Investment Pitches

Pitch Summary:
AVIO SpA., based in Italy, is a key European player in satellite launch and missile propulsion systems. Business momentum has picked up sharply since the European Space Agency awarded AVIO control over Vega-C satellite launches in 2024. The number of low-Earth orbit satellite launches is expanding rapidly, driven by both military and commercial needs. The role of Starlink in the Ukraine war highlighted how critical it is to have sovereign or private satellite networks to support secure communications. In parallel, companies like Maxar are seeing increased demand for high-resolution satellite imagery to support military operations. Major US tech firms are also developing proprietary satellite networks for internal communications. Until recently, Europe lagged in satellite deployment. That has changed. Recognising the strategic importance of space-based infrastructure, Ursula von der Leyen's budget has earmarked significant funding for new launches, with a goal of increasing from 2 to 8 launches per year in the near term. AVIO is well-positioned to benefit from this surge in satellite and missile demand. The company also supplies propellants for European missile stockpiles being replenished due to the Ukraine conflict. We initiated our position at an attractive valuation, around 15x forward earnings, with a strong conviction in the multi-year growth trajectory.

BSD Analysis:
The manager positions AVIO as a strategic beneficiary of Europe's accelerated satellite deployment and defense spending. The investment thesis is anchored on AVIO's control of Vega-C satellite launches awarded by the European Space Agency in 2024, providing a competitive moat in the expanding low-Earth orbit satellite market. The manager emphasizes the strategic importance of sovereign satellite capabilities, highlighted by Starlink's role in Ukraine, which has driven European recognition of space infrastructure criticality. The growth catalyst is substantial, with European launch capacity targeted to increase from 2 to 8 launches annually under von der Leyen's budget. AVIO benefits from both satellite launch demand and missile propellant supply for European stockpile replenishment. The valuation appears reasonable at 15x forward earnings for a company positioned in a multi-year growth trajectory. The manager's conviction reflects AVIO's strategic positioning in Europe's space sovereignty initiative and defense modernization.

Pitch Summary:
Our thesis on Nintendo, the Godzilla of video gaming, is quite simple. Armed with its Apple-like iterative hardware model and software-based ecosystem, as well as a growing active player base and ever-increasing digital sales, the company should generate substantial earnings growth that is de-coupled from the past "boom-bust" console cycles it previously underwent. Indeed, for the first time ever, the new Switch will slide right into an existing software ecosystem, kickstarting an upgrade cycle from a profit base of nearly $4 billion rather than starting from zero, as it has with every other major console changeover in its multi-decade history in the video game space. With that, Nintendo is set to begin the final stage of its ongoing business model transformation we first laid out to you all the way back in 2019. Better yet, with an active playing base of 129 million users, the largest and most diverse integrated hardware/software ecosystem in all gaming, and over 34 million NSO subscribers, sticking the landing is all but certain. After all, Nintendo has an industry-leading (and historically under-monetized) IP library that continues to shine, getting new life in a rapidly expanding number of movies, theme parks, retail stores, general merchandise, and (we strongly suspect) a whole new crop of perpetual first-party live service games in the months and years ahead. All that said, the company officially debuted the Switch 2 in early January, which should go on pre-sale on April 24th, with delivery sometime in June. With the official launch of the Switch 2, the company is embarking on a new era that should see massive and consistent growth that consensus continues to miss. For example, consider the Switch 2's enhanced hardware, which is allowing developers to bring over more technically demanding games to the Switch platform in true fidelity to their intended gameplay right out of the gate. In other words, unlike the OG Switch era, the Switch 2 will be the first Nintendo console with comprehensive AAA third-party support in decades and is expected to receive major AAA titles such as Activision's Call of Duty, Take-Two's Grand Theft Auto 6, and EA's Madden Football within the new console's launch window. This step-change increase in third-party "system selling" game availability will be further bolstered by the fact that all these games do an excellent job of monetizing in-game microtransactions in a recurring, annuity-like fashion, opening Nintendo's ecosystem to not just third-party AAA games but an entirely new cohort of higher-spending gamers. And that's just one driver of returns. The Switch 2's innovative use of AI (thanks to NVIDIA's DLSS), added mouse functionality, and innovative online chat features should certainly do their part in converting the 100 million + PlayStation and Xbox users still gaming on prior-generation consoles, not to mention the 1.86 billion global PC gamers that will finally have a real (highly compelling) reason to consider a Nintendo console for the first time. If that wasn't enough, the global blockbuster Super Mario movie has the company embarking on the next leg of its journey in visual content, i.e., a multi-film, Marvel-esque "Nintendo Cinematic Universe," with the company aiming to build up to a one-movie-per-year pace over the next five years. New movies for Mario, Zelda, and others are in development. And the company's venues at Universal Parks continue to gain traction, with the Japan and LA locations already open, Orlando opening in May later this year, and Singapore following shortly thereafter. We anticipate strong Switch 2 sales starting in May/June of 2025 (FY 2026), alongside an impressive lineup of first- and third-party software and higher prices for NSO and all AAA games sold on Nintendo's App Store-like eShop platform. Furthermore, with reports of Nintendo's supply chain preparing 20 million + Switch 2s for sale this year and a $450 per unit price, consensus FY 2026 revenue estimates of ~¥1.9 trillion would be off by almost ¥1 trillion. Incredibly, we think consensus on software is off by an even larger order of magnitude than the streets deluded hardware takes, but more on all that in the next month or so. For now, it is safe to say that a console release of this importance, plus spring-loaded game sales and a modest valuation of less than 12x normalized earnings (less cash) puts Nintendo's forward risk-adjusted return profile into rarified air over the next three to five years.

