Investment Pitches

Pitch Summary:
Cellnex (CLNX SM) was the sole detractor to performance as rate sensitive stocks underperformed during the quarter. Typically, tower assets are inversely correlated with yields due to their bond-like characteristics, resulting in a technical weakness in these stocks during periods of rising yields. From a fundamental perspective, however, we note several improvements that were highlighted during Cellnex's recent capital markets day which we attended. Firstly, the business is improving their capital allocation significantly by increasing shareholder return through dividends and buybacks. With dividends growing 7-8% per annum and €4bn earmarked for share buybacks, this alone should deliver a material boost to investor returns over the next several years. Secondly, the company is pursuing non-core asset sales to simplify their tower portfolio, improving profitability and using the proceeds to reduce leverage and accelerate the above mentioned shareholder returns. Cellnex are able to sell assets at highly attractive multiples due to robust demand for towers from private equity and infrastructure fund buyers. These buyers are sitting on elevated levels of dry powder and are prioritising high-quality investments in the current interest rate environment. Several of these buyers have flagged that towers offer the most attractive combination of business quality and secular growth, with the latter due to the growing demand for mobile data. Mobile data traffic is expected to grow close to 20% per annum over the next several years as new applications, such as mobile gaming and video streaming, consume significantly higher levels of data. For example, the average amount of mobile data used in video streaming is over 80,000x greater than simply sending an email. This combined with the rollout of new mobile networks such as 5G is driving greater demand for cell towers over time, benefitting the likes of Cellnex. Finally, Cellnex trades at an attractive valuation multiple of ~13.0x EBITDA which compares to multiples of over 20.0x for assets they are selling, which are of comparatively lower quality to their core business. Applying a fair multiple on a conservative basis of 18.0-20.0x EBITDA would result in an internal rate of return (IRR) of over 20% on a 3-year basis, among the highest in our portfolio today. Overall, we remain convinced in the long-term thesis for Cellnex and we have been using the weakness in the share price over the quarter to add to our position.

BSD Analysis:
Despite short-term underperformance due to rate sensitivity, Stenham maintains a strong bull thesis on Cellnex based on improved capital allocation and attractive valuation. The manager highlights significant shareholder return enhancements with 7-8% annual dividend growth and €4bn in share buybacks planned. The company is simplifying its portfolio by selling non-core assets at attractive 20x+ EBITDA multiples to private equity buyers with elevated dry powder, using proceeds to reduce leverage and accelerate shareholder returns. Secular growth drivers remain compelling with mobile data traffic expected to grow 20% annually driven by data-intensive applications like gaming and streaming, which consume 80,000x more data than email. The 5G rollout is creating additional tower demand over time. At 13x EBITDA versus 20x+ for asset sales, Cellnex trades at a significant discount to intrinsic value. Applying a conservative 18-20x EBITDA multiple suggests over 20% IRR potential over three years, among the highest in the portfolio. The fund is using recent weakness to add to the position.

Pitch Summary:
Leveraging some of the insights gathered from our work on the aerospace sector, we initiated a position in Airbus (AIR FP) in January. Similarly to the engine makers, the company enjoys a dominant position in a secularly growing market. Yet, we believe Airbus is also differentiated as it stands at the edge of an inflection in growth. Airbus' deliveries have remained below pre-pandemic levels for the past four years, as airlines initially preserved cash and supply chains were subsequently constrained. During that period, considerable pent-up demand was accumulated and is now poised to be released. Today, the company's backlog stands at an all-time high, with its orderbook sold out until the beginning of the next decade, and deliveries expected to grow twice as fast as their structural rate over the years ahead. In the aftermath of Boeing's door plug incident on Alaska Airlines flight 1282, the company is now facing material delivery and certification delays. With the A320 Family sold out until the early 2030s, Airbus is limited in its ability to exploit Boeing's current quality issues and gain share over the 737MAX. Nevertheless, should airlines doubt Boeing's ability to resolve these issues rapidly, new orders could increasingly skew towards Airbus, fuelling a longer-term market share shift. This was illustrated by key Boeing customers, such as United Airlines, recently fighting for scarce delivery slots on Airbus' schedule. In our view, corporate culture is an underappreciated factor which can often have profound implications for long-term shareholder value creation. Over the past two decades and especially since its 1997 merger with McDonnell Douglas, Boeing has been reinvesting less into its business in comparison to Airbus, prioritising short-term shareholder gratification at the expense of long-term customer satisfaction, and, ultimately, passenger safety. From our perspective, Boeing's recent challenges are rooted in an inferior culture and should translate into a relative premium for Airbus.

