Investment Pitches

Pitch Summary:
Similarly, GE Healthcare Technologies Inc. fell back after a strong start to the year. The company was spun out of GE and is the largest global medical imaging company. With steady growth and improving margins, the stock is trading well below peer valuations at 13 times normalized earnings and a 5% free cash yield. More recently, investors expressed concern with the company's business in China, where demand has slowed along with the economy. We view this headwind as temporary and remain enthusiastic about the investment.

BSD Analysis:
Sound Shore maintains a bullish stance on GE Healthcare despite recent weakness, viewing the company as an attractive value opportunity in the medical technology space. As the largest global medical imaging company following its spinoff from GE, GEHC benefits from market leadership and scale advantages. The fund emphasizes the company's operational improvements, highlighting steady growth and expanding margins that demonstrate effective management execution. The valuation appears compelling at 13x normalized earnings with a 5% free cash flow yield, trading below peer multiples despite its market-leading position. While acknowledging investor concerns about China exposure amid economic slowdown, Sound Shore views this as a temporary headwind rather than a structural issue. The fund's enthusiasm reflects confidence in the company's long-term prospects and belief that current market concerns create an attractive entry point for a quality healthcare technology leader.

Pitch Summary:
This included specialty retailer of personal care products, Bath & Body Works, Inc. Despite announcing its seventh consecutive quarter of beating earnings expectations, as well as raising guidance, the stock gave back some of its prior year-to-date gains as the market continues to be skeptical about the company's growth prospects. Our research identified significant upside potential for the company as it expands into the men's, laundry, lip and hair care segments, which would nearly double its addressable market. We initiated our position when the stock was trading below 10 times earnings and an attractive 10% free cash flow yield. Moreover, by leveraging the company's efficient supply chain and fast inventory turnover, management is returning excess cash through share repurchases.

BSD Analysis:
Sound Shore presents a compelling value thesis on Bath & Body Works, emphasizing the market's skepticism despite consistent operational excellence. The fund highlights the company's impressive track record of seven consecutive quarters of earnings beats and raised guidance, suggesting strong execution capabilities. The investment thesis centers on significant market expansion opportunities through diversification into men's products, laundry care, lip care, and hair care segments, which could nearly double the addressable market. The valuation appears attractive at below 10x earnings with a 10% free cash flow yield at initiation. Management's capital allocation strategy of returning excess cash through share repurchases, supported by efficient supply chain operations and fast inventory turnover, reinforces the value proposition. The fund views current market skepticism as creating an opportunity to invest in a quality retailer with clear growth catalysts at an attractive valuation.

Pitch Summary:
Another significant detractor was Sprout Social, Inc. (SPT). An industry-wide slowdown in sales of new software impacted the company. Sprout provides customers with cloud-based tools for social-media management, communication, contact management, lead generation, reporting and analysis. The company delivered slower-than-expected revenue growth in its most recent quarter and cut its full-year guidance. Also appearing to weigh on the company's stock price was Sprout's announcement of a CEO change, as well as its decision to stop disclosing certain metrics about the performance of its business. After visiting the company, we believe our original reasons for owning it remain intact. Our long-term outlook for Sprout continues to be positive, and we expect our patience to be rewarded.

BSD Analysis:
Despite recent operational setbacks, Wasatch maintains conviction in Sprout Social's long-term prospects following direct management engagement. The managers acknowledge industry-wide software sales headwinds that have pressured revenue growth and forced guidance reductions, reflecting broader SaaS market challenges rather than company-specific issues. Leadership transition and reduced business metric disclosure have created additional near-term uncertainty for investors. However, the fund's on-site company visit reinforced confidence in the underlying business fundamentals and competitive positioning in social media management software. The comprehensive platform offering spanning communication, lead generation, and analytics provides sticky customer relationships and cross-selling opportunities. Management's strategic direction remains aligned with long-term value creation despite near-term execution challenges. Current weakness may present an attractive entry point for patient investors focused on the company's market leadership position.

Pitch Summary:
SiteOne Landscape Supply, Inc. (SITE) was also a major detractor. The company is a one-stop shop primarily for professional landscapers. At Wasatch, we've owned SiteOne for several years. In 2020 and 2021, the company and its stock benefited from customers ramping up home improvements during the Covid-19 pandemic and the ensuing real-estate boom. Since the end of 2021, the stock has been up and down largely based on interest-rate and real-estate speculation. During the second quarter, the stock was hurt by slightly higher-than-expected expenses and news that Home Depot has become more active in targeting landscaping professionals. While we take this competitive threat seriously, we haven't seen any erosion in SiteOne's revenues.

BSD Analysis:
Wasatch expresses measured concern about SiteOne's evolving competitive landscape while maintaining a long-term perspective on the business fundamentals. The managers acknowledge the company's historical benefit from pandemic-driven home improvement trends and subsequent volatility tied to interest rate and real estate market speculation. Recent performance has been pressured by expense inflation and increased competitive intensity from Home Depot's push into the professional landscaping channel. However, the fund notes that revenue trends remain intact despite competitive pressures, suggesting SiteOne's market position retains some defensive characteristics. The company's role as a specialized distributor for professional landscapers provides certain competitive advantages, though these may be tested by large-format retail competition. Management's ability to maintain revenue growth while managing expense pressures will be critical for validating the long-term investment thesis.

Pitch Summary:
The greatest detractor from strategy performance during the second quarter was Five Below, Inc. (FIVE). A specialty value retailer, the company offers a variety of merchandise at discounted prices. Quarterly results at Five Below fell short of expectations as the company continued to grapple with high levels of customer theft at some of its stores. Management also noted that Five Below's base of lower-income customers were more discerning with their dollars as inflation crimped their ability to spend on nonessential items. We expect these headwinds to subside over the next few quarters. Additionally, we like the long-term positives including Five Below's talented management team, strong competitive position and headroom for continued growth. We also note that based on revenues and earnings, the stock is about as inexpensive as it's been since we've owned it.

