of transitioning to a full-service provider of firefighter gear and is expected to improve margins through the integration of recent acquisitions and the fulfillment of delayed orders. Tariff impacts should be mitigated by shifting production to favorable regions, including USMCA-covered facilities. We increased our position on the price weakness during the quarter.

BSD Analysis:
Despite a 31.40% decline in Q2, the manager views Lakeland Industries as an oversold opportunity following a disappointing quarterly report. The weakness was attributed to temporary factors including delayed orders and tariff disruptions rather than fundamental deterioration. The company is executing a strategic transformation to become a full-service firefighter gear provider, which should drive higher margins and recurring revenue streams. Recent acquisitions are expected to contribute to margin improvement as integration progresses and delayed orders are fulfilled. The tariff headwinds appear manageable through geographic diversification of production to USMCA-covered facilities. Management's conviction is demonstrated by increasing the position during the price weakness. The market reaction appears disproportionate to the temporary operational challenges facing the business.

Pitch Summary:
Ducommun, highlighted in our 1Q25 letter, was our top performer in 2Q25, rising 42.39%. Our thesis on DCO and the Commercial Aerospace & Defense sector remains intact, supported by strong order flows and production from Boeing and Airbus. Additionally, European NATO countries have committed to increasing military spending to 5% of GDP over time. Ducommun also continues to improve margins, progressing toward its Vision 2027 targets alongside a robust revenue outlook.

BSD Analysis:
The manager maintains a bullish stance on Ducommun following strong Q2 performance of 42.39%. The investment thesis centers on the aerospace and defense recovery, with Boeing and Airbus production ramping up driving strong order flows. The European NATO commitment to increase military spending to 5% of GDP provides a significant long-term tailwind for defense contractors. Ducommun's operational improvements are evident in margin expansion as the company progresses toward its Vision 2027 targets. The combination of cyclical recovery in commercial aerospace and structural defense spending increases creates a favorable operating environment. Management's execution on margin improvement demonstrates operational discipline during the recovery phase. The robust revenue outlook suggests the company is well-positioned to capitalize on both commercial and defense market strength.

Pitch Summary:
So, during the quarter, for example, we bought Nova Nordisk. which is one of the most exceptional growth companies in Europe. Now, we initially looked at it last year and decided the valuation was far too rich. We waited. And clients, of course, will have heard us talk about trying to be more rigorous about valuation. I think this is a very good example of that. And the shares have fallen 50 per cent or so since we initially looked at it. We bought a holding in that. But I think that's a really good example of trying to take advantage of volatile market conditions, conditions that are really quite difficult for growth investors. Because we're thinking about those long periods where we're trying to find those growth companies that will prosper over five years and beyond. So, its history really is in insulin, so treating diabetes using insulin. More recently, they've developed new generations of drugs, particularly the GLP-1 drugs, which I'm sure clients will have heard a lot about. They have two big brands here, which are both derived from the same underlying compound, which is called semaglutide. They have Ozempic, which is semaglutide for diabetes. And then they have Wegovy, which is semaglutide for obesity. And that latter part of the case is really where we think the big growth opportunity is over the next 10 years. Obesity is a massive problem around the world, particularly in the US. So, we think they've got a great opportunity to grow into that. They make very, very high returns on capital. They've got a very attractive governance setup as well, a long-term owner in the form of the Novo Foundation. So, we think actually the next 5 to 10 years could be very, very good for Nova Nordisk. And as I mentioned, the valuation had become significantly more attractive. So, we took a holding.

BSD Analysis:
Baillie Gifford initiated a position in Novo Nordisk after waiting for a more attractive valuation, demonstrating disciplined value-conscious growth investing. The fund manager views the company as one of Europe's most exceptional growth companies, with shares falling approximately 50% from previously elevated levels. The investment thesis centers on Novo Nordisk's transition from its traditional insulin business to next-generation GLP-1 drugs, particularly semaglutide-based treatments Ozempic (diabetes) and Wegovy (obesity). The obesity treatment market represents the primary long-term growth driver, addressing a massive global health problem especially prevalent in the US. The company demonstrates strong fundamental characteristics including very high returns on capital and attractive governance through the long-term oriented Novo Foundation ownership structure. Management expects the next 5-10 years to be particularly strong for the company as it capitalizes on the obesity treatment opportunity. The position represents a classic example of the fund's patient approach to buying quality growth companies at attractive valuations during volatile market conditions.

