Investment Pitches

Pitch Summary:
We bought Siemens Energy at €14.10/share. This is a new position for us, and about 2.5% of the fund. Siemens Energy spun out of Siemens in September 2020. Siemens Energy combines a world-class electrical power generation business, a world-class electricity transmission business, and an onshore and offshore wind turbine business that is attempting a turnaround. My current view is that—after more than a decade of stagnation—the electrical power industry has returned to growth, Siemens Energy will successfully turn around the wind business, and we bought this company at a very attractive upside-to-downside valuation.

BSD Analysis:
Curreen Capital initiated a new 2.5% position in Siemens Energy at €14.10 per share, viewing it as an attractive turnaround opportunity in the recovering electrical power industry. The manager's thesis centers on the belief that the electrical power sector has emerged from over a decade of stagnation and returned to growth, positioning Siemens Energy to benefit from this industry tailwind. The company's diversified portfolio includes world-class power generation and transmission businesses alongside a struggling wind turbine division that management expects to successfully turn around. The investment appears to be a value play, with the manager emphasizing the attractive upside-to-downside valuation at current levels. This represents a contrarian bet on both the company's operational turnaround and the broader industry recovery. The timing of the investment, coming roughly 3.5 years after the spinoff from Siemens, suggests the manager believes the market has not yet recognized the improving fundamentals. The position sizing at 2.5% indicates moderate conviction while allowing room for additional purchases if the thesis plays out favorably.

Pitch Summary:
Like Tosei, the Fund's position in Nomura Real Estate Holdings ("Nomura Real Estate") is also actively engaged in shareholder value creation. Nomura Real Estate is regarded as already having one of the best corporate governance profiles among the Japanese REOCs, which is a factor that has helped the company create a track record of cash flow and book value growth since its 2006 initial public offering. Despite this, shares at Nomura Real Estate also trade at an undemanding valuation of 11x earnings and attractive upside potential if the shares were to trade at Fund Management's estimate of NAV. Importantly, Nomura Real Estate's management is committed to returning roughly half of the annual cash flow to shareholders through a combination of dividends and share buybacks. Something to also consider is that the Japanese financial services group Nomura Holdings has a 36% controlling stake in Nomura Real Estate. With increased pressure in corporate Japan to simplify, reduce cross-shareholdings, and increase shareholder returns, subsidiary shareholdings could be divested. If Nomura Holdings were to sell its stake in Nomura Real Estate Holdings, seeing interest from a private equity buyer would not be inconceivable.

BSD Analysis:
Third Avenue maintains a bullish stance on Nomura Real Estate Holdings, highlighting the company's superior corporate governance profile among Japanese REOCs and consistent track record of cash flow and book value growth since its 2006 IPO. The investment case centers on attractive valuation metrics, with shares trading at 11x earnings despite the company's quality profile and significant upside potential to management's NAV estimate. The manager emphasizes strong shareholder-friendly capital allocation, with management committed to returning approximately 50% of annual cash flow through dividends and buybacks. A compelling catalyst exists through Nomura Holdings' 36% controlling stake, which could potentially be divested amid broader corporate Japan initiatives to simplify structures and enhance shareholder returns. The manager suggests this ownership structure could attract private equity interest, providing additional upside optionality beyond the company's fundamental value creation capabilities.

