Investment Pitches

Pitch Summary:
Dutch-headquartered biotechnology company uniQure was the top contributor in the quarter. Shares rallied after the company announced positive results from its Phase I/II study of high-dose AMT-130 for Huntington's disease, as results exceeded expectations and spurred optimism that the future value of potential royalty streams far outstripped prior expectations.

BSD Analysis:
The manager highlights uniQure as a top quarterly contributor following strong clinical trial results for AMT-130 in Huntington's disease treatment. The Phase I/II study results exceeded expectations, creating significant optimism around the company's pipeline value. The manager emphasizes that the positive data has fundamentally shifted expectations for future royalty streams, suggesting the market had previously undervalued the commercial potential of this gene therapy candidate. This represents a classic biotech value inflection point where clinical success validates the investment thesis. The focus on royalty stream potential indicates the manager views uniQure's business model as capital-efficient with strong cash flow generation prospects. The Dutch biotech's rally demonstrates how clinical milestones can rapidly unlock value in the gene therapy space. The manager's positioning suggests confidence in uniQure's ability to advance AMT-130 toward commercialization and capture meaningful market share in Huntington's disease treatment.

Pitch Summary:
CCC Intelligent Solutions is a cloud-enabled platform used by insurance carriers, repair shops, and parts suppliers in the auto insurance, claims, and repairs industries. The business model combines attributes from software companies and online marketplaces by serving as the connective tissue that processes 85% of all U.S. automotive claims volume. It operates as a near monopoly and reduces friction for what would otherwise be a very manual process involving significant coordination among industry participants. Theirs is a growing, high recurring revenue business with high operating margins. Long-term growth has been driven by 99% gross dollar retention and 110%+ net dollar retention from continued product innovations. We believe the fundamentals are uniquely stable and largely driven by auto claims volumes that do not necessarily reflect typical economic cycles.

BSD Analysis:
Polen Capital initiated a position in CCC Intelligent Solutions, recognizing its near-monopolistic position in automotive claims processing with 85% market share. The company operates as critical infrastructure connecting insurance carriers, repair shops, and parts suppliers, creating significant switching costs and network effects. With 99% gross dollar retention and 110%+ net dollar retention, CCC demonstrates exceptional customer stickiness and expansion capabilities. The business model combines high-margin software economics with marketplace dynamics, generating stable recurring revenues that are largely insulated from economic cycles since auto claims volumes remain relatively consistent. This defensive growth profile with strong competitive moats aligns well with Polen's quality-focused investment approach.

Pitch Summary:
Kinsale Capital Group is a founder-led specialty insurance company focused on the excess and surplus lines market. Kinsale's business model emphasizes efficiency, technology, and underwriting expertise. The company delivers above-industry growth and returns, consistently outperforming its peers and taking industry market share. A focus on smaller accounts and hard-to-place risks, together with emphasis on technology-driven operations and disciplined underwriting contribute to Kinsale's competitive advantage. We believe these factors, combined with the company's attractive financial performance and foundation for continued growth, make Kinsale Capital an appealing addition to our Portfolio.

BSD Analysis:
Polen Capital added Kinsale Capital Group as a new position, attracted to its founder-led specialty insurance model focused on excess and surplus lines. The company's emphasis on efficiency, technology, and underwriting expertise has enabled it to consistently outperform peers and gain market share. Kinsale's focus on smaller accounts and hard-to-place risks creates a competitive moat, while its technology-driven operations and disciplined underwriting approach drive superior returns. The combination of above-industry growth rates, strong financial performance, and a sustainable competitive advantage in the specialty insurance market makes Kinsale an attractive long-term holding for Polen's quality growth strategy.

Pitch Summary:
AAON is a leading producer of premium and state-of-the-art heating, ventilation, and air conditioning ("HVAC") systems for commercial and industrial indoor environments. Since its founding 35 years ago, the company's strategy has focused on making "semi-custom equipment," whereby it makes a premium product at a price that is growing increasingly competitive with larger competitors due to the secular trends of decarbonization and electrification. By way of illustration, commercial buildings make up 16% of the total carbon emissions in the U.S., with roughly 40% related to building HVAC systems. In 2021, the company acquired BASX Solutions, an Oregon-based manufacturer of custom, high-performance cooling solutions for the rapidly growing hyperscale data center market. We believe this move should provide a tailwind to organic growth for years to come. We believe AAON will continue to grow share in the multi-billion-dollar commercial HVAC market at high incremental operating margins and returns on capital for the long term.