Pitch Summary:
The Fund also started a position in James Hardie Industries after the company's acquisition of our long-term holding, AZEK Company. James Hardie is a leading provider of fiber-cement building solutions, producing and selling siding, and cement-bonded boards for residential and commercial construction, and should benefit from shared innovation with and cross-selling of the acquired AZEK product portfolio.

BSD Analysis:
The fund established a position in James Hardie Industries following the company's acquisition of AZEK Company, which was a long-term holding in the portfolio. The manager's thesis focuses on James Hardie's leadership position in fiber-cement building solutions, particularly siding and cement-bonded boards for both residential and commercial construction markets. The acquisition of AZEK creates strategic value through shared innovation opportunities and cross-selling potential across the combined product portfolio. This combination should enhance James Hardie's competitive position in the building materials space by expanding its product offerings and market reach. The manager appears optimistic about the synergies between James Hardie's fiber-cement expertise and AZEK's composite materials capabilities. The position represents a continuation of the fund's exposure to the building materials sector through a strengthened platform.

Pitch Summary:
The situation in Mexico could be more challenging. They're very reliant on the US for exports, but it feels like a lot of the pain was taken last year with the peso being hit quite hard. Our largest position is FEMSA, which runs the dominant convenience store chain in the market. It has a number of idiosyncratic growth drivers that offset some of the macro challenges.

BSD Analysis:
Baillie Gifford maintains FEMSA as their largest Mexican position despite acknowledging macro headwinds from potential US tariffs and peso weakness. The fund's conviction rests on FEMSA's dominant market position in Mexico's convenience store sector, which provides defensive characteristics and pricing power. The manager believes much of the macro pain was already absorbed in 2024 when the peso declined significantly, potentially creating a more attractive entry point for the stock. FEMSA's business model benefits from idiosyncratic growth drivers that can offset broader economic challenges, suggesting the company has structural advantages beyond macro exposure. The convenience store format typically demonstrates resilience during economic downturns due to its essential nature and local market dominance. Baillie Gifford's position sizing indicates confidence that company-specific factors will outweigh country-level risks over their investment horizon. The fund's focus on idiosyncratic drivers suggests FEMSA has multiple levers for growth independent of US-Mexico trade dynamics.

Pitch Summary:
One company which is an expert in building great user experiences is the Latin American IT services company, Globant, a new holding this quarter. They've helped the likes of Formula One and Disney+ integrate AI into their own products. Helping customers develop usable AI applications is going to be a very valuable skill in the coming years, and it should provide Globant with a huge opportunity. It's really exciting, but it does require thinking about the world. It could be quite different in the future than it is today.

BSD Analysis:
Baillie Gifford initiated a new position in Globant during Q1 2025, positioning the Latin American IT services company as a key beneficiary of the AI application wave. The fund's thesis centers on Globant's specialized expertise in creating superior user experiences and its proven track record with high-profile clients like Formula One and Disney+. The manager views AI integration services as a critical growth driver, with Globant uniquely positioned to help enterprises develop practical AI applications rather than just providing underlying technology. This investment reflects the fund's conviction that the true value of AI will be captured by companies that can effectively implement and customize AI solutions for specific business needs. Globant's client relationships with premium brands demonstrate its ability to execute complex digital transformation projects. The timing of this investment coincides with the broader AI adoption cycle, where demand for specialized implementation services is expected to surge. The fund's emphasis on thinking about a fundamentally different future world suggests they see Globant as positioned for transformational growth rather than incremental improvement.

Pitch Summary:
Trex is a leading manufacturer of wood-alternative composite decking, railing, and outdoor living goods that combines recycled plastic and reclaimed wood to deliver durable, low-maintenance outdoor building products. Trex has a renowned brand, and has benefited from a secular shift to composite materials away from wood. Trex stock had been weak, after concerns regarding slowing housing industry due to elevated rates, and was at a valuation we viewed as attractive.

