Investment Pitches

Pitch Summary:
Aon was another detractor to relative performance during the quarter. Aon reported solid results recently, albeit results that featured slightly slower organic growth in the commercial risk unit than expected. Additionally, the recent $13.4B acquisition of NFP positions Aon to enter the mid-market brokerage segment, though it represents a drag on margins in the near term. With all of this said, our long-term view remains intact, and we continue to view Aon as a steady, durable low-teens earnings compounder.

BSD Analysis:
Polen Capital maintains its bullish long-term thesis on Aon despite near-term headwinds from slower commercial risk unit growth and margin pressure from the $13.4 billion NFP acquisition. The fund views these challenges as temporary factors that don't alter the fundamental investment case for the insurance brokerage leader. Polen emphasizes Aon's strategic expansion into the mid-market brokerage segment through the NFP deal, which should drive long-term growth despite near-term margin dilution. The company's diversified revenue streams across risk management, insurance brokerage, and human capital consulting provide stability and defensive characteristics. Aon's market-leading position and strong client relationships create significant competitive moats and pricing power in the insurance brokerage industry. Management's track record of successful capital allocation and operational execution supports confidence in long-term value creation. Polen expects Aon to deliver steady, durable low-teens earnings growth over time as integration benefits from NFP materialize and organic growth trends normalize.

Pitch Summary:
Shares of Baxter gained 18% in the first quarter, as the company delivered strong results, with numbers moving higher despite tariff disruptions. We thought Baxter took a big step toward rebuilding confidence, with improved execution and visibility into the balance of the year. Management expects operational sales growth of 4% to 5% this year, which appears reasonable to us. The bigger question, which will require a few more quarters of execution, is if 4% or 5% is sustainable long-term. At 12x earnings, or just over half of the market's multiple, the consensus is taking the under. We are happy to take the other side of this one.

BSD Analysis:
Broyhill expresses bullish conviction on Baxter despite market skepticism, viewing the current valuation as an attractive contrarian opportunity. The company's ability to deliver strong results amid tariff headwinds demonstrates operational resilience and management execution capabilities. Management's guidance for 4-5% operational sales growth appears achievable and represents solid performance for a healthcare equipment company. The key investment question centers on sustainability of this growth trajectory, which Broyhill believes the market is underestimating. At 12x earnings, Baxter trades at a significant discount to broader market multiples, suggesting pessimistic expectations are already embedded in the stock price. The fund's willingness to "take the other side" indicates confidence that consensus estimates are too conservative. Improved execution and enhanced visibility provide a foundation for sustained performance, making the risk-reward profile attractive at current valuations.

Pitch Summary:
Bunzl, the UK based distributor, sells a broad range of "goods not for resale" including packaging for grocers, cleaning equipment in canteens and health and safety equipment in warehouses. The key competitive advantage for Bunzl is the ability to be a one stop shop for all products in one delivery reducing customers costs and complexity, whilst also reducing the need for customers to hold inventory. Bunzl's end markets are growing over time, at 2-3% per annum, weighed down by exposure to retail end markets. Despite this, the company has consistently delivered per-share growth in revenue, profits, and dividends of 8–9% per year over the past two decades. This has been driven by a disciplined and repeatable acquisition strategy focused on very fragmented markets across many countries. With a pipeline of around 1,000 potential targets, Bunzl still sees ample room for continued consolidation-led growth. Bunzl generated around £600m of free cash flow last year, equivalent to a free cash flow yield of almost 8%. Historically Bunzl traded on a 5-6% free cash flow yield, implying upside of around 45%.

BSD Analysis:
Overstone identifies Bunzl as an attractive consolidation play in the fragmented distribution market for non-food consumables. The company's competitive moat stems from its one-stop-shop model, reducing customer costs and inventory requirements across packaging, cleaning, and safety products. Despite modest 2-3% end market growth constrained by retail exposure, Bunzl has delivered impressive 8-9% annual per-share growth over two decades through disciplined acquisitions. The manager highlights a substantial pipeline of 1,000 potential targets, suggesting continued consolidation opportunities in fragmented markets globally. At an 8% free cash flow yield versus historical 5-6% levels, the valuation appears compelling with 45% implied upside. The £600m annual free cash generation provides substantial firepower for continued acquisitions while supporting dividend growth. This represents a quality compounder trading at an attractive valuation with clear visibility into future growth drivers.

