Investment Pitches

Pitch Summary:
ICON is an Ireland-domiciled global provider of outsourced development and commercialization services to pharmaceutical, biotechnology and medical-device companies. ICON is one of the largest providers of clinical-trial and related services to support the development of new medicines and devices. Services include the management of clinical trials across all phases (I to IV) needed to collect and analyze data, establishing product efficacy and safety for regulatory filings, bioanalytical and clinical lab services, data analytics and technology for trial design, regulatory consulting and marketing strategies. We have owned ICON in the International All Company strategy for more than a decade. Icon was also a leading detractor in the March quarter. Weak earnings results and an uncertain outlook again drove underperformance in the June quarter. Top-line growth declined 4% year-over-year and earnings per share contracted 15.6%. Management also revised its revenue guidance for the year from flattish growth at the midpoint of the range to -4% at the midpoint. While ICON continues to solidify its position as one of the top three contract research organizations (CROs), there is significant near-term uncertainty surrounding the industry. Among the unknowns are the Inflation Reduction Act's impact on ICON's drug company customers, changing U.S. Food and Drug Administration policies, and fluctuating governmental and industry funding. We still believe that the company can return to 7% to 10% revenue growth and 10% to 14% earnings per share growth, but the current industry uncertainty makes it a low probability that it will meet these growth ranges over the next 12 to 24 months.

BSD Analysis:
Brown Capital Management expresses growing concerns about ICON despite their decade-long investment in this top-three contract research organization. The fund's bearish stance reflects deteriorating fundamentals with 4% revenue decline and 15.6% earnings contraction, representing a significant departure from historical growth patterns. Management's guidance revision from flat growth to -4% revenue decline signals deeper structural challenges beyond typical cyclical headwinds. The investment case faces multiple regulatory and policy headwinds including the Inflation Reduction Act's impact on pharmaceutical customers, evolving FDA policies, and uncertain government funding for drug development. While ICON maintains its competitive position among the largest CROs providing comprehensive clinical trial services across all phases, near-term visibility remains poor. The fund acknowledges the company's long-term potential to achieve 7-10% revenue growth and 10-14% EPS growth but assigns low probability to meeting these targets over the next 12-24 months. This represents a classic value trap scenario where a quality company faces temporary but potentially prolonged industry headwinds that could persist longer than initially anticipated.

Pitch Summary:
We initiated a position in Broadcom in Q2. As a skilled aggregator, Broadcom acquires firms, streamlines their operations, and invests R&D dollars in mission critical products that generate industry leading profit margins, robust cash flows and high returns on invested capital. Its primary markets include AI accelerators targeting generative AI applications, networking & wireless semiconductors, and mission-critical infrastructure software solutions. Broadcom is well-positioned to benefit from the rapidly expanding demand for custom AI accelerator chips that support the evolution of the generative AI market. The company is the second-largest producer of AI accelerator chips behind Nvidia and leads the market in custom AI ASIC chips. Its customers include leading hyper scalers like Alphabet and Meta who are turning to Broadcom for custom silicon due to its performance and cost advantages. We believe the company is a direct beneficiary of a multi-year capital cycle driven by hyper scalers building out next-generation AI factories. Broadcom recently acquired VMware, the leader in virtualization software targeting the enterprise market. The integration of VMware is tracking ahead of plan as management has simplified its product bundles, transitioned to a subscription revenue model, and reduced operating costs. We believe this simplified go-to-market structure will result in strong top-line revenue growth and expanding operating margins. We believe Broadcom will compound intrinsic value per share in the mid-20% range over the intermediate term as it benefits from the AI-infrastructure build-out, a cyclical recovery in its legacy semiconductor business, and modestly accelerating growth from its infrastructure software business as VMware is successfully integrated.

BSD Analysis:
Mar Vista initiated a new position in Broadcom, viewing the company as a premier beneficiary of the AI infrastructure buildout with multiple growth drivers. The fund emphasizes Broadcom's skilled aggregation strategy, highlighting management's ability to acquire companies, streamline operations, and focus R&D on mission-critical products that generate industry-leading margins and returns. The investment thesis centers on Broadcom's position as the second-largest AI accelerator chip producer and leader in custom AI ASICs, serving hyperscalers like Alphabet and Meta seeking performance and cost advantages. The recent VMware acquisition represents a significant strategic expansion, with integration proceeding ahead of schedule through simplified product bundles, subscription model transition, and cost reduction. Management projects mid-20% intrinsic value growth over the intermediate term, driven by AI infrastructure spending, legacy semiconductor recovery, and accelerating software growth. The company's diversified exposure across AI hardware, networking semiconductors, and enterprise software provides multiple avenues for value creation. This positioning suggests Broadcom is well-placed to capitalize on the multi-year AI capital cycle while benefiting from operational improvements in the VMware integration.

