Investment Pitches

Pitch Summary:
Our largest add to an existing investment was CME Group, Inc. CME operates the world's largest financial exchanges for trading derivatives on interest rates, equity indexes, energy, agricultural commodities, currencies, and metals. The company benefits from higher trading volumes during periods of high market volatility. Over the long term, the company benefits from global capital markets expansion, increasing demand for risk management tools, and bank capital requirements that favor CME's centrally cleared securities over non-cleared OTC products. CME has significant competitive advantages due to its proprietary products, deep liquidity pools, and capital efficiencies for its customers. These advantages lead to high margins, low capital intensity, and strong capital returns to shareholders. Given the uncertain path of inflation and interest rates, we believe demand for CME's financial derivatives will likely remain firm. The company's average daily trading volume has increased 15% year-to-date as of June 30. While easing market volatility may cause trading activity to slow from record high levels, we believe CME provides an attractive hedge against tariff- and macro-related uncertainty. We also believe concerns about competition from a new derivatives exchange called FMX are overblown and have created an attractive entry point to increase our position.

BSD Analysis:
The manager increased the CME position based on the company's dominant market position and structural advantages in derivatives trading. CME operates the world's largest financial derivatives exchanges with significant competitive moats including proprietary products, deep liquidity pools, and capital efficiencies that create high switching costs for customers. The business model generates high margins and strong capital returns due to low capital intensity and network effects. Current macro uncertainty around inflation, interest rates, and trade policy supports sustained demand for risk management tools, with average daily trading volume up 15% year-to-date. Long-term secular tailwinds include global capital markets expansion, increasing demand for risk management, and regulatory preferences for centrally cleared products over OTC alternatives. The manager views competitive concerns around the new FMX exchange as overblown, creating an attractive entry point to add to the position. CME provides both growth potential and defensive characteristics as a hedge against macro volatility.

Pitch Summary:
One of our newest holdings is Chord Energy (CHRD), a Williston-basin energy exploration consolidator with a thoughtful capital allocation framework, strong balance sheet and great assets that have low breakeven costs and long lives. Management is aligned with shareholders with approximately 70% of total CEO compensation at risk, and the company recently announced a merger with enerplus, which looks like a good move.

BSD Analysis:
Miller Value Partners initiated a position in Chord Energy, highlighting the company's strategic positioning as a Williston Basin consolidator with attractive operational characteristics. The manager emphasizes the company's disciplined capital allocation approach and robust balance sheet, which are critical factors in the cyclical energy sector. The low breakeven costs and long-lived assets provide operational resilience and cash flow visibility across commodity price cycles. Management alignment is particularly strong with 70% of CEO compensation tied to performance metrics, ensuring interests are aligned with shareholders. The recent merger with Enerplus appears to be a value-accretive consolidation play that should enhance scale and operational efficiencies. This investment reflects the fund's focus on undervalued assets with strong fundamentals and aligned management teams.

Pitch Summary:
During the quarter, we initiated a new position in Amphenol Corporation, one of the world's largest providers of high-technology interconnect, sensor, and antenna solutions. We invested in Amphenol due to the company's strong competitive advantages which are derived from both its distinct operating culture as well as its technological leadership, along with the secular tailwinds that should enable it to benefit from durable growth. Amphenol is a highly diversified business operating in seven different end markets – Industrial, Automotive, Mobile Devices, IT Datacom, Communications Networks, Defense, and Commercial Aerospace, with no end market representing more than 25% of sales. The company's mission-critical products are needed in electrical systems to move data, transmit signals, and enable specific outcomes. As the world electrifies and more systems move from analog to digital, Amphenol's content opportunity grows. In 2024, Amphenol had approximately $15 billion in sales in an estimated $250 billion worldwide market for interconnect and sensor related products. The company has historically grown sales at an approximately 11% CAGR over the last 10 years driven by both organic and acquisition-driven growth. We think the company is entering a period of accelerated organic growth driven by its dominant position in connectors used in AI data centers, which represent multiple times larger content opportunity compared to traditional data centers, requiring a greater interconnect intensity and power density. We think Amphenol is well positioned to capture this opportunity due to their technology leadership as well as their ability to scale manufacturing rapidly at very high quality and with minimal defects. Amphenol has a highly distinguished, entrepreneurial operating culture with 140 general managers running unique, independent businesses. With no centralized operating functions, these 140 general managers (who report to group general managers in three distinct operating divisions) have complete accountability for the performance of their businesses and are incentivized to grow and develop their businesses for the short and long term. This flat organizational structure enables Amphenol to drive with "one foot on the gas and one foot on the brake", meaning that the business can scale rapidly to meet customers' needs as well as take action to preserve margins during cyclical downturns. It enables Amphenol to operate like many small companies, be nimble with quick feedback loops between customer needs and product development. Capital allocation is a key part of Amphenol's strategy. The company aims to return 50% of capital to shareholders through dividends and share buybacks and allocate the remaining 50% to its disciplined acquisition program. Amphenol has acquired more than 50 companies over the last 10 years which have contributed approximately one-third of revenue growth over the long term. The company is focused on three characteristics in potential targets: great people, great product, and great market position. Amphenol takes a long-term approach, noting that they do deals for life, not for the quarter. Amphenol has historically grown EPS at a 13% CAGR over the last 10 years and we believe that thanks to AI, growth should accelerate going forward. Moreover, we continue to believe that the company will continue to execute on its acquisition program in the fragmented but consolidating industry which allows it to continue creating substantial shareholder value over the long term.

BSD Analysis:
The manager initiated a new position in Amphenol based on compelling competitive advantages and secular growth tailwinds, particularly in AI infrastructure. The company's diversified exposure across seven end markets with no single market exceeding 25% of sales provides defensive characteristics while positioning for growth in electrification and digitalization trends. The AI data center opportunity represents a significant catalyst, with content requirements multiple times higher than traditional data centers due to increased interconnect intensity and power density. Amphenol's unique decentralized operating culture with 140 independent general managers creates entrepreneurial agility while maintaining operational discipline. The balanced capital allocation strategy of returning 50% to shareholders while investing 50% in disciplined acquisitions has driven consistent value creation. Historical 13% EPS CAGR over the past decade demonstrates execution capability, with AI expected to accelerate growth going forward. The company's technological leadership, manufacturing scalability, and acquisition expertise in a consolidating industry support the long-term investment thesis.