Pitch Summary:
In contrast with the first quarter, when ICON was the Portfolio's top relative contributor, the stock experienced some weakness in the second quarter. Given a solid earnings report and an investor day on which the company increased guidance, the stock gave back some of its gains from the first quarter. As a very well-positioned player in an industry with an increasingly healthy demand environment, we think ICON is poised to deliver respectable growth and returns over the next few years.

BSD Analysis:
Polen Capital remains bullish on ICON despite second quarter weakness, viewing the pullback as a temporary correction following strong first quarter gains rather than a fundamental deterioration. The fund highlights ICON's solid earnings performance and management's increased guidance at the recent investor day as evidence of underlying business strength. Polen emphasizes ICON's strong competitive position within the clinical research organization industry, which is experiencing increasingly healthy demand dynamics. The company benefits from pharmaceutical companies' continued outsourcing of clinical trial activities and the growing complexity of drug development processes. ICON's scale advantages, global footprint, and specialized capabilities position it well to capture market share in a consolidating industry. Management's confidence in raising guidance demonstrates strong visibility into future growth opportunities and operational execution. Polen expects ICON to deliver respectable growth and returns over the next several years as the CRO industry continues to benefit from robust pharmaceutical R&D spending and outsourcing trends.

Pitch Summary:
Shares of Philip Morris tacked on an additional 33% in the first quarter after returning 34% last year. The company reported a 53% increase in US ZYN shipments as production capacity increased, fueling a 250 basis point improvement in operating margins and illustrating the positive mix shift to smoke-free products. While we have reduced the position as shares have eliminated their discount to the market over the past year, PM remains our largest investment, with momentum accelerating in its business. Simply put, it's difficult to find another company better positioned for the current economic environment.

BSD Analysis:
Broyhill maintains a strong bullish stance on Philip Morris, highlighting exceptional operational momentum in the smoke-free products segment. The 53% surge in ZYN shipments demonstrates successful capacity expansion and growing consumer adoption of reduced-risk products. The 250 basis point margin improvement reflects the favorable economics of the product mix shift away from traditional cigarettes. Despite reducing position size as valuation premiums compressed, PM remains the fund's largest holding, indicating high conviction in the investment thesis. The manager's assessment that PM is uniquely positioned for the current economic environment suggests defensive characteristics combined with growth potential. Strong execution in the smoke-free transition positions the company to capture market share in a declining but profitable industry. The combination of margin expansion, volume growth, and strategic positioning creates a compelling investment narrative.

Pitch Summary:
Kyocera, a Japanese conglomerate, possess all the qualities and vices that we have come to expect from Japanese companies. It is a conglomerate structure with industrial assets that span semiconductor components, printing solutions, pneumatic tools, and mobile phones. It also maintains a pristine balance sheet and significant cross-shareholdings, most notably in KDDI, the Japanese telecom firm. The company appears to be at an inflection point. While it has acknowledged the need for reform, the market remains sceptical. A significant restructuring is underway, which is unsurprising considering the difficulties facing Kyocera's core operations. The biggest risk is a return to past habits of poor capital allocation and a disregard for shareholders. However, the current valuation —0.7x price to book— broadly reflects this outcome and ignores the potential for change. Our fair value of 1x price to book implies over 40% upside.

BSD Analysis:
Overstone presents a classic Japanese turnaround story with Kyocera, betting on corporate reform at an attractive valuation. The manager acknowledges the company's conglomerate structure spanning semiconductors, printing, tools, and mobile phones, while highlighting its strong balance sheet and strategic KDDI stake. The investment thesis centers on a significant restructuring currently underway, with management finally acknowledging the need for reform after years of poor capital allocation. At 0.7x price-to-book, the valuation appears to price in continued underperformance while ignoring transformation potential. The manager's 1x P/B fair value target implies over 40% upside, suggesting the market is overly pessimistic about the company's ability to change. This represents a classic value play on Japanese corporate governance improvement, though execution risk remains substantial given the company's historical track record.