BSD Analysis:
Despite near-term operational challenges, Wasatch maintains conviction in Five Below's long-term value proposition and competitive positioning. The managers acknowledge current headwinds including elevated shrinkage from customer theft and reduced discretionary spending among lower-income consumers due to inflationary pressures. However, they view these as temporary cyclical issues rather than structural problems with the business model. The fund emphasizes management quality and the company's strong competitive position in the value retail segment, suggesting confidence in leadership's ability to navigate current challenges. Significant growth runway remains for store expansion and market penetration. Current valuation levels present an attractive entry point, with the stock trading at historically low multiples relative to revenues and earnings. The combination of temporary headwinds and compelling valuation creates an opportunity for patient investors.

Pitch Summary:
Another substantial contributor was TransMedics Group, Inc. (TMDX), a medical-technology company providing transplant support services for end-stage organ-failure patients across multiple disease states. TransMedics developed the Organ Care System (OCS) to replace a decades-old standard of care that limited access to life-saving transplant therapy. The technology involved in the OCS replicates—outside of the human body—many aspects of an organ's natural living and functioning environment. Although we own TransMedics primarily for its long-term competitive advantages, the stock moved higher in the short term due to basic blocking and tackling with respect to logistics. Previously, investors had been nervous about the significant expense of the company's fleet of airplanes used to transport organs from donors to recipients. But during the past two quarters, TransMedics pleased investors by capturing additional market share and increasing both revenues and earnings.

BSD Analysis:
Wasatch views TransMedics as a transformative medical technology company with substantial long-term competitive advantages in organ transplantation. The Organ Care System represents a paradigm shift from decades-old preservation methods, potentially expanding access to life-saving transplant therapy through superior organ preservation technology. The managers emphasize the company's ability to replicate natural organ environments outside the human body, highlighting significant technological differentiation. Recent operational improvements have addressed investor concerns about the costly airplane fleet logistics, with management demonstrating effective execution through market share gains and accelerating financial performance. The combination of revolutionary technology, expanding market penetration, and improving operational efficiency positions TransMedics for sustained growth in the critical organ transplant market. Strong revenue and earnings momentum validates the long-term investment thesis.

Pitch Summary:
Boot Barn Holdings, Inc. (BOOT) was also a meaningful contributor. The company sells Western and work-related clothing and accessories such as cowboy boots, hats and belts. The need to try on apparel like boots before buying partially insulates the company from online competition. In late 2023, we added to our position in Boot Barn because we anticipated healthy business fundamentals. Since then, we've been rewarded with a rising stock price as the company has added new stores, reported higher sales at existing locations, and grown overall revenues and earnings faster than anticipated. During the height of the Covid-19 pandemic, consumers tended to spend more of their discretionary cash on goods instead of services. That tendency benefited Boot Barn. As a result, we've been on alert for a possible post-Covid reversal. But to the company's credit, we've seen no sign of deteriorating business fundamentals. Although we've trimmed our position on strength, we continue to like Boot Barn for its healthy balance sheet, high-quality management team and ability to self-fund expansion with no debt.

BSD Analysis:
Wasatch expresses strong conviction in Boot Barn's business model and execution capabilities. The managers identify a key competitive advantage in the try-before-buy nature of western footwear, which provides natural protection against e-commerce disruption. The fund's decision to add shares in late 2023 has been validated by accelerating same-store sales growth and new store expansion exceeding expectations. Management's ability to maintain momentum beyond the pandemic-driven goods consumption boom demonstrates operational excellence and market positioning strength. The company's debt-free balance sheet and self-funding growth model provide financial flexibility and reduce execution risk. While acknowledging potential post-COVID normalization concerns, the managers see no fundamental deterioration and maintain confidence in the management team's strategic direction. Position trimming reflects profit-taking discipline rather than thesis deterioration.

Pitch Summary:
The top contributor to strategy performance during the second quarter was Nova Ltd. (NVMI), which benefited as the rapidly expanding field of AI continued to transform the semiconductor industry. The company sells metrology and process control systems used in semiconductor manufacturing. Nova has profited from the increased levels of inspection necessary to produce highly complex chips used in AI applications. We think Nova deploys research and capital wisely—and is well-positioned to introduce new equipment and increase market share over the next several years. With AI euphoria heightened, we sold some shares of Nova as a risk-control measure. Because semiconductor producers and related equipment manufacturers typically face cyclical demand, our approach when investing in such companies is to trim positions on excessive optimism and add to positions on excessive pessimism.

BSD Analysis:
Wasatch maintains a bullish stance on Nova Ltd., viewing it as a key beneficiary of the AI semiconductor revolution. The managers highlight Nova's strategic positioning in metrology and process control systems, which are essential for manufacturing the complex chips required for AI applications. They praise management's capital allocation discipline and research capabilities, positioning the company to capture market share through new equipment introductions. The fund's decision to trim shares reflects prudent risk management given AI-related euphoria rather than fundamental concerns. Nova's exposure to cyclical semiconductor demand patterns is acknowledged, with the managers employing a contrarian approach of selling strength and buying weakness. The company's ability to profit from increased inspection requirements for AI chips demonstrates its competitive moat in a rapidly growing market segment.