BSD Analysis:
Stenham initiated a position in Airbus based on the company's dominant market position and an inflection point in growth trajectory. The manager highlights that Airbus deliveries have remained below pre-pandemic levels for four years due to cash preservation and supply chain constraints, creating substantial pent-up demand now ready to be released. The company's backlog stands at all-time highs with orderbooks sold out until the early 2030s, positioning deliveries to grow at twice the structural rate. Boeing's quality issues following the Alaska Airlines door plug incident are creating additional competitive advantages, with key Boeing customers like United Airlines seeking scarce Airbus delivery slots. The fund emphasizes corporate culture as an underappreciated value driver, noting that Boeing has consistently under-invested in R&D compared to Airbus since the 1997 McDonnell Douglas merger, prioritizing short-term returns over long-term safety and customer satisfaction. This cultural divergence should translate into a sustained premium for Airbus as airlines increasingly prioritize safety and reliability over the coming decade.

Pitch Summary:
Our aircraft engine-maker holdings in General Electric (GE US) and Safran (SAF FP) were among the top contributors to performance during the quarter. Through their joint venture CFM International (CFMI), GE and Safran are the world's largest aircraft engine-maker. On the supply side, the industry's stringent performance and safety requirements inherently foster an oligopolistic structure, with CFMI holding a dominant share exceeding 70% of the global narrowbody engines market. On the demand side, the industry is supported by a powerful secular tailwind, as people's propensity to travel rises alongside their wealth, resulting in global miles flown having outpaced GDP by ~2x over the past two decades. In our view, the interplay of these dynamics offers promising long-term prospects for the aerospace industry, in particular for the engine-makers. During the first quarter, GE returned 38% and Safran 32% as these factors carried forward strong momentum from last year. As discussed in previous letters, we believe we are in a golden era for the aircraft engine aftermarket, underpinned by the combination of strong air travel and supply chain constraints, translating into a higher-for-longer utilisation of the existing aircraft fleet and, ultimately, an increased demand for engine maintenance. In addition, GE outperformed Safran as our idiosyncratic thesis around the separation of GE Vernova (their power & renewables business) unfolded, with the spin-off successfully executed in early April leaving GE as an attractive pure-play aerospace company. The outlook for engine makers remains favourable in our view, with aftermarket growth at above-average levels. This positive outlook is supported by the carryover of unfulfilled shop visits from last year, coupled with delays in new aircraft deliveries stemming from Boeing's recent challenges, further intensifying utilisation rates of the existing fleet.

BSD Analysis:
Stenham's Safran thesis is built on the company's dominant position in the aircraft engine market through the CFMI joint venture with GE, controlling over 70% of the narrowbody engine market in an oligopolistic industry structure. The manager emphasizes powerful secular demand drivers, with air travel growth outpacing GDP by 2x over two decades as wealth creation drives increased travel propensity. The fund believes the industry is in a "golden era" for aftermarket services, with strong travel demand and supply chain constraints extending aircraft utilization and driving higher maintenance needs. Boeing's recent quality challenges are creating additional tailwinds by delaying new aircraft deliveries and forcing airlines to utilize existing fleets longer. The investment case combines oligopolistic market dynamics, secular growth in air travel, high-margin aftermarket exposure, and favorable industry dynamics from supply chain disruptions. While Safran underperformed GE due to the latter's corporate restructuring catalyst, the fundamental thesis remains strong with above-average aftermarket growth expected to continue.

Pitch Summary:
Our aircraft engine-maker holdings in General Electric (GE US) and Safran (SAF FP) were among the top contributors to performance during the quarter. Through their joint venture CFM International (CFMI), GE and Safran are the world's largest aircraft engine-maker. On the supply side, the industry's stringent performance and safety requirements inherently foster an oligopolistic structure, with CFMI holding a dominant share exceeding 70% of the global narrowbody engines market. On the demand side, the industry is supported by a powerful secular tailwind, as people's propensity to travel rises alongside their wealth, resulting in global miles flown having outpaced GDP by ~2x over the past two decades. In our view, the interplay of these dynamics offers promising long-term prospects for the aerospace industry, in particular for the engine-makers. During the first quarter, GE returned 38% and Safran 32% as these factors carried forward strong momentum from last year. As discussed in previous letters, we believe we are in a golden era for the aircraft engine aftermarket, underpinned by the combination of strong air travel and supply chain constraints, translating into a higher-for-longer utilisation of the existing aircraft fleet and, ultimately, an increased demand for engine maintenance. In addition, GE outperformed Safran as our idiosyncratic thesis around the separation of GE Vernova (their power & renewables business) unfolded, with the spin-off successfully executed in early April leaving GE as an attractive pure-play aerospace company. The outlook for engine makers remains favourable in our view, with aftermarket growth at above-average levels. This positive outlook is supported by the carryover of unfulfilled shop visits from last year, coupled with delays in new aircraft deliveries stemming from Boeing's recent challenges, further intensifying utilisation rates of the existing fleet.

BSD Analysis:
Stenham presents a compelling bull case for GE centered on their dominant position in aircraft engines through the CFMI joint venture with Safran, which controls over 70% of the narrowbody engine market. The manager highlights powerful secular demand drivers, with global air travel outpacing GDP growth by 2x over two decades as rising wealth increases travel propensity. The fund emphasizes they are in a "golden era" for the aftermarket business, driven by strong air travel demand and supply chain constraints that extend aircraft utilization and increase maintenance needs. A key catalyst was the successful spin-off of GE Vernova in April, creating a pure-play aerospace company and unlocking value from the conglomerate structure. Boeing's recent quality issues are creating additional tailwinds by delaying new aircraft deliveries and forcing higher utilization of existing fleets. The investment thesis combines oligopolistic market structure, secular growth drivers, high-margin aftermarket exposure, and corporate restructuring catalysts to drive above-average returns.