BSD Analysis:
Crossroads views Nintendo as undergoing a fundamental business model transformation from cyclical console cycles to a sustainable, Apple-like ecosystem model with the Switch 2 launch. The fund emphasizes this is the first Nintendo console transition building upon an existing software ecosystem rather than starting from zero, leveraging a $4 billion profit base and 129 million active users. The Switch 2's enhanced hardware capabilities enable comprehensive AAA third-party support for the first time in decades, including major franchises like Call of Duty and Grand Theft Auto 6, which should attract higher-spending gamers and recurring microtransaction revenue. Beyond gaming, Nintendo is expanding into a "Nintendo Cinematic Universe" with annual movie releases and Universal theme park venues globally. The fund believes consensus estimates are dramatically understating both hardware and software revenue potential, with supply chain reports suggesting 20+ million Switch 2 units at $450 each versus consensus estimates nearly ¥1 trillion below reality. Trading at less than 12x normalized earnings, Nintendo offers exceptional risk-adjusted returns over the next 3-5 years as this ecosystem transformation accelerates.

Pitch Summary:
Crown Holdings is the second largest manufacturer of aluminum beverage cans globally. We own its larger competitor, Ball Corp., in our Large Cap portfolio. Our investment case for the two companies is broadly similar. The beverage can industry is a consolidated and rational industry with high barriers to entry. The industry structure, scale, and long-term contracts with inflationary pass-throughs result in solid and stable margins, high returns on capital, and robust free cash flow. In addition, aluminum cans are taking share from other substrates, most notably plastic, as aluminum is considered a more sustainable product. This transition to aluminum is driving volume growth for Crown. Recently, demand for its products has been weak due to current macro factors. We expect growth to normalize over time.

BSD Analysis:
Vulcan Value Partners presents a bull case for Crown Holdings based on attractive industry structure and secular sustainability trends. The manager emphasizes the beverage can industry's consolidated and rational competitive dynamics with high barriers to entry, creating stable operating conditions. The investment thesis centers on the industry's structural advantages including scale benefits, long-term contracts with inflationary pass-throughs, resulting in stable margins, high returns on capital, and robust free cash flow generation. A key secular tailwind is aluminum cans gaining market share from plastic substrates driven by sustainability considerations, providing volume growth for Crown. The manager acknowledges current demand weakness due to macro factors but expects normalization over time. The similarity to their Ball Corp. investment in the Large Cap portfolio suggests confidence in the industry dynamics and Crown's competitive position as the second-largest global player in aluminum beverage cans.

Pitch Summary:
Park Aerospace manufactures high-performance composite materials (ablatives) used in jet engines and missile systems. Its products are essential to both commercial aerospace and defense applications. Even in the event of a ceasefire in Ukraine, demand appears resilient. Notably, President Zelensky has reached an agreement with former President Trump to purchase $100 billion in military equipment, funded by rising European defense budgets. Anticipating only a temporary ceasefire, Ukraine has already requested 10 additional Patriot missile systems, which require materials that Park Aerospace supplies. Moreover, ongoing demand for commercial engines further supports the company's growth outlook.

BSD Analysis:
The manager presents Park Aerospace as a defense beneficiary with diversified exposure to both military and commercial aerospace markets. The investment thesis is built on the company's specialized manufacturing of high-performance composite materials essential for jet engines and missile systems. The manager highlights the resilience of demand even in potential ceasefire scenarios, citing a $100 billion military equipment agreement between Ukraine and the Trump administration funded by European defense budgets. The specific mention of Ukraine's request for 10 additional Patriot missile systems demonstrates concrete near-term demand for Park's materials. The dual exposure to defense and commercial aerospace provides portfolio diversification within the defense theme. The manager's conviction appears based on sustained defense spending trends and the company's specialized position in critical materials supply chains.

Pitch Summary:
We are pleased to have purchased Starbucks in the first quarter. We have owned the company in the past, and it was a good investment for us. The company has strong brand recognition, global distribution, and outstanding retail real estate. The company generates robust free cash flow and has high returns on invested capital as well as a strong balance sheet. Starbucks has used its financial resources to strengthen its brand and enhance customer loyalty. Additionally, the company has continued to see attractive returns from opening new stores. Stock price volatility over the last year is likely due to management changes, disappointing short-term results, and general hesitancy about consumer spending. We believe that Starbucks' competitive position remains intact, and its value will continue to compound over our five-year plus time horizon.