BSD Analysis:
The fund initiated a position in Trex Company, capitalizing on weakness in the stock due to housing industry concerns and elevated interest rates. The manager's investment thesis is built on Trex's leadership position in wood-alternative composite decking and outdoor living products, which benefit from a secular shift away from traditional wood materials. The company's products offer superior durability and low-maintenance characteristics, combining recycled plastic and reclaimed wood in an environmentally conscious approach. Trex has established a renowned brand in the composite materials space, providing pricing power and market share advantages. The stock's weakness from housing market concerns created an attractive entry valuation for a company positioned to benefit from long-term material substitution trends. The manager appears confident that the secular shift to composite materials will continue despite cyclical housing headwinds.

Pitch Summary:
In Brazil, our positioning is really just a reflection of some good stock-specific ideas with compelling growth stories. Most notably, we'd highlight MercadoLibre, which is a company the team's held since 2010. This has proven to be an incredibly innovative and adaptive company, which has been able to grow its business fast enough to more than offset the currency fluctuations, while deepening its competitive advantages. It was also our best performing holding in the portfolios this quarter.

BSD Analysis:
Baillie Gifford maintains a strong bullish stance on MercadoLibre, a long-term holding since 2010 that represents their conviction in Latin American e-commerce and fintech growth. The fund highlights the company's exceptional ability to navigate currency volatility through rapid business expansion, demonstrating operational resilience in challenging emerging market conditions. MercadoLibre's performance as the portfolio's top contributor in Q1 2025 validates the manager's thesis about the company's competitive moat expansion. The fund emphasizes the company's innovative capacity and adaptability as key differentiators in the Latin American market. This position reflects Baillie Gifford's broader strategy of identifying dominant platforms in emerging markets with structural growth opportunities. The manager's decade-plus holding period demonstrates confidence in the company's long-term value creation potential. MercadoLibre's ability to deepen competitive advantages while scaling rapidly positions it well for continued market leadership in Latin America's digital transformation.

Pitch Summary:
During the third quarter of 2025, the Fund initiated a position in Patrick Industries and Trex Company, Inc. Patrick is a manufacturer and distributor of components and materials for RV, marine, manufactured housing, and residential construction markets that is benefiting from an ongoing outsourcing trend across these end markets. Tariff and inventory concerns caused a pullback in shares to a valuation we found attractive.

BSD Analysis:
The fund initiated a position in Patrick Industries, viewing it as an attractive opportunity following a share price pullback driven by tariff and inventory concerns. The manager's thesis centers on Patrick's exposure to an ongoing outsourcing trend across multiple end markets including RV, marine, manufactured housing, and residential construction. This secular shift suggests Patrick can capture market share as companies increasingly rely on external suppliers rather than in-house manufacturing. The valuation became compelling after the stock declined on macro concerns, presenting an entry point for a company positioned to benefit from structural industry changes. The diversified end market exposure provides some resilience across different economic cycles. The manager appears confident in the long-term outsourcing trend despite near-term headwinds from tariff uncertainty.

Pitch Summary:
Thank you. To turn to BYD, we've held it for a year, hopefully we'll be holding it for a lot longer because they do seem to be really at the forefront of innovation. Only over the last three months we've seen them introduce charging technology that looked really special, but also, and I think probably more interesting, is their approach to autonomy. What's your take on their approach to autonomous driving at the moment? Well, that's been an interesting change because I remember meeting with BYD years ago, and they were extremely sceptical about the future of autonomous driving. They thought that people simply like the experience of driving cars. That's not going to go away. And they've clearly shifted that position slightly. I think that speaks to the value of having an engaged founder at the helm of a company that, when the environment changes, can change his mind and bring the entire company with him. And what they've done is they're effectively giving it away for free. So the actual software platform itself may not be top of the line. But, let's be honest, when we talk about autonomous driving for any car company, it's not really autonomous in the way that people might understand the term. You still, generally speaking, need to have your hand on the wheel. You certainly need to have your eyes on the road. The car isn't taking complete control away from you. It's more like assisted driving at this point in time. And Tesla charges quite a lot of money for that on an annual basis. BYD is giving it away for free. Does that start to pressure other car makers significantly and reduce their chances of making margins that are attractive to them? Does it open up the competitive space even further for BYD? I was surprised. I was looking the other day at folks viewing from America, I think it's $8,000 or $9,000 as an outright sale or $99 per month as a sort of royalty payment, for Tesla's FSD. So, the idea that they won't be able to, at least in China, and we're yet to see how BYD approaches the rest of the world, actually monetise that technology. So it's super interesting. I'm conscious of time, do you have any view on their charging technology? Because it now looks now like they can charge their EVs at the same speed at which you can refuel a traditional gasoline engine. I mean, that's been one of the barriers to adoption for a long time. I think there are still probably structural, infrastructural barriers. Rolling out this charging infrastructure is going to take some time, although they have fairly ambitious targets for the next few years. There's just not enough power to go around. But there, I think they're helped by the fact that, again, they're a Chinese company and China leads the world in renewable energy generation and technology. And so, if anybody can solve that issue of getting enough power to fuel this infrastructure, it's probably them.

