Investment Pitches

Pitch Summary:
Interfor is a North American lumber producer with sawmills situated throughout the continent in close geographic location to major timber baskets. We recently bought more shares of what we believe is a company fighting well below its weight class. The lumber industry is currently depressed due to heavily discounted lumber prices, which have declined significantly from the Covid-19 boom period for myriad reasons including a slowdown in new housing construction caused by persistently high-interest rates. Within this context, it's no surprise that Interfor's stock is under pressure. However, our investment in Interfor is not based on short-term earnings speculation. We didn't buy more shares anticipating the bottom; we bought more shares because we believe the company is currently valued at a substantial discount to its intrinsic value, which is the present value of its future cash flows. This results in a high return opportunity with manageable risk. Our investment is predicated upon the replacement cost of Interfor's productive capacity. We believe that rebuilding Interfor's business would cost multiples of the current valuation, and we are also confident that North America still needs lumber. Of course, no one would spend the money to rebuild the business in the current environment given the lack of any economic return. In fact, the opposite is likely to happen as the financial stress continues to weigh on less cost competitive and weaker financed competitors and capacities. We have confidence in Interfor's management team, having met with them on multiple occasions. Our colleague Mike DeRop has toured several of their southern mills, meeting many of the team members. Through this first-hand research we have found both the people and its capital properties to be assets of high quality, even as it struggles through the current industry weakness. We like to focus on simple facts when we build our investment theses. Lumber pricing today is unsustainable. It has been below break-even for the last year. In this case we see that the best companies in the industry with the lowest costs and the best balance sheets are still losing money, and that is not sustainable. It follows then that if you believe lumber is still a necessary product the price will naturally have to return to more normalized levels of approximately $500 per thousand board feet, well above today's prices of ~$350. This pricing would lead to earnings not far off from the current market cap of the company. When this happens is what we cannot know, so we focus on the companies in the strong financial positions managed by savvy capital allocators who will be not only take advantage of the improved conditions simply surviving but also improve the ability of their businesses to generate free cash flow along the way. We would be remiss if we didn't note that the balance sheet has leverage today, which does cause strain, but believe this debt structure is manageable. We further believe that the company has several levers to pull should the strain grow to a less manageable level. An example of that is the companies have cumulative duties of $570m, which they only carry on their balance sheet for $160m. These are deposits that the company has paid over time that are held in trust by the U.S. and if they sold these assets today they would likely be able to get 35 cents on the dollar, with a back-in on incremental recoveries.

BSD Analysis:
Robotti has increased their position in Interfor, a North American lumber producer, viewing it as significantly undervalued relative to intrinsic value. The investment thesis is built on replacement cost analysis - rebuilding Interfor's productive capacity would cost multiples of current market valuation. Current lumber prices around $350 per thousand board feet are unsustainable and below break-even levels for even the most efficient producers. The fund expects normalization to approximately $500 per thousand board feet, which would generate earnings approaching the company's current market cap. Management quality has been validated through direct meetings and facility tours, providing confidence in capital allocation capabilities. While the balance sheet carries leverage creating near-term strain, the company has financial flexibility including $570 million in cumulative duties carried at only $160 million book value. The investment represents a classic value opportunity where temporary industry distress has created a substantial discount to intrinsic value for a quality operator with strategic assets.

Pitch Summary:
Recently, we made a strategic investment in ArcelorMittal S.A., marking our first direct investment in a steel producer in many years. We believe ArcelorMittal's focus on the more environmentally friendly EAF (electric arc furnace) method, combined with its attractive valuation, positions it as one of the best companies to capitalize on the ongoing changes in the steel industry. This investment highlights two of our core investment philosophies. First, our grassroots macroeconomic approach requires a deep understanding of a company's customers, suppliers, and competitors to gain a comprehensive view of the industry. This approach led us to identify ArcelorMittal and quickly grasp the dynamics surrounding its business. Second, this investment is a prime example of our "ugly duckling" strategy, where we seek undervalued companies with current obstacles but a strong potential for future growth. Despite facing challenges in recent years, including one-time events at their Kazakhstan operations and overall industry headwinds, we see significant upside for ArcelorMittal.

BSD Analysis:
Robotti has initiated a new position in ArcelorMittal, marking their first direct steel producer investment in years. The investment thesis centers on the company's strategic focus on electric arc furnace (EAF) technology, which is more environmentally sustainable than traditional blast furnace methods. This positions ArcelorMittal advantageously as the steel industry undergoes environmental transformation. The fund views this as an "ugly duckling" opportunity - a quality company trading at attractive valuations due to temporary headwinds. Recent challenges include operational issues at Kazakhstan facilities and broader industry weakness, but these appear to be transitory factors. The steel industry has seen significant M&A activity with large premiums to market prices, suggesting public markets are undervaluing steel assets. ArcelorMittal's global scale, technological advantages, and current valuation discount create compelling risk-adjusted return potential. The investment aligns with Robotti's contrarian approach of buying quality businesses during periods of industry distress.