Pitch Summary:
Our semiconductor holdings in ASML (ASML NA) and Applied Materials (AMAT US) were among the top contributors to performance during the quarter. The PHLX Semiconductor Sector Index (SOX) rallied 17% over the period while ASML and Applied Materials outperformed, returning 31% and 27%, respectively. As capital equipment providers, both companies produce the machinery used to manufacture semiconductors. These companies are benefitting from the long-term secular growth in the cost of producing the most advanced chips as complexity in these processes is increasing exponentially. Ten years ago, the cost of building a facility capable of producing the most advanced chips at the time would require c.$1bn of capital. Today, the cost of building the most advanced chip-making facilities is upwards of $20bn, making just one of these facilities among the three most expensive sites in the world. Typically, ~80% of these outlays are in the machinery required, meaning the capital equipment companies are significant beneficiaries of the growing costs in semiconductor manufacturing. More recently, the industry found itself in the crosshairs of geopolitical tensions. Semiconductor sovereignty is becoming increasingly important; as of today, over 80% of the world's semiconductors are manufactured in South East Asia. Other regions, such as the US and Europe, are recognising the importance of semiconductors and are pushing for localised production. In fact, in Q1 2024 alone, Samsung committed to double their capital spending on chip making facilities in the US from $22bn to $44bn while Taiwan Semiconductor Manufacturing Co. (TSMC) committed to increase their spending in the US by $25bn. These investments are hugely significant in the context of a semiconductor equipment market that is worth c.$93bn today, as this will translate into sizeable demand for new equipment for these facilities. Finally, the industry continues to be buoyed by the rising demand for chips being driven by Artificial Intelligence (AI). AI is driving not only the need for more chips, but also exponentially more advanced chips and, as per the above, both will translate into rising equipment demand. For example, the latest generation of iPhones uses Apple's A16 chip, capable of processing 17 trillion operations per second, referred to as 17 TOPS. Meanwhile, Nvidia's latest generation of products used for AI (GB200 GPU) will have 10,000 TOPS or, said differently, the ability to process almost 600x more operations per second than an iPhone 15. While these points clearly reflect our positive long-term view on the space, we are cognisant that near-term valuations in the sector have meaningfully expanded as a result of market euphoria around AI. As such, we are carefully managing our exposure and maintaining our valuation discipline.

BSD Analysis:
Stenham's Applied Materials thesis mirrors their ASML position, focusing on the structural growth in semiconductor equipment demand driven by exponentially increasing chip manufacturing complexity. The manager emphasizes that facility costs have increased 20x over the past decade, with equipment representing 80% of these outlays, directly benefiting Applied Materials. Geopolitical semiconductor sovereignty initiatives are creating substantial incremental demand, with major players like Samsung and TSMC committing $69bn in additional US investments. The AI revolution is driving demand for exponentially more powerful chips, with next-generation processors requiring 600x more processing capability than current consumer chips. While the fund acknowledges stretched valuations from AI euphoria, they maintain disciplined exposure to capture the long-term secular growth opportunity. The investment case is underpinned by oligopolistic market dynamics, massive capital reallocation trends, and the critical role of equipment providers in enabling next-generation semiconductor manufacturing.

Pitch Summary:
Our semiconductor holdings in ASML (ASML NA) and Applied Materials (AMAT US) were among the top contributors to performance during the quarter. The PHLX Semiconductor Sector Index (SOX) rallied 17% over the period while ASML and Applied Materials outperformed, returning 31% and 27%, respectively. As capital equipment providers, both companies produce the machinery used to manufacture semiconductors. These companies are benefitting from the long-term secular growth in the cost of producing the most advanced chips as complexity in these processes is increasing exponentially. Ten years ago, the cost of building a facility capable of producing the most advanced chips at the time would require c.$1bn of capital. Today, the cost of building the most advanced chip-making facilities is upwards of $20bn, making just one of these facilities among the three most expensive sites in the world. Typically, ~80% of these outlays are in the machinery required, meaning the capital equipment companies are significant beneficiaries of the growing costs in semiconductor manufacturing. More recently, the industry found itself in the crosshairs of geopolitical tensions. Semiconductor sovereignty is becoming increasingly important; as of today, over 80% of the world's semiconductors are manufactured in South East Asia. Other regions, such as the US and Europe, are recognising the importance of semiconductors and are pushing for localised production. In fact, in Q1 2024 alone, Samsung committed to double their capital spending on chip making facilities in the US from $22bn to $44bn while Taiwan Semiconductor Manufacturing Co. (TSMC) committed to increase their spending in the US by $25bn. These investments are hugely significant in the context of a semiconductor equipment market that is worth c.$93bn today, as this will translate into sizeable demand for new equipment for these facilities. Finally, the industry continues to be buoyed by the rising demand for chips being driven by Artificial Intelligence (AI). AI is driving not only the need for more chips, but also exponentially more advanced chips and, as per the above, both will translate into rising equipment demand. For example, the latest generation of iPhones uses Apple's A16 chip, capable of processing 17 trillion operations per second, referred to as 17 TOPS. Meanwhile, Nvidia's latest generation of products used for AI (GB200 GPU) will have 10,000 TOPS or, said differently, the ability to process almost 600x more operations per second than an iPhone 15. While these points clearly reflect our positive long-term view on the space, we are cognisant that near-term valuations in the sector have meaningfully expanded as a result of market euphoria around AI. As such, we are carefully managing our exposure and maintaining our valuation discipline.