BSD Analysis:
Baillie Gifford views BYD as a compelling long-term holding positioned at the forefront of EV innovation, having held the position for one year with intentions to maintain it significantly longer. The investment thesis centers on BYD's strategic pivot toward autonomous driving technology, demonstrating the value of engaged founder leadership in adapting to market changes. BYD's disruptive approach of offering autonomous driving features for free, while Tesla charges $8,000-$9,000 upfront or $99 monthly, creates significant competitive pressure and potentially expands BYD's market share. The company's breakthrough charging technology, enabling refueling speeds comparable to gasoline engines, addresses a critical EV adoption barrier. BYD benefits from China's leadership in renewable energy infrastructure, positioning them uniquely to solve power supply challenges for rapid charging networks. The fund recognizes infrastructure rollout challenges but believes BYD's ambitious expansion targets and Chinese government support provide competitive advantages. This strategic positioning in the world's largest EV market, combined with technological innovation and aggressive pricing strategies, supports the bullish long-term outlook despite near-term execution risks.

Pitch Summary:
Thank you. I'm sure it's one we'll be coming back to again in the future. But moving on to the second topic I think would be of interest, the auto industry. We've held Tesla in the strategy for about 10 years and it's been a phenomenally successful investment. But we've sold the last remaining holding of Tesla during the quarter. And we had been reducing and reducing over a number of years. So, it's not like I think anything's materially changed just now. You're right. We've reduced that position over time. And to a certain extent, that's just a recognition of the fact that the auto industry has become much more competitive than it was when Tesla first started out. They were the dominant EV manufacturer for a very long time, but BYD, as of last year, stole that crown. And it's a reflection that, in order to make outlier returns possible from here for this company, you need to believe in a really strong second act in something like humanoid robotics or autonomous driving. And that's still possible, that could happen, but we just didn't have a high enough level of conviction to continue underwriting the position. And then the final thing I would point out is we made quite a large reduction to the position last year after the election when you saw a very strong uptick in the share price on the basis of very little fundamental change in the company's operations. We felt that wasn't really reflecting true underlying value of the company and reduced significantly at that point.

BSD Analysis:
Baillie Gifford completely exited their decade-long Tesla position during Q1 2025, marking the end of what they describe as a "phenomenally successful investment." The decision reflects a fundamental shift in the competitive landscape, with BYD overtaking Tesla as the dominant EV manufacturer globally. The managers acknowledge that Tesla's first-mover advantage has eroded significantly as the auto industry became increasingly competitive. For Tesla to generate outlier returns from current levels, the fund believes the company needs a successful "second act" in emerging technologies like humanoid robotics or fully autonomous driving. However, Baillie Gifford lacks sufficient conviction in these potential catalysts to maintain the position. The final catalyst for the complete exit was Tesla's post-election rally, which the managers viewed as disconnected from fundamental business improvements. This disciplined approach to valuation and competitive positioning demonstrates the fund's commitment to long-term value creation over momentum investing. The exit represents a strategic pivot away from a maturing EV market toward higher-conviction growth opportunities.