Pitch Summary:
Corpay (CPAY), a fleet and corporate payments company, declined due to concerns of a macro slowdown in its fleet customers as well as declining gasoline prices. (Corpay earns a percentage on its customers' gasoline purchases.) The fleet business generates significant cash flow that the Founder & CEO has redeployed very effectively into corporate payments acquisitions. In fact, late in the quarter, Corpay announced its second largest corporate payments acquisition. We held our position because we are confident that the CEO (who owns $550M in shares of the company, which aligns our interests) will efficiently allocate capital at high ROIC into the corporate payments segment.

BSD Analysis:
The manager maintains conviction in Corpay despite near-term headwinds from macro concerns and declining gasoline prices affecting the fleet business. The investment thesis focuses on the company's strategic transformation through acquisitions in the higher-growth corporate payments segment, funded by strong cash flows from the fleet business. Management quality and alignment are key pillars of the investment case, with the founder-CEO owning $550 million in shares, ensuring strong alignment with shareholders. The manager emphasizes the CEO's proven track record of efficient capital allocation at high returns on invested capital. The recent announcement of the second-largest corporate payments acquisition demonstrates continued execution of the strategic pivot toward higher-margin, less cyclical revenue streams.

Pitch Summary:
Teva Pharmaceutical (TEVA), a global manufacturer of generic and branded drugs, outperformed its peers and the broader market in the second quarter due to positive clinical data, successful product launches, and stabilizing generic pricing. Promising first-quarter sales from newer products like Ajovy for migraine and Austedo for tardive dyskinesia and Huntington's continue to highlight its innovative capabilities. TEVA also provided positive phase 3 data on Olanzapine for schizophrenia and received approval for biosimilar versions of Humira and Stelara. These developments, along with a stabilizing generic market, have improved TEVA's financial performance in recent years, allowing it to reduce net leverage to ~3x, with further reductions planned. Despite this progress, many investors undervalue TEVA at a ~7x Enterprise value (EV)/EBITDA, treating it like a commodity-generic company despite its transformation. We continue to hold the security.

BSD Analysis:
The manager presents a compelling turnaround thesis for Teva Pharmaceutical, emphasizing the company's successful transformation from a commodity generic manufacturer to a more diversified pharmaceutical company with innovative capabilities. The investment case centers on multiple positive catalysts including strong performance from newer branded products like Ajovy and Austedo, positive clinical trial results, and successful biosimilar approvals. The manager highlights significant balance sheet improvement with net leverage reduction to 3x and plans for further deleveraging. The valuation argument is particularly strong, noting the market's failure to recognize Teva's transformation, trading at only 7x EV/EBITDA despite improved fundamentals. The stabilizing generic pricing environment provides additional tailwinds for the business model.

Pitch Summary:
Vertiv Holdings Co. (VRT) – Vertiv is a leading critical digital infrastructure technology company that should benefit from strong growth tied primarily to the buildout and expansion of data centers and associated needs of AI technologies, including graphics processing units (GPU). The company's cooling and power management products have earned significant traction in the marketplace, and we believe Vertiv will continue to gain market share in what is a long-tailed opportunity. The company's leadership position in direct-to-chip liquid cooling technology has been a competitive advantage. Foremost GPU chip manufacturer NVIDIA has recognized Vertiv as a strong partner. The computing requirements of AI will continue to accelerate data center infrastructure growth, which is still in a nascent stage. Vertiv's cooling and power management products are vital to run data centers efficiently and safely. About 75% of Vertiv's revenue is derived from "the data center." Among its competitors, it is the most exposed to this vertical. We believe the company can grow revenue in the low-double-digit percentage range, while we expect significant margin expansion and share buybacks should allow EPS to grow in the mid-20% range over the next few years. In our view, Vertiv is complementary to the portfolio's Industrials sector holdings in Trane Technologies and Quanta Services, which are also benefiting from megatrends surrounding power management and expansion and cooling efficiency.

BSD Analysis:
NewBridge initiated a position in Vertiv Holdings, viewing it as a pure-play beneficiary of AI-driven data center infrastructure growth. The manager emphasizes Vertiv's leadership position in critical digital infrastructure, particularly its competitive advantage in direct-to-chip liquid cooling technology that has earned recognition from NVIDIA as a key partner. The investment thesis centers on the company's dominant exposure to data centers (75% of revenue), positioning it to capture the accelerating demand for cooling and power management solutions driven by AI computing requirements. NewBridge believes the data center buildout is still in nascent stages, creating a long-tailed growth opportunity for Vertiv's specialized products that are vital for efficient and safe data center operations. The manager projects low-double-digit revenue growth with significant margin expansion potential, leading to mid-20% EPS growth over the next few years supported by share buybacks. NewBridge views Vertiv as complementary to other portfolio holdings like Trane Technologies and Quanta Services, creating a diversified exposure to power management and cooling efficiency megatrends. The company's market-leading position among competitors in data center exposure and its partnership with leading GPU manufacturers provide competitive moats in this rapidly expanding market.