Pitch Summary:
We first detailed our thesis on AstroNova in our Q1-2023 letter and have provided numerous updates in subsequent letters. In short, our investment was predicated on the view that AstroNova was a low-risk "under-earner" with an obvious path for earnings to normalize significantly higher. So, what went wrong? To begin, the core of our original thesis proved correct: AstroNova's legacy business did experience a significant earnings inflection despite weak performance from its product identification segment. As detailed in prior letters, this recovery, while slower than we had hoped, should have been sufficient to generate attractive returns. However, despite the thesis being mostly on track, the situation would change dramatically with the acquisition of MTEX. In May of 2024, AstroNova would acquire MTEX for approximately $26 million, an amount equal to 20% of its market cap at the time, and the company was expected to contribute roughly $3 million in EBITDA that year. Instead, if we fast forward to today, MTEX is on track to lose approximately $4 million in EBITDA annually – and before you ask, no, sadly, that is not a typo. To be blunt, this acquisition was a catastrophic mistake. Making matters worse, information recently brought to light by an activist investor has deepened our skepticism of the "technology" acquired, as well as the company's decision (until recently) to continue investing in what appears to be a low-quality, cash-burning business with little high-margin recurring revenue. While one could argue that the investment would have worked out without the MTEX acquisition, that is not the correct lesson to draw from this experience. We grossly overestimated the competence and alignment of the prior management team and, crucially, we overlooked a persistent lack of transparency. Across numerous calls and three in-person meetings, we found their evasiveness strange. Their tendency to dodge questions, withhold key metrics, and always offer vague assurances like "we're working on it" were red flags that we failed to weigh appropriately. In retrospect, the persistent lack of transparency from management should have prompted a significant reduction in our position size. My rationale at the time was that our thesis did not depend on managerial excellence, only the avoidance of significant value destruction. Unfortunately, the prior CEO (Greg Woods) delivered exactly that with the MTEX deal. However, our initial analysis did include what I viewed as a safeguard against such significant value destruction: the board's experience. We placed considerable weight on the leadership of the now-former chairman, Dick Warzala. Dick has an extensive track record of successful acquisitions and strong operational skills at his own company, Allient (which we were shareholders of until recently), leading us to believe that he would provide prudent oversight at AstroNova. Further compounding our misplaced confidence in the board was another director, Alexis Michas, whose investment firm owned 7% of shares outstanding. We had viewed this combination of an experienced operator and a director with significant "skin in the game" as a strong safeguard against poor capital allocation. What we failed to appreciate, however, were the interconnected personal and professional relationships among key board members. We knew the former CEO and Dick were likely friends who had previously worked together at Danaher. We also knew that Alexis had at the very least professional ties to Dick through his involvement at Allient, where he previously served on the board and is a significant shareholder. Furthermore, we also believe a few other factors likely explain the significant governance failure surrounding the MTEX deal. The first was a lack of financial alignment; the prior chairman's stake in AstroNova was de minimis compared to his overall wealth. The second was that his own company, Allient, was facing significant destocking around the time of the MTEX deal – likely taking up the considerable majority of his time (coincidentally, this was also around when we made our first purchases in Allient). We speculate that had Mr. Warzala been more financially aligned with AstroNova or less preoccupied with Allient, the MTEX acquisition might have been prevented. As for Alexis, we believe his engagement was likely limited and his focus elsewhere since AstroNova is a small position for his fund at just low single digits. Furthermore, he is near retirement age (late 60s) and likely not as engaged in such a small position, considering that some individual investments appear to make up 20%+ of his portfolio. Publicly available text messages between him and the activist investor seem to confirm this lack of focus and concern for shareholders, in our opinion. With the above in mind, it does not seem unlikely that with both key directors distracted or disengaged, they might have put undue trust in their friend/acquaintance Greg Woods, given his track record of "acceptable" acquisitions. Thus, the board might have been too quick to approve the MTEX deal without the necessary rigor. Further supporting this idea of collegial trust is that, under normal circumstances, given Greg's repeated poor performance in recent years, a competent board would have forced him to resign shortly after the MTEX acquisition. Instead it took a 70% write-down of MTEX and a first time activist getting a full endorsement from Glass Lewis (this is practically unheard of – it genuinely might be a first) and partial endorsement from ISS before the board finally acted and subsequently forced Greg to resign – Had the annual meeting not been delayed post the forced resignation of Greg we believe the activist would have likely won multiple seats, and rightfully so in our opinion. For shareholders, the consequences of the MTEX acquisition were severe. Over the next twelve months, AstroNova's share price collapsed from $18 to a low of $7.53. The MTEX situation came to a head in late March of this year, shortly before "Liberation Day," when the company pre-released earnings and issued accompanying guidance that was highly confusing and failed to align with the known performance of the legacy business. This confusing press release made it increasingly apparent that MTEX was no longer on the path to profitability that the company had promised. Further compounding these issues was the financial strain that MTEX was now putting on the company, leading to the breach of a debt covenant. The confusing guidance issued in March was also not fully clarified for months. When it eventually was, the company revealed it was reinvesting in the acquired "technology" of MTEX for new product launches, which had the impact of negatively affecting profitability across both the legacy and MTEX segments – all while MTEX continued to seemingly burn $4M in EBITDA a year, unable to cover its own overhead. Following this press release, we decided to materially size down the position with debt now being an actual risk and Liberation Day tariffs threatening the economy (AstroNova's product identification customers are SMBs) at ~$9 a share before and after Liberation Day (roughly 30% below our cost basis). Our decision to remain shareholders, rather than liquidating the position entirely following the pre-release of earnings, was due to a single significant development: the activist campaign launched by Askeladden Capital in early April. We happen to know and are friends with the founder and portfolio manager of Askeladden Capital, Samir Patel. Coincidentally, he was the one who introduced us to the idea back in November of 2022, when we first met with Greg Woods at Southwest Ideas. Samir is an incredibly smart and talented individual who we also consider to be an honest and principled person. Furthering that last point is Samir's commitment that if elected to the board, he would NOT be taking a salary. Upon the announcement of Samir's campaign, it was immediately clear to us that he had a formidable case for change and a high probability of winning the ensuing proxy contest. From our perspective, AstroNova was a textbook case for shareholder activism. This initial assessment would subsequently be validated when Samir would later garner the previously mentioned full endorsement from Glass Lewis and a partial endorsement from ISS. Since the Glass Lewis endorsement, the changes at the company have been swift and not immaterial. The former CEO, Greg Woods, was forced to resign; the board has reversed its stance on Samir, shifting from criticism to public support for several of his statements; and the recently elected independent director, Dairus Nevin, has been appointed Chairman. Furthermore, the new CEO's compensation package includes a significant "change in control" provision, strongly suggesting a new strategic direction for the company: improving operations over the next 12-24 months in preparation for a potential sale of the entire business or one of its divisions. It should be noted that AstroNova has yet to announce a settlement with Askeladden Capital, and while we aren't sure what the outcome will be, we believe that the recent cessation of public communication between the two potentially signals ongoing negotiations that are hopefully headed towards a mutually agreeable outcome. While I don't like giving any weight to share price reactions, the market seems to agree that the recent developments are a step in the right direction as well. The day of Greg's forced resignation, AstroNova's shares rallied ~25% and now stand at ~$12, up from lows in the $7's. AstroNova serves as an important reminder that a competent and aligned management team is an essential part of any thesis, a rule of mine that I broke given AstroNova's clear visibility to an earnings inflection, and what we perceived to be a competent board. While I was correct on our original thesis, none of that matters when the company does an acquisition that's 20% of their market cap, finances that acquisition with debt, but turns out to be losing $4M a year compared to the original estimates of a $3M profit. The ultimate error, however, was not our initial investment in AstroNova, but my failure to significantly reduce our position shortly after the MTEX acquisition when cracks began to show. Doing so would have resulted in a slight gain on our initial investment and the opportunity to allocate the proceeds elsewhere to better ideas.

BSD Analysis:
The manager's AstroNova investment illustrates how poor capital allocation can destroy an otherwise sound turnaround thesis. The original "under-earner" thesis proved correct as the legacy business experienced the expected earnings inflection, but management's catastrophic MTEX acquisition for $26 million (20% of market cap) completely derailed shareholder value. MTEX was projected to generate $3 million in EBITDA but instead loses $4 million annually, representing a $7 million annual swing that breached debt covenants. The manager correctly identifies governance failures stemming from board members' personal relationships and misaligned incentives, with the chairman having minimal financial stake and being distracted by his own company's issues. The activist campaign by Askeladden Capital has catalyzed meaningful change including CEO resignation and new leadership focused on potential asset sales. The position has recovered from $7.53 lows to $12 following management changes, suggesting the turnaround thesis may still be viable under competent leadership.