Pitch Summary:
Globant is a multinational IT services company specializing in high-value digital engineering services, including customer experience, artificial intelligence (AI), cloud, and development operations. Unlike many larger IT services firms that maintain broad exposure to slower-growing segments, Globant operates as a digital pure play, generating nearly all its revenue from advanced, high-margin services. The company's business model is mostly project-based, with limited recurring revenue. Founded in 2003 and publicly listed since 2014, Globant has delivered organic growth exceeding 20% annually post-IPO. Its client base is geographically diverse; the U.S., Latin America, and Europe serve as its main markets, while Asia and the Middle East represent growing segments. Through its "Studio" model, Globant is known for blending design and technology to produce user-centric digital experiences. Notable clients include Disney, Google, LinkedIn, Electronic Arts, Formula 1, and Coca-Cola. Operating within the highly competitive and fragmented $1.5 trillion global IT services industry, Globant benefited from a pandemic-era surge in digital transformation spending. However, the company has recently faced a cyclical slowdown as enterprises focus on cost efficiency and delay discretionary technology investments. Additionally, the rise of generative AI introduces long-term uncertainty, with the potential to automate commoditized tasks and disrupt traditional outsourcing models. These headwinds have contributed to a sharp decline in Globant's share price, which was down over 70% year-to-date in 2025. We believe that the cyclicality and the AI-related risks have been more than accounted for in Globant's current market valuation. We like the fact that the company has a healthy balance sheet and strong relationships with its clients. In our view, Globant is well positioned to benefit as IT budgets normalize, and clients move from AI pilots to scaled adoption. It also has the potential to expand its scope of work to more complex, higher-value projects in areas such as product design, data integration, and business process reengineering. At its current valuations, Globant represents an appealing value opportunity to us.

BSD Analysis:
Brandes identifies a contrarian value opportunity in Globant following a dramatic 70% year-to-date decline that the manager believes has overcorrected for cyclical and AI-related concerns. The investment thesis centers on Globant's differentiated positioning as a digital pure-play focused on high-margin, advanced services rather than commoditized IT outsourcing. The manager highlights the company's impressive track record of 20%+ annual organic growth since its 2014 IPO and its prestigious client roster including Disney, Google, and LinkedIn. Brandes acknowledges the current headwinds from enterprise cost-cutting and AI disruption concerns but views these as temporary cyclical factors rather than structural threats. The fund emphasizes Globant's healthy balance sheet and strong client relationships as competitive advantages that position the company to benefit from normalized IT spending and the transition from AI pilots to scaled implementations. The manager sees potential for Globant to expand into higher-value, more complex projects in areas like product design and business process reengineering. At current depressed valuations, Brandes views the risk-reward profile as highly attractive for a company with Globant's growth profile and market positioning.

Pitch Summary:
Well, it's a conference I've been going to for a couple of years now, and it's, I think, one of the best events in the calendar for just getting up to speed with what's going on in the AI space, what exciting things NVIDIA has got coming down the line, building up a network of contacts of people who are working in this industry and doing really exciting things. Obviously, the event itself is undeniably pro-NVIDIA. But the location makes it easy to go out and meet other companies at the same time and get a slightly more balanced view. And the main takeaway for me is that NVIDIA's position in this space is as strong, if not stronger, than it has been in the past. So despite ongoing perennial concerns around the rise of custom silicon and ASICs – for example Amazon talks about its Trainium chips, Meta is pushing out version two of its MTIA as well – these alternatives have not been enough to unseat NVIDIA's GPUs. And the fundamental reason for that is that NVIDIA can just push performance improvements significantly faster than anybody else. Its only focus is on making these AI chips, whereas everybody else is having to spread their attention. And as a result, the price-performance improvement has been 17-fold since 2016, for example. And the roadmap going forward has a pathway to producing more than 40-fold improvement in compute over the next four or five years. So very exciting times. Yes, that sounds about right. I mean, the main reason for that is that an ASIC is fundamentally a specialised chip for a specific use case. So, in order for it to really make sense economically, you have to know what you're going to be using it for and the algorithm that is being used on top of that chip shouldn't change too much. But I was speaking to developers, and they were saying that they can't keep up with the pace of improvements in this technology; that every day, every week, there's something new coming down the line. Yann LeCun from Facebook was saying that he would not be remotely surprised if there's another huge shift in technology over the next three or five years on the level of what transformers did in terms of enabling ChatGPT. And if that happens, you really need a generalised platform in order to implement that sort of shift. Sure. I think it's important to note that we have been trimming the position over the course of the last year as the price went up. You're right that at the end of the day, semiconductors are a very cyclical industry, and I don't really see any structural reasons for why that should change going forward. I think the hypothesis that over time NVIDIA could develop a software recurring revenue, that's still a possibility. But again, I think that pace of change is such that, at this point, it's just not a priority for them. They can't produce enough chips to keep everybody happy. They've got quite a lot on their plate already. So I think we balance that enthusiasm for the long-term opportunity with the understanding that it's a cyclical hardware-based industry. And so that's reflected in the holding size in the portfolio.