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

BSD Analysis:
The manager views Compass Minerals as a high-quality business trading at deeply discounted valuations due to temporary factors rather than fundamental deterioration. Trading at just 6x estimated normalized earnings, the stock has been pressured by management missteps, S&P 600 index removal, and unusually warm winters affecting demand. The investment thesis centers on the non-cyclical nature of road salt demand - a necessity regardless of economic conditions, consumer trends, or technological disruption. New management has implemented a back-to-basics strategy, eliminating distracting side projects like fire retardant and lithium extraction that diverted focus from core salt and Sulfate of Potash operations. The manager expects normalized winter weather patterns combined with improved operational focus to demonstrate the company's true earnings power. This represents a classic value opportunity where temporary operational and weather-related headwinds have created an attractive entry point into essential infrastructure assets.

Pitch Summary:
UnitedHealth Group Incorporated is a diversified health and well-being company with $450 billion in annual revenue, operating across four segments: UnitedHealthcare (insurance), Optum Health (care), Optum lnsight (data), and Optum Rx (pharmacy benefits manager). Shares fell 50.2% during the quarter after the company missed earnings estimates and cut its 2025 earnings per share guidance, citing higher-than-expected medical costs in its Medicare Advantage business. Investor confidence was further shaken in early May by the abrupt departure of CEO Andrew Witty and the suspension of 2025 guidance. The company also mispriced its Medicare Advantage business for 2025—a challenge compounded by reimbursement changes and an influx of newly acquired members who had not been properly risk coded. While we acknowledge UnitedHealth's potential to restore profitability in this segment over time through disciplined pricing and benefit adjustments, we chose to exit our position during the quarter in favor of higher conviction opportunities.

BSD Analysis:
The manager adopted a bearish stance and exited UnitedHealth following a series of fundamental deteriorations and execution missteps. The 50.2% quarterly decline reflected multiple negative catalysts including missed earnings, guidance cuts, and leadership instability with the CEO's abrupt departure. The core issue centers on significant mispricing in the Medicare Advantage business, where higher-than-expected medical costs were compounded by reimbursement changes and inadequate risk coding of newly acquired members. While the manager acknowledges the company's long-term potential to restore profitability through pricing discipline and benefit adjustments, the combination of execution risks, regulatory headwinds, and management uncertainty led to the decision to reallocate capital to higher conviction opportunities. The exit reflects a risk management approach prioritizing capital preservation over potential recovery scenarios in a complex regulatory environment.

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

BSD Analysis:
The manager's Mercedes-Benz investment mirrors the BMW thesis, focusing on attractive valuations and strong balance sheet characteristics during a challenging industry environment. The position acknowledges current headwinds from increased competition resulting in softer demand, but views these pressures as cyclical rather than permanent structural shifts. Mercedes-Benz's low leverage provides financial flexibility to maintain operations and capital allocation during the downturn. The investment case emphasizes multiple return drivers including robust dividend yields and opportunistic share repurchases at discounted valuations. This represents a contrarian value play on a premium automotive brand with strong fundamentals trading at depressed levels. The manager appears confident that Mercedes-Benz's luxury market positioning and financial strength will enable the company to navigate current industry challenges and deliver strong long-term returns as conditions normalize.

Pitch Summary:
Shares of Meta Platforms, Inc., the world's largest social network, rose 28.2% this quarter on impressive top-line growth with revenues growing 19% year-on-year in constant currency and solid forward guidance. Meta is already seeing solid returns on its AI investments across its core business, with improved content recommendations driving increased time spent on the platform, and enhanced ad targeting and ranking delivering higher conversion rates and stronger return on ad spend. Our industry checks also suggest strong advertiser adoption and satisfaction, including in newer areas such as AI-powered creative tools and business messaging. Meta continues to manage costs effectively and remains focused on profitable growth. Over the long term, we believe Meta is well positioned to leverage its leadership in mobile advertising, massive user base, innovative culture, strength in generative AI research, and technological scale, with additional monetization opportunities ahead.

BSD Analysis:
The manager presents a strong bull case for Meta based on impressive fundamental execution and successful AI integration across the platform. The 28.2% quarterly gain was driven by robust 19% constant currency revenue growth and positive forward guidance, demonstrating the company's ability to monetize its massive user base effectively. The AI investments are already generating tangible returns through improved content recommendations that increase user engagement and enhanced ad targeting that drives higher conversion rates and advertiser ROI. Industry feedback suggests strong advertiser satisfaction with new AI-powered tools, indicating sustainable competitive advantages. The manager emphasizes Meta's unique combination of mobile advertising leadership, scale across multiple billion-user platforms, innovative culture, and generative AI capabilities. Cost discipline and focus on profitable growth provide additional confidence in the investment thesis, with multiple monetization opportunities still ahead.

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

BSD Analysis:
The manager initiated a position in BMW based on attractive valuation and strong balance sheet fundamentals despite near-term competitive headwinds. The investment thesis recognizes current challenges from heightened competition leading to softer demand, but views these as temporary cyclical issues rather than structural problems. BMW's low leverage profile provides financial flexibility to navigate the challenging operating environment while maintaining capital returns to shareholders. The combination of robust dividend yields and ongoing share repurchase programs at discounted valuations creates multiple return drivers for long-term investors. The manager appears to be taking a contrarian approach, buying quality automotive assets during a period of market pessimism. The thesis relies on BMW's premium brand positioning and financial strength to weather current industry headwinds and emerge stronger.

Pitch Summary:
NVIDIA Corporation is a fabless semiconductor company specializing in next generation compute and networking platforms for accelerated computing. Its dominant position in AI infrastructure with a comprehensive portfolio spanning graphics processing units (GPUs), systems, software, and high-performance networking solutions, continues to drive strong performance. Shares rose 45.5% during the quarter as increasing data points emerged that the AI cluster buildout is likely to be durable, with NVIDIA maintaining its leadership. The company also removed all AI-related revenue contributions from China from its guidance going forward, effectively de-risking that part of the business. We maintain a long-term constructive view, as leading AI labs show growing confidence in their ability to achieve human-level intelligence and deploy AI products in enterprise settings. All the industries bottlenecked by intelligence will leverage AI, unlocking trillions of dollars in value, in our view. Most of these AI workloads will be supported by large language models running in data centers. NVIDIA is uniquely positioned to power this transformation through its full-stack approach, spanning silicon, systems, software, and developer ecosystem, and hence its competitive moat continues to widen.

BSD Analysis:
The manager maintains strong conviction in NVIDIA's dominant position in AI infrastructure, viewing the company as uniquely positioned to capitalize on the massive AI transformation across industries. The 45.5% quarterly gain reflects growing market confidence in the durability of AI cluster buildouts and NVIDIA's sustained leadership position. The removal of China AI revenue from guidance eliminates a key overhang and de-risks the business model going forward. The manager's thesis centers on NVIDIA's comprehensive full-stack approach spanning hardware, software, and ecosystem development, which continues to widen competitive moats. The long-term opportunity is framed around the potential for AI to unlock trillions in value across intelligence-constrained industries, with most workloads requiring large language models in data centers where NVIDIA maintains technological superiority. The manager views recent volatility as creating attractive entry points while intrinsic value continues to rise.