Pitch Summary:
Trane Technologies plc (TT) – Having owned Trane Technologies in the past, we are familiar with the company's business mix, opportunities, and risks. Trane is a leading global manufacturer and servicer of innovative indoor climate systems and refrigerated transport solutions. We view Trane as a high-quality industrials company with significant levers to grow attractively over the near to long term. While the pandemic had accelerated opportunities for Trane to improve indoor air quality across commercial and residential buildings, its objective to help its customers reduce energy costs and reduce emissions is a secular opportunity – driven by the megatrends of energy efficiency and sustainability. These global megatrends will continue to be top-of-mind considerations driving companies' and homeowners' decisions for air conditioning options. Trane became a pure play following a corporate action in March 2020 that separated its climate businesses from the other assets of Ingersoll Rand. The company is domiciled in Ireland, with U.S. corporate headquarters in Davidson, North Carolina. Seventy-eight percent of Trane's sales are derived from the Americas, while EMEA accounts for 14% of sales and Asia Pacific contributes 8% of sales. Trane is heavily leveraged to commercial sales (~65% of sales) which present opportunities and risks. The clearest opportunity is for building owners to improve the energy efficiency of their HVAC systems through new systems or retrofits using Trane's innovative product and service solutions. Economic slowdowns and/or dislocations in commercial verticals are risks. Data centers, pharmaceutical, healthcare, semiconductors, and education verticals have been areas of recent strength. While investor enthusiasm has focused on Trane's opportunity for high growth potential in data centers, this vertical likely represents a low-double-digit percentage of overall sales. That said, with the increasing use and rapid expansion of AI, Trane will continue to benefit from data center growth. Residential market sales (~20% of sales) have been relatively weak across the industry but are expected to improve. Also expected to improve are sales in the company's transportation (refrigerated truck cooling units) business (~15% of sales). The company is expected to have top-line growth in the mid-single-digit range over the next few years. Trane can drive earnings at a higher growth rate than sales through cost reductions, manufacturing efficiencies, and sales leverage. Trane is well-prepared to take advantage of the long-term megatrends of sustainability and energy efficiency. The company's products and services are aligned with these megatrends and should lead to solid financial results in the coming quarters and years.

BSD Analysis:
NewBridge re-initiated a position in Trane Technologies, a leading HVAC and climate solutions provider, based on its exposure to secular megatrends in energy efficiency and sustainability. The manager views Trane as a high-quality industrial company with multiple growth levers, particularly benefiting from the post-pandemic focus on indoor air quality and ongoing corporate/residential energy efficiency initiatives. The investment thesis centers on Trane's dominant position in commercial HVAC systems (65% of sales), where building owners are increasingly investing in energy-efficient retrofits and new systems to reduce costs and emissions. NewBridge highlights Trane's exposure to high-growth verticals including data centers, pharmaceuticals, healthcare, and semiconductors, with particular optimism about AI-driven data center expansion despite it representing only a low-double-digit percentage of sales. The company's geographic diversification (78% Americas, 14% EMEA, 8% Asia Pacific) and pure-play structure following the 2020 Ingersoll Rand spinoff provide focused exposure to climate solutions. NewBridge projects mid-single-digit revenue growth with earnings growing faster through operational leverage, cost reductions, and manufacturing efficiencies. The manager believes Trane is well-positioned to capitalize on long-term sustainability trends that should drive consistent demand for its innovative climate solutions.

Pitch Summary:
Celsius Holdings, Inc. (CELH) – Celsius is a rapidly growing developer and marketer of functional drinks and liquid supplements. Its assortment of "better for you" flavored beverages has gained share in a large, highly competitive market. The company's biggest competitors include Red Bull and Monster Beverage. Most of Celsius's sales are derived from North America (~95%), but the company has recently announced expansion into Europe and the U.K. The company's distribution agreements with PepsiCo and Suntory will contribute significantly to the company's future growth and international expansion. We believe that Celsius is not simply an "energy drink" brand but more of a lifestyle brand. The company enjoys a wide demographic profile, as consumers focus on health, wellness, and function. About half of Celsius users are women, which shows broader appeal versus its larger competitors. Its "Live Fit" brand message has resonated well and has gained share from existing energy drink customers while drawing new customer groups into the brand and category. We have also found that its appeal is widespread regionally throughout the United States. Celsius products are sold through retail stores, convenience and gas, food service and club stores, and online. Each distribution point has seen greater sales, and we expect the expansion to continue as the company gets more product facings in coolers and more shelf space in non-refrigerated spaces. While the company continues to grow its existing formulation drinks, new categories like hydration and lower caffeine options could be in the cards over time. Product innovation is a key driver for Celsius and the industry. We expect sales to grow in a mid-30% range over the next few years and believe operating margins will continue to expand as the company gains greater scale in the marketplace. We believe that having strong distribution partners like PepsiCo and Suntory, compelling product innovation, and greater brand awareness will contribute to market share gains over the next several years.