BSD Analysis:
Polen Capital initiated a position in AAON, viewing it as a premium HVAC manufacturer well-positioned to benefit from secular decarbonization and electrification trends. The company's semi-custom equipment strategy allows it to compete effectively with larger players while maintaining premium pricing. The 2021 acquisition of BASX Solutions provides exposure to the rapidly growing hyperscale data center cooling market, which should drive organic growth for years. With commercial buildings representing 16% of U.S. carbon emissions and 40% of that from HVAC systems, AAON is positioned to capture market share as buildings electrify. The company's focus on high-margin, high-return products in a multi-billion-dollar addressable market makes it an attractive long-term compounder in Polen's concentrated portfolio.

Pitch Summary:
We purchased shares of PAR Technology Corporation, a leading software, hardware, and service provider to the foodservice industry. PAR is building an all-in-one software and service platform for enterprise restaurants and convenience stores to run the most critical portions of their technology stacks. Historically, the company was known as a hardware supplier to large QSR restaurant chains, but since CEO Savneet Singh took the role in late 2018, he has made software the primary focus of the business through organic investment and M&A. The company has added several complementary software pieces around its core point-of-sale software product (less than $10 million in software revenue when Savneet took over) to build a unified technology platform offering integrated solutions and data insights supporting $275 million in ARR today growing 20% or more annually. While there is a lot of competition in the small and medium-sized business portion of the market, there are significantly less competitors serving enterprise chains, with the two largest players being legacy incumbents with poor reputations when it comes to innovation and service. Enterprise foodservice is playing "catch-up" in adopting new technology, and we anticipate spend to ramp in coming years. PAR's strong reputation, modern platform purpose built for enterprise brands, and product and integration breadth give it a strong competitive positioning, as reflected by a customer list that includes many of the largest restaurant and c-store brands in the world (Burger King, Dairy Queen, and Arby's). We believe PAR will continue to grow its software revenues 20%-plus per year over the next several years, driven by wins with new restaurant brands and cross-sell of its product portfolio to existing customers. PAR just reported two consecutive quarters of adjusted EBITDA profitability driven by very strong operating leverage, and we expect the company to continue to deliver strong incremental margins as it grows revenue in excess of the required investment in its R&D or sales and marketing needed to scale its business. As profitability and cash flow ramp rapidly in the coming years (estimating over 25% EBITDA margins), combined with further accretive bolt-on and/or meaningful acquisitions, we see significant upside in the stock over time.

BSD Analysis:
Baron initiated a position in PAR Technology, attracted by the company's transformation from a hardware supplier to a comprehensive software platform for enterprise foodservice. The manager credits CEO Savneet Singh's strategic pivot since 2018, growing software revenue from under $10 million to $275 million in ARR with 20%+ growth. Baron sees a compelling competitive position in the enterprise segment, where PAR faces less competition than in SMB markets and benefits from legacy incumbents' poor innovation track record. The investment thesis relies on enterprise foodservice's technology adoption acceleration and PAR's ability to capture market share through its modern, integrated platform serving major brands like Burger King and Dairy Queen. The manager is encouraged by PAR's recent achievement of EBITDA profitability and expects strong operating leverage to drive margins above 25%. Baron anticipates continued 20%+ software revenue growth through new customer wins and cross-selling, with additional upside from strategic acquisitions as cash flow generation improves.

Pitch Summary:
During the quarter, we bought shares of RadNet, Inc., the largest owner and operator of fixed-site, freestanding diagnostic imaging centers in the U.S, with 399 locations. The company's imaging centers offer multi-modality imaging services, including magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), and other related procedures. The company develops leading positions in regional markets to leverage operational efficiencies and contracting benefits with health plans. Currently, the company has a strong regional presence in California, Maryland, New York, and New Jersey. RadNet is benefiting from several secular growth trends. The aging population is driving increased demand for diagnostic imaging services. Payors are steering volume to less costly outpatient providers like RadNet, away from higher cost hospitals, and patients prefer the experience of care in an outpatient setting over a hospital. New technology is driving higher demand for more advanced imaging modalities like MRI, CT and PET, all of which generate higher revenue and margin per procedure for RadNet. In addition, we think RadNet is well positioned to lead the transformation of the radiology field with AI and radiology software products. RadNet's emerging Digital Health business offers AI algorithms for enhanced cancer detection, allowing for earlier and more accurate diagnosis and preventive screening. The company has the largest repository of imaging data from its imaging centers, which it can use to train and re-train its algorithms, providing a competitive advantage. The company's newly launched DeepHealth OS cloud-native operating system helps operate all aspects of the radiology service line, from scheduling and patient preparation to technologist workflow to interpretation and referral management. RadNet is investing for growth in this business, which we think can grow 30% per year and scale at very high incremental margins. Over time, AI will enable RadNet to lower costs in its own imaging centers in a material way, driving margin expansion. Finally, RadNet is well capitalized with cash on the balance sheet for accretive acquisitions. RadNet purchases other independent imaging center operators that are not as well capitalized to make investments in new technology or lack scale to contract at favorable rates with payors. RadNet is also expanding through health system joint ventures, including with Cedars Sinai, MemorialCare, Dignity Health and Adventist Health. Additionally, the company intends to use acquisitions to bolster its offerings in the Digital Health business. We think the stock is attractively valued on current estimates based on the growth characteristics of the imaging center business alone and does not reflect the upside potential from the Digital Health business or future acquisitions.