Pitch Summary:
AJ Bell is a U.K-based wealth-management platform, providing both independent financial advisors and do-it-yourself retail investors with tools for planning, integrating and monitoring a variety of stock and fund investments. Think of it as a small Charles Schwab in the U.K. AJ Bell enjoys high profitability (40% operating margins) and returns (45% return on equity), providing the resources necessary to fund long-term revenue and earnings growth of 20%. At March 31, the dual-channel platform serves 593,000 customers and the assets under administration (AUA) are £90.4 billion. The opportunity remains significant, with AJ Bell's assets under administration representing just 9% of a £1 trillion platform market in the U.K. Additionally, we think there is another £2 trillion in retirement assets in the U.K. that may find its way to platforms such as AJ Bell over the long term. We first bought AJ Bell in 2020. During the quarter, AJ Bell released both a trading statement on the March quarter, and later in the quarter reported first half year earnings ending March. Both reports were strong and well received by the marketplace. The trading statement showed new customer growth of 18% year over year. Net inflows in the quarter were £1.9 billion, up 19% year over year. The company followed this trading update with a strong earnings report. The top line was £153.2 million, 17% year over year growth. Profit margins before taxes were 44.9%, down from 46.8% year over year. Management raised its guidance for profit margins before taxes for the year from over 40% to over 42%, and also announced a new stock buyback plan of £25 million. We continue to like AJ Bell's market position and growth prospects.

BSD Analysis:
Brown Capital Management positions AJ Bell as the UK's equivalent to Charles Schwab, operating a dual-channel wealth management platform serving both financial advisors and retail investors. The investment case is built on exceptional profitability metrics with 40% operating margins and 45% return on equity, generating substantial cash flows to fund 20% long-term growth targets. AJ Bell's market opportunity appears substantial, currently capturing only 9% of the £1 trillion UK platform market, with an additional £2 trillion in retirement assets potentially migrating to digital platforms over time. Recent operational performance demonstrates strong momentum with 18% customer growth, 19% net inflow growth to £1.9 billion, and 17% revenue growth to £153.2 million. Management's confidence is reflected in raised profit margin guidance from 40% to 42% and a new £25 million share buyback program. The platform currently serves 593,000 customers with £90.4 billion in assets under administration, providing a scalable foundation for continued expansion. The fund's 2020 initial investment timing suggests they identified this growth opportunity early in the UK's digital wealth management transformation.

Pitch Summary:
Jason returned to BNN Market Call (you can watch HERE) where we highlighted VitalHub (VHI) as one of our top picks. We recently sat down with management and once again they continue to execute just as they said they would. We highly recommend reading the recent interview with the CEO published in the Globe (HERE). It provides a great overview of the opportunity, and we think the company is just getting started. We had a few meetings recently where the comparison of VitalHub today and where Constellation Software was 14 years ago was discussed. The market cap, growth rates, multiples, and margins are strikingly similar. VitalHub has balanced high organic growth with acquisitions well, and we expect 2024 to be a big year for not only acquisitions but also margin expansion as we believe cash earnings margins will almost double over the coming years.

BSD Analysis:
The manager presents VitalHub as a top conviction holding with strong execution momentum and significant growth potential. The investment thesis draws a compelling comparison to Constellation Software's early-stage profile, suggesting substantial upside potential. Management's consistent execution track record provides confidence in the company's strategic direction. The dual growth strategy combining organic expansion with strategic acquisitions appears well-balanced and sustainable. The manager expects significant margin expansion in 2024, with cash earnings margins potentially doubling, indicating operational leverage and scalability. The early-stage nature of the opportunity, combined with proven management execution and margin expansion potential, supports the bullish outlook for this healthcare technology platform.