Pitch Summary:
Sage, an accounting and financial software provider to small and medium-sized (SMB) businesses, was the Portfolio's largest detractor from relative performance during the quarter. The weakness in the stock stemmed from a 2H forecast for revenue growth that was revised lower, stoking concerns that an increasingly challenging macro backdrop is weighing on their core SMB customer. Taking a step back, Sage's core value proposition is providing mission-critical software to SMBs. This level of growth, coupled with modest margin expansion, should, in our estimation, allow Sage to grow earnings at a mid-teens annualized rate going forward.

BSD Analysis:
Despite recent underperformance due to lowered second-half revenue guidance, Polen Capital maintains a bullish long-term view on Sage Group based on its mission-critical software positioning with small and medium-sized businesses. The fund acknowledges near-term macro pressures affecting SMB customers but emphasizes the essential nature of Sage's accounting and financial software solutions. Polen views the current weakness as temporary, driven by cyclical rather than structural factors affecting the SMB market. The company's software provides critical business functionality that customers cannot easily replace or eliminate, creating strong customer retention and pricing power. Management's focus on modest margin expansion alongside revenue growth supports Polen's expectation for mid-teens annualized earnings growth over the long term. The fund sees Sage's market-leading position in SMB financial software as a durable competitive advantage that will drive sustained outperformance once macro conditions stabilize. Current valuation appears attractive given the company's defensive characteristics and growth potential.

Pitch Summary:
As noted last quarter, Teleperformance's stock price has been under pressure over the past year owing to a combination of factors ranging from a challenging macro environment to a perception that artificial intelligence (AI) poses a threat to their core business. This extremely negative sentiment is reflected in the stock's current forward 12-month P/E multiple of 6.5x. Encouragingly, the company reported better-than-expected organic growth in the quarter and reiterated revenue growth guidance, which we view as a positive development given that the company had reduced guidance a few times in 2023. Over the long term, we continue to believe the company can grow its earnings at a healthy double-digit rate.

BSD Analysis:
Polen Capital views Teleperformance as significantly undervalued, trading at an extremely depressed 6.5x forward P/E multiple due to excessive market pessimism about AI disruption and macro headwinds. The fund sees this negative sentiment as creating an attractive entry point for a fundamentally sound business. Recent better-than-expected organic growth and management's reiteration of revenue guidance mark a positive inflection after multiple guidance reductions in 2023. Polen believes market fears about AI displacement are overblown, viewing the technology as more likely to enhance rather than replace human-centric customer service operations. The company's global scale and diversified client base across multiple industries provide defensive characteristics during economic uncertainty. Management's renewed confidence in guidance suggests stabilizing business trends and potential for operational leverage. Polen maintains conviction in Teleperformance's ability to deliver healthy double-digit earnings growth over the long term despite near-term challenges.

Pitch Summary:
After delivering a strong first quarter, SAP's stock price again rose in the second quarter on the back of an acceleration in the growth rate of the current cloud backlog—an indicator of cloud revenue to be booked within the next 12 months. Results showed that SAP's transition to the cloud (a core part of our thesis on the business) continues at pace, and the company is seeing both strong cloud revenue growth and expanding cloud gross margins. Management is guiding cloud sales growth through 2025 in the mid-20% range, which we view as both reasonable and attractive. We also view SAP as one of the more resilient software business models as it is an essential part of their customers' day-to-day operations and cannot easily be turned off or scaled back.

BSD Analysis:
Polen Capital's bullish thesis on SAP centers on the company's successful cloud transformation, which is accelerating ahead of expectations with strong backlog growth indicating robust future revenue visibility. The fund highlights SAP's expanding cloud gross margins and management's guidance for mid-20% cloud sales growth through 2025 as key validation of the investment case. SAP's mission-critical nature in enterprise operations provides significant competitive moats and customer stickiness, making it highly resilient to economic downturns. The company's essential role in customers' daily operations creates switching costs that protect against churn and support pricing power. Polen views the cloud transition as a fundamental driver of long-term value creation, with improving unit economics and recurring revenue characteristics. The acceleration in cloud backlog growth demonstrates strong customer demand and validates the strategic shift. Management's conservative yet attractive growth guidance provides confidence in sustainable execution of the cloud strategy.