BSD Analysis:
Baron initiated a position in RadNet, viewing it as a compelling play on secular healthcare trends and AI transformation in radiology. The manager highlights RadNet's dominant position as the largest operator of outpatient diagnostic imaging centers with 399 locations and strong regional market presence. The investment thesis centers on multiple growth drivers: aging demographics increasing imaging demand, payor preference for lower-cost outpatient settings, and technological advancement driving higher-margin procedures. Baron is particularly bullish on RadNet's AI initiatives, noting the company's competitive advantage through its vast imaging data repository for algorithm training and the launch of DeepHealth OS. The Digital Health segment is expected to grow 30% annually with high incremental margins, while AI implementation should drive cost reduction and margin expansion across existing centers. The manager also sees value in RadNet's acquisition strategy and joint venture expansion with major health systems, viewing the stock as attractively valued relative to its growth potential.

Pitch Summary:
We have also started a 2% position in Medley. This Japanese-based business provides medical human resource recruitment, medical system management, online medical treatment, medical information updating, and other medical web services throughout Japan. Over the past five years, the company has increased revenues at a roughly 35% CAGR, including bolt-on acquisitions, while EBIT has compounded over 60%. We believe the business will benefit from the increasing cost of social welfare in Japan due to demographics and labor shortages. They should also see an uplift from international expansion, aiming to leverage the network platform built in the Philippines and Japan. The company currently has a positive net cash balance that we think can support further bolt-on acquisitions and organic growth.

BSD Analysis:
Polen Capital initiated a 2% position in Medley, recognizing the company's strong growth trajectory and positioning within Japan's healthcare transformation. The manager highlights exceptional historical performance with revenue growing at approximately 35% CAGR and EBIT compounding over 60% over five years, demonstrating both top-line growth and operational leverage. The comprehensive service offering spanning medical recruitment, system management, online treatment, and web services positions Medley as a platform play in Japan's digital healthcare ecosystem. Polen identifies compelling structural tailwinds including Japan's aging demographics and healthcare labor shortages, which should drive increasing demand for Medley's efficiency-enhancing services. The international expansion opportunity, particularly leveraging the established network in the Philippines, provides additional growth optionality beyond the domestic market. The positive net cash balance provides financial flexibility for both organic growth investments and strategic acquisitions to expand capabilities and market reach. Polen's bullish stance reflects confidence in Medley's ability to capitalize on Japan's healthcare digitalization trends while maintaining strong profitability and growth characteristics in an attractive end market with significant structural drivers.

Pitch Summary:
GlobalData is a data analytics and consulting company headquartered in London. It provides market research and business intelligence services to corporates and professional services firms primarily on a subscription basis. Over the past five years, the company has compounded the per-share sales at over 10% compound annual growth rate ("CAGR"). CAGR and earnings before interest and taxes ("EBIT") at a nearly 50% CAGR. GlobalData has grown the top line organically in the high single-digit range. It complements this with bolt-on acquisitions of data-centric boutique market research firms that complement their existing datasets. We believe the business benefits from stable demand, high operating leverage, and an excellent track record for capital allocation. We believe the company can compound free cash flow per share at a high-teens to low-twenties rate over the next five years. The company currently has a robust net cash balance sheet, and we think should be able to self-fund future growth.

