Investment Pitches

Pitch Summary:
We bought back into Fabrinet, a US listed contract manufacturer of photonics systems. Our work on the Photonics innovation frontier reinforced our conviction that the transition to optical communications in data centres is accelerating and we wanted to add to the exposure in this area. Fabrinet remains extremely well positioned, supplying all the key players in this space.

BSD Analysis:
Fabrinet is a behind-the-scenes enabler of advanced optics and precision manufacturing where failure is not tolerated. Its customers outsource complexity and yield risk, not cost, which makes relationships sticky. Demand can look volatile quarter to quarter, but secular drivers in AI optics and data centers remain intact. Investors often misclassify Fabrinet as a generic EMS provider. In reality, process control and engineering depth are the moat. Margins reflect execution discipline rather than pricing bravado. Capacity expansion follows visibility, not speculation. This is quiet leverage to digital infrastructure buildout.

Pitch Summary:
Finally, Eli Lilly, a US listed major pharma company, was another strong contributor. It has strengthened its position as a leader in the obesity and diabetes medication category, with its injectable GLP1 products outperforming competitor Novo Nordisk both clinically and commercially, and its newly approved oral GLP1 promising to unlock a large incremental market opportunity. More benign relations between the Trump administration and the pharma industry also helped.

BSD Analysis:
Lilly is executing one of the strongest product cycles in modern pharmaceutical history. Obesity and diabetes therapies are redefining standards of care, not just incrementally improving them. Demand exceeds supply, shifting risk from science to manufacturing execution. Investors debate peak sales prematurely while Lilly expands indications and capacity globally. Pricing power is grounded in outcomes, not marketing leverage. The broader pipeline meaningfully reduces single-asset risk. Political noise hasn’t slowed real-world adoption. This is pharma dominance backed by data, scale, and momentum.

Pitch Summary:
Another long held view was that memory semiconductors will be a key beneficiary of AI investment, as more high performance memory in data centres and more conventional memory on enterprise and consumer devices will be needed to handle ever larger volumes of data associated with AI algorithms. This has also played out during the year and during the quarter, with Korean memory chipmakers SK Hynix contributing strongly to the fund performance.

BSD Analysis:
SK Hynix is leveraged to the tightest part of the memory stack at exactly the right moment. High-bandwidth memory has shifted from niche to mission-critical as AI accelerators scale. Supply discipline across the industry is materially better than prior cycles, changing the payoff profile. Investors remain anchored to legacy boom-bust scars and underappreciate the mix shift toward higher-margin products. Capex is heavy but targeted, which matters. When pricing tightens, operating leverage is extreme. Volatility is unavoidable, but relevance is not. This is memory cyclicality with an AI multiplier.

Pitch Summary:
Another long held view was that memory semiconductors will be a key beneficiary of AI investment, as more high performance memory in data centres and more conventional memory on enterprise and consumer devices will be needed to handle ever larger volumes of data associated with AI algorithms. This has also played out during the year and during the quarter, with Korean memory chipmakers Samsung Electronics contributing strongly to the fund performance. In Samsung’s case performance was also helped by increasing evidence that it will fully participate in AI growth, having fixed most technical challenges with its high bandwidth memory product.

BSD Analysis:
Samsung is a sprawling tech empire that frustrates investors precisely because it refuses to simplify. Memory cyclicality dominates results, but AI-driven demand is reshaping the earnings curve through advanced DRAM and HBM. Consumer electronics provide ballast even when growth stalls. Foundry ambitions lag leaders, but internal demand supports utilization. The balance sheet is fortress-like, allowing Samsung to outlast weaker competitors every cycle. Governance discounts persist, but shareholder returns are slowly improving. This is not a clean narrative stock. It’s a collection of globally critical assets under one roof. Patience is required — and often rewarded.

Pitch Summary:
On the positive side, we have long believed that photonics and optical communications will play an ever more important role in data centres and networks, as volumes and speeds of data transmission, especially for AI workloads, outgrow traditional copper communication technologies. This has been playing out and Lumentum, our favoured stock pick within that innovation frontier, was a stellar performer during the quarter.