BSD Analysis:
Vulcan Value Partners presents a bull case for Starbucks based on enduring competitive advantages and temporary market concerns creating an attractive entry point. The manager emphasizes the company's strong brand recognition, global distribution network, and premium retail real estate locations as sustainable competitive moats. The investment thesis highlights Starbucks' robust free cash flow generation, high returns on invested capital, and strong balance sheet providing financial flexibility for brand investment and customer loyalty enhancement. The firm views continued attractive returns from new store openings as evidence of the business model's durability. Importantly, the manager attributes recent stock price volatility to temporary factors including management changes, short-term operational disappointments, and broader consumer spending concerns rather than fundamental competitive deterioration. With their five-year-plus investment horizon, Vulcan expects the company's intrinsic value to compound as these temporary headwinds subside.

Pitch Summary:
In our last letter, we issued what was essentially an ultimatum. For reference we wrote, "Calumet's current $15 stock price is nothing short of lunacy as long as management can competently execute the rest of the playbook and, in doing so, rehabilitate the reputation of a C-suite and BoD suffering from several unforced errors and related credibility issues. The 64k dollar question at this point is will the center hold?" To that last question, the answer was no – and we exited the equity early in the quarter in the low 20s, though we still maintain some exposure via call options. On paper, we saw a clear line of sight to well over $30/share in near-term intrinsic value, but realizing that upside was always going to hinge on management execution – not just in operations, but in clearly communicating a transparent and compelling thesis to the investment community. Post-DOE loan, even after direct coaching from shareholders, management still failed to articulate both the thesis and the underlying facts that would have made it obvious normalized earnings were well above where the street had penciled them in. As just one example of our exasperation, management's inability to simply and credibly detail that contracted offtake agreements for SAF are at a $1.50–$2/gal premium to renewable diesel – like peers at Darling Ingredients – remains baffling. Remarkably, the core points of our thesis proved correct: non-core asset sales are complete, and the much-maligned ATM is out of the picture, never having been drawn on. Yet, many who have reached out to us as they start to do the work on the name have asked, "Why can't these guys just be straight with me? What are they hiding? What am I missing here?" Our view is that they're not hiding anything; they simply don't understand what public market investors need to underwrite a position. Despite our rough words, just because public market investors don't see the value doesn't mean a strategic buyer won't. Large shareholders have constructively engaged with the company and refreshed the board, and we think the best outcome here is a sale – likely one buyer for the core business and another for MRL. Additionally, we still see a credible path to a re-rate into the upper $20s in the near term, contingent on an industry-friendly EPA setting a new RVO limit in the next month or two, which we believe would raise renewable diesel margins from $0.70/gal to over $2.00/gal almost overnight. Cash flows should rapidly snowball from there. So for those reasons and as noted above, we maintain a small position in long call options to capture any much-needed catch-up in the share price. But, for us, the opportunity cost is too high to continue to hold the equity for the long term, waiting for management to see the light or, more likely, for the firm to get sold. That mindset, of not letting sunk costs dictate future exposure, proved beneficial when FTAI Aviation ("FTAI") underwent its own bout of turmoil early in the quarter.

BSD Analysis:
Crossroads exited their equity position in Calumet Specialty Products due to management's persistent inability to effectively communicate the investment thesis to public markets, despite the fundamental story remaining intact. The fund had previously identified intrinsic value exceeding $30 per share based on the company's renewable diesel operations and contracted SAF offtake agreements at $1.50-$2/gallon premiums. While the operational thesis proved correct with completed asset sales and unused ATM facilities, management failed to articulate key value drivers like SAF pricing premiums that would justify higher normalized earnings estimates. The fund believes management simply lacks understanding of public market investor requirements rather than hiding material information. Despite exiting the equity position in the low $20s, Crossroads maintains call option exposure to capture potential upside from either a strategic sale or EPA regulatory changes that could increase renewable diesel margins from $0.70/gallon to over $2.00/gallon. The fund views the best outcome as a strategic acquisition, with board refreshment by large shareholders supporting this scenario.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the United States and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell, and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax extremely well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan presents a strong bull case for CarMax based on competitive positioning and operational improvements during a challenging market cycle. The manager emphasizes CarMax's market leadership as the largest used car retailer with significant wholesale and captive finance operations. The investment thesis centers on the company's omnichannel approach providing sustainable competitive advantages in a highly fragmented market against under-resourced independent dealers and struggling digital-only competitors. The manager highlights CarMax's continued digital infrastructure investments improving customer experience across buying, selling, and financing. Critically, the firm views the recent two-year period of balance sheet deleveraging and operational right-sizing as positioning CarMax exceptionally well for volume normalization. The combination of a leaner cost structure with enhanced competitive positioning through digital capabilities should drive stronger profitability and market share gains as industry conditions improve.