BSD Analysis:
Polen Capital initiated a position in GlobalData based on the company's compelling growth profile and capital allocation track record. The manager highlights impressive historical performance with per-share sales growing at over 10% CAGR and EBIT expanding at nearly 50% CAGR over five years, demonstrating strong operational leverage and margin expansion. The combination of high single-digit organic growth supplemented by strategic bolt-on acquisitions of complementary data-centric firms shows a disciplined approach to market expansion. Polen emphasizes the subscription-based business model's stability and predictability, which provides visibility into future cash flows. The "excellent track record for capital allocation" suggests management's ability to deploy capital effectively across organic growth and acquisitions. The projection of high-teens to low-twenties free cash flow per share growth over the next five years reflects confidence in the company's ability to maintain its growth trajectory. The robust net cash balance sheet provides financial flexibility for self-funded growth without dilution. Polen's bullish stance reflects the attractive combination of recurring revenue characteristics, operational leverage, proven management execution, and significant growth runway in the data analytics market.

Pitch Summary:
Alight, a leading cloud-based provider of employee engagement and workplace benefit tools, delivered quarterly financial results below their expectations. The company saw sales decline driven by the wind-down of its "hosted business" operations, along with lower volumes, project revenues, and net commercial activity. The company also announced changes to its C-suite team, causing further unease. We still think the company's fundamentals remain on track, and the long-term opportunity remains promising. We believe it is an underappreciated business because of its quality, stability of earnings, and accelerating growth potential.

BSD Analysis:
Polen Capital maintains a bullish view on Alight despite recent operational challenges, emphasizing the company's long-term fundamentals and market opportunity. The manager acknowledges disappointing quarterly results driven by the wind-down of legacy "hosted business" operations, declining volumes, and reduced project revenues, along with C-suite changes that created additional uncertainty. However, Polen views these as temporary headwinds rather than structural issues, maintaining confidence that "fundamentals remain on track." The manager characterizes Alight as an "underappreciated business" with attractive qualities including earnings stability and accelerating growth potential in the cloud-based employee engagement and benefits tools market. This suggests Polen believes the market is undervaluing the company's competitive position and growth prospects. The emphasis on "quality" and "stability of earnings" indicates confidence in the underlying business model's resilience and recurring revenue characteristics. Polen's conviction appears based on the belief that current operational challenges are masking the company's true potential in the large and growing HR technology market, creating an attractive investment opportunity for patient investors.

Pitch Summary:
Progyny is the leading managed care provider specializing in fertility. The company provides a clear and differentiated value proposition, leading many employers to carve out fertility as a separate medical benefit. The company reported weaker 1Q24 results in May due to lower-than-expected benefit utilization. This was largely due to patients reassessing treatment after the Alabama Supreme Court ruling in February declaring embryos created through In vitro fertilization ("IVF") should be considered children. While Alabama accounts for very little of Progyny's revenue, the headlines—particularly in conservative Christian groups—caused some patients with authorized procedures to delay the start of those cycles. What followed was a widespread cry to carve out legal exceptions for IVF, and Alabama passed legislation protecting IVF. Based on trends management is observing, the incident appears to be a temporary blip. However, it appears persistent news headlines and uncertainty continue to weigh on the stock (along with the disappointing guidance). We believe this is a near-term headwind, and our view of Progyny's long-term opportunity and competitive position is unchanged. We further believe fertility benefits still have an extremely long runway for potential growth, particularly as Progyny shows success penetrating new sectors and industries beyond the fertility benefits early adopters. While we believe news and political headlines may continue to weigh on the stock near-term, we take a long-term view and believe the stock is attractively valued.

BSD Analysis:
Polen Capital maintains strong conviction in Progyny despite recent volatility, viewing the company as the leading fertility benefits provider with significant long-term growth potential. The manager provides detailed context around Q1 2024 weakness, attributing lower utilization to temporary patient hesitation following the Alabama Supreme Court IVF ruling rather than fundamental business deterioration. Polen emphasizes that Alabama represents minimal revenue exposure, but headlines created broader uncertainty that caused treatment delays. The subsequent legislative protection for IVF and management's observed trend improvements support the "temporary blip" thesis. The manager highlights Progyny's differentiated value proposition that drives employers to carve out fertility as a separate benefit, indicating strong competitive positioning and customer value creation. The "extremely long runway for potential growth" reflects the early stage of fertility benefit adoption across industries beyond early adopters. Polen's emphasis on attractive valuation suggests the market has overreacted to temporary headwinds, creating an opportunity for long-term investors. The combination of market leadership, expanding addressable market, and temporary valuation discount supports the bullish stance despite near-term political and headline risks.