BSD Analysis:
Lumentum lives at the volatile intersection of optical networking, telecom, and data center demand. Spending cycles create brutal swings, but optical complexity keeps increasing regardless of sentiment. AI workloads, faster interconnects, and higher bandwidth requirements support long-term relevance. Customer concentration is real and painful when orders pause. That said, technological differentiation still matters in high-speed optics. Margins expand sharply when volumes recover. This is not a stock for smooth earnings. It’s a levered bet on bandwidth demand normalization. When capex turns, Lumentum moves fast.

Pitch Summary:
Finally, PTC, a US listed industrial design software provider, had a weak quarter. The business continues to grow and perform well, and while its fortunes are linked to some more subdued industrial sectors, it is a mission critical tool for its customers, with high value add and predictable, recurring revenue streams. Earnings expectations for PTC continued to be upgraded during the quarter. We suspect the stock weakness was due to generic concerns about software industry vulnerability to AI disruption. We see these concerns as irrelevant to PTC, where AI is an opportunity to enhance the value of their software tools, not a disruption risk. We added to our position during the quarter.

BSD Analysis:
PTC sits at the digital core of how products are designed, built, and maintained — a position that creates enormous switching costs. Its PLM and CAD software are deeply embedded in engineering workflows that don’t tolerate disruption. The real upside lies in connecting design to manufacturing and service through a single digital thread. Growth has moderated, forcing more focus on margins and discipline. Subscription revenue improves predictability but requires patience during transition. Competition exists, but incumbency matters more than feature parity here. This is not flashy SaaS. It’s industrial software infrastructure. PTC wins by becoming invisible and indispensable.

Pitch Summary:
Chemring, a UK listed defence technology company and a recent addition to the portfolio, was off to a poor start. Concerns emerged about UK defence funding and potential for a resolution to the Russia / Ukraine war caused a broad sell-off in defence stocks. Again, we see an undiminished long-term growth opportunity for Chemring, both for its energetics business, where it is a leading supplier in Europe, and its high growth electronic warfare business. We added to the position.

BSD Analysis:
Chemring operates in the uncomfortable but lucrative world of countermeasures, sensors, and advanced defense technology. Its products don’t make headlines, but they keep aircraft, ships, and soldiers alive. Defense spending has shifted from cyclical to structural, and Chemring benefits from that reality. Long contract cycles create revenue visibility once programs are secured. Margins improve as production scales and development costs roll off. Execution risk exists, but backlog quality is strong. Geopolitics are a tailwind whether markets like it or not. This is not defense hype — it’s defense plumbing. Chemring compounds quietly as threats don’t go away.

Pitch Summary:
Cognex, a US listed machine visions systems supplier, had a steady set of results but issued relatively cautious guidance. The company’s business is linked to capital investment cycles in its end markets, and while some are buoyant, others, like the automotive industry, remain subdued. We see a compelling long-term growth opportunity as machine vision proliferates across industries and AI based vision algorithms democratise this technology, making it accessible and feasible for more and smaller industrial users. We think that when capital investment recovers many more industrial machines will be equipped with vision, and Cognex will be a leading vendor. We added to our position in the quarter.

BSD Analysis:
Cognex is a pure-play on machine vision, supplying the “eyes” that allow automation to actually work. Demand can be lumpy because customers pause automation projects during downturns, creating frustrating revenue volatility. But long term, labor scarcity and quality control only push manufacturers toward more vision systems. Cognex’s software and algorithms differentiate it from cheaper hardware-only competitors. Gross margins remain elite because the value is intellectual, not mechanical. China exposure creates noise, but automation adoption there hasn’t stopped. When industrial capex turns, Cognex rebounds quickly. This is not a linear growth story. It’s a cyclical lever on an unstoppable automation trend.

Pitch Summary:
RBC Bearings, Inc. (RBC) was another positive contributor during the quarter. There was no change to the managers’ longstanding thesis on the company. Management continues to execute well operationally and has successfully integrated acquisitions over time. RBC benefits from exposure to aerospace and defense markets, which provide stable demand and attractive margins. The managers believe the company is well positioned for another year of steady growth in 2026.