Pitch Summary:
The Fund's investment in Tosei Corp. ("Tosei") exemplifies Fund Management's preference for highly active real estate managers that can create shareholder value over time. Tosei has several business lines focused on the Tokyo real estate market. This includes the 'revitalization' business focusing on value creation by buying, revitalizing, and selling smaller office, logistics, and residential rental buildings. Often, these revitalizations include a dramatic improvement in environmental standards. With greater Tokyo's large inventory of older small buildings, combined with increased tenant demand and regulation of sustainability requirements, Tosei is in an excellent position to continue to create significant value over time, in Fund Management's view. In addition, Tosei is Japan's largest independent property manager, with US$16 billion of real estate assets under management, about half of which are managed for Western investors such as Blackstone and Allianz. Impressively, assets under management have grown at 28% per year since 2020, and with increasing international interest in Japanese real estate, we believe Tosei is well-positioned to continue this growth. Since initiating a position in Tosei in 4Q of 2021, Tosei has generated the Fund a 25% annualized total return per year in US dollars. Despite this impressive performance, Tosei continues to trade at substantially discounted valuation levels, with a price-to-earnings multiple of only ten times this year's expected earnings and an estimated 80% upside if shares were to trade at the company's net asset value ("NAV") estimate. Fund Management feels aligned with Tosei's management, given that the CEO's ownership stake is 26% of the outstanding shares.

BSD Analysis:
Third Avenue presents a compelling bull case for Tosei Corp, emphasizing the company's multi-faceted real estate platform and value creation capabilities in Tokyo. The manager highlights Tosei's revitalization business model, which involves acquiring, improving, and selling smaller buildings while enhancing environmental standards - a strategy well-positioned to benefit from Tokyo's aging building stock and increasing sustainability regulations. The company's property management division has demonstrated exceptional growth with assets under management expanding 28% annually since 2020 to $16 billion, serving prestigious Western investors like Blackstone and Allianz. Despite generating a 25% annualized return since the fund's 4Q 2021 initiation, Tosei trades at an attractive 10x P/E multiple with an estimated 80% upside to NAV. The investment thesis is strengthened by strong management alignment, with the CEO owning 26% of outstanding shares, and the company's dominant position as Japan's largest independent property manager in a market experiencing growing international interest.

Pitch Summary:
I first wrote about Cable One in our Q1 2023 letter, nearly three years ago. I won't rehash the full thesis here and would point you to that letter for more detail, but at a high level, we invested in Cable One under the belief that its rural Hybrid Fiber-Coaxial (HFC) network would remain defensible against both fiber overbuilders, such as AT&T, and fixed wireless access (FWA) providers like T-Mobile, enabling Cable One to continue subscriber, revenue, and EBITDA growth (even if at a slower pace). However, over the following two and a half years, that thesis unraveled. Cable One's HFC network went from roughly 30% overbuilt (which mainly was the large population centers of their footprint) to more than 60%, so in short, we were wrong. It turned out that Cable One had pushed ARPUs high enough that it became economically viable for AT&T, Lumen, and others to overbuild their more rural markets. The footprint that we initially viewed as a strength turned out to be a double-edged sword for the company: while it had enabled ARPUs well above industry peers for many years due to limited competition it is now significantly overbuilt and Cable One is being forced to compete against non-powered fiber lines (which are cheaper to maintain and a superior product), and whose providers can and have been undercutting them on price. This is a challenging setup for Cable One. Not only do they risk ongoing subscriber losses, but maintaining competitiveness might ultimately require price cuts, which carry high decremental margins. So far, they have managed to hold pricing reasonably well, but the trade-off has been accelerating data subscriber losses. Eventually, they will likely have to cut pricing or risk losing even more customers. Thus far, Cable One has seen a decline in both its top and bottom lines, despite passing 6.5% more homes than when we first invested. Adding fuel to the fire is Cable One's balance sheet, which is now levered at greater than four times, which under a par-for-the-course operating environment would not be a problem for this business, but with EBITDA declining, data subscriber losses accelerating, and the MBI put-option coming up in 2026 has made the company's equity effectively behave more like a "stub," now trading at $150 per share - 5x EBITDA. However, to say I was ignorant of any of these risks would not be accurate, and thus the position was sized conservatively from the get-go. Even at its peak, Cable One never exceeded a mid-single-digit position in the portfolio, and we made just one minimal addition over our two years of ownership before exiting entirely around $250 per share when it became clear that our thesis was wrong and that subscriber losses were likely to be accelerating.

BSD Analysis:
The manager's Cable One investment represents a classic value trap scenario where a seemingly defensible rural cable franchise deteriorated rapidly due to competitive pressures. The original thesis centered on Cable One's rural HFC network providing protection against fiber overbuilders and fixed wireless competitors, but this proved fundamentally flawed. The company's high ARPU strategy backfired as it made rural overbuild economics attractive for AT&T and Lumen, increasing competition from 30% to 60% of their footprint. Cable One now faces the difficult choice between maintaining pricing and losing subscribers or cutting prices with high decremental margins. The balance sheet leverage of 4x+ EBITDA compounds the problem as earnings decline, creating a "stub equity" situation trading at just 5x EBITDA. The manager appropriately sized the position conservatively and exited around $250 when the thesis broke down, demonstrating disciplined risk management despite the fundamental misjudgment of competitive dynamics.

Pitch Summary:
During the quarter, the Growth Fund initiated a position in Taiwan Semiconductor Manufacturing Company (TSMC). TSMC is the largest semiconductor manufacturing company in the world with over 60% market share of advanced logic chips. In every semiconductor node advancement, transistors are shrunk so they can be packed more densely onto a chip. The smaller the transistor, the more expensive and challenging the manufacturing process becomes. Over the years, TSMC gained market share while competitors fell behind and many exited the market altogether. Almost 70% of TSMC's revenue comes from the U.S., with Samsung and Intel as its two remaining competitors, and each is facing its own unique challenges. We believe that TSMC's cost discipline and relentless focus on research & development, as well as customer service, positions it well for further share gains. The stock has been hit hard due to the pullback in the Technology sector, and its valuation has become too attractive to pass up.

BSD Analysis:
The fund initiated a new position in TSMC, capitalizing on the recent technology sector selloff that created an attractive entry point. The managers highlight TSMC's dominant 60% market share in advanced logic chips and its competitive moat built through superior manufacturing capabilities at smaller transistor nodes. The thesis centers on TSMC's market leadership position as competitors like Samsung and Intel face operational challenges, creating opportunities for further share gains. The fund emphasizes TSMC's operational excellence through cost discipline, R&D investment, and customer service focus. With 70% of revenue coming from the U.S. market, TSMC benefits from strong demand dynamics despite geopolitical concerns. The managers view the recent sector-wide pullback as creating a compelling valuation opportunity for this market-leading semiconductor foundry. This represents a contrarian play on semiconductor manufacturing leadership during a period of AI-related volatility.