Pitch Summary:
dLocal, a payments processing company headquartered in Uruguay saw further weakness after reporting disappointing first quarter results. While payment volumes and revenues grew 49% and 34%, respectively, in 1Q 2024, gross profit only grew 2% due to elevated processing costs. The company has also invested more in building out its scale and functionality, which further weighed on profitability. Longer term, as one of the leading emerging markets payments processing companies, we believe dLocal can continue to see attractive growth and improve profitability under a highly-regarded management team.

BSD Analysis:
Despite recent underperformance, Polen Capital maintains a bullish long-term view on dLocal, recognizing temporary headwinds while emphasizing the company's strategic positioning. The manager acknowledges disappointing Q1 2024 results where strong top-line growth (49% payment volume growth, 34% revenue growth) was offset by margin compression due to elevated processing costs and increased investment in scale and functionality. However, Polen views these investments as necessary for long-term competitive positioning rather than fundamental business deterioration. The manager highlights dLocal's leadership position in emerging markets payments processing, a large and underpenetrated market with significant growth potential. The emphasis on the "highly-regarded management team" suggests confidence in execution capabilities and strategic direction. Polen appears to view the current weakness as a temporary margin compression cycle that should reverse as the company achieves scale benefits from its investments. The emerging markets payments opportunity represents a substantial addressable market with structural growth drivers, positioning dLocal for long-term value creation despite near-term profitability pressures.

Pitch Summary:
Monolithic Power Systems is a semiconductor company with an analog and mixed-signal integrated circuit that is a prominent innovator in the power management market. The company has seen compelling fundamentals largely due to growth in its enterprise data segment, which has been driven by cloud-based Central Processing Unit ("CPU") server applications, including AI. Monolithic is an example of the dynamic described in our opening remarks in which momentum continued to drive certain AI stocks higher. While the Enterprise Data strength will likely moderate as suppliers are added, we think Monolithic's other end-markets have secular tailwinds that should pick up over time. The company has a compelling track record of steady organic growth that typically contradicts the semiconductor industry's inherent cyclicality.

BSD Analysis:
Polen Capital views Monolithic Power Systems as a differentiated semiconductor company with strong positioning in power management solutions. The manager highlights the company's compelling fundamentals driven by growth in enterprise data applications, particularly cloud-based CPU server applications including AI infrastructure. While acknowledging the current AI-driven momentum may moderate as competition increases, Polen emphasizes the company's diversified end-market exposure with secular growth tailwinds. The manager particularly values Monolithic's track record of steady organic growth that defies typical semiconductor cyclicality, suggesting superior business model characteristics. This counter-cyclical performance indicates strong competitive positioning and customer relationships across multiple end markets. The company's analog and mixed-signal integrated circuit technology appears to provide sustainable differentiation in power management applications. Polen's bullish stance reflects confidence in the company's ability to capitalize on multiple secular trends beyond just AI, including broader digitalization and electrification themes across various industries.

Pitch Summary:
Pro Medicus, a position we have held since the Portfolio's inception, is a medical technology company based in Australia that derives most of its revenue from large hospital systems in the U.S. Their cutting-edge medical software and technology enables hospitals to "stream" diagnostic images like MRIs and CT scans with high integrity and speed. It has rapidly been adopted in the largest U.S. hospital systems and has become a platform for all types of medical images and AI in diagnostics. The stock saw further strength over the quarter as Pro Medicus announced new long-term contracts, which could underpin accelerating revenue growth into 2025. The stock also experienced several broker upgrades over the period.

BSD Analysis:
Polen Capital demonstrates strong conviction in Pro Medicus, having held the position since the portfolio's inception. The manager highlights the company's innovative medical imaging technology that enables high-speed, high-integrity streaming of diagnostic images including MRIs and CT scans. The platform's rapid adoption by major U.S. hospital systems validates its competitive advantages and market positioning. The evolution into a comprehensive platform for medical images and AI diagnostics suggests significant expansion potential beyond traditional imaging. Recent contract wins provide visibility into accelerating revenue growth through 2025, indicating strong customer demand and recurring revenue characteristics. Multiple broker upgrades during the quarter reflect broader market recognition of the company's prospects. The U.S. hospital market represents a substantial addressable market, and Pro Medicus appears well-positioned to capture share through technological differentiation. The combination of innovative technology, proven adoption by tier-one customers, and expanding AI capabilities positions the company for sustained growth in the digital healthcare transformation.

Pitch Summary:
Tencent Music Entertainment, China's equivalent to Spotify, posted another robust quarter with continued improvement in profitability. Its music business has continued to perform well in a robust pricing environment, leading to robust revenue and earnings growth. The company now has over 113 million paying music subscribers, a more than 20% year-over-year increase and revenue mix shift. Higher average revenue per paying user has led to the company's highest gross margin in five years.