Pitch Summary:
Tele2: We have been invested in Tele2 for many years now, and view the business as a best-in-class telecom operator with very low capital intensity (c12% sales sustainably) and high returns on capital. The shares have been adversely affected over the last 18 months by high cost inflation not being fully passed onto consumers immediately, and a temporary capex shock related to switch-out of legacy Huawei equipment in the network as well as for 5G build-out. We think these temporary factors are abating, with the Group passing its peak capex profile over 2024-25, before a normalisation in capex intensity back to the sustainable long-term average of very low double digit / sales. In addition, price increases in mobile and broadband have landed well, with the Group now growing MSR at c4%. As cost inflation headwinds abate, this should allow for sustained EBITDA growth, particularly given the new SEK600m opex reduction plan. In addition, the change in Tele2's anchor ownership from financial investor Kinnevik to an industrial investor in the form of Iliad is likely to lead to renewed focus on strategic and operational execution across the Group. We expect minority shareholders to benefit significantly from Iliad's strategic investment into Tele2, in the short run from improved strategic and operational execution, and in the long-run from industry consolidation and / or full takeover by Iliad. As a result, and given the shares still trade on an elevated 7% Dividend Yield, we view the risk-reward as deeply asymmetric, and therefore further increased our holding in the name.

BSD Analysis:
Lansdowne Partners maintains a long-term bullish position in Tele2, viewing it as a best-in-class telecom operator with sustainable low capital intensity of 12% of sales and high returns on capital. Recent share price weakness reflects temporary headwinds from cost inflation and elevated capex for Huawei equipment replacement and 5G buildout. The fund expects these pressures to abate as the company passes peak capex in 2024-25, returning to normalized low double-digit capex intensity. Price increases are gaining traction with 4% MSR growth, while a SEK600m opex reduction plan should drive EBITDA growth as inflation headwinds fade. A key catalyst is the ownership change from financial investor Kinnevik to industrial player Iliad, which should improve strategic execution and potentially lead to industry consolidation or full takeover. With shares trading at a 7% dividend yield, Lansdowne views the risk-reward as deeply asymmetric and has increased their position.

Pitch Summary:
EssilorLuxottica: We recently undertook in-depth due diligence research work on EssilorLuxottica, culminating in our meeting with the Group Deputy CEO at the Group R&D HQ in Milan. We think EssilorLuxottica is a unique business model, by far the #1 scaled the only vertically integrated operator in a still highly fragmented eye-care industry globally. The company spends c75% of the industry's R&D budget for example, and has unique, unmatched market positioning across manufacturing, brands, retail, and insurance. This combination should allow the business to grow structurally at c5% p.a. whilst expanding margins and delivering c3-4% annual cash yield to shareholders, thus representing a highly attractive, hard-currency denominated, defensive low teens TSR. On top, we think there are 3 growth opportunities which are highly mis-priced by the market – myopia management in kids, Nuance hearing aids embedded in reading glasses for older adults and RayBan Meta smart glasses. In particular, our in-depth market survey and sizing work suggests Myopia management in kids could be a very substantial c$10bn revenue opportunity for EssilorLuxottica over the next decade, contributing as much as c25% of current revenues by 2040. Even de-risking these growth opportunities, organic growth should structurally be lifted to 6-7% p.a., taking sustainable TSR to low-mid teens. For just 28x PE, we think EssilorLuxottica represents a highly attractive medium-long term investment opportunity. Our site visit trialling these innovations and meetings with management further confirmed the attractive long term upside on offer. We consequently increased our position in the shares.

BSD Analysis:
Lansdowne Partners presents a compelling bull case for EssilorLuxottica following extensive due diligence including management meetings at the Milan R&D headquarters. The fund highlights the company's dominant position as the only scaled, vertically integrated player in the fragmented global eyecare industry, controlling 75% of industry R&D spending. The investment thesis centers on structural growth of 5% annually with margin expansion and 3-4% cash yields, delivering low-teens total shareholder returns. Three key growth catalysts are identified: myopia management in children (potentially $10bn revenue opportunity by 2040), Nuance hearing aids in reading glasses, and RayBan Meta smart glasses. Management's market research suggests myopia management alone could represent 25% of current revenues by 2040. Even conservatively, these opportunities could lift organic growth to 6-7% annually. At 28x PE, Lansdowne views the valuation as attractive for a defensive, hard-currency denominated business with significant long-term upside potential.

Pitch Summary:
ASML: We've increased our position in ASML this quarter. ASML is the leading producer of front-end lithography equipment used in the production of semiconductors globally. What is unique about ASML is its monopolistic position in the latest generation of lithography equipment in Extremely Ultraviolet (EUV) machines, which has allowed it to earn a remarkable ROIC of >30%. After its blowout orders number of EUR 9.2bn in Q4 last year, the stock drew down significantly after it reported surprisingly weak orders of only EUR 3.6bn in its first quarter's results. While orders were undoubtedly weak, we believe that it can be attributable to (1) the inherently lumpy nature of orders, (2) TSMC's strong negotiating position given the large volume of EUVs they need and the need for them to improve their profitability due to their 3nm ramp. However, we remain confident in the ramp of EUV as feedback from supply chain on 2nm remains extremely positive, and ASML's monopolistic position makes this a "when" not "if" question. We took the opportunity to increase our exposure to ASML this quarter.

BSD Analysis:
Lansdowne Partners maintains a bullish stance on ASML despite recent order weakness, viewing the company's monopolistic position in EUV lithography as a compelling long-term investment. The fund manager emphasizes ASML's exceptional ROIC of over 30% and its unique market position as the sole supplier of cutting-edge EUV machines. While Q1 orders disappointed at EUR 3.6bn versus Q4's EUR 9.2bn, management attributes this to the inherently lumpy nature of semiconductor equipment orders and TSMC's negotiating leverage. The investment thesis centers on the inevitable ramp of EUV technology for next-generation 2nm semiconductor production. Supply chain feedback remains positive for 2nm development, reinforcing confidence in future demand. Lansdowne used the recent stock weakness as an opportunity to increase their position, demonstrating conviction in ASML's long-term prospects despite near-term volatility.