BSD Analysis:
RBC Bearings sits in the kind of industrial niche that only gets attention when something breaks — which is exactly why it’s valuable. Its highly engineered bearings and components are mission-critical in aerospace, defense, and industrial applications where failure is not an option. Certification cycles and customer qualification create brutal barriers to entry. The aerospace recovery is a real tailwind, but the bigger story is aftermarket and long-life platforms that throw off recurring revenue. Margins are strong because pricing power comes from engineering complexity, not scale alone. The Dodge acquisition added cyclicality but also broadened the earnings base. Execution discipline will determine how cleanly that integration pays off. This is not a fast grower. It’s an industrial compounder built on inevitability and replacement demand.

Pitch Summary:
Fabrinet (FN) was a significant contributor during the quarter. The company manufactures optical transceivers and related components used in high-speed data transmission. Demand has increased as data centers upgrade networks to support AI workloads requiring faster and lower-latency communication. Fabrinet’s products are valued for their ability to maintain precise thermal control and alignment. Favorable trends in telecommunications and data-center end markets boosted investor optimism and supported share price gains.

BSD Analysis:
Fabrinet is a precision manufacturing partner for advanced optics where quality failures are catastrophic. Customers outsource complexity and yield risk, not cost, which keeps relationships sticky. Demand looks volatile quarter to quarter, but long-term drivers in data centers, AI optics, and telecom remain intact. Investors often misclassify Fabrinet as a generic EMS provider. In reality, process control and engineering depth are the moat. Margins reflect execution discipline, not pricing bravado. Capacity expansion follows visibility, not speculation. This is quiet leverage to digital infrastructure buildout.

Pitch Summary:
JFrog Ltd. (FROG) was the top contributor to strategy performance during the quarter. The stock rallied in November following a strong third-quarter earnings report. Revenue grew 26% year over year, with earnings exceeding consensus expectations. Cloud revenue reaccelerated, driven by increased adoption of security, governance, and AI-related features. Demand was further supported by heightened awareness of software supply-chain vulnerabilities. These factors contributed to strong investor enthusiasm and share price appreciation.

BSD Analysis:
JFrog sells developer infrastructure that becomes invisible once installed—and impossible to rip out. Software supply-chain complexity keeps artifact management mission-critical regardless of budget cycles. Spend optimization slowed growth optics, not platform relevance. Consumption-based pricing improves revenue quality as usage scales. Investors mistake slower bookings for competitive loss. Security and DevOps convergence expands wallet share organically. Margins expand as platform costs amortize. This is plumbing for modern software factories, not experimental SaaS.

Pitch Summary:
Trex Co., Inc. (TREX) detracted from performance after reporting third-quarter earnings below market expectations. Management also issued disappointing guidance for the fourth quarter, citing a weaker housing market and softer consumer spending on home improvement. The stock sold off sharply in November following the release. Despite near-term challenges, the managers continue to view Trex as a high-quality business with a strong competitive position. Trex is the largest player in what is effectively a duopolistic market for composite decking. Ongoing due diligence is being conducted, but the long-term thesis remains intact.

BSD Analysis:
Trex dominates composite decking through material substitution, not housing speculation. Replacement demand anchors the business even when new construction stalls. Consumers don’t redo decks often, but when they do, durability beats upfront price. Investors overreact to housing sentiment and miss the long-term shift away from wood. Manufacturing scale and recycled inputs support margin resilience. Distribution reach matters more than advertising here. As volumes recover, operating leverage is meaningful. This is building materials with a secular tailwind hiding behind a cyclical chart.

Pitch Summary:
Vital Farms, Inc. (VITL) was another notable detractor during the quarter. The stock declined largely due to falling egg prices, which raised investor concerns about potential market share loss. Previously, when egg prices were high, Vital maintained relatively stable pricing while competitors raised prices, allowing it to gain share. With prices now declining, investors feared that competitive dynamics could reverse. Management believes these concerns are overdone, as many consumers remain loyal due to Vital’s pasture-raised and ethically sourced products. Additionally, lower input costs may support future margin improvement.