BSD Analysis:
NewBridge initiated a position in Celsius Holdings during Q2 2024, viewing it as a rapidly growing functional beverage company with significant market share expansion potential. The manager emphasizes Celsius's differentiation as a lifestyle brand rather than just an energy drink, noting its broad demographic appeal with 50% female users compared to traditional energy drink competitors like Red Bull and Monster. The investment thesis centers on strong distribution partnerships with PepsiCo and Suntory that should drive both domestic growth and international expansion into Europe and the UK. NewBridge projects mid-30% sales growth over the next few years, supported by expanding retail presence, product innovation in hydration and lower-caffeine categories, and operating margin expansion from scale benefits. The manager believes the company's "Live Fit" brand messaging resonates well with health-conscious consumers and positions Celsius to capture share from existing energy drink users while attracting new demographics to the category. Despite some volatility concerns and inventory management issues with PepsiCo during the quarter, NewBridge maintains conviction in the long-term secular growth opportunity in functional beverages.

Pitch Summary:
Intel (INTC) stumbled, and shares retreated as the company continued to struggle to right the ship as part of its shift in strategy. The company reported a weak quarter, with most results coming in below expectations, especially margins. The company did outline accelerating revenue growth in the second half of the year based off stable PC demand, the ramp up of its AI product and the recovery of end markets off of cyclical lows.

BSD Analysis:
The manager expresses concern about Intel's ongoing strategic transformation challenges while acknowledging potential recovery catalysts. The company reported disappointing quarterly results with below-expectation performance across most metrics, particularly concerning margin compression. Intel continues to struggle with its strategic pivot, indicating execution difficulties in a rapidly evolving semiconductor landscape. However, management guidance points to potential second-half acceleration driven by three factors: stabilizing PC demand, AI product ramp-up, and cyclical end-market recovery. The neutral stance reflects uncertainty about Intel's ability to successfully execute its turnaround while competing against stronger positioned rivals like NVIDIA and AMD. The manager appears cautiously optimistic about the recovery timeline but concerned about competitive positioning.

Pitch Summary:
In a tough backdrop for software companies, shares of Salesforce (CRM) cratered after the company reported quarterly results that surprised to the downside due to a tougher spending environment. The company reported revenue growth that missed on expectations, while also lowering its outlook for revenue growth, due to a more measured buying environment from its customers. Salesforce experienced elongated sales cycles, deal compression and elevated budget scrutiny, which pushed some deals to following quarters. Taking a step back, the company's evolving AI story should not be overlooked as it is integrated across the company's sprawling suite of cloud and digital assets.

BSD Analysis:
The manager acknowledges significant near-term headwinds for Salesforce while maintaining cautious optimism about its long-term AI potential. Current challenges include a deteriorating spending environment with elongated sales cycles, deal compression, and heightened customer budget scrutiny leading to revenue growth disappointments. The company lowered forward guidance, reflecting the challenging enterprise software environment. However, the manager emphasizes Salesforce's developing AI integration across its comprehensive cloud and digital platform as a potential longer-term catalyst. The neutral stance reflects the tension between current execution challenges and future AI-driven opportunities. The manager appears to be monitoring whether Salesforce can navigate the current downturn while positioning for AI-driven growth acceleration.

Pitch Summary:
Shares of Advanced Micro Devices (AMD) lagged the market after the company reported earnings results that, while generally strong, left the market wanting more. The company reported AI revenue of ~$600 million and increased its forward-looking outlook for AI revenue growth, but shares took a breather, as results missed elevated expectations after the stock's strong performance. Despite the stock's underperformance during the quarter, the company's AI story remains very much intact. The growth outlook for the company is supported by better cloud demand, enterprise recovery and continued share gains ahead of the company's new AI product launch.

BSD Analysis:
Despite short-term underperformance, the manager maintains conviction in AMD's AI growth story and competitive positioning. The company generated $600 million in AI revenue with management raising forward guidance, indicating strong underlying momentum. The manager views the recent weakness as a temporary pause after strong prior performance rather than fundamental deterioration. Key growth drivers include improving cloud demand, enterprise market recovery, and anticipated share gains from upcoming AI product launches. The thesis relies on AMD's ability to compete effectively in the AI chip market and capture market share from incumbents. The manager sees current weakness as potentially creating an attractive entry point for a company well-positioned in the AI semiconductor cycle.

Pitch Summary:
Not to be left out, Apple (AAPL) delivered on high expectations related to its much-anticipated Worldwide Developers Conference in June, where the company gave further details for its AI strategy. In addition to new product upgrades as well as an operating system software refresh, AI will be integrated into the newest versions of iPhones, iPads and Macs. Shares reacted positively to this announcement as the market anticipated that the new AI features could drive a product cycle upgrade. Separately, Apple also announced a partnership with AI pioneer OpenAI to integrate its wildly popular ChatGPT into the Apple ecosystem.