Pitch Summary:
IG Design Group is a UK-based producer and distributor of gift packaging, craft and party supplies, homewares, and other items. After a number of years of growing earnings and dividends, IG Design acquired two large US competitors, first Impact Innovations in 2018 for ~$75M, then CSS Industries in 2020 for ~$95M. Integrating these US acquisitions did not go well and they've been struggling to bring their "DG Americas" division to profitability ever since. After hitting a high of over 7 GBP/sh in late 2019, supply chain struggles and the underperforming US acquisitions forced them to cut their once growing dividend entirely. The stock price proceeded to get cut by over 80% in 2022. They were able to stabilize the business and delivered a much better bottom line result in 2024, but only right before disaster struck again. One of their larger customers, Joann Fabrics, after initially restructuring in 2024, went bankrupt again in early 2025, which likely was the beginning of the end for DG Americas. Given the seasonal working capital demands of their business and uncertainty presented by tariffs, management decided to exit the US business completely. DG Americas was sold to a liquidator for a nominal sum of $1 and a 75/25% split of net proceeds between the IG Design and the liquidator, respectively. Even if they receive a material sum from the liquidations, it will be a far cry from what they purchased the US businesses for 5-7 years ago. Clearly this was a terrible experience and outcome for the company and any unfortunate shareholders along for the ride. You're probably wondering why anyone would want to touch this company and certainly wondering why I'm bothering talking about it. IG Design's core business, "DG International", has hummed along just fine throughout this entire debacle. During FY25, the DG International segment generated $28.1m in adjusted operating profit before corporate costs. In fact, DG International has consistently churned out $20-$30m in adjusted operating profit for most of the last decade. They still anticipate some headwinds for FY26 and will incur some costs related to DG Americas for a couple months prior to selling to Hilco Capital (the liquidator). Importantly, management sees adjusted operating profit returning to $13-15m in FY27. That target seems very achievable, especially since they can finally put all of their attention to their more profitable, stable segment. The market cap today is around $80m USD and they have $85m in net cash, so there's not much good news baked in. While I don't expect much in terms of proceeds from the DG Americas liquidation, they have received $8.4m so far. I've estimated DG Americas owns over $30m of real estate and some smaller structurally profitable segments but it's unclear how well the good parts are structured separately from the bad parts and also how material wind-up costs could be. For those reasons I'm keeping expectations low for any proceeds from the DG Americas liquidation. While I truly think the bulk of bad news is behind them, owning even a small position has been a headache to say the least. When it comes to small LSE traded companies, and especially AIM-listed companies, I'm disappointed by the lack of respect given to minority shareholders, dark-room style trading on the AIM, and trading updates with as little information as possible. In my experience, it's always better to communicate to shareholders in a straightforward manner, delivering bad news clearly and up-front, owning up to mistakes, and discussing the path forward. Continually trying to paint everything in the most rosy way (especially significant mistakes) often leads to distrust of management. My favorite companies are ones that continually underpromise and overdeliver, and my least favorite do the opposite.

BSD Analysis:
The manager presents a cautious turnaround thesis on IG Design Group following the complete exit from its troubled US operations. The core DG International business has demonstrated resilience, consistently generating $20-30m in operating profit over the past decade despite the US division's struggles. With an $80m market cap supported by $85m net cash, the downside appears limited while management refocuses entirely on the profitable international segment. The liquidation of DG Americas, while destroying significant shareholder value from the original $170m acquisition cost, eliminates a persistent drag on profitability and management attention. However, the manager's neutral stance reflects ongoing concerns about corporate governance standards and communication transparency typical of smaller LSE-listed companies. The projected return to $13-15m operating profit by FY27 appears achievable given the historical performance of the core business, though execution risk remains given management's track record with the failed US expansion.

Pitch Summary:
During the first quarter of 2025, we initiated a position in Cognex Corporation (CGNX). Cognex, headquartered in Massachusetts, is a leading provider of computer vision systems for industrial automation. The company serves a diverse client base that includes automotive, semiconductor, logistics, healthcare and consumer goods manufacturers. Cognex's embedded AI capabilities are promising, as they improve accuracy and productivity for their customers' material handling processes, and their products reduce deployment complexity, which is a key differentiator in a competitive space.

BSD Analysis:
Mairs & Power initiated a new position in Cognex Corporation, a leading provider of computer vision systems for industrial automation. The fund managers are attracted to Cognex's embedded AI capabilities that enhance accuracy and productivity for customers' material handling processes. The company serves a diversified client base across automotive, semiconductor, logistics, healthcare, and consumer goods manufacturing sectors. A key competitive advantage highlighted is the reduced deployment complexity of Cognex's products, which differentiates them in a competitive market. The timing of this investment appears strategic as industrial automation continues to gain traction across multiple sectors. The fund's decision to add this position suggests confidence in Cognex's technology platform and market positioning. This represents a growth-oriented investment in the industrial technology space with AI integration as a key value driver.

Pitch Summary:
FILA reported a strong Q1 with revenues up 4% and adjusted EBITDA up 7% YoY. FILA has also committed to paying .80/sh in dividends for 2025, .40 was paid in May and .40 will be paid in November. They reaffirmed previous guidance for 2025 but cautioned Q2 could be softer due to tariffs, from delayed customer orders and/or softer US consumer spending. Understandably, shares pulled back on these comments. More surprisingly, last week when Intermonte (one of the equity research firms covering FILA) published a revised 2025 EBITDA target of €95m (vs. €102m previously) due to US consumer weakness, it sent the stock down almost 15% on heavy volume. What I thought was seemingly priced in, apparently caught some by surprise, so again FILA looks very undervalued in my eyes. At 8.50/sh, FILA shares trade at only 5x EV/EBITDA if you only give them credit for the 6% ownership in DOMS they can sell without impacting their shareholder rights at all. They still own a remaining 20% of DOMS, worth 283m. I believe the reason they changed the relevant rights threshold at DOMS from 26% to 20% is very clear. They intend to sell another 6%. But in order to maximize leverage in any negotiation with a potential buyer, there is no reason to definitively declare your intention to sell. Importantly, FILA is not under any post-IPO lockup or other restriction on their remaining shares. In the right scenario, if they wanted, they could sell the entire stake. At present, FILA relies very little on DOMS for any manufacturing capacity. If they were to retain their stake and maintain relevant shareholder rights, I think the path forward could be to increase utilization of DOMS as a manufacturing hub, thereby making FILA more of the capital-light brand owner and distributor. This would obviously take time and resources but DOMS has been consistently expanding capacity and could continue doing so. Then on the other hand, if FILA wanted to sell its entire stake in DOMS (valued around 370m), in my mind it would make sense to do so before becoming more intertwined. There are many other scenarios as to how this could play out, but curiously a common market perception seems to be that FILA will never sell any more DOMS. FILA's management team has created significant value with a number of pieces over the years, most notably Dixon Ticonderoga and DOMS, and I believe will continue to do so. I think shares present a very attractive opportunity at current levels and have added to our position accordingly.