BSD Analysis:
Stenham presents a compelling bull case for ASML based on multiple structural tailwinds driving semiconductor equipment demand. The manager highlights the exponential increase in chip manufacturing complexity, with facility costs rising from $1bn to $20bn over the past decade, with 80% of these outlays going to equipment providers like ASML. Geopolitical tensions are accelerating semiconductor sovereignty initiatives, with Samsung doubling US capex to $44bn and TSMC adding $25bn in US investments, creating substantial equipment demand in a $93bn market. The AI revolution is driving demand for exponentially more advanced chips, with Nvidia's latest GPU processing 600x more operations than an iPhone chip. While acknowledging elevated valuations due to AI euphoria, the fund maintains exposure with disciplined position sizing. The thesis is supported by secular growth drivers, oligopolistic market structure, and significant capital reallocation toward domestic chip production across major economies.

Pitch Summary:
CXI is one of only three major suppliers of foreign banknotes to the United States and of US dollar banknotes internationally. Banknotes are typically used for travel and the Covid induced downturn masked major market share gains made by the company after its key competitor Travelex exited the US. CXI is run by Founder Randolph Pinna, who owns 21% of the company and has high integrity, delights customers, and a 35-year track record of building two banknotes businesses that have delivered strong shareholder returns. The company trades on 11x EV/FCF today and we expect earnings to compound at 15+% p.a. over the next three years. That puts the stock on just 5-6x our estimate of FCF in three years' time, net of cash generated in the interim. We started buying shares at US$14 in mid-2022, it trades at US$18.5 today, and we believe intrinsic value will be around US$50 in three years. We attended the company's AGM in Toronto, Canada, and visited its headquarters in Orlando, Florida, this quarter. These gave us an opportunity to speak with many of CXI's management and board members. We continue to see progress on two key opportunities for the company. We think CXI's first large opportunity is to use its cash. The company holds $106mm in cash and $4mm in debt, a huge amount of net cash compared to its $120mm market cap. We estimate that $80mm of this cash needs to be held as physical banknotes so should be thought of as inventories while $20mm is needed as working capital, meaning excess cash that could be deployed is closer to $20mm. One of the reasons the stock is cheap is that investors are concerned management are not allocating capital well. However, CXI began buying back shares this quarter and have an authorization to buy back 5% of the share count which we believe will be fully utilized this year. That means around half of this years' FCF will be deployed into buybacks. Over the next three years that should reduce the share count by 15%. We continue to believe that a potentially excellent use of cash would be for the company to acquire one of its banknote competitors. This would result in large synergies as costs such as vaults, tech, and staff often do not need to be duplicated. Since there are only a few other players in the industry, any acquisition would be large and significantly increase FCF. And at the company's AGM, the CEO publicly stated that additions to senior management have freed up his time to focus on transformational acquisitions. Given the strength of the company's balance sheet, we estimate much of this acquisition could be financed through credit facilities. An acquisition would also demonstrate that the company's cash is not 'trapped' and so likely lead to a significantly higher valuation multiple as investors start pricing in future cash deployment. We are also confident management will not overpay given their conservative nature. We think CXI's second opportunity is to grow outside the United States. The company is one of only three licensed to supply dollar banknotes from the Federal Reserve to banks across the world. We think this market is worth around $380mm in revenues, versus CXI's total revenues over the last twelve months of $83mm. CXI had yet to make any serious progress because the US banking crisis last year made customers reluctant to source banknotes from a small company. That has changed in the last month, with CXI finally opening trust accounts at one of the world's largest providers. The trust will effectively act as a middleman and guarantee large transactions between CXI and its customers for a small fee. Given this solution was found in collaboration with customers, we are hopeful that the company will now be able to capitalize on this opportunity. We expect that investors will greatly reappraise CXI's intrinsic value over time as the business grows outside the US and management deploys cash. We also believe that the potential downside over a 3-5 year horizon is low if we are wrong given the company's fortress balance sheet, 11x EV/FCF valuation, and double-digit growth rate.