Pitch Summary:
While many Chinese AI-related companies now appear expensive, we have identified a compelling exception: Chongqing Machinery. Through its joint venture with Cummins, the company is one of just three major producers of high-horsepower diesel backup generators in China. These generators are essential for AI datacentres and broader grid resiliency. Global demand for large-scale generators has surged. For example, Generac recently estimated a global shortage of 5,000 high-end diesel generators in 2026, each priced around US$1 million. Chinese manufacturer China Yuchai has publicly stated it is turning away business due to capacity constraints, even after accounting for planned expansions. In contrast, Chongqing Machinery is in expansion mode and trading at attractive valuations. We initiated our position at a forward P/E of 7.5x, with profits growing at ~50% per annum. Adjusting for the firm's significant net cash and liquid securities, the enterprise value multiple falls to ~3.8x earnings. As its new manufacturing capacity ramps up in 2026, we expect earnings growth to accelerate further.

BSD Analysis:
The manager identifies Chongqing Machinery as an undervalued beneficiary of the global AI datacenter buildout through its diesel generator manufacturing joint venture with Cummins. The investment thesis is anchored on a significant supply-demand imbalance, with Generac estimating a shortage of 5,000 high-end diesel generators in 2026, each valued at $1 million. The manager notes that competitors like China Yuchai are already turning away business due to capacity constraints, while Chongqing Machinery is expanding capacity. The valuation appears compelling at 7.5x forward P/E with 50% annual profit growth, and an enterprise value of just 3.8x earnings after adjusting for net cash. The manager expects earnings growth to accelerate as new manufacturing capacity comes online in 2026. This represents a contrarian play on Chinese AI exposure through critical infrastructure rather than expensive direct AI companies.

Pitch Summary:
Every so often, an external shock creates a rare opening to invest in a high-quality business undergoing a value-unlocking transition, where the predictability of the end game draws us in with conviction. In this instance, a Muddy Waters short report published in January triggered just such an event, sending shares tumbling and sentiment into a tailspin. We entered into a position in the midst of this fallout. FTAI, once a hodgepodge of transportation assets under Fortress Investment Group, has now executed what we believe is one of the sharpest pivots in the industrial landscape. In the span of a couple of years, FTAI shed both its MLP structure and non-core infrastructure, emerging as a pure-play aerospace platform. Management has built the first leg of their platform around the CFM56 engine – the workhorse of global narrow-body aviation – unlocking value by treating the engine not as a monolith, but as a set of interchangeable, high-value modules. By building the largest pool of CFM56 modules and internalizing MRO, we believe FTAI has created a network effect: the more modules it owns, the more efficiently it can service, repair, and exchange engines across the industry. With OEMs looking at close to a decade of backlog, the aftermarket is expected to have a long tailwind. Additionally, the company's $4 billion Strategic Capital Initiative (SCI) is now in place, providing the dry powder to acquire aircraft and engine modules, all run through FTAI's own platform for capital-light, recurring earnings. Early estimates show that FTAI could generate over $250 million in EBITDA per $4 billion in capital deployed through the SCI. With SCI deployment, FTAI is positioned to deliver robust, uncorrelated growth – regardless of the macro backdrop. In fact, the tariff rules, as currently written, do not impact FTAI and MRO activity, as of the second week of April, has continued at the same pace as early in the year. If anything, the recent weeks' tariff actions stand to further complicate the aerospace supply chain, aiding the aftermarket players. Lastly, we are expecting FAA approval for FTAI's third (of five) PMA part in the coming months, which should structurally raise margins. Of course, the market still sees a lessor, and an economically sensitive one at that; we see an emerging aerospace compounder underpinned by a much more stable MRO backdrop, with a capital-light growth vehicle, network effects, and scale that should only deepen as the platform matures. Our kind of set up to be sure.

BSD Analysis:
Crossroads initiated a position in FTAI Aviation following a Muddy Waters short attack that created an attractive entry point. The fund views FTAI as having executed a successful transformation from a diversified transportation asset company to a pure-play aerospace platform focused on CFM56 engine aftermarket services. The investment thesis centers on FTAI's creation of network effects through building the largest pool of CFM56 modules and internalizing MRO operations, positioning the company to benefit from OEM backlogs extending nearly a decade. The $4 billion Strategic Capital Initiative provides significant dry powder for capital-light growth, with management estimating over $250 million in EBITDA generation per $4 billion deployed. The fund believes FTAI is insulated from current tariff uncertainties and may actually benefit from supply chain complications that favor aftermarket players. With FAA approval expected for additional PMA parts, the company should see structural margin improvements while transitioning from a cyclical lessor to a stable aerospace services compounder.

Pitch Summary:
The release of ChatGPT-5 brought only incremental improvements, and AWS growth has notably lagged Microsoft and Google, who have proprietary AI models. We believe the market is only beginning to appreciate Google's AI leadership. The company controls the full web stack – search, browser, maps, YouTube, and more – and has now begun commercialising its TPU (Tensor Processing Unit), a chip it has developed over the past decade. We believe TPUs are the only real challenger to NVIDIA's GPUs. In its most recent quarterly earnings call, Google announced plans to offer its TPUs externally – a decision that could unlock significant standalone value. If this unit were valued in line with NVIDIA's GPU business, we believe Alphabet could justify a valuation multiple closer to 50x earnings, rather than its current ~20x. While regulatory risks remain – particularly the pending antitrust remedy involving its Chrome and ad-tech businesses – we believe the core business is deeply undervalued, barring an extreme outcome such as the forced divestiture of Chrome.