BSD Analysis:
The manager views Apple's AI strategy announcement as a significant catalyst for the next product upgrade cycle. The investment thesis centers on Apple's integration of AI across its entire ecosystem, including iPhones, iPads, and Macs, which could drive meaningful hardware refresh demand. The strategic partnership with OpenAI to integrate ChatGPT represents a major competitive move in the AI space. The market's positive reaction to the Worldwide Developers Conference indicates investor confidence in Apple's AI roadmap. This positions Apple to monetize the AI trend through its massive installed base and premium hardware ecosystem. The manager sees this as a potential inflection point for Apple's growth trajectory, leveraging AI to drive the next major product cycle upgrade across multiple device categories.

Pitch Summary:
Broadcom (AVGO) also performed well during the quarter, as the company reported better-than-expected earnings, with upside from demand related to AI. This long-term holding is strongly positioned to benefit from continued AI demand, with AI sales in the quarter up 400% over the prior year. Overall, AI-related revenue accounted for 30% of total revenue in 2024 and is on pace to represent a majority of the company's revenue within two to three years.

BSD Analysis:
The manager expresses strong conviction in Broadcom as a key AI beneficiary, highlighting explosive 400% year-over-year growth in AI-related sales. The investment thesis focuses on Broadcom's strategic positioning to capture the AI infrastructure buildout, with AI revenue already representing 30% of total revenue in 2024. The manager projects AI will become the majority revenue driver within two to three years, indicating significant structural growth ahead. Recent earnings beat expectations driven by AI demand, validating the secular trend. As a long-term holding, this represents a core position in the AI semiconductor supply chain. The rapid revenue mix shift toward AI demonstrates Broadcom's successful pivot to capitalize on this transformative technology cycle.

Pitch Summary:
Shares of long-term holding NVIDIA (NVDA), the largest position in the fund, increased during the quarter and added nearly $1 trillion in market cap alone during the period. In the wake of the company's stellar earnings report, the company passed Microsoft to become the world's largest publicly traded company in the world — an extraordinary outcome for a company founded in a Denny's breakfast booth in Silicon Valley in 1993. Of note during the quarter, the company announced the latest iteration of its market-leading semiconductors had started shipping, which alleviated concerns of a potential 'air pocket' ahead of the launch of the new product cycle. The stock has increased since 2024, and the company's approach of providing the best hardware for AI training, along with an expansive software ecosystem and the industry's best talent, makes NVIDIA one of the most influential companies in the world.

BSD Analysis:
The fund manager maintains a highly bullish stance on NVIDIA, positioning it as the largest holding and praising its transformation into the world's most valuable company. The thesis centers on NVIDIA's dominant position in AI hardware, particularly its market-leading semiconductors for AI training applications. The manager highlights the company's comprehensive competitive moat through superior hardware, expansive software ecosystem, and top-tier talent acquisition. Recent product cycle momentum with new semiconductor shipments addresses investor concerns about potential demand gaps. The fund views NVIDIA as uniquely positioned to capitalize on the AI megatrend, with the company adding nearly $1 trillion in market cap during the quarter alone. This represents a conviction play on AI infrastructure leadership and secular growth in artificial intelligence adoption.

Pitch Summary:
Shopify has been an incredibly rewarding investment for those lucky enough to get in early after the company's initial public offering (IPO) in 2015. The shares have delivered a return of 2,600% or 42% annual. Its revenues have grown at 49% per annum since the end of 2014 from $105 million to estimated $8.6 billion in 2024. The massive e-commerce market is a huge opportunity, as the company's growth indicates. As you tell from the chart below, revenues are forecasted to grow above 20% for the next 3 years. Keep in mind, Shopify has been around for more than a decade — and it's still growing at these high rates. We have owned Shopify for only 2.5 years, establishing our position in the first quarter of 2022 at a cost basis of $60, after the stock collapsed from its highs of $169 in November 2021. In hindsight, our entry may have been a bit premature, as the stock continued to plunge, eventually reaching a low of $27 in October 2022. However, such market movements are inherently unpredictable, and we seized the opportunity to invest in a company we had long admired. As you can see in the chart below, the drawdowns for SHOP over the past five years have been dramatic, with the stock dropping over 80% in 2022: Fast forward to today, the stock trades at $75 — a 25% return for our holding period or 9.5% annual, which is a bit disappointing so far. However, our holding period for the stock is still relatively short and we are optimistic about the long-term growth prospects of the company. If we turn to the fundamentals of the business, Shopify had put up some very impressive growth numbers in the past 2.5 years that we had owned it (see table below): Shopify's stock surged close to 25% following a strong second-quarter earnings report that exceeded expectations on both revenue and profit. Revenue increased by 21% to $2.05 billion, surpassing the forecast of $2.01 billion, and gross merchandise volume rose 22% to $67.2 billion. The company also reported a significant rise in free cash flow and improved gross margins, aided by higher subscription prices and the sale of its logistics business. Additionally, Shopify provided optimistic guidance for future revenue growth and margin expansion, further boosting investor confidence, leading to the sharp rise in the stock price.