BSD Analysis:
Plural Investing presents a compelling bull case for Currency Exchange International, positioning it as an oligopoly player in the foreign banknote supply market with significant untapped potential. The investment thesis rests on two key catalysts: capital deployment and international expansion. With $106mm cash against a $120mm market cap, CXI trades at just 11x EV/FCF despite 15%+ expected earnings growth, creating an attractive entry point at 5-6x projected three-year FCF. Management's recent share buyback authorization and CEO focus on transformational acquisitions address previous capital allocation concerns. The international expansion opportunity is particularly compelling, with CXI being one of only three Federal Reserve-licensed suppliers to a $380mm global market versus current $83mm revenues. Recent trust account arrangements with major providers should unlock this previously inaccessible market. Founder-CEO Randolph Pinna's 21% ownership and 35-year track record provide strong execution confidence, while the fortress balance sheet limits downside risk in this specialized, high-barrier industry.

Pitch Summary:
TerraVest is an acquirer and operator of steel-based storage tank and equipment businesses that has delivered shareholder returns of ~30% p.a. for the last decade. The company generates a 25% post-tax incremental return on tangible capital and has an excellent and aligned management team who own 35% of the business. We first bought shares in TerraVest late last year around C$40, the stock trades at C$70 today, and we think management will continue to compound capital at strong returns for many years to come. The company follows a strategy of acquiring, restructuring, and operating businesses that are generally mom & pops across storage tanks and pressure vessels (~65% of revenues), oil & gas equipment (~20%), and boilers and furnaces (~15%). We believe that TerraVest creates value by acquiring businesses for an average of 10x FCF then restructuring to cut that to 6x, with restructuring the more important and where management spends most of its time. TerraVest is able to increase profits primarily in three ways: (i) By shifting the mindset of mom & pops to focus on FCF over revenues, (ii) by using its scale to procure steel and other materials at a lower cost, and (iii) by sharing resources across businesses such as by consolidating facilities or cross-selling products. The company's five key members of management all earn relatively low base salaries and have the vast majority of their net worth in the stock. All are highly experienced and most are fairly young – CEO Dustin Haw is the key and is 40 – giving them a strong incentive and long runway to continue compounding. The CEO has never sold a share to supplement his relatively modest income, which suggests to us he thinks TerraVest will continue to be successful. We think there remain many businesses and adjacent industries for TerraVest to deploy capital into. The stock has appreciated significantly over the last twelve months but remains reasonably valued at 15x FCF for a business likely to compound earnings at double digit rates. TerraVest does not speak to sell-side analysts, hold earnings calls, or give investor presentations and so the stock is largely undiscovered among institutional investors. We believe the company's intrinsic value will increasingly be reflected as management executes, more investors take notice, and stock liquidity increases.

BSD Analysis:
Plural Investing presents a compelling bull case for TerraVest, a Canadian industrial consolidator that has delivered exceptional 30% annual returns over the past decade. The investment thesis centers on management's proven ability to acquire mom-and-pop steel tank and equipment businesses at 10x FCF and restructure them to 6x FCF through operational improvements. The company's value creation strategy involves three key levers: shifting acquired businesses from revenue-focused to FCF-focused operations, leveraging scale for better procurement costs, and consolidating resources across the portfolio. Management alignment is exceptional with 35% insider ownership and the CEO never having sold shares despite modest compensation. At 15x FCF, the valuation appears reasonable for a business generating 25% post-tax returns on tangible capital with significant runway for continued acquisitions. The lack of sell-side coverage and institutional following suggests the stock remains undiscovered, creating potential for multiple expansion as execution continues and liquidity improves.

Pitch Summary:
As the country's largest healthcare company, UnitedHealth touches just about every aspect of our healthcare system. It's still mostly known for its health plan business, which covers more Americans than anyone else, even though it has also grown to become one of the largest providers of actual medical care—doctors, urgent care, surgeries, etc.—through a division known as Optum that now earns as much for the company as its plans business. Optum includes a wide range of health-related businesses: pharmacy benefit management, medical practice consulting, software, analytics for drug development, and a comparatively small division called Change Healthcare that serves as the primary payments clearinghouse for medical providers. An attack in February by a cybercriminal group shut down the Change Healthcare payments platform, cutting off cash for almost a month to thousands of medical practices. UnitedHealth has since paid a ransom to the hackers, restored the network, and provided $6 billion in interest-free loans/advances, but the general consensus is that it did not exactly cover itself in glory in a moment of crisis. Communication was poor, and the company's reaction time was slow. This debacle is expected to cost at least $1.5 billion, a lot of money, but only less than 0.5% of the company's market value. It's disappointing and embarrassing, but we don't expect the cyberattack and its repercussions to have an ongoing impact on the company's economics. What will have a greater impact is the lower rates from serving Medicare patients. Each year, the Center for Medicare & Medicaid Services (CMS) updates how much it pays providers for the over 10,000 types of procedures it covers, from brain surgery to stitches, and it announced in March that this year's rate would decline by 1.25%. This was harsher than the market was expecting, and healthcare stocks got dinged up. It isn't great for UnitedHealth, but this is also where the company's size and diverse lines of business come into play. UnitedHealth has a lower cost structure than its competitors, and CMS can't reduce its rates so low that providers stop accepting Medicare patients. If some providers get squeezed out, UnitedHealth is in a position to take advantage of that. Also, Medicare and Medicaid are inching away from the traditional fee-for-service model, where a provider receives a payment for each procedure it does and is thus incented to encourage procedures, to a so-called "capitated" model, where a plan provider gets a flat fee for each member in its plan and then covers all the medical costs itself. This gives providers a strong incentive to keep patients healthy by emphasizing preventative care and diligent follow-up after major procedures. The results so far are promising for both reducing costs and improving health, and we expect these kinds of plans to grow. Being both a provider of health plans and medical services—the vast majority of healthcare providers are one or the other—UnitedHealth is in a great position for this shift. They have insights into both sides of the business and can more easily coordinate care. With a relatively low valuation and high expected earnings growth, we are bullish on the stock.