BSD Analysis:
The manager presents a compelling bull case for Alphabet based on the company's underappreciated AI leadership and potential TPU monetization. The thesis centers on Google's comprehensive control of the web stack and its proprietary Tensor Processing Units, which the manager believes are NVIDIA's only credible GPU competitor. The key catalyst is Google's recent announcement to offer TPUs externally, which could unlock significant standalone value. The manager's valuation analysis suggests Alphabet could trade at 50x earnings versus the current ~20x multiple if the TPU business were valued similarly to NVIDIA's GPU segment. While acknowledging regulatory risks around Chrome and ad-tech antitrust issues, the manager views these as manageable relative to the core business's deep undervaluation. The pitch reflects high conviction in Google's AI competitive positioning and the market's failure to properly value the TPU opportunity.

Pitch Summary:
Live Nation is the world's largest live entertainment company. The live entertainment industry has grown in the high single-digits over the last two decades, and demand continues to exceed supply. Live Nation is a dominant player and offers a complimentary suite of services including concert promotion, venue operations, ticketing, and artist management businesses. Artists today make 90% of their revenue on tour as album sales and royalties become less important. Tours are increasingly global, and there are an increasing number of shows per tour. Live Nation's comprehensive offerings and scale enable its concert promoters to make better decisions on pricing and venue organization which benefits artists, venues, and fans. We expect Live Nation to continue to grow in the high single-digits over our long-term time horizon.

BSD Analysis:
Vulcan Value Partners presents a compelling bull case for Live Nation based on structural industry tailwinds and the company's dominant market position. The manager highlights that the live entertainment industry has demonstrated consistent high single-digit growth over two decades, with demand persistently exceeding supply. The investment thesis centers on Live Nation's comprehensive service offering across concert promotion, venue operations, ticketing, and artist management, creating a vertically integrated ecosystem. The manager emphasizes a key secular shift where artists now derive 90% of revenue from touring versus traditional album sales, with tours becoming increasingly global and featuring more shows per tour. This structural change benefits Live Nation's scale advantages in pricing optimization and venue organization. The firm expects continued high single-digit growth over their long-term investment horizon, supported by the company's market-leading position and operational synergies across its business segments.

Pitch Summary:
HEICO is a resilient holding and an excellent example of a high-NZS business within the zero-sum industry of aircraft aftermarket parts. HEICO supplies aftermarket parts and services to the airline industry, as well as electronic components to the broader aerospace and defense industry. Long-term operators Larry, Eric, and Victor Mendelson (who assumed control of HEICO in 1990 and transformed the business into what it is today) run the business in a hyper-decentralized fashion with a customer-centric and entrepreneurial culture. The nature of the aerospace industry requires zero-risk tolerance, and the regulatory approval process for each part in an aircraft is severe. Yet, the cost to manufacture most individual parts is insignificant (i.e., a Boeing 737 MAX has hundreds of thousands of individual parts and a list price >$100M). As a result, parts manufacturers typically accrue slim margins on OEM parts sold to aircraft manufacturers and then monopolistically price gouge on aftermarket parts sold to airline operators over the 20- to 30-year life of an airliner, in many cases achieving gross margins that would make a software company jealous. HEICO's portfolio of third-party aftermarket parts subsidiaries carefully identifies and reverse engineers each component (usually improving the part), secures FAA approval of these "PMA" parts as functionally equivalent replacements for the OEM parts, and sells them at a 30-50% discount vs. the OEM supplier, saving customers hundreds of millions of dollars annually. The business' decentralized structure and focus on aircraft operators allows them to be more flexible for customers, as opposed to OEM part manufacturers who must serve and allocate production between aircraft operators and the companies building new aircraft/subcomponents. HEICO's positive relationship with the FAA and impeccable track record of quality (have delivered nearly 90 million PMA parts without incurring any service bulletins or airworthiness directives, which address manufacturing defects and safety concerns) have made them the clear power-law leader in supplying third-party parts, a market that is growing at multiples above air passenger miles growth but is largely unpenetrated relative to the total commercial aftermarket spending by airlines. We also believe HEICO's status as the preferred acquirer in A&D is evidence of a non-zero-sum approach. They offer sellers a permanent home for their business, decentralized autonomy in decision making once they join (the majority of subsidiaries are still entrepreneur-led), a no-cost synergy playbook, and the positive externalities that come with being under the HEICO umbrella. Uniquely, they even encourage the individuals selling to retain a minority stake in the profits of the new subsidiary, leaving the seller upside and aligning incentives. The result is HEICO's acquisitions are typically directly negotiated, non-competitive, and at reasonable valuations. Aircraft operators are also supportive of HEICO's M&A given the key role they play in offering high-quality parts at a significant discount. The business made headlines last year when Berkshire Hathaway appeared on the shareholder list. When questioned as to whether the Mendelsons would sell the business to a like-minded organization like Berkshire, we were pleased to hear them express excitement in having Berkshire as a shareholder, but state that HEICO is "not interested in selling the business". Given our view of the long runway for NZS-fueled growth in the sector and the quality of management and culture at HEICO, we certainly hope to be shareholders of the airlines' favorite supplier for many years to come.