BSD Analysis:
Vital Farms monetizes ethical sourcing and premium positioning in a category consumers actually care about: food quality. Pricing power has held even as grocery inflation cooled, signaling brand trust rather than trendiness. The supply model is asset-light, relying on partner farms instead of balance-sheet bloat. Margins are volatile due to feed and logistics costs, but normalization snaps through quickly. Investors dismiss the brand as niche, yet distribution keeps expanding. Premium eggs and butter aren’t discretionary luxuries for the target customer. Scale improves marketing efficiency over time. This is values-based branding with real economics, not ESG cosplay.

Pitch Summary:
Shift4 Payments, Inc. (FOUR) was the largest detractor from strategy performance during the fourth quarter. A longtime holding, Shift4 delivers payment processing solutions to hospitality, retail, and e-commerce clients. While fundamentals remain solid in the managers’ view, the stock declined after a competitor reported disappointing results, raising broader industry concerns. Investors worried that a potential slowdown in consumer spending could negatively impact some of Shift4’s end markets. Despite these concerns, the managers continue to believe in the company’s long-term growth potential and competitive positioning.

BSD Analysis:
Shift4 is a vertically integrated payments platform built for complex, high-ticket merchants rather than vanilla SMB checkout. Its strength is owning the full stack—gateway, processing, and software—which improves economics and reduces churn. Hospitality, stadiums, and travel exposure add cyclicality, but also higher take rates than generic retail. Acquisitions look aggressive, yet integration deepens merchant lock-in rather than inflating volume for its own sake. Investors worry about competition from Stripe and Adyen, but Shift4 wins where customization and uptime matter. International expansion is still early and underappreciated. Operating leverage shows up fast when volumes normalize. This is payments infrastructure optimized for edge cases, not mass-market sameness.

Pitch Summary:
On the downside, software distribution company Climb Global Solutions, Inc. (CLMB) was the Fund’s leading laggard in the quarter. The company has a strong track record of bringing new products to small and medium-sized businesses that require higher levels of technical support than the large enterprise market. Its results can be somewhat “lumpy” depending on the timing of larger deals, and recognized revenue has also been impacted by the cost of integrating a handful of acquisitions in recent years. While the stock performed poorly in the quarter, we view Climb as positioned to post double-digit year-over-year growth over a significant runway while it continues to reinvest in its business.

BSD Analysis:
Climb Global is a niche IT distributor focused on emerging and non-mainstream software vendors that larger distributors ignore. Its value lies in technical support, vendor incubation, and deep partner relationships rather than raw volume. The model benefits from complexity — the harder the software, the more Climb matters. Growth is lumpy because vendor success drives results, not macro demand. Margins are better than typical distribution due to specialization. Scale is limited, but returns can be attractive without it. This is not a tech growth stock. It’s a picks-and-shovels platform for niche software ecosystems. Climb compounds quietly if vendor partnerships keep maturing.

Pitch Summary:
Castle Biosciences, Inc. (CSTL), another top contributor to Fund performance during the quarter, is a provider of diagnostic tests, with its largest product targeting melanoma. The company also offers a newer test for squamous cell carcinoma, another type of skin cancer. Castle has been challenged by reimbursement issues for the squamous cell test, which has weighed on the stock as growth has matured for its traditional lead product addressing melanoma. The company has developed a third test targeting a form of esophageal cancer which can result from untreated gastroesophageal reflux disease (commonly known as “GERD”). The new product, combined with reinvigorated sales efforts around the melanoma test, has helped Castle restore its growth trajectory and outlook for positive cash flow. Relative to Castle’s gross profit, the stock has been trading at a severe discount to its micro-cap bioscience peers.