Pitch Summary:
MercadoLibre is a Uruguay-based marketplace model company that operates the leading e-commerce shopping platform in Latin America (like Amazon) and provides payment and credit services (like PayPal). Although Latin America is a large market with a population of 650 million, it still has low e-commerce penetration compared to most developed markets. We first bought MercadoLibre in our International Small Company portfolio in 2013, and it graduated to the International All Company portfolio in 2020. Currently, about half of MercadoLibre's business is in Brazil and just under a quarter is in each of Mexico and Argentina. Long-term investments in the marketplace and its rapid-shipping solutions provide significant barriers to entry for competitors. MercadoLibre ships about half of its orders with same-day or next-day arrival to more than 67 million unique active buyers. We also like the potential in the company's newer fintech businesses, where 64 million monthly active users benefit from MercadoLibre's payment-processing services, credit cards, loans and savings accounts. During the quarter, the company reported 37% year-over-year revenue growth to $5.9 billion (USD) and 44% year-over-year earnings per share growth to $9.74. These results easily beat consensus expectations, suggesting that MercadoLibre remains a healthy and growing franchise. Note that the company was a leading contributor in the March quarter as well. We believe that MercadoLibre's e-commerce and fintech marketplace model provides a unique competitive advantage, leaving the company with a long runway for growth.

BSD Analysis:
Brown Capital Management presents a compelling bull case for MercadoLibre as Latin America's dominant e-commerce and fintech platform. The investment thesis centers on the company's dual marketplace model combining Amazon-like e-commerce with PayPal-style financial services across a 650 million person market with low digital penetration. MercadoLibre's operational excellence is evident in its logistics capabilities, delivering same-day or next-day shipping to over 67 million active buyers, creating significant competitive moats. The company's financial performance demonstrates strong momentum with 37% revenue growth to $5.9 billion and 44% EPS growth, both exceeding consensus estimates. Geographic diversification across Brazil (50%), Mexico and Argentina (25% each) provides multiple growth vectors while the fintech segment serves 64 million monthly active users with comprehensive financial services. The fund's long-term conviction is reflected in their 12-year holding period, upgrading the position from small-cap to all-cap portfolios. Management views the low e-commerce penetration in Latin America as providing substantial runway for continued expansion and market share gains.

Pitch Summary:
Salesforce's stock came under pressure in Q2 as the company modestly missed Street expectations for software bookings and reduced its FY2025 subscription revenue guidance to "around 10%" year-to-year growth from "greater than 10%." We believe Salesforce is experiencing cyclical pressures as software demand across the industry is pressured at the margin. This has led to longer sales cycles; smaller deal sizes and budgets being allocated away from enterprise software to emerging areas like generative AI. We continue to believe that Salesforce will see a tailwind to demand from its generative AI offerings as many AI use cases are found in front office software like customer relationship management. This, coupled with Salesforce's treasure trove of customer data, positions it well to exploit the evolution of next-generation AI offerings.

BSD Analysis:
Mar Vista maintains conviction in Salesforce despite near-term cyclical headwinds affecting the broader enterprise software sector. The fund acknowledges the modest guidance reduction and booking shortfalls but attributes these challenges to industry-wide pressures including longer sales cycles and budget reallocation toward AI initiatives. The investment thesis centers on Salesforce's strategic positioning in generative AI, particularly given the natural fit between AI use cases and customer relationship management software. Management's extensive customer data repository represents a significant competitive advantage for developing and deploying next-generation AI solutions. The fund views current weakness as cyclical rather than structural, expecting Salesforce to benefit as AI adoption accelerates in front-office applications. The company's dominant CRM market position and data assets should enable effective monetization of AI capabilities over time. This positioning suggests Salesforce is well-placed to capture value as enterprise AI spending matures beyond initial infrastructure investments.

Pitch Summary:
First, we recently visited the head office of Zedcor Inc (ZDC) in Calgary. This was a very helpful meeting as we got to see the inner workings of the company and get to know management better. There is a lot more to this company than building and selling security towers. They're signing contracts with large companies like D.R. Horton, Best Buy, and Amazon because of the high quality back-end service and not just the piece of equipment. The 24/7 multi-stage monitoring process which involves AI tagging and alerting plus human intervention is being done in-house at Zedcor in Calgary. This process is impressive and from what we have found, is head and shoulders above the level of service offered by any other competitor. Their expansion into Texas appears to be going well and they're on pace to grow revenues and earnings much faster than what they are getting credit for. We have the stock trading on less than 6x 2025 cash earnings and believe it will be significantly higher 12 & 24 months from now.