Pitch Summary:
Reversing course from last quarter, HDFC Bank was our top relative contributor in the second quarter. Despite pressure on returns and margins in the near term, management is determined to avoid irrational competition that precipitates excessive risk-taking on either side of the balance sheet. The company remains focused on sustainably growing its deposit franchise, improving profitability metrics, and growing earnings per share. As such, HDFC remains well-positioned as one of the dominant banks in the attractively growing Indian economy.

BSD Analysis:
Polen Capital maintains a bullish stance on HDFC Bank despite near-term margin pressures, highlighting management's disciplined approach to risk management and sustainable growth. The fund emphasizes the bank's strategic focus on deposit franchise expansion and earnings per share growth while avoiding excessive risk-taking that could compromise long-term stability. HDFC's position as a dominant player in India's rapidly growing economy provides significant structural tailwinds. The bank's commitment to improving profitability metrics while maintaining conservative underwriting standards positions it well for sustained outperformance. Polen views the current margin pressure as temporary, with the bank's fundamental competitive advantages remaining intact. The investment thesis centers on HDFC's ability to capitalize on India's economic growth while maintaining superior risk-adjusted returns. Management's rational approach to competition and focus on sustainable growth metrics supports the long-term investment case.

Pitch Summary:
Grindr reported fantastic earnings once again in May, demonstrating further progress on becoming the 'Gayborhood in Your Pocket'. Maple Tree Capital is up well over 100% on our position, and Grindr is now a maturing company that spits free cash flow with enormous EBITDA margins, and soon, net margins. Despite this, we did trim our position at $23.00 ($22.17 -3.6% as of 7/2) to buy Lemonade at $31.95 ($42 +31.5% as of 7/2) which was a huge benefit to Jonagold's performance.

BSD Analysis:
Maple Tree Capital presents a successful bull case on Grindr, having achieved over 100% returns on their position while recognizing the company's evolution into a mature, cash-generating business. The manager's "Gayborhood in Your Pocket" thesis appears to be materializing as Grindr demonstrates strong execution with fantastic May earnings results. The company has reached an inflection point where it generates substantial free cash flow with enormous EBITDA margins, and management is progressing toward positive net margins. This financial maturation represents a significant transformation from a growth-stage company to a profitable, cash-generative platform. However, the manager's decision to trim the position at $23.00 to redeploy capital into Lemonade at $31.95 suggests tactical portfolio management rather than diminished conviction. The trade proved beneficial as Lemonade subsequently gained 31.5% while Grindr declined 3.6%. Grindr's evolution into a profitable social networking platform serving the LGBTQ+ community with strong unit economics validates the original investment thesis and positions it as a mature holding within the portfolio.

Pitch Summary:
Shopify, a leading cloud-native commerce software platform, is a business we've been studying since 2018 and which we have long admired. At its core, Shopify's goal is to be the operating system of retail, helping to democratize commerce via lowered barriers to entry, the rise of DTC (direct-to-consumer), and hyper-targeted digital ads. Shopify's business model combines 1) a mission-critical software business where merchants can run all their business operations from one dashboard and 2) a payments business with a long runway to increase attach rates and grow alongside merchants. Additionally, we believe the business possesses significant optionality to continue attaching existing merchant solutions and adding more merchant services as high-margin cross-sells. With several powerful tailwinds at their back (e-commerce, mobile commerce, social media, digital payments, seamless omnichannel, DTC, cloud software digitization) and a highly scalable business model, we think their growth will likely prove to be stronger for longer than investors expect.

BSD Analysis:
Polen Capital initiated a position in Shopify after six years of research, reflecting deep conviction in the long-term opportunity. The fund views Shopify as positioned to become the "operating system of retail" by democratizing commerce and lowering barriers to entry. Polen appreciates the dual business model combining mission-critical software with a growing payments business that can increase attach rates over time. The company benefits from multiple powerful secular tailwinds including e-commerce growth, mobile commerce, social media integration, and direct-to-consumer trends. Polen sees significant optionality for high-margin cross-selling of merchant services and expects the highly scalable business model to deliver stronger-than-expected growth over extended periods. The fund believes current investor expectations underestimate Shopify's long-term growth potential.