BSD Analysis:
Rowan Street Capital maintains a bullish long-term view on Shopify despite modest returns since their Q1 2022 entry at $60 per share. The manager acknowledges the challenging timing, with the stock declining to $27 before recovering to current levels around $75, resulting in a 9.5% annualized return over 2.5 years. However, they emphasize Shopify's exceptional long-term track record with 2,600% returns since IPO and 49% annual revenue growth from $105 million in 2014 to an estimated $8.6 billion in 2024. The company's Q2 2024 results validate the thesis with 21% revenue growth to $2.05 billion and 22% GMV growth to $67.2 billion. Improved operational metrics including enhanced free cash flow generation and gross margin expansion, supported by strategic initiatives like logistics business divestiture, demonstrate management's focus on profitability. With revenue growth forecasted above 20% for the next three years and continued e-commerce market expansion, the manager remains optimistic about Shopify's long-term prospects despite near-term volatility.

Pitch Summary:
As a reminder, Topicus is a Dutch company that acquires, manages and builds vertical market software ("VMS") businesses, primarily located in Europe. Generally, these businesses provide mission critical software solutions that address the specific needs of their customers in particular vertical markets. Topicus was spun off from Constellation Software, a Canadian company, in February 2021. Constellation Software established Topicus.com Inc. as an independent publicly traded entity and merged it with its subsidiary, Total Specific Solutions (TSS), a key player in the European VMS sector. We took a position in Topicus shortly after its spin-off, with an average cost basis of CA$70.19. Currently, the stock is trading at CA$124, reflecting a 19% annualized return over approximately 3.5 years holding period. Our investment returns have closely mirrored the growth rate of revenues, operating income and operating cash flow per share (see below): If you take a look at the graph below, which shows the trailing 12 months data, you'll notice that Topicus has seen a significant increase in cash flow generation in 2024 — doubling from the levels that we observed back in 2021. This is a result that we're certainly pleased with. However, the pace of acquisitions has noticeably slowed. This indicates that management is finding fewer attractive opportunities in the current market. We have confidence in their judgment and expect them to continue being disciplined in their acquisition strategy.

BSD Analysis:
Rowan Street Capital demonstrates confidence in Topicus, a European vertical market software acquirer spun off from Constellation Software in February 2021. The manager established their position shortly after the spinoff at CA$70.19 and has achieved a solid 19% annualized return with the stock currently trading at CA$124. Topicus operates in the attractive VMS sector, providing mission-critical software solutions to specific vertical markets across Europe. The company has shown impressive operational improvement with cash flow generation doubling from 2021 levels in 2024, demonstrating strong execution and integration capabilities. While the pace of acquisitions has slowed, the manager views this as prudent capital allocation rather than a concern, trusting management's disciplined approach to finding attractive opportunities. The close correlation between investment returns and fundamental metrics (revenues, operating income, cash flow per share) validates the manager's thesis. Topicus benefits from the proven Constellation Software playbook applied to the European market, providing a compelling growth platform.

Pitch Summary:
We have owned TTD for a little over 4 years now, opportunistically establishing a position in March of 2020 at a cost basis of $17.40 (split-adjusted). Since then, TTD has appreciated nearly sixfold, delivering an annualized return of approximately 55%. These are indeed remarkable results, but it's important to recognize that this journey has been far from a smooth ride—much like many of our other investments. Since its public debut in 2017, the stock has experienced several significant drawdowns, with the most notable occurring in 2022 when it declined by over 60% (see below). As we have previously discussed in relation to our investments in Meta and Spotify, one would have to be comfortable with sitting through these dramatic drawdowns and keeping their emotions in check in order to realize the long-term rewards of compounding that this company had delivered. Turning attention to the fundamentals of the business rather than gyrations of stock prices, the progress is very impressive as evidenced from the numbers below. Over the 4 years, revenues, operating earnings, and earnings per share have each grown at a rate of 30%+ annually. Our return from holding the stock has been even greater than that since we were able to opportunistically purchase the stock when it briefly traded at 10x revenues during the early days of the pandemic scare. The multiple has now recovered to 20x revenues, which boosted our returns. In The Trade Desk's latest quarter, the company reported a revenue of $584.6 million, marking a 26% year-over-year increase, which exceeded analyst expectations. Adjusted EBITDA came in at $229 million with an impressive 39% margin. CEO Jeff Green emphasized the company's strong position in the digital advertising ecosystem, particularly in Connected TV (CTV) and retail media. He highlighted that their success is driven by the shift towards data-driven advertising and the growing adoption of their Unified ID 2.0 solution, which is seeing broad industry support.