BSD Analysis:
Polen Capital maintains a bullish stance on Tencent Music Entertainment, highlighting the company's strong operational momentum and improving financial metrics. The manager emphasizes the robust pricing environment that has driven revenue and earnings growth, with paying subscribers reaching 113 million—a significant 20% year-over-year increase. The revenue mix shift toward higher-value subscribers has enhanced profitability, with average revenue per paying user expanding to deliver the company's highest gross margin in five years. This demonstrates the platform's pricing power and ability to monetize its user base effectively. The comparison to Spotify positions TME as the dominant music streaming platform in the Chinese market. The sustained subscriber growth and margin expansion suggest strong competitive positioning and execution of the company's monetization strategy. Polen's positive view reflects confidence in TME's ability to continue capitalizing on China's digital music market growth while maintaining pricing discipline.

Pitch Summary:
One position in the portfolio we have not discussed much in our earlier letters to investors is our 6% investment in OCI, which we started in April 2023. Despite important catalysts, the stock is currently trading at our entry price. On a total return basis, we are up 16.1% in the position due to regular and special dividends paid out last year. We expect to receive another significant special dividend this year, as outlined below. For those unfamiliar with the company, OCI is a European-listed, global fertilizer business focused on the "3 F's" of fuel, food, and feedstock. This company is essential to food supply chains and owns a strategically valuable, global asset base that would be difficult to replicate. The firm is the world's largest exporter of nitrogen fertilizer products and the only major producer with international production, distribution, and storage capacity in the US, Europe, and the MENA regions. The firm is a "family business," now helmed by the second generation of the Egyptian Sawiris family. Our initial interest in the business started in 2022. At the time, we were reviewing the fertilizer industry for potentially interesting short opportunities, as fertilizer prices were trading at what we judged to be cyclical peaks. While we did not find any short opportunities we liked, our sum-of-parts analysis suggested that OCI could be worth €50 per share vs. its 2022 peak of ~€43 per share with a downside of €20 per share. We judged the valuation discount insufficient to justify an investment at the time but enough to put it on a watch list. By March/April 2023, the stock had fallen by roughly 50% relative to its 2022 high due to a nearly 80% collapse in Middle Eastern ammonia prices (the core nitrogen fertilizer medium relevant to OCI). With that price fall, we accumulated a 6% position. We were rewarded in December of last year with the announcement from OCI that it was making two significant asset sales as part of a strategic review prompted by activist investor Jeff Ubben's 2022 prodding: The first announcement was the firm's $3.6 billion sale of its controlling interest in Fertiglobal PLC, the Abu Dhabi-based fertilizer venture with the Abu Dhabi National Oil Company (ADNOC). The second announcement was the sale of the firm's 100%-owned Iowa Fertilizer Company, OCI's US nitrogen fertilizer business, to Koch Ag and Energy Solutions for $3.6 billion. In December of last year, the firm announced asset sales, net of debt, of $6.2 billion, or roughly the firm's market capitalization at the end of 2023. The firm has traded down in 2024 and is currently sitting at a discount of ~6% to the cash we expect the business to receive at some point this year for the assets it has sold. Management has noted that they expect to return "a substantial amount of capital to shareholders…in a very tax efficient manner." Why the stock is now trading below the cash value of the two deals, especially given the remaining assets the firm owns and management's good track record of creating value, is a mystery. If management had a history of destroying shareholder value, we could understand; after all, many management teams have bungled the capital allocation job when confronted with a large pile of cash, but this is not the case with OCI. Furthermore, the business has other assets, specifically its European Nitrogen business, Methanol operations, and a currently under-construction ammonia plant in Texas, expected to be up and running in 2025. Finally, as Management noted in the FY2023 call in February, they intend a 2024 capital return of about ~€12 per share. Management also outlined on the same call that, in addition to the $3 billion capital return, they intend to use proceeds from the asset sales to pay down debt (~$2 billion) and fully finance the remaining CapEx on the firm Texas facility (~$500 million). This leaves the firm with a net cash position of $700 million at the end of 2024 if everything runs smoothly. According to management, the firm's post-transaction assets generate roughly $500 million in mid-cycle EBITDA, and the Texas ammonia facility is expected to generate mid-cycle EBITDA of $100 to $200 million. Assuming the business trades at a 5-year historical EV/EBITDA of 6x and generates $600 million in EBITDA in 2026, the post-transaction equity stub is worth roughly €18 per share. Put another way, assuming a hard cash return of €12 in 2024, the market is pricing the ongoing business at ~€13 per share, a 38% discount to our estimate of the value of the remaining assets. Although we do not believe there is strong evidence to support the idea that public markets will value the equity stub at the current 8x EV/EBITDA multiple the firm is trading for, management did sell the Iowa operations to Koch Industries at an 8x EV/EBITDA multiple. Assuming an 8x multiple, the post-transaction business is worth €23 per share. At a 3x multiple, the five-year low, the post-transaction business is worth €11 per share, implying a ~8% downside from the current share price after netting out the expected ~€12 per share capital return. Although this investment has become complicated, and we are unconvinced a breakup was the route to the highest investor returns, we are satisfied with how this investment is unfolding. If the firm price falls by €12 on the day of the abnormally large capital return, we will have a mark-to-market loss on the core equity position of 48%. However, we will also have received 65% of our original investment back in cash. If the remaining equity position rerates to between €18 and €23, we will still have a mark-to-market loss but a total return inclusive of dividends/capital returns of between 37% and 57%—a potentially tidy little investment and an interesting tax situation for us to consider.