BSD Analysis:
The manager presents a comprehensive bull case for UnitedHealth despite recent headwinds from a cyberattack and Medicare rate cuts. The thesis centers on UnitedHealth's unique dual positioning as both the largest health plan provider and a major healthcare services provider through Optum, which generates equal revenue to the insurance business. While acknowledging the $1.5 billion cost from the Change Healthcare cyberattack represents poor crisis management, the manager views this as a temporary setback representing less than 0.5% of market value. The 1.25% Medicare rate reduction is seen as manageable given UnitedHealth's superior cost structure and scale advantages that position it to gain market share if competitors are squeezed out. The manager highlights the structural shift from fee-for-service to capitated Medicare models as a key catalyst, where UnitedHealth's integrated model provides competitive advantages in care coordination and cost management. The investment case rests on the company's defensive moat, diversified revenue streams, and positioning for healthcare industry evolution, supported by attractive valuation and expected earnings growth.

Pitch Summary:
I believe that years of reduced capital expenditures, along with ESG restricting capital access, combined with Western governments that are openly hostile to fossil fuels, have created an environment for dramatically higher oil prices. While we could purchase oil producers, and we are long shares of Journey Energy (JOY – Canada), I feel it is far more conservative to simply own the physical commodity itself. I believe that this leveraged play on oil gives us the most upside to oil and ultimately inflation, while exposing us to reduced risk when compared to producers.

BSD Analysis:
Kupperman's Journey Energy position reflects his broader oil thesis while acknowledging the superior risk-reward of commodity exposure over equity exposure. The manager identifies a structural supply constraint from years of underinvestment, ESG capital restrictions, and government hostility toward fossil fuels. These factors create conditions for dramatically higher oil prices as supply fails to meet demand. While the fund holds Journey Energy as an oil producer, Kupperman explicitly states preference for physical commodity exposure due to lower risk profiles. The Canadian heavy oil producer provides leveraged exposure to oil price movements while maintaining operational focus in the Western Canadian Sedimentary Basin. This represents a tactical allocation within the broader energy thesis, with the manager favoring commodity futures and options for primary oil exposure.

Pitch Summary:
As the world gets increasingly crazy, I believe that people will come to realize that ownership of precious metals, in physical form, as opposed to in a brokerage account, is part of being financially prudent. They will mostly likely buy those coins from a coin dealer, either in person, or online. A-Mark supplies both of those markets as one of the largest players in online coin brokerage through their JM Bullion, LPM, Silver Gold Bull, Goldline, etc. verticals, along with serving as one of the largest wholesalers to local coin shops. A-Mark also has stakes in two mints (Silver Towne and Sunshine). A-Mark benefits from periods of chaos in two ways. They see transaction volumes increase, and they see the spreads that they can charge widen. During the three years from Fiscal 2021 to 2023, A-Mark earned approximately $7 a share, if you adjust for certain non-recurring items and remove non-cash intangible amortization. We acquired our shares for approximately four times this earnings level, which seems quite cheap for a business with such high returns on capital. That said, the business has seen reduced earnings over the past few quarters, as a result of declining transaction volumes and spreads. I believe that this decline in activity has created a unique opportunity to buy a high-quality business, with substantial insider ownership, at a bargain price. I naturally am enamored of the counter-cyclical nature of the business, which hopefully should help offset the risks to our portfolio in future periods of crisis. I believe that this business can earn as much as $10 a share in such a period of crisis and get a healthy multiple applied to it. For years, I have sought out a way to play an anticipated increase in the prices of precious metals, without the risks of owning a mine. I believe that A-Mark is the ideal proxy for this view and as other investors discover it, the valuation will re-rate.

BSD Analysis:
Kupperman's A-Mark investment represents a leveraged play on precious metals demand without mining risks, focusing on the distribution and trading infrastructure. The company operates dominant online platforms (JM Bullion, LPM) and wholesale networks, benefiting from both volume increases and spread expansion during market stress. The manager acquired shares at 4x normalized earnings of $7 per share, representing attractive valuation for a high-ROIC business with substantial insider ownership. Recent earnings weakness from reduced volumes and spreads creates the buying opportunity, with potential for $10 per share earnings during crisis periods. The counter-cyclical nature provides portfolio diversification benefits during market turmoil. A-Mark's vertical integration through mint ownership (Silver Towne, Sunshine) enhances margins and supply chain control. This represents an infrastructure play on precious metals adoption with strong cyclical earnings potential.