Pitch Summary:
The second was a position in ESAB Corporation (ESAB), which is a global welding company with high brand loyalty and attractive growth opportunities in emerging markets.

BSD Analysis:
Fenimore established a position in ESAB Corporation, a global welding equipment manufacturer with strong competitive positioning. The manager highlights the company's high brand loyalty, which creates pricing power and customer retention in the industrial welding market. ESAB's global footprint provides exposure to emerging market growth opportunities, where infrastructure development and industrialization drive demand for welding solutions. The company benefits from its established reputation and technical expertise in welding technology, creating barriers to entry for competitors. Brand loyalty in industrial applications typically translates to recurring revenue through consumables and service contracts. The emerging markets exposure offers attractive long-term growth potential as developing economies invest in manufacturing capacity and infrastructure projects. ESAB's diversified end-market exposure across construction, energy, and manufacturing provides revenue stability.

Pitch Summary:
We initiated two new positions during the quarter. The first was a position in OneSpaWorld Holdings (OSW), the largest cruise spa operator in the world with more than 90% market share.

BSD Analysis:
Fenimore initiated a position in OneSpaWorld Holdings, recognizing the company's dominant market position in the cruise spa industry. With over 90% market share, OSW operates as a near-monopoly in providing health and wellness services aboard cruise ships. This market leadership provides significant competitive moats through exclusive partnerships with major cruise lines and high barriers to entry for competitors. The business model benefits from the captive audience nature of cruise passengers, creating predictable revenue streams during voyages. As the cruise industry continues to recover and expand post-pandemic, OSW is positioned to benefit from increased passenger volumes and higher onboard spending. The company's scale advantages and established relationships with cruise operators make it difficult for new entrants to compete effectively.

Pitch Summary:
We purchased one new name: Houlihan Lokey (HLI). HLI is a boutique, mid-market M&A investment bank. This industry has parallels to insurance brokerage. It's a people business where the industry-specific managing directors are focused on making connections and bringing in deals. M&A activity can be very cyclical, but HLI has an established restructuring business that creates a nice counter-cyclical revenue stream, muting some of the M&A cyclicality. HLI has strong cash generation that supports a dividend growth policy.

BSD Analysis:
Fenimore initiated a new position in Houlihan Lokey, a boutique mid-market M&A investment bank. The manager views this as a people-driven business model similar to insurance brokerage, where relationship-focused managing directors generate deal flow. The key investment thesis centers on HLI's diversified revenue streams that provide cyclical protection. While M&A activity is inherently cyclical, the company's established restructuring business creates counter-cyclical revenue that helps smooth earnings volatility. The manager appreciates HLI's strong cash generation capabilities, which support a sustainable dividend growth policy. This defensive characteristic aligns with Fenimore's dividend-focused investment strategy. The boutique positioning in the mid-market segment provides competitive advantages through specialized expertise and client relationships.