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

BSD Analysis:
The manager maintains a strong bullish stance on Five Point Holdings following a remarkable turnaround from debt concerns to net cash generation. The company reported robust Q4 results and guided for $200 million in net income for 2025, representing a dramatic transformation that drove a 50% single-day stock gain. The investment thesis centers on the company's transition from financial distress to significant free cash flow generation, supported by strong demand for their California real estate developments. The upcoming Candlestick Park (San Francisco) development represents the next major catalyst, expected to progress by late 2025/early 2026. Trading at just 0.5x the manager's fair value estimate, the stock offers compelling upside despite recent market pullbacks. The combination of a healthy balance sheet, strong management execution, and robust property demand underpins the long-term investment case.

Pitch Summary:
Broadcom Inc. is a leading fabless semiconductor and enterprise software company, generating approximately 60% of revenue from semiconductors and 40% from software. The company is strategically positioned at the intersection of high-performance AI compute and networking infrastructure, while also demonstrating disciplined execution in software. Shares rose 65.0% during the quarter on continued momentum in Broadcom's AI application-specific integrated circuits and networking with improved visibility into 2026. VMware, Broadcom's recently acquired infrastructure software business, is performing in line with expectations, while the non-AI semiconductor segment appears to have bottomed and is poised for a recovery over the next 12 months. We retain strong conviction in Broadcom's long-term outlook, as the company is well positioned to capture a majority share of the $60 billion to $90 billion serviceable addressable market by 2027 with its AI business, driven by demand from key customers such as Google, Meta, and ByteDance, accompanied by durable growth in its other segments.

BSD Analysis:
The manager presents a compelling bull case for Broadcom based on its strategic positioning in AI infrastructure and strong execution across both semiconductor and software segments. The 65% quarterly gain reflects market recognition of the company's AI momentum, particularly in application-specific integrated circuits and networking solutions. The VMware acquisition appears to be performing as expected, providing software diversification and recurring revenue streams. The manager's confidence is anchored in Broadcom's ability to capture significant market share in the rapidly expanding AI infrastructure market, with a serviceable addressable market projected to reach $60-90 billion by 2027. Key customer relationships with hyperscalers like Google, Meta, and ByteDance provide visibility into sustained demand. The recovery outlook for non-AI semiconductor segments adds additional upside potential as cyclical headwinds subside.

Pitch Summary:
We continue to believe that that many of the stocks that we own are deeply undervalued and have the potential to deliver outstanding returns as the bull market in Gold and Silver develops. Here is an example detailing a Company which is overweight in our portfolio: Avino Silver and Gold. (NYSE: ASM) Avino operates a primary silver mine in Durango, Mexico. They presently have a market capitalization of $119 million (at $.92 per share) and they produced 2.4 million ounces of silver (equivalent) in 2023. Avino's all in sustaining cost (AISC) to produce an ounce was $20.23 in the first quarter of 2024. Using today's silver price of $30.00 per ounce they are generating mine profits of $5.8 million/quarter ($30.00-20.23 x 600,000 oz/quarter). Quarterly SG&A is $1.3 million so they have quarterly EBITDA of $4.5 million which is close to cash flow because they have zero debt. Just staying flat in terms of silver price and production profile they should cash flow of $18 million this year. Therefore, the business is currently trading at 6.6x run rate cash flow. But, there are a few catalysts that will make this cash flow figure grow substantially. First, we anticipate higher silver prices as we have detailed elsewhere in this report and the operating leverage is substantial. For example, at a $40 silver price, which we anticipate within 18 months, cash flow would grow to $41 million implying that today's valuation is 3x cash flow. However, the upside doesn't stop there. The Company has excess capacity in its existing mill and it acquired another mining project called La Preciousa (12 miles away easily trucked to their mill) during this downturn that can be brought on line in as little as 12 months and which will greatly increase the rate of production. First, through efficiency improvements they believe they can produce between 2.5-2.8 million oz in 2024. As their second deposit gets developed they anticipate increasing production to over 3.5 million ounces per year in 2025 and growing to 4.0 million oz in 2026 and 2027. After that, they anticipate a further capacity expansion which will take them to 7+ million oz in 2028. The initial expansion can be achieved with only <$15 million in capex as these are straightforward mines. Let's just consider the nearer term scenarios. If they produce 3.5 million oz in 2025 with a $40 average silver price they will have cash flow of $52 million. At today's price, they are selling at 2.3x one year out cash flow. To put this in context we have seen growing mining companies trade at 10-20x projected cash flow in precious metals bull markets. Not saying this will happen again, but 2x is silly cheap. Now, let's dream a little bit. In a few years, we think silver goes to its old time high of $50 per oz. In fact, we think it will exceed it (given how tight the silver market is), but let's stop at $50. Furthermore, let's assume they are successful in their expansion and they produce 7mm oz in 2028. Cash flow in 2028 will be $148mm. More than their present market cap. If their multiple does not expand (6.9x run rate today) the Company would be worth $1.0 billion or 8x today's price. If their multiple does expand to say 15x the Company value would be $2.2 billion or 18x today's price. Imagine what a $100 per ounce silver price would do and we do not think that is impossible or even unlikely as this bull market unfolds. Another interesting fact about Avino is that they control very large deposits. The Company has 371 million AgEq ounces in its 43-101 report. This makes it the fourth largest silver developer in the world and implies that these mines will operate for decades. Throwing aside the cash flow story, 371million oz is a huge deposit. At today's market price the company is valued at $0.32 per ounce in the ground. Comparable junior silver companies are valued at $1.50 per ounce in the ground and intermediate silver miners are valued at $2.50 per ounce in the ground. (so 5-8x upside is possible on that asset value metric) To be clear, none of this upside is guaranteed. Management has to execute, but we know them, trust them and believe they are very capable of pulling this off. The silver price also has to go up, but we believe it will. And finally, people have to come back to the mining stocks and pay higher multiples for them. None of these are certain, but we have a margin for error here. Any one of these things happening will make this a good investment. If they all come together, we will make an outstanding return. Full disclosure, probably one of the largest investment risks here is that other mining companies can see the inherent value in Avino and someone comes in and makes an acquisition bid that does not fully reflect the underlying value in the company. Management will resist inadequate bids, but our fellow shareholders may not. It would be unfortunate if we are taken out at a low premium.