Pitch Summary:
JOE owns approximately 168,000 acres in the Florida Panhandle. It has been widely known that JOE traded for a tiny fraction of its liquidation value for years, but without a catalyst, it was always perceived to be "dead money." Over the past few years, the population of the Panhandle has hit a critical mass where the Panhandle now has a center of gravity that is attracting people who want to live in one of the prettiest places in the country, with zero state income taxes and few of the problems of large cities. The oddity of the current disdain for so-called "value investments" is that many of them are growing quite fast. I believe that JOE may grow revenue at a rapid rate for the foreseeable future, with earnings growing at a much faster clip. Meanwhile, I believe the shares trade at an attractive multiple on Adjusted Funds from Operations (AFFO), while substantial asset value is tossed in for free. Besides the valuation, growth, and high Return on Invested Capital (ROIC) of the business, why else do I like JOE? For starters, land tends to appreciate rapidly during periods of high inflation—particularly an inflationary period where interest rates are likely to remain suppressed by the Federal Reserve. More importantly, I believe we are about to witness a massive population migration as people with means choose to flee big cities for somewhere peaceful. I suspect that every convulsion of urban chaos and/or tax-the-rich scheming will launch JOE shares higher, and it will ultimately be seen as the way to "play" the stream of very wealthy refugees fleeing for somewhere better.

BSD Analysis:
Kupperman's St. Joe thesis combines traditional value investing with demographic and political migration trends in Florida. The company owns 168,000 acres in the Florida Panhandle, historically trading below liquidation value but now benefiting from population inflection points. The manager identifies rapid revenue and earnings growth potential as the region reaches critical mass for development. The investment offers multiple value drivers: attractive AFFO multiples, substantial embedded land value, high ROIC, and inflation protection through real asset ownership. The thesis anticipates accelerated wealthy migration from high-tax, urban areas to Florida's tax-friendly environment. Political and social tensions in major cities could serve as catalysts for further migration waves. This represents a demographic play with strong asset backing and multiple expansion potential as development accelerates.

Pitch Summary:
It may take some time still, but I believe that society will eventually settle on nuclear power as a compromise solution for baseload power generation. This will come at a time when there is a deficit of uranium production, compared with growing demand. As aboveground stocks are consumed, uranium prices should appreciate towards the marginal cost of production. Additionally, there is currently an entity named Sprott Physical Uranium Trust (U-U – Canada) that is issuing shares through an At-The-Market offering, or ATM, in order to purchase uranium (we are long this entity). I believe that these uranium purchases will accelerate the price realization function by sequestering much of the available above-ground stockpile at a time when utilities have run down their inventories and need substantial purchases to re-stock. The combination of these factors ought to lead to a dramatic increase in the price of uranium as it will take multiple years for sufficient incremental supply to come online—even if the re-start decision were made today.

BSD Analysis:
Kupperman's uranium thesis centers on a structural supply-demand imbalance as nuclear power gains acceptance for baseload generation amid the energy transition. The manager identifies a critical inflection point where above-ground uranium inventories are being depleted while new mine development faces multi-year lead times. Sprott Physical Uranium Trust serves as both an investment vehicle and a catalyst, with its ATM program actively removing physical uranium from the market. The fund's position benefits from utility restocking needs after years of inventory drawdowns, creating sustained demand pressure. The thesis anticipates uranium prices moving toward marginal production costs as the market tightens. This represents a commodity play with strong fundamental support and a clear supply-demand catalyst through Sprott's ongoing uranium purchases.

Pitch Summary:
In 2020 when oil traded below zero, drilling activity ground to a halt and many energy service providers declared bankruptcy. Many of these businesses had teetered on the verge of bankruptcy for years due to reduced demand and over-leveraged balance sheets. The bankruptcies led to consolidation and reduced future industry capacity, removing future competition in the recovery. With oil prices now recovering, I believe that demand for drilling and other services will increase from subdued levels. While producers have been slow to increase spending on exploration despite recoveries in energy prices, I believe that this only extends the timing on the thesis. In the end, the only way to reduce future energy prices is to see a dramatic increase in global oilfield services spending. Any postponement of this spending only leads to higher prices and more wealth transfer from the global economy to the oil producers, which will likely end up resulting in an increase in spending on exploration and production. We purchased many of these positions at fractions of the equipment's replacement cost, despite restored balance sheets and positive operating cash flow. As spending in the sector recovers, I believe that the potential for cash flow will become more apparent and this equipment will trade up to valuations closer to replacement cost.