BSD Analysis:
Baillie Gifford maintains a bullish stance on NVIDIA despite acknowledging the cyclical nature of semiconductors and trimming the position as prices rose. The manager's thesis centers on NVIDIA's unassailable competitive moat in AI chips, driven by their singular focus and ability to deliver performance improvements 17-fold since 2016 with a roadmap for 40-fold improvements over the next 4-5 years. While competitors like Amazon and Meta develop custom ASICs, NVIDIA's generalized platform advantage becomes more pronounced as AI technology evolves rapidly, with developers unable to keep pace with innovation cycles. The fund recognizes the risk of technological shifts comparable to transformers enabling ChatGPT, but views NVIDIA's flexible platform as best positioned to adapt. Management balances long-term AI opportunity enthusiasm with prudent position sizing given semiconductor cyclicality. The company's current supply constraints and full capacity utilization support near-term fundamentals. NVIDIA's dominance appears sustainable as the pace of AI innovation favors generalized over specialized solutions.

Pitch Summary:
Prestige Consumer Healthcare is an over-the-counter pharmaceutical manufacturer that operates primarily in North America. The company is a brand builder, focused on acquiring underperforming brands and expanding market share through advertising, marketing expertise and product innovation. Its notable brands include BC/Goody's, Monistat, Chloraseptic, Clear Eyes, Compound W, Dramamine and Summer's Eve. Prestige has 17 brands: 12 have market share leadership, while the rest are between second and fourth in their individual markets. Recent share-price weakness for Prestige created an opportunity to invest in a company we know very well, having owned it for years previously, as recently as earlier this year. Prestige is well positioned as demand for its products is fairly defensive even in tougher economic times because its products are purchased on an "as-needed basis," often annually or biannually. Private label competition is insignificant. The markets are niche, given consumers' tendency to buy branded products for infrequent use, known efficacy, and trust. Topline growth is not high but stable. The key is capital deployment, with Prestige ranking (in order of priority): investing in strategic brands to ensure long-term, organic success, mergers and acquisition, and share repurchases. We take comfort in its track record of prior purchases and the company's stated discipline of being opportunistic and focused on returns.

BSD Analysis:
Brandes presents a compelling value opportunity in Prestige Consumer Healthcare, capitalizing on recent share price weakness to re-enter a familiar position. The manager emphasizes the company's defensive characteristics, with products purchased on an "as-needed" basis that maintain pricing power through brand loyalty and limited private label competition. The investment thesis centers on Prestige's proven brand-building capabilities, having achieved market leadership in 12 of its 17 brands while maintaining strong positions in niche markets. The manager appreciates the company's disciplined capital allocation strategy, prioritizing strategic brand investments, selective M&A, and share repurchases. Brandes highlights the defensive nature of the business model, with stable topline growth and products that remain resilient during economic downturns. The fund's familiarity with the company, having owned it previously as recently as earlier in the year, provides confidence in the investment decision. The manager views the current valuation as attractive given the company's track record and strategic positioning in branded OTC pharmaceuticals.

Pitch Summary:
We just purchased shares in Paycom. This is a payroll software company in the US with its own specific challenges and opportunities. And we're excited about things like that.

BSD Analysis:
Baillie Gifford recently established a position in Paycom Software, a cloud-based human capital management company serving small to mid-sized businesses in the United States. While the manager acknowledges that Paycom faces specific challenges, they remain excited about the company's opportunities in the payroll and HR software market. Paycom operates in the growing HCM software sector, providing comprehensive solutions that span the entire employee lifecycle from recruitment to retirement. The company has built a strong position serving the underserved small and mid-market segment with integrated HR, payroll, and talent management solutions. Despite near-term headwinds that may be affecting the stock price, the manager sees attractive long-term growth potential in this market. The investment reflects the team's willingness to invest in quality software companies during periods of temporary weakness. Paycom's focus on the SMB market and comprehensive platform approach positions it well for continued growth as businesses increasingly digitize their HR operations.