BSD Analysis:
Equity Management Associates presents a compelling bull case for Avino Silver and Gold, positioning it as a deeply undervalued silver producer with significant operational leverage to rising silver prices. The fund highlights Avino's attractive valuation metrics, trading at just 6.6x run-rate cash flow with zero debt and strong operational fundamentals including $20.23 AISC and 2.4 million ounces of silver equivalent production in 2023. The investment thesis centers on multiple expansion catalysts including anticipated silver price appreciation to $40-50+ per ounce, production growth through the La Preciousa acquisition and mill capacity expansion, and potential re-rating of mining multiples during precious metals bull markets. The fund projects dramatic cash flow growth scenarios, with potential 8-18x returns if silver reaches $50 and production scales to 7 million ounces by 2028. Avino's asset base of 371 million AgEq ounces positions it as the fourth largest silver developer globally, yet trades at a significant discount to comparable miners at $0.32 per ounce in the ground versus $1.50-2.50 for peers. The fund acknowledges execution risk and potential takeover risk as key concerns but emphasizes the asymmetric risk-reward profile with limited downside and substantial upside optionality.

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

BSD Analysis:
The manager views DFIN's 20% post-earnings decline as an overreaction to temporary headwinds rather than permanent business impairment. The investment thesis focuses on the company's recurring software solutions segment, which demonstrated strong organic growth of 11.6% in Q4, indicating resilience in the core digital transformation business. The weakness was primarily driven by legacy paper/printing segment declines and reduced capital markets activity (IPOs/M&A), both viewed as cyclical rather than structural issues. Forward estimates were reduced by 9% for 2025 and 7% for 2026, yet the stock's 20%+ decline implies a permanent 10%+ reduction in terminal valuation multiples. The manager believes this creates a compelling mispricing opportunity, arguing that the market's indiscriminate selling following earnings misses has become increasingly severe. The thesis relies on the temporary nature of current headwinds and the underlying strength of the software solutions business driving future recovery.

Pitch Summary:
One such company that helps with these difficult situations is collision repair company Boyd Group Services. It happens to be Right Tail's newest investment and one that I would not be surprised to see double in value in the next 4-5 years. Like many Right Tail investments, it's a company I've been studying for a long time. I originally invested in the company in 2017 and have researched/invested in several companies which are tangentially related to collision repair. Boyd owns ~950 collision repair locations across the United States and Canada. The business has produced a track record of incredible growth and returns on capital. Boyd is headquartered in Winnipeg, Manitoba though 90% of its revenue is generated in the US. Its banner in the US is Gerber, which Boyd bought ~20 years ago. The company has an enterprise value of ~$6B. Like several of our other investments, Boyd does many little things well, which is a great source of competitive advantage. They buy and grow many smaller repair shops. They remain fastidious on what they're willing to pay for acquisitions, despite this becoming an industry that has attracted much private equity capital. In fact, as multi-site operators have become more expensive, Boyd has shifted its focus to buying single locations or building greenfields. They expected to receive 30% returns on capital for the greenfields though the returns take longer to achieve as the new sites mature. They balance growth and profitability rather than solely focusing on growth at any cost like many companies over the past several years. As a result, Boyd's return on invested capital has typically been greater than 25%. This fragmented industry continues to consolidate with the larger players leading the charge. The top 3 companies (Caliber Collision, Boyd, and Crash Champions/Service King) generate ~20% of industry revenue, a number which has grown significantly over the last 20 years though still leaves much room for further increases. It's a fun industry to research and develop unique insights with Boyd being the only company that is traded publicly. 60-70% of the locations in the industry are still single store, mom and pops. Often these smaller companies don't have the balance sheets to invest in technology to repair newer cars. I've spoken to a few operators and insurance partners who support our thesis. I have also needed to get some minor collision repair work done twice in the last year. Once I used a direct repair program and the other time I did not. My sense is that there still big improvement that can be made to further optimize these repairs and make them easier on consumers. Boyd provides significant value to its auto insurance partners and consumers. Consumers want their cars repaired well and quickly. If not, they may decide to change insurance providers. The insurance companies have preferred to establish Direct Repair Programs usually with the larger collision repair companies. The goal is to make the process as easy and simple as possible for the customer. The larger collision repair companies are usually better operators with the latest equipment to repair cars that are becomingly increasingly complex. Often the insurance company pays the collision repair company directly – in fact, 90% of Boyd's revenue involves insurance companies. In inflationary times, collision repair companies need to raise prices to cover their costs and insurance companies need to get prices approved by their state regulators. This process typically works well though time lags are normal. I expect Boyd to compound at a high teens to low twenties rate of return. This rate of return is achieved by a 2-3% cash yearnings yield + 3-5% growth without reinvestment + 10-15% growth from reinvestment. The most attractive piece here is that Boyd invests nearly all its free cash flow at 25% or higher incremental rates of return. The least attractive part of the equation is the current valuation but I expect the reinvestment opportunity to more than compensate us over a multi-year holding period. I expect Boyd to produce an IRR that I believe ranks near the top of our portfolio. Further opportunities exist if Boyd can get back to pre-COVID levels of profitability which have been impacted by higher labor rates or even higher levels of profitability as calibrating sensors on newer cars is a newer and higher margin opportunity. I also like that this business is less economically sensitive. People will still drive and maybe even drive more during tougher economic times. Industry specific risks could include a significant, permanent drop in accident frequency possibly driven by collision avoidance technology. Offsetting this risk is population growth, growth in miles driven and continued high levels of distracted driving. Another risk is that more cars are being declared total losses due to increased vehicle complexity and rising repair costs – that said, there continues to be more demand than supply for repair services and backlogs are often several weeks in advance. Put it all together and I think we have the chance for a five year double or better with a management team that's prudently allocated capital at high incremental rates of return. That it's a less cyclical business is also appealing as we'll encounter a recession at some point in the future. While getting in an accident is never a pleasant experience, I love how this company provides great value to its partners and hopefully will turn into a more than pleasant investment for us.

BSD Analysis:
The manager presents a compelling bull case for Boyd Group Services, a collision repair consolidator operating ~950 locations across North America with a $6B enterprise value. The investment thesis centers on Boyd's exceptional capital allocation discipline, generating 25%+ returns on invested capital through strategic acquisitions and greenfield expansion. The company operates in a highly fragmented industry where 60-70% of locations remain single-store operations lacking the capital and technology to service increasingly complex vehicles. Boyd's competitive moat stems from its Direct Repair Program partnerships with insurance companies, which value the company's operational excellence and advanced repair capabilities. The manager expects high-teens to low-twenties annual returns driven by 2-3% dividend yield, 3-5% organic growth, and 10-15% growth from reinvestment at attractive returns. The defensive nature of the business model provides recession resilience, as accident frequency remains relatively stable during economic downturns. Key risks include potential disruption from collision avoidance technology, though population growth and distracted driving trends provide offsetting tailwinds.