Pitch Summary:
Lemonade's retail narrative continues to positively evolve. Membership of the Lemonade X retail investor community has risen to over 3,100 members and more eyes are on the story. Lemonade is a technology company, with huge operating leverage, that just so happens to do insurance. Management recently reduced their reinsurance from 55% to 20%, directly onboarding more risk, a sign of extreme confidence in their AI models.

BSD Analysis:
Maple Tree Capital maintains a bullish stance on Lemonade, emphasizing its identity as a technology company with insurance operations rather than a traditional insurer. The manager highlights the growing retail investor community of over 3,100 members in Lemonade X, suggesting increasing awareness and momentum around the story. The most significant development is management's decision to reduce reinsurance coverage from 55% to 20%, directly taking on more underwriting risk. This strategic shift demonstrates exceptional confidence in Lemonade's AI-powered risk assessment models and represents a major catalyst for margin expansion. By retaining more premium income previously ceded to reinsurers, Lemonade can capture significantly more upside from accurate underwriting while leveraging its technology platform's operating leverage. The reduced reinsurance dependency validates the effectiveness of their behavioral economics and AI-driven approach to insurance, positioning the company for accelerated profitability as they scale their customer base across multiple insurance verticals.

Pitch Summary:
Blue Label Telecoms (BLU) continues its path of self-healing. BLU announced that it received approval from the Competition Commission to take control of Cell C. This is a subtle but essential development to unlock shareholder value. The remaining impediment is the telecoms regulator. Despite BLU trading at single-digit multiples of its core business earnings, investor interest has been subdued. A significant reason for this hesitancy is the complexity associated with Cell C—an overhang that has muddled BLU's financials and made the business difficult for investors to understand. For many, this places BLU in the 'too hard' pile, leading to its neglect. Gaining "control" of Cell C should simplify matters considerably. Once Cell C is consolidated into BLU's accounts, the financial statements will become less complex and feature a manageable external debt balance. The transformation under the new management at Cell C cannot be understated. They have shifted the business from a seemingly hopeless situation to one where merely achieving a break-even point would be sufficient for BLU to prosper. Additionally, Cell C's management has renegotiated their roaming agreement with MTN on very favourable terms, reducing cash burn and positioning Cell C for growth as a wholesaler of mobile communications. The consolidated external debt position is the last remaining piece of the puzzle that must fall into place. During the Cell C recapitalisation, lenders leveraged BLU's robust core business as credit enhancement to offset their risk. This strategy, while necessary, imposed a substantial debt load on BLU, a point that continues to be a significant concern in the market. However, what seems underappreciated by the market is the expected repayment of this debt by the third quarter of this year. This repayment milestone is crucial as it would improve BLU's balance sheet and restore management's capacity to undertake shareholder-friendly actions, such as share buybacks or dividend distributions. Assuming Cell C reaches a point where it no longer has a negative operating cash flow, BLU stands to generate significant excess free cash flow (FCF). Given the current stock valuation multiples, BLU could aggressively repurchase shares, potentially reducing its share count by a substantial margin within 3-4 years. This scenario would demonstrate a solid financial turnaround and enhance future profitability, making BLU an increasingly attractive investment for current and potential new investors. Such an event could recalibrate market perceptions and spotlight BLU as a compelling comeback story in the telecom sector.

BSD Analysis:
SaltLight Capital presents Blue Label Telecoms as a compelling turnaround story centered on gaining control of Cell C and simplifying the business structure. The manager identifies BLU as trading at single-digit multiples due to investor confusion over Cell C's complex financials, creating a 'too hard pile' situation. The key catalyst is regulatory approval to consolidate Cell C, which would simplify financial statements and unlock value. Cell C's transformation under new management has been remarkable, moving from a hopeless situation to near break-even, with favorable MTN roaming agreements positioning it for growth as a mobile wholesaler. The critical inflection point is the expected Q3 debt repayment, which would restore BLU's financial flexibility for shareholder returns. Once Cell C achieves positive operating cash flow, BLU could generate substantial excess free cash flow and aggressively repurchase shares, potentially reducing share count significantly over 3-4 years. This represents a classic 'self-healing' investment where operational improvements and capital allocation could drive substantial returns as market perceptions recalibrate.