Pitch Summary:
A blue-haired shark girl, a time-traveling detective, and a rapping reaper walk into a bar. This isn't the setup for a joke – it's a glimpse into the world of VTubers managed by COVER Corporation. In just five years, COVER has grown from A$1 million to A$300 million in revenue through this innovative entertainment concept. VTubers, or Virtual YouTubers, are content creators who use digital avatars to livestream content, and COVER has become one of the most prominent agencies in this space. To understand COVER Corp's business model, think of it as a blend of K-pop talent management and WWE character creation. Like K-pop agencies, COVER Corp (under the brand Hololive) will scout, train, and manage digital stars. Like WWE's approach, each VTuber is developed with a distinct backstory, personality, and visual design, creating a diverse roster of digital entertainers. This commitment to character depth, akin to wrestling's concept of 'kayfabe', enhances each VTuber's brand appeal and merchandising potential. The economics of talent-based businesses hinge on a crucial factor: the ability to add value to the talent they represent. This principle applies across various industries, from funds management to entertainment, where organisations must demonstrate their worth to both attract and retain top performers. The decision for talent to align with an organisation rather than remain independent is predicated on the belief that the whole will be greater than the sum of its parts. When analysing talent-based businesses like COVER Corp, it's essential to scrutinise how the company enhances its talent's potential. Central to this value proposition is the management team, whose vision and approach can make or break a talent-based enterprise. COVER Corp exemplifies this principle through CEO Motoaki "Yagoo" Tanigo, a critical factor in the company's meteoric rise. In an industry where executives often become lightning rods for controversy, Yagoo has become a beloved figure among both talent and fans. His leadership style, which prioritises respect for creators and balances corporate interests with artistic freedom, has resulted in exceptional talent retention and growth. At the recent Anime Expo in Los Angeles, Yagoo's appearance sparked fan frenzy typically reserved for the talent themselves – a stark contrast to how executives in traditional media companies are often perceived. This leadership approach is driving COVER Corp's ability to attract and rapidly grow new talent. The recent launch of COVER Corp's new HoloJustice group provides a compelling example. One performer saw her YouTube subscriber count grow from 12,000 under a different agency to 240,000 under Hololive in just a few days. This significant audience growth demonstrates the company's ability to create and promote digital talent effectively. As a result, COVER Corp has become highly attractive to aspiring VTubers, fielding thousands of applications from independent creators each year. While some may view VTubing as a passing trend, it's worth considering the trajectory of game streaming. A decade ago, watching others play video games online seemed niche to many. Today, Twitch boasts 240 million monthly active users. VTubing appears to be following a similar path to wider acceptance. The avatar is simply a medium; the real draw is the entertainer's ability to engage an audience for extended periods, much like any successful streamer. The appeal of VTubing for the talent goes beyond novelty. It's making content creation more accessible in intriguing ways. For female streamers who often face unwarranted focus on their appearance, virtual avatars shift attention to personality and content. Additionally, the digital anonymity offers protection against some of the internet's less savoury elements. This growing acceptance is evident in COVER Corp's global expansion. While VTubing originated in Japan, it's rapidly gaining traction worldwide. The recent launch of HoloJustice, COVER Corp's first majority-European group with three European members and one American, showcases their commitment to expanding beyond their Asian stronghold. This strategic move into Western markets demonstrates COVER Corp's ambition to become a truly global entertainment company, positioning them to capture a larger share of the growing VTuber audience across diverse regions and cultures. This global expansion is just one facet of COVER Corp's multi-dimensional growth strategy. The company's value proposition extends far beyond initial talent acquisition and audience growth, as evidenced by the dramatic increase in revenue per VTuber from A$400,000 in March 2020 to A$3.5 million in March 2024. This impressive growth stems from successful diversification beyond streaming, which now accounts for only 25% of revenue, down from 40%. Concerts (19%), merchandising (41%), and licensing (15%) have become significant revenue drivers. Take Mori Calliope, the rapping reaper VTuber, as an example of this diversification. While she engages in traditional streaming activities like playing Red Dead Redemption 2, her success extends far beyond that. Mori has achieved billboard-charting albums and recently provided the end credits song for Warner Bros' new anime, Suicide Squad Isekai. These accomplishments showcase how COVER Corp develops talent across multiple revenue streams. Notably, although the talent behind Mori also performs under her own name, she has found greater commercial success with her Hololive persona, underscoring the value COVER Corp can add to its VTubers' careers. We believe COVER Corp's growth story has more chapters to unfold. The company is guiding to 22% net profit growth this year (to March 2025), but we believe this will prove conservative. Trading at a forward P/E of 23x, the stock appears attractively priced given its growth profile and market position. The world of VTubing might seem unconventional at first glance, but then again, so did the idea of social media or streaming video games not too long ago. With its strong management, innovative business model, and position at the forefront of a growing trend, we believe COVER Corp represents a compelling investment opportunity in the future of digital entertainment. To bolster our conviction, we've enhanced Taurient to monitor engagement metrics across COVER Corp's entire VTuber roster. This capability provides us with data-driven insights that go beyond traditional financial reporting, allowing us to accurately assess the company's growth trajectory and the success of their talent development strategies in real-time.

BSD Analysis:
Minotaur identifies COVER Corporation as a unique play on the emerging VTuber entertainment segment, drawing parallels to the evolution of game streaming from niche to mainstream with Twitch's 240 million monthly users. The fund emphasizes COVER's exceptional talent management capabilities, highlighted by CEO Yagoo's beloved status among both creators and fans, resulting in superior talent retention and rapid audience growth for new recruits. The company has demonstrated remarkable revenue diversification, with streaming now representing only 25% of revenue compared to 40% previously, while merchandising (41%), concerts (19%), and licensing (15%) drive growth. Revenue per VTuber has increased dramatically from A$400,000 to A$3.5 million between March 2020 and 2024, showcasing the platform's value creation. COVER's global expansion strategy, including the launch of HoloJustice targeting Western markets, positions the company to capture international growth beyond its Japanese origins. Trading at 23x forward P/E with 22% guided profit growth, the manager believes the valuation is attractive given the company's growth profile and market-leading position in the expanding digital entertainment space.

Pitch Summary:
It is well established that the world must undergo an energy transition particularly given the pace of technological development. There is a lot of talk about energy sources but less focus traditionally on how we transmit energy. Cables facilitate underground transmission of energy from one place to another. They are the highways of energy and yet investors don't seem to naturally think about them as beneficiaries of the energy transition. Prysmian does the whole end-to-end transmission of electricity from the point of generation to transmission (high voltage) to distribution (medium voltage) to end users (low voltage). The high voltage (HV) space in particular requires highly technical nous and experience. There are only three companies in the world that can do subsea high voltage direct current (HVDC) cables and they are all listed - Prysmian, NKT and Nexans. These 3 companies hold an 86% combined share of the HV market and there are high barriers to entry due to: The need for a track record of projects with similar technologies High capex related to factories and vessels Technology risk - especially with the market shifting into new technologies (e.g. >220kV HVDC) Risk aversion of the major customers in the space - the Transmission and Distribution Operators' (TSO and DSO) - to wanting to work with new players. They have a high preference towards established operators for critical infrastructure projects for obvious reasons. Prysmian is an example of a company that showcases the power of combining our software, Taurient, with our own insights. We manually added the stock to our "Idea Triage" funnel but Taurient's idea score put it at the top of the list. Given the combination of the AI saying we should prioritise work on it and us having prior, deep knowledge and unique insights on the company, adding it to the portfolio made a lot of sense. Prysmian came to our attention from Arms' time at Grok, the private investment firm of Atlassian co-founder Mike Cannon-Brookes. One of Grok's most ambitious undertakings is Suncable, a project which aims to export solar energy from the Northern Territory to Singapore via a >4,000km HVDC subsea cable. As part of that DD Arms did a thorough analysis of Prysmian and saw firsthand the structural imbalance in HV due to ongoing capacity shortages, forcing transmission and distribution operators to book production slots through large tenders now for installations planned in 2026-31. The structural demand/supply imbalance equates to five years' worth of backlog for all three key players. We like Prysmian over the other two as our DD suggested that the company has the best technology and experience and also has funding support from its cash-generative telco business which is important given the highly capital intensive nature of HVDC subsea cable projects. Pure-play competitor, NKT, tends to need to tap the markets on a fairly regular basis. Although it was subsea cables that brought Prysmian to our attention, the company benefits in all areas of its transmission business given the material acceleration we have seen in power demand driven by electrification trends such as EVs and charging, heat pumps and data centres. Utilities in Europe and the US drastically need to update the power grids, with significant queues building to connect new renewable energy sources to the grid and an ageing infrastructure that will struggle to cope with load growth. The major EU utilities are already targeting 10%+ growth in regulated assets and this does not factor in the needs from data centres and AI. The US is also struggling with a fragmented grid across 13 regions and 3 separate networks. Over $15B of funds and grants for transmission and the grid have been set aside to support projects in the US. Prysmian is the only listed cable manufacturer with high exposure to the US market and especially medium and high voltage transmission. The group has key relationships with large Utility companies. In particular, there is significant potential for E3X technology and advanced conductors, singled out among grid enhancing technologies by the regulator and seeing strong momentum with several recent partnerships announced. Prysmian announced an EBITDA target for Power Grids of €410m by 2027 but we think this is undercooked, in line with the company's traditional conservatism. These favourable market dynamics combined with a knowledge of the skill level and acumen that was apparent in the company's high and middle levels of management piqued our interest. Financial analysis showing the strength of the company's balance sheet and FCFs, led to viewing Prysmian as a high quality stock and one where we feel that the Projects/High voltage business is highly underappreciated by the market. Prysmian has a medium-term EBITDA target of €2B in 2027 from ~€1.5B in 2022. Given the market dynamics, we believe the company has the potential to generate closer to €3B. This is supported by the fact that the company has historically been conservative with earnings estimates by orders of magnitude and we see this continuing. On a conservative EBITDA multiple (assuming no re-rating in the stock) as well as some probability-weights on the bull and bear-case scenarios, we believe there is at least 30% upside on the stock with limited downside risk.