BSD Analysis:
Rowan Street Capital showcases exceptional timing and conviction with The Trade Desk, achieving a nearly sixfold return and 55% annualized gains over four years from their March 2020 entry at $17.40. The manager emphasizes the importance of withstanding volatility, including a 60% drawdown in 2022, to capture long-term compounding benefits. The Trade Desk's fundamental performance has been outstanding with 30%+ annual growth in revenues, operating earnings, and EPS over the holding period. Q2 2024 results demonstrate continued momentum with $584.6 million revenue (26% growth) and impressive 39% EBITDA margins. CEO Jeff Green's focus on Connected TV and retail media positioning, along with the growing adoption of Unified ID 2.0, highlights the company's strategic advantages in data-driven advertising. The manager's opportunistic purchase during pandemic fears at 10x revenues, compared to current 20x revenues, illustrates the value of contrarian timing. The Trade Desk's leadership in programmatic advertising and strong competitive moat support continued growth prospects.

Pitch Summary:
Back in our 2022 year-end letter, we highlighted Spotify, which was trading at roughly $15 billion at the time. We asked the question: "Does this valuation make any sense?" Now, just 18 months later, Spotify is valued at about $68 billion — a 4.3x increase. To put this in perspective, we initially estimated a valuation of about $70 billion by 2025, and it seems we got there a bit faster than anticipated. Spotify went public in 2018 at a price of $132 per share. We began purchasing shares that same year and continued to add to our position as the stock appreciated. Today, Spotify trades at $337 per share, reflecting a total return of 155% since its IPO, or about 16% annually — quite a respectable performance. However, our average cost basis is $216, as we increased our position as the stock rose. As a result, the stock return from that cost basis stands at 58%. While it's somewhat disappointing in comparison to the overall gain since the IPO, we remain confident in the position we've built, given the company's strong long-term growth and profitability potential. Spotify's rise in stock price has been far from a smooth journey. Take a moment to consider the drawdowns since its IPO. Much like Meta, Spotify faced an 80% decline in 2022 — an experience not suited for the faint of heart. We stayed with it… …and focused on the actual fundamentals of the business, where Spotify performed quite well over time. Active users and premium subscribers have grown at an impressive pace, while both revenues and gross profits have increased at an annual rate of over 20%. Although the free cash flows have been relatively flat until 2023, the company has recently become a strong cash generator as you can see from the chart below. Spotify achieved record profitability, reporting a net income of €274 million and a 20% year-over-year revenue increase to €3.8 billion. Gross margins improved to 29.2% — an all-time high — underscoring the company's efforts to boost efficiency. Premium subscribers grew 12%, reaching 246 million, while monthly active users rose by 14% to 626 million. The company's operating income surged to €266 million from a loss of €247 million in Q2 2023, reflecting Spotify's recent focus on cost efficiency and monetization strategies, including a streamlined podcast strategy and enhanced ad revenue initiatives.

BSD Analysis:
Rowan Street Capital demonstrates strong conviction in Spotify, noting the company's remarkable valuation increase from $15 billion to $68 billion in just 18 months, achieving their 2025 target ahead of schedule. Despite an 80% drawdown in 2022, the manager maintained their position based on strong fundamental performance. Spotify's Q2 2024 results showcase record profitability with €274 million net income and 20% revenue growth to €3.8 billion. The company achieved all-time high gross margins of 29.2%, demonstrating improved operational efficiency. User growth remains robust with 246 million premium subscribers (12% growth) and 626 million monthly active users (14% growth). The dramatic turnaround from a €247 million operating loss in Q2 2023 to €266 million operating income highlights management's successful cost efficiency initiatives. The manager views Spotify's transition to strong cash generation and enhanced monetization strategies as validation of their long-term thesis.

Pitch Summary:
We are pleased to report that Meta Platforms, our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return. We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that's simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There's no escaping it; it's the "price of admission" the market demands. If you take a look at the chart below, you'll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop. However, if we were to tune out the market's volatility (and the emotions that inevitably come with it) and focus solely on the fundamentals of the business with a long-term perspective, the results are quite impressive (see key performance data below). Over the course of our six-year ownership, the growth in revenue, earnings, and free cash flow per share closely mirrored the strong returns we achieved from the stock. We were pleased with Meta's robust progress in its financial and strategic position. There are now 3.27 billion people that use at least one of their apps each day. In Q2, Meta achieved a 22% year-over-year increase in revenue, reaching $39.07 billion, and net income rose by 73% to $13.47 billion, surpassing analyst expectations. Key to this growth is their significant investment in artificial intelligence, particularly with the development of their Llama 3.1 model. CEO Mark Zuckerberg envisions Meta AI as potentially the most used AI assistant globally by year-end, although monetization will take time. AI integration has also bolstered their advertising revenue, which grew to $38.33 billion, demonstrating its effectiveness in optimizing their core business. Their "Family of Apps" core business posted a $19.3 billion operating profit in the quarter, which resulted in a very impressive 50% operating margin — we don't often come across businesses that put up those kind of margins. The company has also increased its capital expenditure forecast to $37-40 billion, underscoring its commitment to AI infrastructure. We believe that Meta's strategic focus on AI and open-source initiatives positions it well for future success.