BSD Analysis:
Kupperman's Tidewater position reflects the same energy services consolidation thesis as Valaris, focusing on offshore support vessels rather than drilling rigs. The investment capitalizes on the dramatic capacity reduction following 2020's industry distress, when vessel operators faced bankruptcy and fleet rationalization. Tidewater's restructured balance sheet and positive operating cash flow provide downside protection while the company trades at a significant discount to asset replacement cost. The manager anticipates that recovering offshore activity will drive utilization rates and day rates higher, leading to substantial cash flow generation. The delayed recovery in offshore capex extends the investment timeline but potentially amplifies returns as supply-demand imbalances become more acute. This represents a leveraged play on offshore energy activity with strong asset backing and improving industry fundamentals.

Pitch Summary:
In 2020 when oil traded below zero, drilling activity ground to a halt and many energy service providers declared bankruptcy. Many of these businesses had teetered on the verge of bankruptcy for years due to reduced demand and over-leveraged balance sheets. The bankruptcies led to consolidation and reduced future industry capacity, removing future competition in the recovery. With oil prices now recovering, I believe that demand for drilling and other services will increase from subdued levels. While producers have been slow to increase spending on exploration despite recoveries in energy prices, I believe that this only extends the timing on the thesis. In the end, the only way to reduce future energy prices is to see a dramatic increase in global oilfield services spending. Any postponement of this spending only leads to higher prices and more wealth transfer from the global economy to the oil producers, which will likely end up resulting in an increase in spending on exploration and production. We purchased many of these positions at fractions of the equipment's replacement cost, despite restored balance sheets and positive operating cash flow. As spending in the sector recovers, I believe that the potential for cash flow will become more apparent and this equipment will trade up to valuations closer to replacement cost.

BSD Analysis:
Kupperman presents a compelling contrarian thesis on offshore drilling services, capitalizing on the industry's post-2020 consolidation and capacity destruction. The manager's investment rationale centers on purchasing distressed assets at deep discounts to replacement cost while balance sheets have been restructured. The thesis relies on the inevitable recovery in exploration spending as oil producers face pressure to increase supply to moderate energy prices. The fund acquired positions when drilling equipment traded at fractions of replacement value, positioning for multiple expansion as cash flows recover. The delayed capex cycle creates a longer runway for the thesis to play out, with higher oil prices potentially accelerating the timeline. This represents a classic value play with strong cyclical recovery potential in a consolidated industry structure.

Pitch Summary:
Initial coverage was on Dec 16, 2021. Then, the follow-up report was on Feb 17, 2022. Sell-side brokers have no interest in the company; falsely represent bookings as sales; and false financial advertising to SEC; the company is unable to make any significant sales;

BSD Analysis:
authID.ai develops biometric identity authentication platforms. Bears argue the company lacks scale, with immaterial revenues relative to larger competitors like Okta and Microsoft. Persistent cash burn and limited customer wins raise dilution concerns. While cybersecurity tailwinds exist, authID has yet to prove it can secure significant contracts or establish network effects in a crowded field.

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

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

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

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

Pitch Summary:
Cipher Pharmaceuticals holds the Canadian distribution rights for MOB-015, a promising topical treatment for toenail fungus developed by Moberg Pharma. The treatment's ability to achieve high mycological cure rates with a safer profile than oral alternatives positions it well for market success. The ongoing phase three trial aims to optimize the treatment regimen to improve complete cure rates, potentially enhancing its market appeal. Cipher stands to benefit from the anticipated shift in the toenail fungus treatment landscape, similar to the transition seen in dandruff treatments from oral to topical solutions.

BSD Analysis:
Cipher Pharmaceuticals' strategic position as the Canadian distributor of MOB-015 aligns with the growing demand for safer and effective topical treatments for toenail fungus. The treatment's potential to disrupt the market is underscored by patient anecdotes highlighting the limitations and safety concerns of current oral treatments. As Moberg Pharma refines the dosage regimen to address the complete cure rate issue, Cipher is poised to capitalize on the anticipated market shift. The parallels with the evolution of dandruff treatments suggest a significant opportunity for Cipher in the Canadian market.

Pitch Summary:
Moberg Pharma has developed MOB-015, a novel topical treatment for toenail fungus that effectively penetrates the nail to deliver high concentrations of terbinafine, an antifungal agent, to the nail bed. The treatment shows promise in achieving high mycological cure rates, comparable to oral terbinafine, but with a safer profile. The ongoing phase three trial aims to optimize the dosage regimen to improve complete cure rates by adjusting the treatment phases. The potential for MOB-015 to disrupt the $3-5 billion toenail fungus treatment market is significant, given its safety and efficacy compared to existing treatments.

BSD Analysis:
The patent extension application for MOB-015 provides insights into the treatment's mechanism, highlighting its ability to hydrate the nail and deliver effective antifungal concentrations. Despite the low complete cure rate due to overhydration, Moberg is testing a revised dosage regimen to address this issue. The market demand for a safe and effective topical treatment is evident from patient anecdotes and the limitations of current oral treatments, which pose safety risks. MOB-015's potential to transform the toenail fungus treatment landscape mirrors the shift seen in dandruff treatments, moving from oral to topical solutions.