BSD Analysis:
The manager presents a compelling value thesis on FILA, highlighting the company's undervaluation following market overreaction to modest guidance revisions. At 5x EV/EBITDA excluding DOMS stake value, the stock appears deeply discounted despite solid Q1 performance with 4% revenue growth and 7% EBITDA expansion. The key catalyst centers on FILA's 26% stake in DOMS, valued at €370m, which provides significant optionality for value realization through partial or complete divestiture. Management's strategic flexibility to either monetize the DOMS holding or leverage it as a manufacturing hub creates multiple paths to unlock shareholder value. The manager's confidence in adding to the position reflects conviction in both the core business fundamentals and management's proven track record of value creation through strategic transactions. The dividend commitment of €0.80 per share provides additional downside protection while the market awaits resolution of the DOMS strategic review.

Pitch Summary:
Upslope's thesis on Hershey is similar to BC in that the company should be able to navigate the cocoa crisis better than smaller competitors due to its scale and experience. However, there are some important differences and additional points to note: (1) With chocolate inflation continuing to rise sharply, consumers are likely to trade down to cheaper products (Barry Callebaut noted this on its April 10 earnings call). While Hershey has some diversification outside of chocolate, its chocolate offerings contain relatively lower amounts of cocoa and sell at lower price points vs. premium competitors. Like BC, this means Hershey should be positioned to take share in the current challenged market. (2) Hershey's scale and experience mean it should also have the tools (e.g. hedging programs and sourcing) to navigate the cocoa crisis better than smaller competitors. Should cocoa remain elevated for an extended period, it seems likely the industry would see quite a few smaller competitors wiped out. This would benefit large, established players like Hershey. (3) If/when cocoa prices do revert, Hershey should benefit as prices lag commodity declines and margins expand. This could occur in an environment with reduced competition (prior point). (4) Finally, it's worth acknowledging that we don't really know how the cocoa shock will affect Hershey. It is entirely possible that Hershey has so little cocoa in its products that the financial impact won't be particularly dramatic. If this is the case, point (3) above would be moot, but shares should see significant relief.

BSD Analysis:
Upslope's Hershey thesis leverages the company's market position during the cocoa crisis, emphasizing its competitive advantages over smaller rivals. The manager highlights Hershey's lower cocoa content and price points as defensive characteristics that should drive market share gains as consumers trade down during inflationary periods. The investment case relies on Hershey's scale advantages in hedging and sourcing, positioning it to survive an extended period of elevated cocoa prices while smaller competitors face elimination. The thesis anticipates margin expansion when cocoa prices eventually revert, potentially in a less competitive landscape. Notably, the manager acknowledges uncertainty about Hershey's actual cocoa exposure, suggesting the financial impact may be less severe than feared. Trading at attractive valuations with normalized free cash flow yields of 6-7%, Hershey offers defensive characteristics with potential upside from both market share gains and eventual commodity normalization.

Pitch Summary:
Which brings us to Six Flags Entertainment - FUN. This has been owned on and off for 25 years along with a few of its peers from time to time. It has cyclicality in the business and how investors value it. We would and continue to argue that a well-run regional theme park business is a solid moat business with high margins, returns and solid free free-cash flow. But it is not a straight line due to "need something new" capex spending and the vagaries of attendance, which can be affected by general economic conditions, gas prices, and the relative insanity of management on how they price tickets. But somehow, here we are 25 years later making almost the same pitch. We see higher labor costs as real, but much of the rest is the same. This is a place for kids under 21 to get the hell out of their parent's Dodge and for the next generation of parents who have exhausted every other entertainment option for their kids. You know who you are. One thing that has changed is we have a mess on a much bigger scale as Six Flags and Cedar Fair merged last year, bringing together a management team that couldn't run a theme park with a management team that can't run an integration. Naturally, we think we know better. And we aren't tied to legacy acrimony. So we are sticking our nose in the mix here and being public with this Letter to the Board. First a word to the math. Take the trailing 12 months and add 20% to it and put a ten multiple of EBITDA. Then take the Aspirational Plan in the Sky and take 20% off it and put on a ten multiple. That will give you roughly 39 and 77. That is unadjusted for nonsense or stock comp and uses the current debt level. The stock is 23 as of this writing. Different fun can be had taking capex down and making attendance projections on a DCF. And there is arguably well north of $500mm of potential asset sales that will barely dent operating earnings. One of the funny things about theme parks is many of them were built "way out of town" 30 years ago. Now, they are right in the middle of high-end suburban construction where "higher and better use" may be a value add. Read the letter. We have a "guy" who sits on the Board with a non-theme park background. That background was CFO for a decade of what has become ABInBev, so he has the ability to set in place proper integration at a pace that is not the current pony trot. This is not "activism," this is simply paying attention to what you own and helping shorten the road to the bank.

BSD Analysis:
The manager presents a compelling value opportunity in Six Flags Entertainment following the merger with Cedar Fair, viewing the current management integration challenges as a temporary headwind masking underlying business quality. The thesis centers on theme parks being high-margin moat businesses with solid free cash flow generation, despite cyclical attendance patterns. The valuation analysis suggests significant upside, with the stock trading at $23 while fair value ranges from $39-77 based on 10x EBITDA multiples applied to various scenarios. The manager identifies over $500 million in potential asset sales that wouldn't materially impact operations, plus real estate value creation as former "out of town" parks now sit in prime suburban locations. A board member with ABInBev CFO experience provides confidence in proper integration execution. The 25-year ownership history demonstrates deep sector knowledge and pattern recognition. The manager's activist-lite approach through board engagement aims to accelerate value realization without formal activism.