BSD Analysis:
Minotaur presents a compelling thesis on Prysmian as a pure-play beneficiary of the global energy transition, specifically focusing on the overlooked transmission infrastructure segment. The fund highlights Prysmian's dominant position in the highly specialized subsea HVDC cable market, where only three companies globally possess the technical capabilities, creating significant barriers to entry. The manager emphasizes a structural supply-demand imbalance with five years of backlog across all players, driven by accelerating electrification trends including EVs, data centers, and renewable energy grid connections. Prysmian's competitive advantages include superior technology, established customer relationships with utilities, and funding support from its cash-generative telecom business, unlike pure-play competitor NKT which requires regular market financing. The investment case is strengthened by significant infrastructure spending commitments, including over $15B in US grid funding and 10%+ growth targets from major EU utilities. The manager believes Prysmian's conservative EBITDA guidance of €2B by 2027 significantly understates potential, with upside to €3B given favorable market dynamics and the company's historical pattern of conservative estimates.

Pitch Summary:
Embotelladora Andina is a pan-Latin-America Coca-Cola bottling and distribution franchisee listed in Chile. We appreciate that both Andina and Coca-Cola are benefiting from changes in the nature of bottler agreements, including recently established concentrate pricing agreements between bottlers and Coca-Cola that bring more visibility on the ROI-attractiveness of investments made by bottlers for growth. In addition, a large segment of Andina's business operates in the refillable bottles space, which has high barriers to entry and increases the competitive strength of Andina's distribution capabilities. Andina shares have recently suffered from multiple compressions due to regional macro-political headwinds in 2022 and 2023. However, the company demonstrated consistent earnings growth and expanding returns over this same time period. In spite of the improving business quality and easing political tension, Andina shares recently traded near a 15-year low multiple, and we were happy to purchase shares of the company at a discount to other quality bottlers and our estimate of the company's business value.

BSD Analysis:
Oakmark initiated a position in Embotelladora Andina, a Latin American Coca-Cola bottler, at compelling valuations near 15-year low multiples. The managers appreciate improved bottler economics from new concentrate pricing agreements with Coca-Cola that enhance ROI visibility for growth investments. Andina's competitive moat stems from its refillable bottle operations, which create high barriers to entry and strengthen distribution capabilities. Despite regional macro-political headwinds causing multiple compression in 2022-2023, the company maintained consistent earnings growth and expanding returns. The disconnect between improving fundamentals and depressed valuation relative to other quality bottlers created an attractive entry opportunity. Easing political tensions should support multiple re-rating as business quality improvements become more apparent.

Pitch Summary:
Bravida Holding is the Nordic region's leading provider of solutions for the service and installation of electrical, heating and plumbing, HVAC and other technical functions in buildings and facilities. Bravida is primarily exposed to non-residential construction, remodeling, and services, each of which is more defensive than construction spending overall, enabling a structurally growing earnings profile. Longer term, it is likely that Bravida's through-cycle organic growth can increase as electrification intensifies demand for installation content and environmentally-conscious remodeling. We also like that Bravida's management team has expanded the company's scale and scope of business through accretive acquisitions, and since the region's installation market is quite fragmented, we believe there is ample opportunity for continued value creation. The stock price has come under pressure recently due to the construction cycle slowdown, but we believe Bravida will fare better than its peers thanks to its advantaged business mix and profit-aligned operating model. This provided the opportunity to purchase shares in the company at a discount to our estimate of intrinsic value.