BSD Analysis:
The manager presents a compelling bull case for Zedcor based on direct management engagement and operational insights. The investment thesis centers on the company's differentiated service offering that extends beyond hardware to include sophisticated AI-powered monitoring capabilities. Key value drivers include blue-chip client wins (D.R. Horton, Best Buy, Amazon) and successful geographic expansion into Texas. The manager emphasizes Zedcor's competitive moat through superior service quality versus competitors. At less than 6x 2025 cash earnings, the valuation appears attractive for a company experiencing accelerating revenue and earnings growth. The combination of operational momentum and compelling valuation metrics supports the manager's bullish 12-24 month outlook.

Pitch Summary:
During the quarter, one of the management teams we met with was that of REA Group. REA Group owns and manages Australia's leading real estate online portal, a marketplace model for buying and selling homes. This was a routine business update with CEO Owen J. Wilson, who will be retiring later in the calendar year, and CFO Janelle Hopkins. Reflecting on REA and the industry, Wilson shared that there are more than 120 real estate marketplace models around the world, and that he has not found one example of a model in a mature market that lost its leadership position. This does not mean that hard work is no longer required once a company gains the pole position as a marketplace. A commitment to innovation and growth through investments in sales and marketing, new product offerings and R&D is still essential. However, when the market leader protects its franchise with these investments, it becomes extremely difficult to be overtaken by second-tier competitors, or new market entrants.

BSD Analysis:
Brown Capital Management highlights REA Group as Australia's dominant real estate marketplace, emphasizing the structural advantages of market-leading platforms. The fund manager's thesis centers on the durability of marketplace leadership positions, citing CEO Wilson's observation that no mature real estate marketplace has ever lost its dominant position globally. This creates significant competitive moats through network effects, where buyers and sellers gravitate toward the platform with the most activity. REA's marketplace model generates recurring revenue streams with high margins, as the company charges fees for listings and additional services. The investment case relies on REA's ability to maintain its leadership through continued innovation and strategic investments in technology and marketing. Management's commitment to R&D and new product development should help defend against potential competitors while expanding revenue per user. The fund views REA as a classic example of their Exceptional Growth Company criteria, combining durable revenue streams with defensible market positioning.

Pitch Summary:
Disney's shares declined after its earnings release, even though the company exceeded recently upgraded financial forecasts. While Disney+ and Hulu reached a milestone by turning their first quarterly profit, the company cautioned about theme park attendance returning to pre-pandemic norms. This signals a deceleration following a period of exceptional growth, impacting the stock as theme parks and experiences account for roughly 60% of Disney's earnings. Despite broader consumer worries, Disney's stock is still trading with a significant discount to fair value. We expect the gap between Disney's market price and its intrinsic value to shrink as its streaming division evolves and increases profitability over time.

BSD Analysis:
Mar Vista maintains a bullish long-term view on Disney despite near-term headwinds, emphasizing the significant valuation discount to intrinsic value. The fund highlights the milestone achievement of Disney+ and Hulu reaching quarterly profitability, marking a critical inflection point in the streaming strategy. However, management's cautious guidance regarding theme park normalization presents challenges, given parks and experiences represent approximately 60% of earnings. The investment thesis centers on the streaming division's evolution toward sustainable profitability and the expectation that market valuation will converge with intrinsic value over time. Despite broader consumer spending concerns, the fund views current pricing as attractive relative to Disney's long-term earnings power. The company's diversified entertainment portfolio, including streaming, parks, and content creation, provides multiple avenues for value creation. Mar Vista's conviction appears grounded in Disney's brand strength and the streaming business reaching an important profitability milestone.

Pitch Summary:
Nike's stock declined following management's revised forecast for fiscal year 2025, projecting negative mid-single-digit revenue growth instead of the previously anticipated positive growth. The company has observed a marked slowdown in lifestyle product sales since April, a trend that persisted into June. Our current projections indicate that both sales and earnings will fall 15-20% below the conservative estimates set by management just a quarter ago. This substantial downward revision in sales and earnings is attributed to insufficient product innovation, wholesale channel shift, and intentional reduction of supply in lifestyle franchises. While the negative adjustments to guidance could potentially act as a clearing event for the stock, the degree of conservatism in the new projections remains uncertain. Nike maintains its position as the global leader in sportswear. However, its revenue growth has been hampered by a lack of innovation, and its recovery is further complicated by deteriorating macroeconomic conditions in the US and China. The company's renewed focus on innovation and efforts to re-engage with wholesale channels may eventually help restore growth, but we believe increased skepticism regarding management's ability to execute is justified.