Pitch Summary:
The Regis refinancing provided a tremendous return during Q2, and we are eagerly awaiting a refinancing solution for Superior Industries (SUP). I continue to believe SUP has more upside than Regis, but the market is waiting for the situation to simplify. Consider: 1. Superior is on track to exit the year earning about $190m of EBITDA, having optimized their European production by consolidating German operations in Poland. However, due to bankrupting their German subsidiary to make this move, its sales were temporarily removed from their financials and will "reappear" this year. I suspect the market hasn't grasped this nuance, or the significant margin improvements resulting from this transition. 2. Superior has three main obligations which interact; their credit facility with Oaktree, publicly traded Senior Notes, and convertible preferred stock with TPG. The company has been opaque about their refinancing approach, which could encompass any part of the capital structure, but prioritizes the Notes coming due next summer. Superior has enough cash to mostly cover the redemption of the Notes, but I suspect a more sweeping change to the capital structure. Overall, I expect Superior to carry about $650m of net debt at a blended 10-12% rate at the conclusion of the process. Therefore, we expect Superior to exit 2024 with the ability to repay $50-75m of debt per year, resulting in about 50% free cash flow yield on shares. While some auto suppliers face risks from the forecasted rate of EV adoption, Superior will not face obsolescence risk until cars no longer require wheels. We also see Superior positioned well for the "near-shoring" trend brought about by Covid, given their proximity to U.S. and European automakers. As the debt situation is de-risked, I expect Superior to trade around 5x EBITDA like most similarly situated producers. If the company achieves their stated goal of $240m 2027 EBITDA, along with expected deleveraging, the stock should trade above $20/share by 2027, over a 600% gain. This is a "show me" story, and we expect the market will require definitive news before a rerating can occur.

BSD Analysis:
Kingdom Capital presents Superior Industries as a compelling turnaround story with significant upside potential contingent on debt refinancing. The manager expects $190M EBITDA for 2024, driven by operational improvements from consolidating German operations in Poland, though this transition temporarily obscured financial results. The complex capital structure involving Oaktree, Senior Notes, and TPG preferred shares creates uncertainty but also opportunity. With expected $650M net debt at 10-12% rates post-refinancing, Superior should generate $50-75M annual debt repayment capacity, yielding approximately 50% free cash flow on current shares. The wheel manufacturing business benefits from EV-resilient demand and near-shoring trends favoring US/European proximity. At 5x EBITDA multiple on the projected $240M 2027 EBITDA target, shares could reach $20+ representing over 600% upside. The investment requires patience as the market awaits definitive refinancing news to trigger revaluation.