BSD Analysis:
Oakmark initiated a position in Bravida, viewing the Nordic installation services leader as attractively valued amid construction cycle headwinds. The managers highlight Bravida's defensive exposure to non-residential construction, remodeling, and services rather than volatile new construction. They see structural growth drivers from electrification trends increasing installation content demand and environmental remodeling requirements. The fragmented Nordic installation market provides acquisition opportunities for continued value creation. Management's track record of accretive acquisitions and the company's profit-aligned operating model should enable outperformance versus peers during the downturn. The recent stock price pressure from construction cycle concerns created an attractive entry point below intrinsic value estimates.

Pitch Summary:
At the right price, we would fill the portfolio with the rest. Orbis Global first owned Alphabet (then just called Google) in late 2008, and the Strategy has held it cumulatively for over a decade on and off since then. We have also held Microsoft, Apple, Amazon, and Meta before. But while several of the Seven are now regarded as unassailably successful, sentiment has been less rosy for Alphabet. For us, that is part of the appeal. The sceptical view of Alphabet goes something like this. Microsoft and its partner OpenAI have eaten Google's lunch on artificial intelligence (AI), which will become the key capability for all technology businesses, including internet search. Employees worry that shareholders dominate the company's culture, while shareholders worry it has been dominated by overly political employees and a thick layer of middle managers. It is easy to understand the scepticism on Google's AI efforts. In November 2022, OpenAI launched ChatGPT, and the next February, Microsoft announced it would incorporate ChatGPT into its Bing search engine. Microsoft CEO Satya Nadella took explicit aim at Google, noting that Bing could win market share and profits even while driving down the profit margins of all internet search players. The next day, Google previewed its own AI bot, called Bard, which spectacularly flopped. That paints a scary picture for Google's prospects, particularly Nadella's search salvo, which calls to mind Jeff Bezos' quip that "your profit margin is my opportunity". But it is easy to overstate Google's challenges. Most importantly, chat apps do not produce better results for all searches. We see this in the numbers, where both ChatGPT and Bing have lower weekly retention rates than Google Search. While ChatGPT's app and website have raced ahead of other AI competitors, they have added just 20 million daily users over the past year, bringing the total to 50 million. That sounds big, but Google has 800 million daily users on its mobile app and 1.6 billion on its Chrome web browser. Comparing search against search, you have to squint to see Bing's inroads. On mobile, Bing has less than one daily user for every thousand Google users, and on desktop, Bing's share of daily searches is just 4%—up a grand total of 0.4 percentage points from the pre-ChatGPT days. Neither challenger has stopped Google from growing, and its search volumes and ad revenues are both up about 10% over the past year. In its latest earnings report, Google laid some of these demons to rest, materially increasing our conviction in its fundamentals. After embedding AI into its own "search generative experience", Google's search engagement is up (because users are getting better answers), its search profit margins are up (because advertisers are following users), and its cost to serve AI queries is down (by 80% since their initial introduction). We took this as encouraging evidence that Google is not just surviving in an AI world, but thriving. The market agreed, sending the shares up roughly 15% since that earnings report. And Google's core business remains attractive for other reasons. Even today, digital advertising accounts for less than 60% of total US ad spending, and less than half in other developed markets. Digital ads should continue to take share from traditional television advertising, boosted by the far-better relevance and returns on investment for marketers. That in turn should allow Google's core advertising revenues to keep growing for years to come. That does not mean Google can coast. In a few areas, it clearly needs to improve, including in its AI products. The company has already fixed the most glaring problems with Gemini (the new Bard), explaining that the model was improperly calibrated. That may be true, but it is hard to dismiss the idea that Gemini's output has been skewed by the political priorities of Google's outspoken staff. Still, we believe Google will continue to improve. Proficiency in AI boils down to engineering talent, access to cutting-edge computer chips, and large data sets on which to train the AI models. Google has all three. While the company was slower to launch consumer AI apps than OpenAI and Microsoft, that is not for a lack of ability. The company has been developing AI for years, and experts across the tech world regard Google's AI engineering prowess as first class, backed up by the company's 58% share of citations for academic papers on AI. Google can back up that engineering ability with computing power, as one of the handful of companies that can afford to deploy Nvidia's leading AI chips at scale. Rarer still, Google has even developed an in-house AI chip with competitive performance to Nvidia's. Nor will data be a problem. Google's decades-long dominance of search gives it access to a trove no competitor could hope to amass today. As the company refines Gemini, we believe it should be seen as more competitive with ChatGPT, helping to stave off any threats to the search business. If AI isn't likely to threaten Google's profitability, its expenses still could. There, the company has lagged peers like Meta in managing its sprawling workforce. Though Alphabet did conduct layoffs in 2023, it still has 15% more full-time employees today than it did in 2021, while Meta's full-time headcount is smaller. Meta's experience is instructive. 18 months ago, the company was perceived as unfocused, bloated, burning money on unprofitable initiatives, and sloppy at executing—all criticisms that have been levelled at Google today. After reducing its workforce, Meta is now seen as focused and disciplined, and it seems to be executing better as a result. If Meta's example is any indication, any improvement from Google could be well-rewarded by stockmarkets. Alphabet, to its credit, is not ignoring shareholders. Last year, the company bought back $61.5 billion of its own stock, reducing its share count by 3.3% even after awards to employees. We expect the company to buy back around $70 billion this year, suggesting an ongoing "shareholder yield" of about 3%. That is remarkable for a company of Alphabet's quality. We look at the math the following way. Alphabet earned $74 billion last year, but that is weighed down by severance expenses and losses in the "other bets" segment focused on nascent opportunities. Excluding those losses, we see the company trading at 22 times trailing core earnings, to say nothing of the $79 billion of net cash on its balance sheet. That valuation is only a hair above the multiple of the broader S&P 500, and in relative terms it is unusually low for Alphabet. In our view, Alphabet deserves more of the premium it usually has. This is a business with returns on equity and net profit margins of over 20%, both well above the market average, with above-average growth prospects to boot. If the valuation stays where it is and the company can grow at even 10% per annum, growth and free cash flow alone should drive a near-15% p.a. long-term return. That growth potential is supported by Alphabet's commanding positions in several big businesses. Its core search business is unique, and its YouTube unit is unique in the West. Alongside OpenAI, Alphabet is one of two leaders in AI services; alongside Nvidia, it is one of two in AI accelerator chips; alongside Apple, Android is one of two mobile operating systems; and behind Amazon and Microsoft, Google is one of three hyperscale cloud services operators. Each of these businesses is valuable and has extraordinary potential—but that is often lost as investors focus excessively on threats to the search business. The company does have its risks, however. AI could prove more disruptive than we expect. Advertising spending is cyclical, so if the US economy slows or crashes, Alphabet won't be immune. But weighing up the risks against the price and the quality of the business, Alphabet looks reasonable to us, and it also brings diversification to the portfolio, as its share price behaves differently to many of our other holdings.