BSD Analysis:
Rowan Street Capital maintains a strong bullish stance on Meta Platforms, their largest holding, highlighting exceptional returns of 450% since November 2022 and a 20% annualized return over six years. The manager emphasizes Meta's fundamental strength despite significant volatility, including a 75% drawdown in 2022. Meta's Q2 2024 results demonstrate robust growth with 22% revenue increase to $39.07 billion and 73% net income growth to $13.47 billion. The company's AI investments, particularly the Llama 3.1 model, are driving advertising optimization and positioning Meta for future growth. With 3.27 billion daily active users across their apps and an impressive 50% operating margin in their Family of Apps segment, Meta shows strong competitive positioning. The increased capex forecast of $37-40 billion underscores their commitment to AI infrastructure development. The manager views Meta's strategic AI focus and open-source initiatives as key drivers for continued success.

Pitch Summary:
SharkNinja operates under two key brands: Shark and Ninja. Shark focuses on home cleaning and beauty appliances, while Ninja specialises in food preparation, cooking, and beverage appliances. Spun off from JS Global Lifestyle in 2023, SharkNinja's product range spans across 33 subcategories, from vacuums to grills. SharkNinja's innovation engine consistently produces cutting-edge products that meet market demands. They launch approximately 25 new products annually, with a focus on both iteration and invention. This translates to roughly 20 new versions of existing items and 5 entirely new products each year. Their focus on understanding and meeting customer needs has significantly contributed to their performance. SharkNinja analyses feedback to develop products, creating a strong feedback loop ensuing that its offerings are constantly evolving to meet consumer needs. SharkNinja's commitment to innovation has contributed to positive financial results. In Q1 2024, they delivered net sales growth of 28% and a 5ppt increase in FY24 sales guidance (revised from 8% to 13%). Currently holding ~4% of the $120 billion household appliance market, SharkNinja has significant room for further growth. Their strategic partnership with David Beckham is expected to further boost global brand awareness. SharkNinja is an example of a consumer company who has delivered strong results through its emphasis on product innovation and effective social media marketing strategies.

BSD Analysis:
Munro Partners highlights SharkNinja as a compelling consumer growth story driven by innovation and market share expansion. The manager's thesis emphasizes the company's systematic innovation engine, launching 25 new products annually across 33 subcategories, creating a sustainable competitive advantage. The strong Q1 2024 results with 28% sales growth and upward revised guidance demonstrate execution capability. With only 4% market share in a $120 billion household appliance market, SharkNinja has substantial runway for growth. The David Beckham partnership adds global brand awareness potential. The company's customer feedback-driven product development creates a virtuous cycle of innovation and market responsiveness. Recent spin-off from JS Global provides focused management attention and clearer investment thesis. The combination of innovation, market opportunity, and effective marketing positions SharkNinja well in the competitive consumer appliance space.

Pitch Summary:
TSMC was founded in 1987 in Taiwan and is the largest semiconductor foundry globally, fabricating more than 60% of the world's semiconductors for many of the world's largest companies such as Apple and Nvidia. The foundry model relies on scale, time-to-market and node maturity as participants work alongside 'fabless' customers to deploy their technology roadmaps. Given its market position, we see TSMC as the bellwether for the semiconductor industry. Many of TSMC's key end markets (such as smartphone, IoT (internet of things) and automotive) slowed over the course of 2023 as the broader macroeconomic environment softened. Munro saw this as an attractive opportunity to build a position through December 2023 as we forecasted TSMC's earnings to rebound into 2024 and beyond as these end markets passed through their cyclical troughs. Two key drivers beyond broad end market growth are core to our investment thesis: the first being revenue from AI servers growing as a portion of overall revenue (think Nvidia GPUs and custom ASICs for AI training/inference). TSMC expects AI server revenues to grow at a 50% CAGR over the next 5 years, representing more than 20% of their total revenue by 2028, a target they have revised upwards twice since Q2 23, emphasising how quickly this new market opportunity is emerging. The second key driver is that as AI proliferates through consumer and business applications, as recently showcased by Apple at the WWDC conference, the next generation of smartphones and PCs will need substantially more semiconductor content per device to run these applications, of which TSMC is a direct beneficiary. We continue to find TSMC's valuation attractive at 25x blended forward consensus EPS estimates and can see a credible path to more than $60 in EPS by 2026.

BSD Analysis:
Munro Partners presents a compelling bull case for TSMC based on its dominant foundry position and AI-driven growth catalysts. The manager's thesis centers on TSMC's role as the primary beneficiary of the AI infrastructure buildout, with AI server revenues expected to grow at 50% CAGR and reach 20% of total revenue by 2028. The investment timing appears strategic, as Munro built the position during December 2023 when cyclical end markets were at their trough. The dual catalyst of hyperscaler AI capex and consumer device AI refresh cycles provides multiple growth vectors. At 25x forward P/E with a path to $60+ EPS by 2026, the valuation appears reasonable for a company with TSMC's market dominance and growth prospects. The manager's conviction is reinforced by TSMC's twice-revised upward guidance for AI revenues, demonstrating the accelerating nature of this opportunity.