BSD Analysis:
NZS Capital presents a compelling bull case for HEICO as a resilient holding within the aerospace aftermarket parts industry. The manager highlights HEICO's unique positioning as a third-party manufacturer of PMA (Parts Manufacturer Approval) parts that offer 30-50% cost savings to airlines compared to OEM suppliers. The company's decentralized structure under the Mendelson family leadership enables superior customer service and flexibility versus traditional OEM manufacturers who must balance production between new aircraft and aftermarket needs. HEICO's exceptional quality track record of delivering nearly 90 million PMA parts without safety issues has established them as the market leader in a growing, underpenetrated segment. The manager emphasizes HEICO's acquisition strategy as a competitive advantage, offering sellers permanent homes with retained minority stakes and entrepreneurial autonomy, resulting in non-competitive, reasonably-valued deals. Berkshire Hathaway's recent investment validates the quality of the business, though management has indicated no interest in selling. The thesis centers on HEICO's non-zero-sum approach of creating value for all stakeholders while capturing share in a market growing faster than air passenger miles. NZS views this as a long-term holding with significant runway for growth in the aerospace aftermarket sector.

Pitch Summary:
Crown Holdings is the second largest manufacturer of aluminum beverage cans globally. We own its larger competitor, Ball Corp., in our Large Cap portfolio. Our investment case for the two companies is broadly similar. The beverage can industry is a consolidated and rational industry with high barriers to entry. The industry structure, scale, and long-term contracts with inflationary pass-throughs result in solid and stable margins, high returns on capital, and robust free cash flow. In addition, aluminum cans are taking share from other substrates, most notably plastic, as aluminum is considered a more sustainable product. This transition to aluminum is driving volume growth for Crown. Recently, demand for its products has been weak due to current macro factors. We expect growth to normalize over time.

BSD Analysis:
Vulcan Value Partners added Crown Holdings to their Small Cap portfolio, viewing it as an attractive play on the consolidated aluminum beverage can industry with similar characteristics to their existing Ball Corp. position. The manager's thesis emphasizes the industry's rational competitive structure with high barriers to entry, scale advantages, and long-term contracts featuring inflationary pass-throughs that generate stable margins and robust free cash flow. A key secular tailwind is aluminum cans gaining market share from plastic substrates due to sustainability considerations, driving structural volume growth for Crown. While near-term demand has been weak due to macro factors, Vulcan expects growth to normalize over time. The investment reflects confidence in Crown's position as the second-largest global player in a consolidated industry with attractive economics, sustainable competitive advantages, and exposure to the ongoing shift toward more environmentally friendly packaging solutions.

Pitch Summary:
In this volatile market, we also understand that promising long-term opportunities may already reside in our portfolio; our job is to have the discipline to stick with them, even amid short-term challenges. An example of this is Century Communities (CCS), a homebuilder based in Denver. The stock slumped more than 15% in the second quarter along with other homebuilders as mortgage rates rose. While weakness in real estate could persist for the next few quarters, this is a case where the story is about the future. Simply put, there is a massive shortage of homes in America after building rates fell below the 50-year average following the global financial crisis. Since 2012, 7.2 million more households have been formed than single-family homes constructed. As the median sales price on new homes sold rose to $433,500 in April, housing affordability sank to record lows, putting a strain on the lower end of the market just as millennials are forming new households. Less than 52% of millennials currently own homes, compared with 78% for Baby Boomers and 70% for Gen X. This is creating an attractive supply-demand dynamic for CCS, as approximately 94% of the homebuilder's sales are made to entry-level buyers. We believe Century's management team, which has guided the company to more than 20 consecutive years of profitability, has should be able to navigate the housing slowdown while taking advantage of this gap. Yet the stock trades at just under 1X book value versus 1.7X book for homebuilders and 4.3X for the S&P 500.

BSD Analysis:
Heartland maintains conviction in Century Communities despite a 15% quarterly decline, viewing the Denver-based homebuilder as positioned to benefit from a structural housing shortage in America. The long-term thesis centers on a massive supply-demand imbalance, with 7.2 million more households formed than single-family homes constructed since 2012, creating a fundamental shortage after post-financial crisis building rates fell below 50-year averages. The company's strategic focus on entry-level buyers (94% of sales) aligns perfectly with millennial household formation, as this generation has significantly lower homeownership rates (52%) compared to Baby Boomers (78%) and Gen X (70%). Management's track record of over 20 consecutive years of profitability demonstrates their ability to navigate cyclical downturns while capitalizing on structural opportunities. The valuation appears compelling at just under 1x book value, representing a significant discount to the homebuilding sector average of 1.7x book and the broader S&P 500 at 4.3x book. This positions Century Communities as an asymmetric opportunity to benefit from America's housing shortage resolution.