Pitch Summary:
PotlatchDeltic – Timberland and mill company PotlatchDeltic was a detractor after we initiated a position in the first quarter. We have owned this company in various forms over the years, including Potlatch in the late 2000s/early 2010s, Deltic twice before and post-merger PotlatchDeltic in the late 2010s/early 2020s. We have the opportunity to invest again because the stock market is overly focused on the challenging near-term housing market. This most impacts the lumber mill segment, which is less than 20% of our appraisal. The company's mills are currently operating at break-even, which is commendable in such a tough environment, demonstrating cost efficiency relative to peers. Long-term value will be driven by the vast majority of the value that comes from high-quality timberlands in the southern US and Idaho. While log prices are depressed currently, timberland has a long history of growing value and alternative use development that is not currently recognized in the stock price. For example, the growing solar market is driving developers to pay $10,000 to $15,000 per acre for land we previously valued at $1,500 to $2,000 per acre. Additionally, PotlatchDeltic has a strong management team that we know well, with a proven history and the ability to buy back stock at a significant discount to the private market net asset value. Meanwhile, we benefit from a solid, tax-efficient dividend.

BSD Analysis:
Longleaf's re-investment in PotlatchDeltic represents a classic contrarian opportunity where the market is overly focused on near-term housing market challenges while ignoring the underlying timberland asset value. The manager emphasizes that lumber mills represent less than 20% of their appraisal, with the mills currently operating at break-even despite tough conditions, demonstrating operational efficiency. The core investment thesis centers on high-quality timberlands in the southern US and Idaho, which have historically appreciated and offer alternative use optionality not reflected in current pricing. A compelling example is solar development driving land values from $1,500-2,000 per acre to $10,000-15,000 per acre, highlighting significant hidden value. Management's proven track record and ability to repurchase shares at substantial discounts to private market net asset value provides additional value creation opportunities. The combination of depressed log prices creating a cyclical low entry point, substantial alternative use upside, experienced management, and a tax-efficient dividend yield creates an attractive risk-adjusted return profile for patient investors.

Pitch Summary:
Barry Callebaut is a defensive, reasonably high-quality business facing several temporary challenges. The troubles can partly be traced back to a plant contamination scare in late 2022. This was a catalyst for change at the company, ultimately resulting in a CEO transition and implementation of a multi-year streamlining and modernization program. These changes had just begun when cocoa prices started to take off. As an outsourced chocolate producer, BC appears more directly in the line of fire of cocoa prices. However, recent results (covering the early ramp in prices) and outlook have not quite shown this and are aligned with Upslope's key thesis points: (1) BC's vertically integrated model and role as the largest global manufacturer of cocoa and chocolate products, position it better than any competitor to navigate the crisis. Simply put, BC has a major competitive advantage in times of supply crisis due to better sourcing and financing capabilities. This should enable share gains that should at least partly offset market and volume headwinds. Recent results also show the company's cost pass-through mechanisms working very well. (2) With cocoa prices catching financial and mainstream press headlines daily, valuation at decade+ lows, and EPS estimates already down sharply, such worries seem extremely well-known. Bottoms (or tops, in the case of cocoa prices) are impossible to time; but, it's hard to argue the pendulum hasn't already swung sharply in one direction. (3) While not an original view, it seems highly likely the great cocoa squeeze will end like virtually every other extreme commodity squeeze in history. We don't know the timing or trigger, but ultimately cocoa prices should revert and collapse. Forward-looking markets should only need to see a way out of the crisis – not an immediate exit. Should this coincide with BC's efficiency efforts already underway, it could provide a strong tailwind to free cash flow for years to come.

BSD Analysis:
Upslope presents a compelling contrarian thesis on Barry Callebaut during the unprecedented cocoa price surge. The manager argues that BC's vertically integrated model and position as the world's largest chocolate manufacturer provides a competitive moat during supply crises through superior sourcing and financing capabilities. The thesis centers on BC capturing market share while smaller competitors struggle, supported by effective cost pass-through mechanisms already demonstrated in recent results. With shares trading at decade-low valuations and consensus estimates already slashed, the manager believes negative sentiment is fully reflected in the stock price. The investment relies on the historical pattern of commodity price reversions, positioning BC to benefit from both operational efficiency improvements and eventual cocoa price normalization. Risk factors include continued cocoa price volatility and potential balance sheet strain, but the defensive nature of the chocolate business and BC's market-leading position provide downside protection.

Pitch Summary:
Mattel – Global toy and media company Mattel detracted for the quarter. The company reported what we viewed as solid quarterly results and an affirmation of 2024 guidance. We were particularly encouraged by their decision to increase their share repurchase program, which positions them well for FCF per share growth. As the quarter went on, however, the market focused on weaker consumer purchase trends impacting Mattel and its peers. The market also seems to have moved past the success of last year's Barbie movie, but we believe there is significant upside from media and entertainment revenue streams that are not yet reflected in today's earnings expectations.

BSD Analysis:
Longleaf remains bullish on Mattel despite near-term consumer weakness, focusing on the company's solid operational execution and capital allocation strategy. Management delivered solid quarterly results while reaffirming 2024 guidance and increasing share repurchases, demonstrating confidence in cash generation and commitment to shareholder returns. The enhanced buyback program positions the company well for free cash flow per share growth, creating value even in a challenging consumer environment. While the market has moved past the Barbie movie success and is focused on weaker consumer trends affecting the entire toy industry, the manager sees this as a temporary headwind. The key long-term opportunity lies in media and entertainment revenue streams that are not yet reflected in current earnings expectations, suggesting significant untapped value from Mattel's intellectual property portfolio. This represents a classic case where short-term cyclical concerns are overshadowing the company's strategic transformation into a broader entertainment company with multiple revenue streams beyond traditional toy sales.