Pitch Summary:
Born in Italy in 1996, WIIT is a rare breed as Europe's only pure-play specialist for sovereign private cloud solutions. Powered by a network of twenty data centers across Germany, Italy, and Switzerland, they focus exclusively on mission-critical and heavily regulated workloads such as ERP systems. Their 600 enterprise clients simply can't risk their most sensitive data floating around in public hyperscaler land. Think of European banks, hospitals, pharma giants, or law firms uploading their trade secrets and customer data into the AWS cloud. You get it, it's not going to happen. WIIT operates exclusively in Europe, built from the ground up around the principle of data sovereignty, meaning no legal, technical, or operational ties to the US. They run some of the continent's only Tier IV-certified data centers, which are the Fort Knox of cloud computing, offering 99.9999% uptime … so, quite a lot. Additionally, each data center is mirrored, meaning that unless two asteroids hit Germany simultaneously, your backups are safe. Their focus on system-critical ERP solutions results in heavy integrations at the heart and soul of a company's IT backbone. Such level of integration isn't easy to unwind, which is why average contracts run for five years, with some stretching up to 9-12 years. Recurring revenues are locked in with inflation protection and auto-renewals. With the pricing double that of standard private cloud, WIIT's high-end offering isn't for the budget-conscious. But for clients who need it, there's no substitute. Customers stick like glue, making the business model both defensive and durable, yet still highly scalable, which results in 40% EBITDA margins. Me gusta. I think we are all on the same page regarding the shift away from on-premise IT back-officers in white running shoes walking the floors to fix your computer. Some of you might be too young to have experienced the old days. This is absolutely fading out, and workload is heavily shifted into the cloud, of which a lot goes to the public cloud heavy hitters AWS, Azure, Google, and Alibaba. They are large and scalable, so we don't compete with them. They rock! Here comes the essence: Most businesses shoot for a hybrid cloud setup with significant workloads in private networks as well, given it is more customizable and has higher security standards, and, well, you don't want to give everything into US and Asian hands. But only 38% of European SMEs have adopted any cloud solutions so far. Hence, the best is yet to come. No doubt, these structural trends are driving their high single-digit organic growth, which is additionally boosted by consolidating the fragmented market with synergetic and accretive bolt-on M&A. 70% of the EU cloud market is controlled by the above-mentioned heavyweights, and that number has been growing over the past decade. That's bad. No surprise, there are growing concerns about the European digital sovereignty from regulators. But if the EU is good at one thing, it's regulation, and this time I am somewhat forgiving: Microsoft recently admitted under oath that it can't guarantee French citizens' data stored in EU data centers is safe from US agency access, despite all previous assurances. Somehow, we all knew this, but now it's official, stamped, and laminated. Consequently, European cloud customers are increasingly looking to have their most sensitive data immune to US or Chinese extraterritorial laws, which heavily calls for a European alternative. I didn't study political science, but I would claim these trends could be a tailwind for WIIT. There is also OVH Group, but they have a US arm, which eliminates them as a viable EU cloud alternative. Importantly, the EU regulator also has every incentive to support M&A transactions amongst European cloud players with local infrastructure. WIIT does quite a bit in M&A, but we'll address those CEO decisions later. For once, regulation feels like a win. I can't believe I am writing that. WIIT offers all three: infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). This is important. By combining infrastructure with application management services, WIIT can offer a multi-level approach to cloud computing services, enabling the company to provide tailor-made private and hybrid cloud solutions. The whole value chain. Enough theory bingo: Time for a trade show surprise visit to see them in action and interview their customers myself. How delighted are you with their product, and would you recommend it to your friends? WIIT serves hundreds of high-quality clients, absent concentration (check). But clients aren't just rack renters, they're brands like Prada and Armani who literally hand over the beating heart of their mission-critical ERP workloads. Securely, compliantly, 24/7, with full EU data sovereignty matters to them. The CTOs I met find real peace of mind in handing off key responsibilities to WIIT. They eliminate the complexity and brain damage associated with managing fragmented IT systems. Even at a premium price, clients know their most critical systems are in expert hands. Many also increasingly value WIIT's insulation from US jurisdiction, which wasn't a big surprise. One pivotal part of my primary research was to understand if clients were fed up with the long contracts and itching to switch. When customers on the ground complain about being trapped in messy, complex systems, that's a serious red flag. Fortunately, that was not the case here. WIIT offers what hyperscalers lack: Accountability, full transparency, and hands-on support. Clients happily trust them, and that's why they sign long-term contracts. Happy customers, happy investors! The team spirit was excellent. "Everyone, join the selfie!". Their strong "WIIT-itude" culture, as they call it, came through loud and clear during my fieldwork. They take pride in delivering the full package and confidently say, "Pay for our value or look elsewhere". Competition doesn't faze them whatsoever. All they are focused on is winning, which I really like. Why focus on peers anyway? Anyone can invest €25 million to build a Tier IV data center, but who's going to be your first customer? That's a big chicken and egg, as brand reputation and client experience matter. No doubt, WIIT has established a strong position as "The Premium Cloud" in the European market that others can hardly match, boasting numerous quality logos. The business also benefits from growing economies of scale. As the client base expands, the fixed costs of running and certifying Tier IV data centers, maintaining compliance layers, and managing core infrastructure are spread across more workloads. This creates a virtuous cycle: more scale brings more margin headroom, enabling reinvestment in platform quality, talent, and certifications to win new customers. WIIT enjoys high switching costs with its existing clients as they aren't just leasing server space, but entrusting them with their fundamental operations. Contracts come with steep early termination penalties, but more importantly, the operational disruption of leaving is heavy. Not the most desirable component of their moat, but the business is recurring and sticky, which I value. Critically, WIIT's moat is built on more than just infrastructure. In contrast to capex-heavy providers like OVH or Equinix, only around one-fourth of their value creation sits in the infrastructure layer. The rest comes from managed services, high-margin software, and integration with client systems. Think certified expertise and full-stack service delivery. It's true data centers are high fixed-cost assets, but once built and certified (especially Tier IV), the marginal cost of adding new clients or workloads is low. As utilization increases, gross margins expand significantly. Walking through their seemingly endless data center floors during my plant visit in Dusseldorf was reaffirming. Having toured competitors during my work, I can confidently say WIIT isn't just venturing into the space whatsoever. I can also confirm that current utilization figures are realistic, with plenty of headroom to expand with minimal investment in Germany. If WIIT disappeared tomorrow, the EU would struggle to find another locally anchored alternative without US legal entanglements. That's a multi-layer moat, and it's getting wider over time as incremental capital is allocated either to onboarding new customers with an ROIC above 20%, or accretive M&A. Time to put management to the test. With all caution and learnings from the past. Alessandro Cozzi is the founder, CEO, and with 58% ownership, the majority shareholder. No doubt, with ten accretive M&A deals since IPO in 2017, he has been very successful. Brad Jacobs might actually be a bit proud of him, given the playbook is familiar: Rolling up a fragmented infrastructure industry through acquisitions. Yes, leverage is elevated, but in the context of their strong cash generation and cheap targets, it would be inefficient of Alessandro not to put the balance sheet to work. The business model is designed to carry the weight. But the CEO hasn't grown WIIT for the sake of size. M&A targets are fully integrated, infrastructure is turned off, customers migrated, and synergies realized. This isn't about empire building, it's about capacity utilization and leverage on fixed costs: you don't just get bigger, you get better. No surprise, not everything was as positive as my initial meeting impression, but management did pass my checklist. They are "locked in" on the opportunity ahead. Who speaks first? Nervous fidgeting. Alessandro also doesn't flinch from the messy parts of M&A. Cutting headcount post-deal is part of the job. No surprise, some of the conversations I had with ex-employees were bumpy, yet not concerning. Maintaining a lean workforce is key. We are not here for an ESG convention. After several meetings with management, I'm convinced they act like owners and take long-term bets for a better future. Having visited other Italian companies before, I was struck by how different this one feels. There is a strong Italian spirit blended with German precision beneath a durable business model, making for a promising combination. Over the last years, their operations have materially improved and yet the public market hasn't agreed. No surprise, private equity investors are like wasps to the CEO. Of course, I've imaginary appointed myself to the advisory board of WIIT. Maybe it's not officially, but since we now own a piece of the business for the long haul, I feel justified claiming a phantom seat at the boardroom. That's what ownership is about, thinking long term and pulling up a chair. I can confirm already, we are dissatisfied with a 25% premium offered by PE, given the significant compounding runway ahead. The thesis does not rely on AI; it should unfold independently. That said, ignoring AI entirely would be overly conservative as well. As more applications move beyond LLMs and "Chatty", I do expect incremental upside. Consider Ferrari upgrading its ERP systems with AI solutions that actually drive real operational efficiencies, resulting in incremental EBIT growth. But WIIT operates at the heart of mission-critical systems. These environments are typically the last to adopt new technology, not the first. AI will be tested elsewhere first, but when it comes, it will need to be secure, private, and compliant. AI workloads almost always involve sensitive data and that's where WIIT is perfectly positioned. As demand grows for private, sovereign AI infrastructure, and as computational needs increase, players like WIIT should be natural beneficiaries. Operating some of the highest-quality data centers in Europe really doesn't hurt in the AI showtime era. The business stacked up well against my four investment criteria and cleared my five step research process. I believe WIIT has the potential to become a multi-billion-euro company and lead the private cloud niche across Europe. Go for it, team blue!

BSD Analysis:
Baumann presents a compelling bull case for WIIT as Europe's leading sovereign cloud provider, emphasizing the company's unique positioning in data sovereignty amid growing regulatory pressure on US hyperscalers. The investment thesis centers on WIIT's defensive moat through Tier IV data centers, sticky 5-9 year contracts with premium pricing, and 40% EBITDA margins driven by high switching costs and mission-critical ERP integrations. The manager conducted extensive primary research including facility visits, customer interviews, and management meetings, validating strong customer satisfaction and competitive positioning. WIIT benefits from structural tailwinds including European cloud adoption (only 38% SME penetration), regulatory support for EU alternatives, and consolidation opportunities in a fragmented market. Management under founder-CEO Alessandro Cozzi has executed ten accretive M&A deals since IPO, demonstrating disciplined capital allocation with ROIC above 20%. The company serves premium clients like Prada and Armani with no customer concentration risk, while AI adoption could provide incremental upside as computational needs increase for secure, compliant workloads.