Pitch Summary:
We are pleased to have purchased Starbucks in the first quarter. We have owned the company in the past, and it was a good investment for us. The company has strong brand recognition, global distribution, and outstanding retail real estate. The company generates robust free cash flow and has high returns on invested capital as well as a strong balance sheet. Starbucks has used its financial resources to strengthen its brand and enhance customer loyalty. Additionally, the company has continued to see attractive returns from opening new stores. Stock price volatility over the last year is likely due to management changes, disappointing short-term results, and general hesitancy about consumer spending. We believe that Starbucks' competitive position remains intact, and its value will continue to compound over our five-year plus time horizon.

BSD Analysis:
Vulcan Value Partners re-initiated a position in Starbucks, viewing recent stock price volatility as a compelling entry opportunity for a high-quality business with enduring competitive advantages. The manager's thesis centers on Starbucks' strong brand recognition, global distribution network, and prime retail real estate portfolio that generates robust free cash flow and high returns on invested capital. Despite near-term headwinds from management changes, disappointing short-term results, and consumer spending concerns, Vulcan believes the company's fundamental competitive position remains intact. The firm's confidence stems from Starbucks' continued ability to generate attractive returns from new store openings and its track record of using financial resources to strengthen brand equity and customer loyalty. With a strong balance sheet providing financial flexibility, Vulcan expects the company's intrinsic value to compound over their five-year-plus investment horizon as temporary challenges subside.

Pitch Summary:
Another area where we are underweight is banks, but we don't just want to add holdings in that industry to check a box. The goal is to find well-run institutions in good regions with solid population growth. Enter Seacoast Banking Corp. of Florida (SBCF). SBCF, which provides commercial and consumer banking, wealth management, and mortgage services across Florida, has been on our watch list for some time. Investors, concerned about Seacoast's profitability, have pushed the share price down more than 17% year to date. But we believe the bank's net interest margin is poised to rebound in the second half of this year. Meanwhile, management has been aggressively reducing costs by closing redundant branches at the same time it has been adding bankers. If loan demand picks up even modestly, the combination should result in decent operating leverage. An added benefit: Seacoast could be a takeout target, as it is one of the few remaining pure-play regional banks in Florida, one of the highest growth regions for financial services. Yet the stock trades at just 1.5 times tangible book value, which is one standard deviation below its 10-year average multiple.

BSD Analysis:
Heartland added Seacoast Banking Corp as a strategic regional bank play in Florida's high-growth market, capitalizing on investor concerns that drove shares down over 17% year-to-date. The investment thesis rests on an expected net interest margin recovery in the second half of 2024, supported by management's proactive cost reduction through branch closures while simultaneously adding banking talent. This operational restructuring positions the bank for significant operating leverage when loan demand modestly improves. The geographic focus on Florida, one of the fastest-growing regions for financial services, provides a structural tailwind for long-term growth. The valuation appears compelling at 1.5x tangible book value, representing one standard deviation below the 10-year average multiple. Additionally, Seacoast presents potential M&A upside as one of the few remaining pure-play regional banks in an attractive market, making it a logical acquisition target for larger institutions seeking Florida exposure.

Pitch Summary:
PAR Technology Corp (PAR) – PAR, our restaurant software business had a strong year with annual recurring revenue (ARR) and the number of customer doors both doubling or more during the year. This level of growth is unlikely to be repeated, but management has a high level of visibility into their pipeline, and the company has indicated that ~20% organic growth should continue in the near term. This is in part due to past M&A which has recently seen the company expand their TAM into convenience stores and international markets, and management has further indicated that the M&A pipeline is more full now than it is has ever been. Importantly, revenue has been growing significantly faster than expenses for some time now, and the operating leverage is becoming apparent.

BSD Analysis:
The manager highlights PAR's exceptional growth trajectory with both annual recurring revenue (ARR) and customer doors doubling during the year, demonstrating strong execution in the restaurant software market. While acknowledging this growth rate is unsustainable, management maintains high pipeline visibility and expects continued ~20% organic growth in the near term. The company has successfully expanded its total addressable market (TAM) through strategic M&A into convenience stores and international markets, with management indicating the M&A pipeline is fuller than ever. Most importantly, the company is demonstrating significant operating leverage as revenue growth substantially outpaces expense growth, suggesting the business model is reaching scale and profitability inflection points. The combination of strong organic growth prospects, TAM expansion opportunities, active M&A pipeline, and emerging operating leverage positions PAR well for continued value creation in the restaurant technology sector.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the United States and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell, and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax extremely well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan Value Partners sees CarMax as well-positioned to gain market share in the highly fragmented used car retail market through its omnichannel competitive advantage. The manager's thesis emphasizes CarMax's superior digital infrastructure investments compared to small independent dealers who lack resources for technology upgrades, and digital-only competitors now prioritizing profitability over volume growth. The company's integrated approach combining retail, wholesale, and captive financing generates higher and more stable profit per vehicle while delivering solid returns on capital. Management's recent focus on balance sheet deleveraging and operational right-sizing has significantly de-risked the business model. Vulcan believes the combination of a leaner cost structure, enhanced digital customer experience, and improved competitive positioning creates a compelling setup for when used car volumes normalize. The investment reflects confidence in CarMax's ability to continue taking share in a fragmented market while generating superior unit economics through its differentiated omnichannel platform.