Pitch Summary:
We re-established a position in Zoetis after holding a position from late 2017 to late 2021. Our sale came after a successful holding period and was solely driven by valuation, which we felt was stretched at the time. We had an opportunity to re-establish a position at a lower price than we sold in September 2021 despite Zoetis having a roughly 25% higher earnings base. In short, we've taken advantage of the recent dip in valuation to buy back what we think is an attractive safety business capable of sustaining durable low double-digit earnings growth.

BSD Analysis:
Polen Capital strategically re-entered Zoetis at an attractive valuation after previously selling due to stretched pricing. The fund demonstrates disciplined capital allocation by repurchasing the stock at a lower price than their 2021 sale despite Zoetis having grown earnings by approximately 25% since then. This creates an attractive risk-adjusted entry point for a business Polen characterizes as having "safety" characteristics. The fund expects durable low double-digit earnings growth, which aligns with their investment criteria for predictable, quality businesses. Polen's willingness to repurchase a previously held position reflects strong conviction in Zoetis' competitive advantages in animal health and the defensive nature of the veterinary pharmaceutical market.

Pitch Summary:
Our largest position, Upstart Holdings, reported exceptional Q1 2025 results, raising guidance for FY '25. The unwinding of the macro narrative caused shares to fall from February high of $96 to an April low of $31, a whopping 67.7% decline. We increased Jonagold's position size in Upstart by 38%, and shares have since rebounded 138.7% from the April $31 low. During the quarter, our portfolio manager Henry Invests attended Upstart's AI Day in New York City, learning more about Upstart's product roadmap and meeting with the management team. This greatly strengthened our conviction, and in the days that followed, Maple Tree Capital raised Jonagold's Upstart allocation by 38%, deepening our commitment to what was already the portfolio's largest position. Upstart posted $213m in Q1 '25 revenue, surpassing expectations. Their guidance for $225m in revenue was lighter than the street expected, but given during a time of max economic uncertainty. This caused shares to fall post earnings, we bought the dip, which quickly reversed. The main concern from institutional investors (the same analysts we watched not pay attention during Upstart's AI Day presentation) was margin compression as Upstart scales. This backwards thinking had confirmation bias in Q1. While Upstart's margins did thin, it wasn't from expanding their credit box to riskier borrowers. Instead, it reflected an expansion of their borrower base, not credit quality degradation. Upstart has shifted from primarily serving only the non-prime segment of the market, into providing coverage for all borrowers for several different products. This expansion into prime dilutes aggregate contribution margins, but is entirely accretive to aggregate contribution dollars!!! Further, as Upstart's product offerings grow in size, they collect more data and their AI underwriting gets better. This results in each new product growing at expanding margins over time. The chart for Upstart is phenomenal. Upstart has: golden cross, inverse H&S, demolished $72 resistance, gap near $80, 25% short interest, institutional accumulation (red bars), supportive macro narrative, and an explosive business with strong fundamental turnaround. Last quarter we wrote, "Let us be clear, our conviction in Upstart is unwavering." That still stands, but it no longer captures the full picture. Our conviction in Upstart is absolute, the thesis has advanced well beyond our earlier expectations, and the balance of risk now tilts decisively toward even greater upside. Upstart's evolution over the past year has been nothing short of remarkable. Their AI has grown more accurate, comprehensive and adaptive, while funding on the platform is now well above the 50% committed mark, greatly reducing the volatility of the business. Layer onto that a broader product suite, a widening mix of borrowers, and early signs of revenue streams that are less tethered to transactional volume, and you have the makings of an historic turnaround. A heavy short interest only adds kinetic potential should execution continue to surprise to the upside. Maple Tree Capital is positioned to ride that inflection. Our years of due-diligence and on-the-ground engagement with management convince us that today's progress is just the foothill of a steeper ascent. We therefore maintain a price target of $150, confident that the market has yet to fully appreciate the scale of value creation now in motion.