Pitch Summary:
We first mentioned Net Lease Office Properties (NLOP) in our Q4 letter, but I think it's important to elaborate as we continue adding to our top position. As a quick refresher, NLOP is actively liquidating their portfolio of office buildings. There were two risks that stood out when we first invested: 1. Sales would take longer than expected 2. Realized sale prices would disappoint Fortunately, sales have progressed at a rapid pace allowing NLOP to substantially reduce their debt. Once the debt is fully retired, we expect regular and special distributions will be a catalyst for re-rating shares. The situation is reminiscent of a favorite investment to date, Unit Corporation (UNTC). Like UNTC, I expect current investors to recoup their investment via dividends as soon as 2025, significantly de-risking the opportunity cost. To date, realized prices have generally met or exceeded my estimates, with two notable disappointments from European holdings. However, the European holdings only represent 5 of the initial 59 buildings in the portfolio. Furthermore, as more sales are finalized, our margin of safety continues to widen. To this end, NLOP has approximately a $400m market cap and $150m of net pooled debt remaining. I think it's possible to cover much of the enterprise value ($550m) with the sales of just 5 of their 47 remaining properties (KBR, PPD, CVS, Omincom, and Google). I'm surprised the market has not reacted more optimistically, but I am simply taking the lack of price appreciation as an opportunity to buy more.

BSD Analysis:
Kingdom Capital presents a compelling liquidation play in NLOP, where the fund is adding to its top position as the REIT systematically sells its office portfolio. The manager highlights two key de-risking factors: sales are proceeding faster than expected and realized prices are meeting estimates despite some European disappointments. With a $400M market cap against $150M net debt, the enterprise value of $550M could potentially be covered by just five high-quality tenant properties (KBR, PPD, CVS, Omnicom, Google). The investment thesis centers on debt reduction leading to special distributions, with management expecting investors to recoup their investment through dividends by 2025. The comparison to Unit Corporation suggests a successful precedent for this liquidation strategy. The widening margin of safety as more sales complete provides downside protection, while the market's lack of appreciation creates additional buying opportunities for the patient value investor.

Pitch Summary:
Magnite is the largest independent programmatic Sell-Side Platform (SSP), an entity that provides technology solutions to automate the purchase and sale of digital advertising inventory on behalf of publishers. The company arose from the merger of The Rubicon Project and Telaria in 2020. It then acquired a CTV competitor SpotX in early 2021 to become the third-biggest CTV SSP, after Comcast's Freewheel and the Darth Vader of the AdTech world, Google. Critically, Magnite stands today as the key enabler of Connected TV (CTV) advertising for streaming platforms, an increasingly crucial revenue source for media parent companies around the world. The company's contract win with Netflix is proof of its differentiation in the space, and was something we expected after hearing back in early 2023 that Microsoft's Xandr ad tech stack wasn't capable of true CTV ad delivery. The company has impressive incremental EBITDA margins (75%+), and after spending the last few years consolidating its acquisitions, is in a place to capitalize on growth opportunities, generating cash flow far in excess of current market expectations. Nonetheless, the company trades on a single-digit multiple of this year's estimated EBITDA, with minimal credit applied to Netflix onboarding programmatic advertising. That's strange, if only because we believe the Netflix ad tier is likely to deliver $6 billion in ad spend next year, and half of that may go through Magnite with low-single-digit take rates (3.5 to 5.0%). Should this occur with incremental margins they have shown in the past, the company could see EBITDA rise by over $70 million next year, implying 30%+ growth from Netflix alone. Better yet, with the success of Netflix's programmatic endeavors, other media customers may accelerate adoption of the same type of programmatic infrastructure/services with MGNI that were previously just tertiary monetization activities. Meanwhile, Magnite DV+, the company's open internet SSP division, should continue its modest growth. However, it also has a potentially massive call option in Google's forced divestment of its ad tech stack (Google Networks). We published our first writeup on the situation in September 2023 before the search trial, highlighting investor complacency about a breakup risk for both search and ad tech trials. With (1) Google's loss in the search trial and (2) there still being an opportunity for the beneficiaries in the ad tech case, we published an update to that thesis in September 2024. The ad tech trial concluded in November and the ruling was delivered on April 17th. As we contended from the beginning, the judge ruled that Google monopolized the supply side of the display advertising market. With the ruling out of the way, we expect the judge to deliver remedies shortly, which should provide greater clarity to investors who are just now starting to wake up to the thesis we've held for years. As for remedies, as long as the supply side of Google's ad tech stack is separated from the demand side, the resulting breakup would have independent SSPs, like Magnite, able to mop up market share. And as we pointed out previously, for the first time in Google's history, its open internet DSP, DV360, announced direct integration with MGNI DV+ to streamline ad transactions. We saw that action as a canary in the coal mine, lo and behold that assertion proved correct. After remedies in the DOJ ad tech case, the second shot on goal is the Texas ad tech trial with a handful of States Attorney's General, which should start later in 2025. What are we really playing for? Market share stats usually measure impressions, not revenue. Google's AdX may command over 50% of impressions, but that overlooks the real story: Google keeps the highest-paying inventory for itself, with CPMs up to 50% higher than competitors. When you look at dollars-weighted impressions and add on Google's 90% ad server share – the true opportunity becomes clear, tens of billions generated from their elevated take rates. The focus on impressions hides just how much value Google controls, and how much is left on the table for challengers, the chart below should be self-evident. In the event of a breakup of Google's ad tech stack, Magnite stands to see its DV+ market become competitive again and gain share from Google, potentially resulting in 5-10x upside in MGNI's equity and fare more asymmetric upside in the LEAPs. In fact, remedies don't even have to take effect to see a change in earnings prospects, publishers with 80% of their ad revenue tied to Google will be looking to protect that revenue from any internal disruption. Again, this thesis is completely independent from a compelling setup in the stock itself. That's our kind of setup, to say the least.

BSD Analysis:
Crossroads views Magnite as the largest independent programmatic sell-side platform positioned to benefit from two major catalysts: Netflix's programmatic advertising adoption and potential Google ad tech breakup. The Netflix partnership represents significant upside, with the fund estimating $6 billion in Netflix ad spend next year, potentially half flowing through Magnite at 3.5-5.0% take rates, driving over $70 million in incremental EBITDA and 30%+ growth. The company's 75%+ incremental EBITDA margins provide substantial operating leverage as volumes scale. The second catalyst involves Google's antitrust ruling, where the judge determined Google monopolized display advertising supply-side markets. The fund believes remedies requiring separation of Google's supply and demand-side operations would allow independent SSPs like Magnite to capture significant market share, potentially delivering 5-10x equity upside. Google's recent direct integration with Magnite's DV+ platform signals early preparation for this scenario. Trading at single-digit EBITDA multiples despite these catalysts, Magnite offers compelling risk-adjusted returns with multiple paths to substantial value creation.