BSD Analysis:
Mar Vista expresses significant concern about Nike's operational execution and near-term prospects despite acknowledging the company's market leadership position. The fund highlights management's dramatic guidance revision from positive to negative mid-single-digit revenue growth, with internal projections suggesting performance could be 15-20% below even these reduced expectations. Key issues include insufficient product innovation, strategic missteps in wholesale channel management, and deliberate supply reductions in lifestyle categories. The investment thesis reflects skepticism about management's execution capabilities amid deteriorating macroeconomic conditions in key markets including the US and China. While Nike retains its global sportswear leadership, the fund views the innovation deficit as a critical competitive vulnerability. The lifestyle product slowdown since April represents a concerning trend that challenges Nike's growth algorithm. Although management's renewed focus on innovation and wholesale re-engagement could eventually restore growth, the fund maintains a cautious stance given execution uncertainties.

Pitch Summary:
As a leading supplier in the global interconnect and sensor market, Amphenol benefits from a tailwind of demand as things become smarter and more connected. Amphenol's unique entrepreneurial culture, savvy capital allocation and diverse end-market exposure have allowed it to deliver market-leading operating margins and strong returns on invested capital. We believe Amphenol should continue to deliver robust returns as it integrates and optimizes its meaningful acquisition of Carlisle Interconnect Technologies, and benefits from the build out of next-generation AI factories providing critical interconnect solutions.

BSD Analysis:
Mar Vista maintains a bullish outlook on Amphenol, positioning the company as a key beneficiary of the global connectivity and AI infrastructure buildout. The fund highlights Amphenol's leadership position in interconnect and sensor markets, emphasizing the secular trend toward increased device connectivity and intelligence. Management's entrepreneurial culture and disciplined capital allocation have consistently generated market-leading operating margins and strong returns on invested capital. The recent acquisition of Carlisle Interconnect Technologies represents a strategic expansion that should enhance the company's competitive position and scale advantages. The investment thesis centers on Amphenol's critical role in next-generation AI factory infrastructure, where interconnect solutions are essential components. The fund views the company's diverse end-market exposure as a defensive characteristic while maintaining growth optionality. This positioning suggests Amphenol should benefit from both cyclical AI infrastructure spending and secular connectivity trends.

Pitch Summary:
Alphabet reported robust quarterly financials, demonstrating accelerated revenue growth and improved margins from restructuring efforts. The company's core advertising business is rebounding after a challenging 2022-2023 period, when advertisers curtailed spending due to economic concerns. While this quarter's exceptional growth rate may not persist, Alphabet's performance indicates it is likely to exceed our annual projections. Following Meta's lead, Alphabet is adopting a more stringent approach to expenses. The company continues to reduce headcount and consolidate teams, aiming to counterbalance the impact of infrastructure investments on profitability. Alphabet's better-than-expected revenue and earnings underscore both the resilience of its core business and management's early success in sustainably restructuring the cost base. Notably, AI advancements are already showing promising results, enhancing consumer engagement, and improving advertiser performance. These developments position Alphabet favorably in an increasingly AI-driven digital landscape.

BSD Analysis:
Mar Vista expresses strong conviction in Alphabet's operational turnaround and AI-driven growth trajectory. The fund emphasizes the company's successful navigation through the 2022-2023 advertising downturn, highlighting accelerated revenue growth and margin expansion through disciplined cost management. Management's restructuring efforts, including headcount reduction and team consolidation, demonstrate effective capital allocation while maintaining investment in AI infrastructure. The investment thesis centers on Alphabet's core advertising business resilience and early AI monetization success, with improvements in consumer engagement and advertiser performance metrics. The fund views Alphabet's expense discipline as sustainable, positioning the company to benefit from infrastructure investments without compromising profitability. AI integration across Alphabet's platform ecosystem represents a significant competitive advantage in digital advertising. The pitch suggests performance is exceeding internal projections, indicating potential upside to current valuations.