BSD Analysis:
Massif Capital presents a compelling value opportunity in OCI, a global fertilizer producer trading at a significant discount to its asset value following major divestitures. The manager initiated the position in April 2023 after the stock fell 50% from its 2022 highs due to collapsing ammonia prices, creating an attractive entry point. OCI announced $6.2 billion in asset sales (roughly equal to its market cap) including its Abu Dhabi fertilizer venture and Iowa operations, with management committing to return approximately €12 per share to shareholders in 2024. The stock currently trades at a 6% discount to the expected cash proceeds alone, ignoring the value of remaining assets including European nitrogen operations, methanol business, and a new Texas ammonia facility. Using conservative 6x EV/EBITDA multiples on the remaining $600 million EBITDA business, the equity stub appears worth €18 per share, representing a 38% discount to current pricing. Even in a downside scenario using 3x multiples, total returns including the €12 capital return could range from 37-57%, making this an asymmetric risk-reward proposition with limited downside protection.

Pitch Summary:
We initiated a new investment in Dollar Tree during the first quarter, as the company's announced divestiture of Family Dollar put shares back on our radar. We continue to see significant upside potential from the roll-out of higher price points, which should be much clearer to the market without the noise of a decade-long restructuring in the background. Subsequent to quarter-end, and 48 hours after "Liberation Day," we aggressively increased our position, as shares plummeted ~ 20% in the two days following the announcement.

BSD Analysis:
Broyhill initiated a position in Dollar Tree following the announced Family Dollar divestiture, viewing this as a catalyst to unlock value in the core business. The fund believes the separation will eliminate the "noise" from Family Dollar's decade-long restructuring, allowing investors to focus on Dollar Tree's fundamental strengths. The rollout of higher price points represents a significant growth opportunity that should become more visible without the distraction of underperforming assets. Management's decision to divest Family Dollar suggests a strategic focus on optimizing the core Dollar Tree format and operational efficiency. The fund's aggressive position increase following a 20% post-"Liberation Day" decline demonstrates strong conviction in the investment thesis and opportunistic capital deployment. Higher price points should drive margin expansion and revenue growth while maintaining the value proposition that attracts price-conscious consumers. The simplified business structure and strategic focus create a clearer path to improved financial performance and valuation re-rating.

Pitch Summary:
We initiated a new investment in Uber, the largest ride-share and food delivery provider globally. With investors increasingly focused on the threat from driverless technology, which we believe is at least years away from having any material impact on Uber's business, we think the market is overlooking the incredible benefits of scale currently driving (pun intended) outsized growth in profitability and surging free cash flow. We expect CEO Dara Khosrowshahi to follow a similar playbook to the one he developed at Expedia, where he was a consistent buyer of stock, ultimately repurchasing nearly a third of the company's shares outstanding during his tenure.

BSD Analysis:
Broyhill initiated a new position in Uber, viewing autonomous vehicle concerns as premature while the company benefits from powerful scale advantages. The fund believes driverless technology threats are "years away" from meaningful impact, allowing Uber to capitalize on its dominant market position in ride-sharing and food delivery. Current scale benefits are driving "outsized growth in profitability and surging free cash flow," indicating the business model is reaching maturity and generating substantial returns. CEO Dara Khosrowshahi's track record at Expedia, where he repurchased nearly one-third of shares outstanding, suggests a shareholder-friendly capital allocation approach. The market's focus on long-term disruption risks appears to be overshadowing near-term fundamental improvements and cash generation capabilities. Uber's global leadership position in multiple transportation and delivery markets provides defensive moats and growth optionality. The combination of improving profitability, strong free cash flow generation, and experienced management creates an attractive investment proposition.