Pitch Summary:
This quarter, we initiated a position in British Land, a UK-based property REIT with a diverse, high-quality commercial real estate portfolio that includes office space, retail, and urban logistics. Like our investment in Helical, we believe the market is underestimating the long-term value of these REITs. The current focus on the short-term challenges created by higher interest rates obscures the fact that the replacement value of their properties far exceeds current trading prices. We anticipate that once interest rates stabilize (and potentially decline) alongside an improving economy, the stagnant letting environment will change, boosting the market's perception of these REITs.

BSD Analysis:
Mayar Capital initiated a position in British Land, viewing it as an undervalued UK commercial real estate opportunity. The fund believes the market is overly focused on near-term headwinds from higher interest rates while ignoring the substantial discount to replacement value. Their thesis centers on the quality and diversity of British Land's portfolio spanning office, retail, and logistics properties. The investment appears to be a contrarian bet on UK commercial real estate recovery. Mayar expects that interest rate stabilization and economic improvement will revive the letting market and drive REIT revaluation. The comparison to their existing Helical position suggests this fits their broader strategy of acquiring quality real estate assets at significant discounts. This represents a classic value play on asset-rich companies trading below intrinsic worth.

Pitch Summary:
Anywhere Real Estate – Real estate brokerage franchisor Anywhere was the top detractor for the quarter. Anywhere has faced the most challenging news flow in the first half of the year among our holdings. First was the National Association of Realtors (NAR) settlement affecting buy-side commissions that we wrote about last quarter. Despite this already being in the numbers, the entire industry, including Anywhere, was hit hard in the second quarter as existing home sales remained weak. To compound the issue in the short-term, Anywhere was removed from the S&P Small-Cap Index at the end of the quarter. Given the high percentage of index fund ownership, this was particularly damaging to the stock price but, of course, not to the value. Despite these challenges, we remain invested for two main reasons. First, Anywhere can produce FCF over the next twelve months even in today's tough industry environment, and this FCF could be substantial in a more normalized environment. Second, the company is buying back its debt at discounts, strengthening the balance sheet and adding value beyond simply paying it back at par. We continue to have confidence in the management team to work on what is within their control.

BSD Analysis:
Despite significant headwinds, Longleaf maintains conviction in Anywhere Real Estate based on the company's ability to generate free cash flow even in the current challenging environment. The manager acknowledges multiple pressures including the NAR settlement impact on buy-side commissions, weak existing home sales, and technical selling pressure from S&P Small-Cap Index removal. However, they emphasize that these are largely temporary or already reflected in current results. The investment thesis rests on two key pillars: the company's resilient cash generation capability and management's opportunistic debt buybacks at discounts to par value. These debt repurchases not only strengthen the balance sheet but create additional value beyond simple debt reduction. The manager expects substantial free cash flow generation in a normalized housing environment, suggesting significant operating leverage to any market recovery. Their confidence in management's execution during this difficult period reinforces the long-term value creation potential once industry conditions improve.

Pitch Summary:
CoStar is the leading vendor of real estate technology, often referred to as the "Bloomberg of commercial real estate". The company's portfolio includes data and software products (the "CoStar Suite") and digital marketing platforms (LoopNet, Apartments.com). We have long admired this collection of franchises, which provide the real estate industry with mission-critical data, software, and services that are designed into workflows and function as a system of reference. They hold dominant market share, have low TAM penetration with a long runway for future growth, have significant untapped pricing power, and enjoy high-margin business models with ample room for further margin expansion. These attributes have allowed CoStar's core business to compound EBITDA at a 20% CAGR over the past ten years, a level which we expect to sustain going forward. Despite the continued strength of its core business, we believe recent capital allocation decisions have derailed CoStar's compounding algorithm. Over the past five years, management has increasingly focused on leveraging CoStar's dominance in commercial real estate (CRE) to expand into residential real estate (RRE). The primary vehicle for this expansion has been its nascent Homes.com business, which aims to supplant Zillow as the leading digital marketplace for home sales in the U.S. In pursuit of that goal, we estimate that CoStar is spending almost $1 billion annually on growth investments (and will have spent more than $3 billion cumulatively by the end of this year), but this investment has yet to generate meaningful revenue. Expanding losses at Homes.com have obscured rapid growth in the core business and reduced consolidated EBITDA by approximately 80%. The market is increasingly questioning the magnitude and duration of future losses, and investment performance has stagnated. After compounding at a ~25% IRR for two decades following its IPO, the stock has now been flat for more than five years, underperforming indices and peers by wide margins. After several years of uncertainty, we believe it is time for CoStar to begin the journey of meaningful self-help. During the first quarter, we engaged with the company and its founder and CEO, Andy Florance, with the goal of helping the company improve its capital allocation framework. CoStar agreed to add three new directors (all of whom have deep capital allocation experience), create a Capital Allocation Committee of its Board of Directors tasked with establishing a rigorous framework for future capital deployment, including that of Homes.com, and review its executive compensation programs to ensure management's incentives remain aligned with stockholder value creation. Third Point has signed a standstill agreement that lasts for less than one year, and while results will not be immediate, we expect to see a meaningful improvement in capital allocation by YE 2025. As CoStar's core business continues to compound value and improved capital allocation starts to narrow the losses at Homes.com, we believe the company can grow EBITDA by a factor of >7x over the next few years, setting the stage for the stock to regain its star status.

BSD Analysis:
Third Point presents a compelling activist thesis on CoStar Group, positioning it as a high-quality franchise with misallocated capital. The manager highlights CoStar's dominant market position as the "Bloomberg of commercial real estate" with mission-critical data services that have generated 20% EBITDA CAGR over the past decade. However, management's aggressive $1 billion annual investment in the nascent Homes.com residential platform has reduced consolidated EBITDA by 80% without meaningful revenue generation. Third Point's activist engagement resulted in board changes, including three new directors with capital allocation expertise and the creation of a dedicated Capital Allocation Committee. The fund secured a standstill agreement lasting less than one year, indicating confidence in near-term improvements. With the core business continuing to compound and expected capital allocation discipline around Homes.com losses, Third Point projects potential 7x EBITDA growth over the coming years. The thesis combines quality franchise characteristics with activist-driven operational improvements, targeting a return to the stock's historical 25% IRR performance after five years of stagnation.