BSD Analysis:
Maple Tree Capital presents an exceptionally bullish thesis on Upstart Holdings, positioning it as their largest holding with absolute conviction. The manager's thesis centers on Upstart's AI-driven lending platform evolution from serving primarily non-prime borrowers to covering all credit segments across multiple products. While Q1 2025 margin compression concerned institutional investors, the manager argues this reflects beneficial borrower base expansion rather than credit quality deterioration, with each new product ultimately growing at expanding margins as AI models improve with more data. The fund increased its position by 38% during the quarter's volatility, capitalizing on shares falling from $96 to $31 before rebounding 138.7%. Technical indicators including golden cross formation, inverse head-and-shoulders pattern, and 25% short interest support the bullish case. The manager's proprietary Upstart Trustpilot Index and UpstartIQ forecasting model provide unique insights, consistently predicting quarterly revenue within single-digit error bands. With funding above 50% committed and diversified revenue streams emerging, Upstart appears positioned for reduced volatility and sustained growth, justifying the aggressive $150 price target.

Pitch Summary:
Transaction Capital (TCP) completed its spin-off of WeBuyCars (WBC) during the quarter – an event we've written about many times. We've previously expressed our belief that WBC has ample room to grow over the next few years. The market often misunderstands the dynamics of "aggregators" and, as a result, underestimates WBC's potential value. Through economies of scale, aggregators tend to capture significant portions of the "industry pools of profit." Our research of other aggregators across various industries bolsters our confidence in maintaining our position in WBC. The forthcoming year presents a particularly intriguing opportunity with the remaining TCP 'rump', which includes Nutun and the troubled SA Taxi. In our fourth-quarter 2023 letter, we posed a critical question post-unbundling: "What becomes of the remaining TCP business? Lenders no longer have leverage over the holding company through HoldCo debt cross-default clauses. Theoretically, if SA Taxi lenders choose not to support debt-rollover relief, TCP could simply put SA Taxi into business rescue in an orderly process rather than the voluntary workout process they're following at the date of writing. We'll know in two months how things will look post-unbundling." We hypothesised that a contingent of investors (retail and wealth managers) would likely want to own the 'clean' and 'exhilarating' WeBuyCars business over TCP's complex, troubled remains (likely to avoid the complications of explaining a potential credit event to their clients). True to expectations, we observed a rapid sell-off of TCP shares post-spin-off. This is a classic spin-off special situation, so we increased our holdings. Over the years, engaging in such spin-off opportunities has yielded excellent, non-correlated returns for us. While the timing of these developments can vary, often taking 6-12 months to unfold, each situation is unique. The next significant catalyst will be clarity around the SA Taxi debt situation.

BSD Analysis:
SaltLight Capital identifies Transaction Capital as a classic spin-off special situation following the separation of WeBuyCars. The manager's thesis centers on the market's preference for the 'clean' WeBuyCars business over TCP's remaining complex operations, creating a temporary valuation disconnect. The remaining TCP entity includes Nutun (unsecured lending) and the troubled SA Taxi division, with the key catalyst being resolution of SA Taxi's debt situation. The manager notes that post-spin-off, lenders no longer have cross-default leverage over the holding company, providing TCP with more flexibility in handling SA Taxi's issues, including potential business rescue proceedings. This structural change removes a significant overhang that previously constrained the holding company. SaltLight has increased their position following the predictable post-spin-off sell-off, viewing this as a non-correlated opportunity with 6-12 month catalysts. The investment relies on the manager's successful track record in spin-off situations and the eventual clarity around SA Taxi's debt resolution.

Pitch Summary:
Finally, Paycom Software—a new addition we started at a smaller position size—represented another relative detractor in the period. Paycom is a leading cloud-native payroll and human capital management (HCM) software provider. A recent go-to-market hiccup with their new BETI product and some macro weaknesses have led to a deceleration in their near-term growth. However, we continue to think the long-term picture remains intact as a leader in an attractive industry, providing mission-critical software with highly recurring revenue, 90%+ retention rates, and high returns on capital. The stock price performance has effectively been all P/E multiple compression.

BSD Analysis:
Polen Capital initiated a new position in Paycom despite near-term headwinds, demonstrating confidence in the long-term investment thesis. The fund acknowledges temporary challenges including go-to-market issues with the BETI product and macro-related growth deceleration. However, Polen emphasizes Paycom's strong fundamental characteristics: leading position in cloud-native payroll and HCM software, mission-critical nature of the product, highly recurring revenue model, and exceptional 90%+ retention rates. The fund views recent stock weakness as primarily multiple compression rather than fundamental deterioration. Polen sees attractive entry valuation for a high-quality business with strong competitive positioning and capital efficiency in the growing HCM software market.