Pitch Summary:
CONSOL Energy is an American energy company focused on the coal sector. The business has undergone a shift from being a majority producer of coal for domestic energy purposes to an export-driven producer of coal for non-power generation purposes. Over the last few years, the Company has delevered to a near-zero net-debt position and is trading at a 20-25%+ unlevered free cash flow. While there is a negative stigma associated with coal (and some deserved) there are parts of the world that have limited energy alternatives and will require coal supply over the coming years. I expect the company to commit a large amount of the free cash flow to buying in cheap stock and the per share intrinsic value to grow substantially over the next 3 years.

BSD Analysis:
Black Bear's CONSOL Energy investment reflects a contrarian bet on coal's continued relevance in global energy markets, particularly for non-power generation uses and export markets. The fund emphasizes the company's strategic transformation from domestic thermal coal to export-focused metallurgical and specialty coal markets, which typically command higher prices and margins. CONSOL's deleveraging to near-zero net debt provides significant financial flexibility and reduces operational risk during commodity cycles. The 20-25% unlevered free cash flow yield represents exceptional value, even accounting for the cyclical nature of the business. Management's commitment to aggressive share buybacks should drive substantial per-share value creation as the float shrinks. While acknowledging coal's negative ESG perception, the fund recognizes that certain global markets have limited energy alternatives in the near to medium term. This creates a supply-demand imbalance that should benefit well-positioned producers like CONSOL, particularly those with strong balance sheets and disciplined capital allocation.

Pitch Summary:
Investors were reminded of the strength of the Apple ecosystem as management demonstrated how generative AI solutions would be integrated into Apple's 1.2 billion iPhone installed base. Apple plans to integrate generative AI features into its iOS 18, which will be broadly released in the fall with the iPhone 16. We believe Apple should benefit from generative AI as it will spur a meaningful iPhone upgrade cycle and create new avenues of monetization through its app store and advertising offerings. We believe this will support intrinsic value growth that will range between high-single-digits and low-double-digits over our investment horizon.

BSD Analysis:
Mar Vista maintains a bullish stance on Apple, emphasizing the transformative potential of generative AI integration across the iPhone ecosystem. The fund highlights Apple's strategic advantage with its 1.2 billion iPhone installed base, positioning the company to capitalize on AI-driven upgrade cycles through iOS 18 and the iPhone 16 launch. The investment thesis centers on AI as a catalyst for both hardware refresh cycles and expanded monetization through the App Store and advertising platforms. Management projects intrinsic value growth in the high-single-digit to low-double-digit range, reflecting confidence in Apple's ability to leverage its ecosystem dominance. The pitch underscores Apple's defensive moat through its integrated hardware-software approach and substantial user base. This AI integration strategy represents a significant evolution in Apple's value proposition beyond traditional hardware sales. The fund's conviction appears grounded in Apple's proven ability to drive consumer adoption of new technologies across its ecosystem.

Pitch Summary:
BLDR is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 40%+ of the topline. While mortgage rates are higher, they are not unusual versus history. The low rates of the last 5-10 years are the outlier. We have a structural shortage of housing in the USA. With existing homeowners locked into low-rate mortgages, the aspiring homeowner may increasingly need to find a home from a homebuilder. The next 6-12 months could be rocky as people adjust to the increase in pricing and rates. Eventually the housing market should adjust to the new normal (or rates could go down). I still believe a conservative run rate of FCF per share is $15-$17 looking out a couple years. This translates to a 7-8% modestly levered free-cash-flow yield. I still expect this to outperform broader markets and to be a healthy go-forward investment for us.

BSD Analysis:
Black Bear's BLDR thesis is built on the company's successful transformation from a cyclical commodity business to a value-added building materials supplier, with 40%+ of revenue now coming from higher-margin products. The fund manager correctly identifies the structural housing shortage in the US as a long-term tailwind, particularly as existing homeowners remain locked into low mortgage rates, forcing new buyers toward homebuilders. While acknowledging near-term headwinds from higher rates and pricing adjustments, the fund maintains conviction in the normalized earnings power of the business. The projected $15-17 free cash flow per share represents a compelling 7-8% levered yield at current prices, suggesting attractive risk-adjusted returns. Management's capital allocation through share buybacks has been a significant value driver, allowing the fund to own more of the company without additional investment. The combination of structural demand drivers, improved business mix, and disciplined capital allocation creates a durable competitive position in the residential construction value chain.