Pitch Summary:
Eastman Kodak – Licensing, imaging and technology company Kodak contributed for the quarter. It is important to note that we hold a convertible preferred security which acts more like a bond than common stock. Our security performed well, driven by Kodak's significantly overfunded pension. This asset, long evident on the company's balance sheet, gained attention recently due to Kodak's hiring of investment consultant NEPC. NEPC is working to monetize this asset in a way that takes care of plan participants first but likely leaves ample cash and borrowing power to repay our security before its maturity in early 2026. The realization of this dynamic has begun to benefit the price of the stock and our security, with further positive impact expected.

BSD Analysis:
Longleaf's investment in Eastman Kodak centers on a convertible preferred security that offers bond-like characteristics with upside potential. The key catalyst is Kodak's significantly overfunded pension plan, which represents a substantial hidden asset on the balance sheet that the market has largely overlooked. The company's hiring of investment consultant NEPC signals management's intent to monetize this pension surplus, which could generate significant cash proceeds. The manager expects this monetization to provide ample liquidity to repay their preferred security before its 2026 maturity while taking care of pension plan participants. This represents a classic asset-rich situation where the sum of the parts exceeds the market valuation. The convertible structure provides downside protection through its bond-like features while offering equity upside as the pension monetization story unfolds. Recent market recognition of this dynamic has already begun to benefit the security's price, with further appreciation expected as the monetization process progresses.

Pitch Summary:
Oscar Health – Health insurance and software platform Oscar was the top contributor for the quarter. The stock experienced strong performance early in the quarter but gave back some gains later. In May, the company reported strong 1Q results with revenues up over 40% with a substantial portion of this growth dropping to the bottom line, leading to improved free cash flow (FCF). Oscar continues to gain share in the Affordable Care Act (ACA) market due to its superior customer experience and technology. In early June, the company held an investor day outlining growth plans within and outside of (e.g. small employer plans) the ACA market in a variety of environments, projecting over $2/share of pre-tax earnings power by the end of its current three-year plan. However, at the end of the quarter, the Presidential debate negatively impacted the stock price. The market's perception is that a Republican victory in November could pressure the ACA market. Despite this, the ACA's strong growth in many red and purple states makes aggressive cutbacks unlikely due to potential swing-state backlash. However, we are not banking on an aggressive scenario where the status quo remains in place and acknowledge there could be short-term drama. Despite strong stock price performance this year, value per share growth has been even stronger, so Oscar remains under a sixty-cent dollar on our conservative appraisal.

BSD Analysis:
Longleaf maintains a bullish stance on Oscar Health despite political headwinds, highlighting the company's strong operational momentum with 40%+ revenue growth and improving free cash flow conversion. The manager emphasizes Oscar's competitive advantages in customer experience and technology that are driving market share gains in the ACA marketplace. Management projects $2+ per share in pre-tax earnings power by the end of their three-year plan, indicating significant earnings growth potential. While acknowledging political risks from potential Republican policy changes, the manager argues that ACA's popularity in swing states makes aggressive cutbacks unlikely. The investment thesis centers on the disconnect between strong fundamental progress and market concerns about regulatory changes. At current levels, the stock trades at a significant discount to the manager's conservative appraisal, providing an attractive margin of safety. The combination of strong execution, market share gains, and political risk being overblown supports the bullish outlook.

Pitch Summary:
Our second-largest position, AST SpaceMobile ("ASTS"), is a pioneer in space-based cellular broadband that will quite literally change the world should it succeed in its ambitious mission to solve a persistent and universal pain point for mobile users around the globe: eliminating coverage gaps while bringing affordable broadband to billions without basic internet services. As a quick refresher, AST was founded in 2017 by CEO Abel Avellan before going public as a SPAC in 2021. The company's raison d'être is to "connect the unconnected" by providing uninterrupted direct-to-device ("D2D") broadband coverage to everyday smartphones via the world's first and only purpose-built global low earth orbit ("LEO") network for D2D. In short, the company provides satellite-based cell tower services to wireless carriers around the world through basketball court-sized phased array antennas deployed in LEO, a key globally scalable enabling technology set to redefine wireless connectivity on a global scale. The emergence of AST represents a pivotal moment in the evolution of not just the company but the entire telecommunications industry, primarily because AST is not merely iterating on existing technology but is introducing a fundamentally new category of service that aims to bridge the digital divide and provide ubiquitous cellular coverage to underserved populations worldwide. Indeed, if we may be so bold, the company isn't just building a satellite network – it's constructing the final piece of digital infrastructure that will complete a century-long arc toward universal human connectivity. While the stock doubled in June, we continue to hold a substantial position at ~15% of NAV as our conviction that the company remains grossly undervalued based on normalized economics and long-term potential has only grown since we initially built our position last fall. In fact, pretty much since the day we got involved, AST has achieved several critical operational milestones that we believe have fundamentally altered its risk profile and future cash flow potential for the better. Ergo, the company was a standout performer for the quarter, surging 157% year-to-date and a whopping 122% in Q2 alone. However, despite its magnificent run, we remain both heavily invested and highly confident in CEO Abel Avellan and his team's ability to deliver on the company's ambitious roadmap. Indeed, even with the equity at ~$48.84/share (vs. our $17.91/share average cost), only a tiny fraction of the company's future growth prospects are currently reflected in its stock price. While the equity appears expensive on near-term numbers, the reality is Mr. Market remains behind the curve despite the massive outperformance of AST's equity year to date. As I type, our favorite emerging compounder is trading hands at a truly inexplicable 2.75x "steady state" EBITDA, i.e., AST's normalized earnings capacity once its global constellation is fully operational over the medium term.

BSD Analysis:
The manager presents AST SpaceMobile as a transformational investment opportunity in space-based cellular infrastructure. The company's direct-to-device satellite network represents a paradigm shift in telecommunications, targeting billions of underserved users globally. Despite the stock's 157% year-to-date surge, the manager maintains conviction based on AST's 2.75x steady-state EBITDA valuation multiple. The investment thesis centers on AST's first-mover advantage in LEO satellite cellular services and its potential to bridge the global digital divide. With $1.5 billion in cash and milestone-based funding from telecom partners, the company appears well-positioned for constellation deployment. The manager emphasizes AST's transition from narrative to execution phase, with manufacturing ramping to 6 satellites per month. Risk factors include execution challenges in space deployment and achieving commercial scale, but the manager views these as manageable given recent operational milestones and strong balance sheet position.