Pitch Summary:
During the quarter, we reinvested back in Tencent (and proxy Prosus) primarily because we're observing another pattern from our playbook that we cited in our last letter: the idea that advertising is a helpful 'switch' that can be 'turned on' to enhance margins when they're required. Tencent's WeChat is used daily by 1 billion people in China. Still, Tencent has historically under-monetised the advertising potential of its vast social network, relying on in-game purchases and fintech take rates. Then came TikTok (Douyin in China), where engagement was determined not by what your friends were doing but through an omnipotent algorithm delivering personalised short-form video content. Social network effects became less relevant, and eyeballs moved elsewhere. Seeing this as a competitive threat, Tencent launched its own short-form video—much as Meta had done through Reels. Similarly to Facebook and Instagram, with Tencent's daily ubiquity and existing network effects, video took off rapidly as a complement to engagement time. Once they reached a sufficient scale, management started monetising the content. Our thesis is that AI is likely to enhance the opportunity by 1) improving video engagement through surfacing more personal content to users (providing more monetisable ad inventory) and 2) improving ad targeting (more relevant ads that lead to higher click-through rates) in the same way it has benefited AppLovin and Meta Platforms. Independent of AI. If Tencent gets these elements right, each is combinatorial to growing profitability, but AI is a force multiplier. Despite this positive backdrop, Tencent's promising narrative is somewhat overshadowed by broader negative sentiment towards Chinese investments, which has pressed Tencent's valuation multiples to historically low levels. In this environment, Tencent is compelled to self-heal. In response, Tencent is deploying its increasing profitability by returning capital to shareholders by boosting dividends by 42% and doubling its share repurchases over the coming year. There is a financial link to its shareholder Prosus here. In the past, Tencent's repurchases had little impact on their share price and were primarily a mechanism to 'sterilise' share sales from Prosus in its own value unlock programme. We think there is a good chance that Prosus will also step up its own repurchases. To give some sense of the scale of the repurchases, Prosus' market cap is $75bn, and Tencent has announced $12bn in repurchases over the next year. You'll notice that our thesis does not rely on Chinese macroeconomic conditions. We think a combination of 'self-healing' and low valuations should generate a favourable return for us.

BSD Analysis:
SaltLight Capital presents a compelling bull case for Tencent centered on the company's ability to monetize its massive WeChat user base through advertising. The manager identifies Tencent's historical under-monetization of its 1 billion daily WeChat users as a significant opportunity, particularly as the company launches short-form video content to compete with TikTok. The thesis hinges on AI-driven improvements in both content engagement and ad targeting, which could create a multiplicative effect on profitability. At current ad loads of only 3% compared to Western counterparts at ~10%, there's substantial room for revenue expansion. The investment benefits from Tencent's 'self-healing' approach through aggressive capital returns - a 42% dividend increase and doubled share repurchases totaling $12 billion annually. With Tencent trading at historically low valuations due to broader Chinese market sentiment, the manager sees an asymmetric opportunity where fundamental improvements in monetization could drive significant returns independent of macroeconomic conditions.

Pitch Summary:
In line with broader weakness across the enterprise software complex, Workday sold off more than 15% as management guided to organic subscription sales growth in the range of 16.6-17%, 50bps lower than previously guided. Zooming out longer term, we believe nothing has fundamentally changed for Workday. According to our research, it remains a solid, market-leading, long-term compounder with a substantial runway for future growth in the market for both its human capital management and financial software.

BSD Analysis:
Polen Capital maintains conviction in Workday despite near-term guidance disappointment and stock weakness. The fund views the 15% selloff as temporary market reaction to slightly reduced organic subscription growth guidance (16.6-17% vs. previous guidance). Polen emphasizes that fundamental business characteristics remain intact, with Workday maintaining its market-leading position in human capital management and financial software. The fund sees substantial long-term growth runway in both core markets and characterizes Workday as a solid long-term compounder. This perspective suggests Polen views current weakness as a temporary setback rather than structural deterioration, maintaining confidence in the company's competitive positioning and growth prospects in the enterprise software market.