Pitch Summary:
Penske is unique in that in addition to their domestic car dealerships they also own: auto dealerships in the UK, leading truck dealerships in the US, and ~29% of Penske Truck Solutions (PTS) a logistics/truck rental business (aka "the hidden asset"). The truck dealerships have always captured my attention as Parts/Service are an even larger chunk of the business than in autos (65-70% of profits for trucks). This is a very sticky, high-margin business that would trade at far higher multiples as a standalone entity. For accounting reasons, PTS is accounted for using the equity method which means their share of income comes below the operating income line and is often ignored or misvalued. Their share of PTS is conservatively worth $2.5-$3.5BB or 22-32% of the market cap of the entire company. The quality of PAG is not properly reflected in the share price. Management owns a lot of stock and seems to agree as the Company has bought back 17% of the Company in the last 2 years at attractive prices.

BSD Analysis:
Black Bear identifies Penske Automotive as a significantly undervalued opportunity due to the market's failure to properly value its diversified business model and hidden assets. The fund emphasizes that truck dealerships generate 65-70% of profits from parts and service, creating an even stickier and higher-margin business than traditional auto dealerships. The 29% stake in Penske Truck Solutions represents a substantial hidden asset worth $2.5-3.5 billion, or 22-32% of the entire company's market cap, that's obscured by equity method accounting. This logistics and truck rental business would command premium multiples as a standalone entity but is essentially being given away for free in the current valuation. Management's significant stock ownership and aggressive share repurchase program (17% of shares bought back in two years) demonstrates alignment with shareholders and confidence in the undervaluation. The combination of geographic diversification, multiple business lines, and the undervalued PTS stake creates a compelling value proposition that the market has yet to recognize.

Pitch Summary:
AutoNation operates auto dealerships across the United States. While much attention is paid to the number of cars sold, the strength of the model comes from the back of the house in parts and services where more than 50% of the profits come from. We are exiting a period of high margins on new and used car sales. While profits per car are at all-time highs, the volumes sold have mirrored prior recessions. My expectation is that dealers will likely make less per car but will mitigate some of that pressure by selling more cars, especially used vehicles, as prices drop. When an auto dealer sells a car to a consumer, they capture both the trade-in (inventory to sell) and the relationship for parts and services. It is a razor-razorblade model in a highly fragmented industry (many dealerships are owned privately by families). The large dealer groups have transitioned to an omni-channel model where much of the selling/pre-buy activity can be done online reducing the need for headcount and making the transaction smoother for their customers. The lower operating costs of the business are not appreciated by the market. They are appreciated by us and the management teams as most dealers, including AN, have been buying in lots of stock with their free-cash flow.

BSD Analysis:
Black Bear's AutoNation thesis centers on the underappreciated value of the parts and service business, which generates over 50% of profits and operates as a high-margin, recurring revenue stream. The fund manager recognizes that while new car margins may compress from current elevated levels, volume increases should provide some offset as prices normalize. The razor-razorblade model creates customer stickiness through ongoing service relationships that extend well beyond the initial vehicle purchase. AutoNation's scale advantages and omni-channel capabilities have reduced operating costs in ways the market hasn't fully recognized. Management's aggressive share buyback program, funded by strong free cash flow generation, demonstrates confidence in the business model and creates additional value for remaining shareholders. The fund appears to view current market conditions as temporary headwinds that mask the underlying durability and cash generation potential of the automotive retail model.

Pitch Summary:
Altius explores and develops mineral properties through a unique setup. While they spend a small amount of upfront capital to explore and identify prospects, they utilize 3rd party partners for the capital-intensive drilling/mining in exchange for a royalty on the production. Their assets are diversified across potash, copper, lithium, and iron ore among others. The beauty of a royalty structure is several fold. On the one hand, if there is increased volume of production, they get their share without any increase in their operating costs. The company doing the work pays for the labor/machinery etc. If the commodity price goes up, it is pure "extra" profit to the royalty holder. Additionally, on the way down there are very few fixed costs for the royalty owner as they can maintain a small number of headcount at HQ. The management team is aligned (they own a good amount of stock), think like shareholders and has done an excellent job. We own the Company at 50% of the underlying value of the assets using conservative assumptions.