Pitch Summary:
A good example is Hexcel Corp. (HXL), a new position added during the quarter. We didn't have any holdings in the aerospace & defense portion of the Industrials sector entering the period. Admittedly, this is not a huge sub-industry group; in fact, it only makes up a little more than 1% of the Russell 2000 Value Index. But we are mindful that deviating from our benchmark's weightings detracts from our stock picking and potentially adds risk and volatility to our Strategy. The good news for us was the shares took a hit in early April, after the market reacted negatively to the announced appointment of Tom Gentile as Chief Executive Officer. Gentile formerly served as CEO of Spirit AeroSystems, a major aerospace supplier that ran into production challenges and quality issues on parts produced for Boeing. Investors clearly did not like the hire, but we felt the reaction was excessive. Gentile inherited bad contracts at Spirit, and the HXL Board of Directors has significant experience in the aerospace & defense space, so we feel confident they understand the implications of their decision. Hexcel seems to be in the 3rd inning of a long-term recovery. The company is diversifying into new defense production, where its composites are critical for stealth platforms. The sweet spot for the business, however, is in wide-body aircrafts (such as the Airbus A350 or Boeing 787) that help airlines lower their unit costs. This segment has yet to bounce back from the global pandemic, so there is still runway for HXL's rebound. Yet the shares are attractively priced relative to cash flow, trading below prior aerospace M&A multiples. Management seems to agree, as there has been a healthy dose of insider buying activity lately, including on the part of its outgoing CEO, who recently purchased nearly $1 million in company stock.

BSD Analysis:
Heartland initiated a new position in Hexcel Corp during Q2, viewing the aerospace composites manufacturer as an attractive recovery play trading at compelling valuations. The fund capitalized on market overreaction to the appointment of Tom Gentile as CEO, whose previous role at troubled Spirit AeroSystems spooked investors despite the circumstances being different at Hexcel. The investment thesis centers on Hexcel being in the early stages of a multi-year recovery, with diversification into defense composites for stealth platforms providing additional growth avenues. The core opportunity lies in wide-body aircraft production recovery, particularly for fuel-efficient models like the Airbus A350 and Boeing 787, which remains below pre-pandemic levels. The valuation appears attractive relative to cash flow and historical aerospace M&A multiples, with management confidence evidenced by significant insider buying including nearly $1 million in purchases by the outgoing CEO. The position addresses a sector underweight while offering asymmetric upside potential as aerospace markets normalize.

Pitch Summary:
Vistry Group PLC (VTY.L) - Vistry, our UK based homebuilder that is in the midst of becoming a pure play asset light "partnerships" business concluded a difficult year that was marred by accounting problems in their legacy business, which they are in the process of exiting. Quite frankly, there has not been much to like here of late. Capital returns have been slower than expected, the balance sheet remains weaker than expected, and sales rates have been uninspiring. That being said, these problems can be mostly linked to the aforementioned accounting problems which will fade into the background before long, and a gap in government financing for affordable homes in the UK as we have been in year 5 of a 5 year plan. However, the Labour government has committed to creating 1.5 million new homes, and recently announced plans for more than £2 billion in (unlevered) investments in affordable housing. In my view, the stock implies that recent cost overruns will last forever, which is demonstrably false, and that the UK housing market will never rebound, despite the government dedicating resources to ensure that it will. This has been a frustrating period, but I believe that while the timeline has shifted to the right, the thesis remains intact. With time, Vistry's intermediate term goal remains achievable, and even if they fall short, at current prices there should be plenty of upside. Insiders own a considerable amount of stock here, and the company continues to repurchase shares in the open market. Additionally, CEO Greg Fitzgerald made a large open market purchase of shares to start Q2. Notably, historically the Partnerships business has continued to grow through recessionary periods.

BSD Analysis:
The manager's thesis focuses on Vistry's transformation into a pure-play asset-light "partnerships" business, despite recent operational challenges. The company has faced accounting problems in its legacy business (which it's exiting), slower capital returns, weak balance sheet, and uninspiring sales rates. However, the manager attributes these issues to temporary factors including the accounting problems and a gap in UK government financing as the previous 5-year affordable housing plan concluded. The investment case centers on the new Labour government's commitment to build 1.5 million homes and over £2 billion in affordable housing investments. The manager believes the market is incorrectly pricing in permanent cost overruns and assumes no UK housing market recovery despite government support. Strong insider ownership, ongoing share repurchases, and CEO Greg Fitzgerald's recent large open market purchase demonstrate management confidence. The partnerships business model has historically shown resilience, continuing to grow through recessions, providing defensive characteristics during economic uncertainty.