BSD Analysis:
Orbis presents a compelling contrarian case for Alphabet, arguing that AI concerns are overblown and the stock offers attractive value. The manager demonstrates that despite ChatGPT and Bing's emergence, Google's search dominance remains intact with 800 million mobile users versus ChatGPT's 50 million, and Bing capturing only 4% desktop search share. Recent earnings showed Google's AI integration actually improved search engagement and margins while reducing serving costs by 80%. At 22x core earnings (excluding other bets losses) with $79 billion net cash, the valuation appears reasonable for a business generating 20%+ ROE and profit margins. The $70 billion annual buyback program provides a 3% shareholder yield, while digital advertising's structural growth runway supports long-term revenue expansion. Management efficiency concerns exist, but Meta's successful workforce optimization provides a potential roadmap for value creation.

Pitch Summary:
Nintendo is an example of one of the more idiosyncratic investments that we have made recently. Its core business of proprietary video game hardware and software needs no introduction, but it is increasingly undergoing a transformation that is less widely appreciated. Nintendo has a long history and a reputation for conservatism. The company has had just six presidents since it was founded as a playing card manufacturer in 1889, and has been slow to embrace many of the changes that other entertainment companies have made long ago. Nintendo's historical reluctance to monetise its vast intellectual property (IP) has also been frustrating for many investors, as has the boom-bust cyclical nature of its hardware releases. A lot of this is changing. Unlike previous consoles, the Nintendo Switch is a single "hybrid" device that can be played on a television and on the go. Previously, Nintendo had always maintained separate home and portable platforms with different, highly customised hardware and software. This is not only more expensive to produce, but also discourages third-party game development, which ultimately means fewer games and greater pressure to deliver something new in the next hardware cycle. With a single platform that uses industry standard components, the Switch enables both internal and external developers to create more games for the system and keep customers engaged with the product. Digital downloads and subscriptions can also give games a new lease on life, something that was never possible with the physical cartridges of the past. We estimate that Nintendo currently makes about $26 in profit, across all its businesses, for each of its 120 million or so annual Nintendo Switch users—and there is room for both of those numbers to be much higher. At the same time, Nintendo is expanding beyond games into theme parks and movies—a playbook that Disney has followed for decades, but Nintendo has been slow to embrace due to a reluctance to build capacity inhouse and caution over outside depictions of its IP. With media companies increasingly interested in video game IP, Nintendo has now found eager partners willing to make movies and theme parks on their terms. These deals appear promising with low downside risk, as Nintendo can receive licensing fees and/or a percentage of profits without needing to finance projects completely out of pocket. While these deals are often lucrative on their own, they also strengthen Nintendo's core video game business—interest in parks and movies generate greater interest in games, and vice-versa. Nintendo saw this play out when The Super Mario Bros. Movie, released last year, increased sales for their Mario video game franchise. We believe Nintendo has only scratched the surface in these adjacent areas, and over the long term, we believe Nintendo has real potential to become a true multimedia juggernaut that looks very different from its "cyclical" past. The burning questions for this investment thesis are unique to Nintendo as a company and have very little to do with any broader economic developments or market trends. Instead, the success or failure of this investment will be driven by Nintendo's ability to boost the profitability of its core video game business and to monetise its formidable yet still relatively untapped IP. If these efforts are successful, we believe it could result in a step change in Nintendo's profitability and valuation—in our view, the Nintendo "ecosystem" would cost far more to replicate or to acquire than its current enterprise value of $49 billion suggests. That said, if its next console, the Switch 2, is a flop, it could be a major setback. As shown in the chart below, our view is that the risk-reward opportunity skews favourably for Nintendo—there is a lot of upside if they succeed in transforming the business, but otherwise limited downside since expectations are already low.

BSD Analysis:
Orbis identifies Nintendo as an underappreciated transformation story, moving beyond its traditional cyclical hardware business model toward a sustainable multimedia ecosystem. The manager emphasizes the strategic importance of the Nintendo Switch as a unified platform that reduces development costs and encourages third-party participation, breaking from Nintendo's historically fragmented approach. With approximately $26 profit per user across 120 million Switch users, significant monetization upside exists through improved user engagement and expanded IP licensing. The expansion into theme parks and movies represents a low-risk, high-reward strategy that creates synergistic value across entertainment verticals, as demonstrated by The Super Mario Bros. Movie's positive impact on game sales. Nintendo's conservative management approach, while historically frustrating, now provides optionality as the company selectively embraces modern monetization strategies. At a $49 billion enterprise value, Orbis believes the Nintendo ecosystem is significantly undervalued relative to replacement cost, with asymmetric risk-reward favoring substantial upside if the transformation succeeds.