Pitch Summary:
Basic Fit has become a bit of a battleground stock, with opinions varying widely. Last three months brought some negative news that warrant further examination. The first important news item was their indication on Capital Markets Day that they would slow down their pace of expansion. While the CEO still targets the same number of clubs by 2030, he now intends to open 175 instead of 200 clubs per year. With the fitness-industry being in a landgrab mode, this is unwelcome news. Locations that are left on the table will be picked up by competition, reducing the potential of expansion further along the line. Secondly, in December it became clear Basic Fit has also started offering 20.00 Euro memberships again (only in France for now). This is disturbing, as we were hoping to see some pricing power through their dominant position in France and the Benelux, and this indicates the opposite. The third 'punch' came when Planet Fitness, the largest Fitness Centre brand in the world, announced to enter Basic Fit's market in Spain. Planet Fitness uses a franchise model and offers memberships as cheap as 9.99-14.99. Fortunately, Basic Fit has a clear first-mover advantage, and I'd be reluctant to enter as a franchisee into an environment with price war risk. Moreover, Planet Fitness' ambitions are a bit soft on the expected pace. Still, it seems clear to me Basic Fit will need to move away from the single-price strategy and adopt a more flexible pricing approach, enabling the hike of fees in less competitive locations, while aggressively handing out discounts in locations where low-priced competition needs to be driven out. Small competitors will fold quickly, while Planet Fitness and its potential franchisees will receive advance warning against moving into Basic Fit's primary markets. While my personal thoughts on strategy are clear, management is trying a lot of other things. It is a good thing they are experimenting and innovating, but it clearly doesn't look like they are comfortable in their current position. A feeling shared by stockholders, as is reflected by the current stock price. So how do I feel about our position in Basic Fit? Well clearly it is not our best performer. With a decline of 40% y-o-y it is our largest detractor. However, in our estimates the Fair Value for Basic Fit has declined less than its stock price, while the other stocks we own are growing into their valuation. In our estimates, Basic Fit is at this moment nominally the biggest opportunity, and we have expanded our position after earnings despite its ugly momentum. While growth is set to decline coming year, this is not all bad: less club opening improves visibility on 'real' profitability. As the percentage of mature clubs will rise, the average number of members per club will rise, the number of incentivized starter-members will shrink and capex will be lower. These three effects will improve cashflows and the bottom line substantially. And lastly, it's not impossible Basic Fit will be acquired by another company: with Planet Fitness eying expansion in Europe it might make sense for them to make their life easier and bid for Basic Fit. It would be my course of action.

BSD Analysis:
The manager presents a contrarian bullish thesis on Basic Fit despite acknowledging significant headwinds including slowed expansion plans, pricing pressure, and new competition from Planet Fitness entering Spain. The investment case centers on valuation dislocation, with the manager believing fair value has declined less than the stock price, which has fallen 40% year-over-year. The manager has increased the position following earnings, viewing it as the portfolio's biggest opportunity. The bull case rests on improving unit economics as the club base matures, with higher membership density, reduced promotional costs, and lower capex driving cash flow improvement. The manager also sees potential acquisition value, suggesting Planet Fitness might acquire Basic Fit to facilitate European expansion. Trading at 22.6x forward P/E with 19% expected revenue growth, the position reflects a bet on operational leverage and potential strategic value despite competitive pressures.

Pitch Summary:
UK homebuilder Vistry Group is transitioning to a pure-play "partnerships" business model that combines the financial and land resources of local authorities and housing associations, the UK central government, and even financial institutions with Vistry to create a capital-light home construction enterprise at the center of a virtuous circle for all stakeholders. Unlike traditional homebuilders, Vistry's "partnerships" model pre-sells over 50% of its homes at affordable prices (mostly to cycle-agnostic local councils or housing associations), shortening cash collection times and considerably reducing the business's cyclicality and interest rate sensitivity. Vistry's shift from a hybrid traditional/partnerships housebuilder to a partnerships "pure play" will not only make it the UK's largest affordable housing manufacturer but will also drastically improve the predictability of its financial and operational results, radically increasing its revenue visibility, return on capital, and earnings potential in lockstep. The best analogy, valuation comp, and example of expected returns that we see for Vistry is US-listed NVR. For those unfamiliar with NVR, it's a slow-growing, capital-light US housebuilder that's repurchased more than 75% of its shares over the last 30 years. Vistry continues to repurchase its shares as it reaches the late stages of its ongoing business transformation. The company should complete ~17k homes this year and will be delayed in reaching its 20k Partnerships completion and £800 million operating profit targets as part of the issues. Mind you, we still view both targets as very achievable, as their issues to date have been Housebuilding related, which is in wind-down and ultimately irrelevant to our long-standing thesis. Though the pace of the wind-down is contingent on open market housing sales, the release of this trapped working capital will be material, not to mention a matter of when, not if it can be returned to shareholders. . To that end, the company has stuck to a 40% ROCE,12%+ operating margins and revenue growth of 5%-8% per annum. The UK Labour government has also prioritized affordable housing and should debut a new, larger, funding program in June/July. Moreover, both management and the Board of Directors, as well as the company's major shareholders, continue to show conviction in Vistry as they've been adding to their collective investments meaningfully in the face of recent weakness. The company has put out a level-headed set of expectations for 2025 with a few key markers to show progress on their delayed transformation into a capital-light homebuilder, namely a reduction in work in progress (WIP) in the second half of the year As Vistry makes both amends and progress in the transformation the discount applied to them should evaporate. At present, the name trades at ~4x EBIT on reasonable 2026 expectations of £500 million in operating profit, while comparable firms trade 3x-4x higher.

BSD Analysis:
Crossroads views Vistry as executing a compelling transformation from a traditional homebuilder to a capital-light "partnerships" model focused on affordable housing. The company pre-sells over 50% of homes to cycle-agnostic local councils and housing associations, dramatically reducing cyclicality and interest rate sensitivity while improving cash collection times. The fund draws comparisons to NVR, a successful US capital-light homebuilder that has repurchased 75% of its shares over 30 years, suggesting similar shareholder return potential. While Vistry faces delays in reaching 20,000 partnership completions and £800 million operating profit targets, the fund believes these issues stem from the legacy housebuilding division being wound down rather than core partnership operations. The UK Labour government's prioritization of affordable housing should provide additional tailwinds through new funding programs expected in mid-2025. With management, board members, and major shareholders adding to positions during recent weakness, the fund sees strong insider conviction. Trading at approximately 4x EBIT on 2026 expectations of £500 million operating profit, Vistry appears significantly undervalued compared to peers trading 3-4x higher multiples.