Pitch Summary:
I'll give you an example. We've purchased shares, new position for the portfolio in Salesforce. This is a company that sells the eponymous customer relationship management software. It's entrenched in its customers. It has a lot of data about what they do. And it's using that position and that data to come up with some really powerful AI tools. It's a bit of a first mover in the space. We think that it's ahead of its rivals. And what I mean by those AI tools is it is allowing customers to use artificial intelligence agents to handle a lot of their customer contact. So if you want to get in touch with a business, you have a customer service enquiry, maybe you want to return something or you have a query, an AI agent can often handle that type of task more quickly and more effectively than a human being. That's going to lead to enormous cost saving for the customers of Salesforce and therefore we think a commensurately large revenue opportunity for the company.

BSD Analysis:
Baillie Gifford initiated a new position in Salesforce, viewing the company as a prime beneficiary of AI adoption in enterprise software. The manager highlights Salesforce's entrenched customer relationships and vast data assets as key competitive advantages that enable superior AI tool development. Salesforce is positioned as a first-mover in deploying AI agents for customer service automation, allowing businesses to handle customer inquiries more efficiently than human representatives. This AI-powered customer service capability represents a significant value proposition that can drive substantial cost savings for Salesforce customers. The manager expects this to translate into meaningful revenue growth opportunities for Salesforce as enterprises increasingly adopt these AI solutions. The company's dominant position in CRM software provides a strong foundation for cross-selling these advanced AI capabilities. This investment reflects the team's strategy of identifying companies that can most effectively leverage AI to enhance their existing business models. Salesforce represents a compelling way to participate in the AI transformation of enterprise software.

Pitch Summary:
So for us, that means establishing positions in companies like Disco, which makes cutting and grinding equipment for the silicon wafers that then become the chips that power AI at the one end and at the other we want to think more sharply about those companies that will be able to use AI most effectively.

BSD Analysis:
Baillie Gifford has established a position in Disco Corporation as part of their strategy to gain exposure across the AI value chain. Disco manufactures specialized cutting and grinding equipment essential for processing silicon wafers into semiconductor chips that power AI applications. The company occupies a critical position in the semiconductor manufacturing process, providing the precision tools needed to create the advanced chips driving the AI revolution. As AI demand continues to accelerate, the need for more sophisticated semiconductor manufacturing equipment should grow correspondingly. Disco's specialized technology and market position in wafer processing equipment makes it a key beneficiary of the ongoing AI infrastructure buildout. The manager views this as a way to participate in AI growth through the essential manufacturing tools rather than just the end-use applications. This investment reflects the team's approach of seeking diversified exposure to transformative themes like AI. Disco represents a picks-and-shovels play on the AI boom through its critical role in chip manufacturing.

Pitch Summary:
Quick example, AutoZone. We own shares in this car parts retailer. It imports a lot from Mexico and China, so it attracts concern for things like tariffs. But when you go into what makes AutoZone different, one of the facts that stands out is that 90 per cent of its revenue goes to customers that need the parts for either maintenance or repair. It can't really be put off. The customer also has a much broader selection of products than a lot of its rivals, which tend to be smaller businesses. This all gives the company pricing power, the ability to pass through tariffs and to gain market share. So whilst the headlines can seem negative for that particular asset, we think there's still an attractive long-term growth opportunity so we are happy holders of those shares.

BSD Analysis:
Baillie Gifford maintains confidence in AutoZone despite concerns about potential tariff impacts on its supply chain from Mexico and China. The manager emphasizes AutoZone's defensive business model, with 90% of revenue derived from non-discretionary maintenance and repair needs that customers cannot defer. This creates a stable demand base that is relatively recession-resistant. AutoZone's competitive advantage lies in its superior product selection compared to smaller competitors, giving the company significant pricing power. The manager believes this pricing power enables AutoZone to pass through any tariff costs to customers while potentially gaining market share from less competitive rivals. The investment thesis centers on AutoZone's ability to grow through market share gains and pricing optimization, supported by its essential service offering. Despite macro headwinds, the company's defensive characteristics and competitive positioning make it an attractive long-term holding. This represents the type of quality compounder that can navigate challenging environments while delivering consistent growth.