Pitch Summary:
Shares of Six Flags declined 26% during the quarter, as investors became increasingly concerned about the potential for reduced discretionary spending amidst slowing economic growth. We think these fears are misplaced, as regional theme park attendance has historically proven remarkably resilient throughout previous recessions. And following its recent combination with Cedar Fair, the combined company has several levers at its disposal to drive operational improvements and optimize its balance sheet.

BSD Analysis:
Broyhill maintains a contrarian bullish view on Six Flags despite market concerns about discretionary spending pressures. The fund's investment thesis rests on the historical resilience of regional theme park attendance during economic downturns, suggesting the business model has defensive characteristics that the market is overlooking. The recent merger with Cedar Fair creates significant operational synergy opportunities and balance sheet optimization potential. Management now has multiple levers to drive performance improvements, including cost synergies, revenue optimization, and capital allocation efficiency. The 26% decline appears to reflect excessive pessimism about consumer discretionary spending, creating an attractive entry point for a business with proven recession resilience. Broyhill's confidence in the defensive nature of regional theme parks contrasts with market fears, positioning the investment as a potential beneficiary when economic concerns prove overblown. The combination creates a larger, more diversified platform with enhanced operational flexibility.

Pitch Summary:
We initiated a new position in Tokyo Electron, a leading semiconductor capital equipment vendor based in Japan. Tokyo Electron is a market leader in etch, deposition, wafer cleaning and other technologies. These are critical steps in the semiconductor manufacturing process. Beyond its meaningful scale advantages, Tokyo Electron strategically partners with customers to continuously improve its technologies (more than $17.5bn cumulatively on research and development over the last three decades) and are well managed, according to our research. Secular trends like digitalization and miniaturization in chip technology—and now the AI boom—are at work here, too. We believe Tokyo Electron is poised to grow total returns at a mid-teens rate over the coming years.

BSD Analysis:
Polen Capital initiated a new position in Tokyo Electron, viewing the Japanese semiconductor equipment leader as well-positioned to benefit from multiple secular growth drivers including AI, digitalization, and chip miniaturization trends. The fund highlights Tokyo Electron's market-leading positions in critical semiconductor manufacturing processes including etch, deposition, and wafer cleaning technologies. The company's significant scale advantages and $17.5 billion cumulative R&D investment over three decades demonstrate strong competitive moats and technological leadership. Polen emphasizes Tokyo Electron's strategic customer partnerships that drive continuous innovation and technology improvements, creating sustainable competitive advantages. The company's strong management team and operational execution provide confidence in capital allocation and strategic decision-making. Current secular trends including the AI boom, ongoing digitalization, and advanced chip miniaturization requirements create multiple tailwinds for semiconductor equipment demand. Polen expects Tokyo Electron to deliver mid-teens total return growth over the coming years as these favorable industry dynamics drive sustained outperformance.

Pitch Summary:
Shares of Avantor declined 23% in the first quarter, as policy uncertainty around budget cuts for academic institutions and pharmaceutical companies weighed on the life sciences sector. With shares trading at valuations not previously seen in its history as a public company, we believe this is a dramatic overreaction as the market is essentially discounting a halting or meaningful slowdown in scientific progress at these levels. It is rare for companies benefiting from such strong secular growth trends to be valued at trough multiples on trough earnings, but that's exactly how we view AVTR today, and exactly why we've capitalized on recent weakness to continue building our position.

BSD Analysis:
Broyhill views Avantor's 23% decline as a compelling buying opportunity, arguing the market has overreacted to policy uncertainty concerns. The fund believes current valuations represent historic lows for the company, creating an attractive entry point for a business benefiting from long-term secular growth trends. The manager's assessment that the market is "discounting a halting of scientific progress" suggests extreme pessimism is embedded in the stock price. Avantor's exposure to life sciences research and pharmaceutical development positions it to benefit from continued innovation and drug discovery efforts. The combination of "trough multiples on trough earnings" for a secularly growing business creates an asymmetric risk-reward profile. Broyhill's decision to increase position size during the weakness demonstrates high conviction in the investment thesis. The fund appears to be betting that policy headwinds are temporary while the underlying growth drivers remain intact.