BSD Analysis:
Black Bear presents a compelling case for Altius Minerals based on its unique royalty business model that provides leveraged exposure to commodity prices without operational risks. The fund manager highlights the structural advantages of royalty streams, including pure profit flow-through from commodity price increases and minimal fixed costs during downturns. Management alignment through significant stock ownership adds credibility to the investment thesis. The fund's valuation assessment suggests they acquired shares at a 50% discount to underlying asset value using conservative assumptions, indicating substantial upside potential. The diversified commodity exposure across potash, copper, lithium, and iron ore provides multiple avenues for value creation. This asset-light model with high operating leverage to commodity cycles appears well-suited for the current environment of resource scarcity that the fund emphasizes. The combination of discounted valuation, aligned management, and structural business model advantages creates an attractive risk-adjusted opportunity.

Pitch Summary:
Our fourth-best-performing position is also our best-performing position of the year thus far, Enovix, which was up 39% during the second quarter and has increased by a further 57% in the first 17 days of the third quarter. Unlike Organo and Chemring, Enovix is sized correctly in our portfolio, having built a position over the last two years at an average price of $6.98. The stock is now trading at approximately $14/$15 and is our largest position, accounting for 14% of the portfolio. Enovix remains a volatile stock and a business that still has a few things to prove, so it could fall again, perhaps even more than once, before it reaches our probability-weighted value of $27. Still, we are confident that some of the initial operational growing pains are behind us. On July 7th, the firm released its AI-1 silicon anode smartphone battery platform. Enovix believes the 900WH/L capacity makes AI-1 the "highest energy density battery" commercially available on the market, complemented by fast charging (i.e., 50% in 15 minutes) and cycle rates of 900+ based on internal testing of initial units. Although we are aware of specialty batteries that have a higher energy density, specifically those from drone battery-focused producer Amprius, we believe Enovix's claim holds up for the most part. Most competitors are in a similar situation to Samsung, which has a road map for a 900 Wh/L cell phone battery but does not expect it to be available before 2027. Although we believe the stock has appreciated somewhat on a positive read-through from incremental disclosure regarding battery specs, coupled with the earnings beat (which it seems investors care about, but in these early days is meaningless), we suspect that the stock's rapid rise this time around has been facilitated in part by the unwinding of the firms persistently high short interest. The stock remains a favorite punching bag of the investing commentariat on twitter who are skeptical of everything from management's ability to manufacture the battery to skepticism of the potential of a silicon anode, or just doubt about the willingness of anyone to pay a premium price for a more energy dense battery, we expect the first purchase orders later this year to a be key de-risking event for the final unwinding of the prominent short position, which was still 30% of the stocks float at the end of the 2nd quarter.

BSD Analysis:
Massif Capital maintains a strong bullish stance on Enovix, positioning it as their largest holding at 14% of the portfolio with a $27 target price representing significant upside from current levels around $14-15. The manager's thesis centers on Enovix's breakthrough AI-1 silicon anode battery technology, which delivers industry-leading 900Wh/L energy density, 50% charging in 15 minutes, and 900+ cycle rates. This technological advantage provides a 2-3 year lead over competitors like Samsung, whose similar battery won't be available until 2027. The recent 96% gain (39% in Q2 plus 57% in early Q3) reflects both fundamental progress and short covering, with short interest still elevated at 30% of float. Massif expects upcoming purchase orders to serve as a key de-risking catalyst that could drive further short unwinding. While acknowledging the stock's volatility and execution risks, the manager expresses confidence that operational growing pains are subsiding and the company is positioned to capitalize on premium battery demand in smartphones and other applications.

Pitch Summary:
We also initiated a position in financial services provider Lincoln National (LNC), which just broke out to a 52-week high and looks inexpensive relative to its earnings power.

BSD Analysis:
Miller Value Partners initiated a position in Lincoln National, a diversified financial services company specializing in insurance and retirement products. The manager's timing appears strategic, entering the position as the stock achieved technical momentum by breaking out to 52-week highs, suggesting improving market sentiment and potential for continued upward movement. Despite this recent strength, the valuation remains attractive relative to the company's underlying earnings capacity, indicating the market may not fully recognize LNC's intrinsic value. Lincoln National's core businesses in life insurance, annuities, and retirement services benefit from demographic tailwinds as the aging population drives demand for retirement planning products. The combination of technical breakout momentum and fundamental value disconnect presents an attractive risk-adjusted opportunity. This investment reflects the fund's ability to identify undervalued financial services companies with strong earnings power trading below fair value.