BSD Analysis:
Castle Biosciences operates at the intersection of diagnostics and decision-making, where tests influence real clinical behavior. Its dermatology and oncology assays aim to reduce uncertainty, not just detect disease. Adoption is driven by physician trust and reimbursement coverage, both of which take time to build but create stickiness once in place. Growth has been strong, but profitability remains the next hurdle. Competition exists, but Castle’s focus on actionable results differentiates it from generic testing. Cash usage needs monitoring, but the balance sheet remains manageable. This is not hype-driven precision medicine. It’s workflow diagnostics with real clinical pull. Castle works if utilization keeps expanding faster than costs.

Pitch Summary:
Another contributor to Fund performance during the quarter was Mama’s Creations, Inc. (MAMA). A provider of prepared food items such as meatballs and paninis, Mama’s targets the deli area of grocery stores and warehouse clubs. The size of the market for prepared meals has been expanding as budget- and time-challenged consumers seek convenience and quality at a lower price point than most restaurants can provide. In recent years, Mama’s has revamped its senior management team to include executives with deep consumer-product experience across operations, manufacturing and distribution. In addition, the company recently expanded its product line and distribution by acquiring a ready-to-eat meal manufacturer specializing in poultry and with a substantial existing business servicing upscale grocery chain Trader Joe’s. The acquisition promises to provide Mama’s with cost efficiencies in manufacturing and resulting margin expansion while supporting efforts to bring on new clients and expand existing customer relationships.

BSD Analysis:
Mama’s Creations is a small but fast-growing branded food company riding consumer demand for fresh, premium convenience meals. The brand resonates because it sits between homemade and mass-produced, which is a valuable psychological niche. Distribution expansion is the growth engine, not price hikes or marketing spend. Margins are improving as scale builds, but this is still an execution story, not a finished business. Refrigerated foods are operationally unforgiving, so logistics discipline matters. The company has avoided overextension so far, which is encouraging. This is not a packaged-food dinosaur. It’s an early-stage consumer brand with real momentum. If scale arrives without quality slipping, the upside compounds quickly.

Pitch Summary:
Leading individual contributors to the Fund’s relative performance included Axogen, Inc. (AXGN), a holding within the health-care equipment industry. Axogen specializes in providing allografts—nerves harvested from cadavers and processed in such a way that they can safely be transplanted by surgeons for use as “scaffolding” to help restore feeling and functionality to a patient’s damaged nerves. In many cases this solution may be deemed preferable to an autograft, which requires harvesting the patient’s own tissue. While the use of Axogen’s products had been permitted on an experimental basis, in early December the FDA approved a Biologics License that greatly expanded insurance coverage for these allografts while providing the company with 12 years of market exclusivity. Importantly, the market for Axogen’s solutions has expanded well beyond addressing trauma from a car accident, for example, to encompass areas like breast reconstruction as well as restoring sensation lost by cancer patients in the wake of head and neck surgery.

BSD Analysis:
Axogen plays in a highly specialized corner of medtech: peripheral nerve repair, where outcomes matter more than price. Its biologic and synthetic nerve repair products address real surgical problems with limited alternatives. Surgeon adoption is sticky once clinical confidence is established, but penetration takes time. Growth has been uneven, largely due to reimbursement friction and sales execution rather than product quality. The opportunity is meaningful if Axogen can standardize usage and expand indications. Cash burn and dilution risk remain front and center, forcing management discipline. This is not a binary biotech, but it’s not risk-free medtech either. Success depends on converting clinical value into predictable revenue. Axogen works only if execution finally catches up to the science.

Pitch Summary:
Finch shares ended 2025 at $13.49, rising 19% for the year despite no major updates during the period. In August 2024, Finch won a jury trial against Ferring Pharmaceuticals, with findings of patent infringement on three patents, resulting in approximately $30 million in awarded licensing fees and pre-trial interest, plus ongoing royalties to be determined. The jury also found willful infringement, opening the door to enhanced damages of up to three times the award. We continue to await the post-trial ruling from the judge, including the determination of royalty rates and potential enhanced damages. Delays may reflect ongoing settlement discussions, during which interest continues to accrue at the Federal Reserve discount rate plus 5%.

BSD Analysis:
Finch was a microbiome-focused biotech whose promise ultimately ran ahead of clinical and capital-market realities. The science attracted interest, but execution and trial outcomes failed to sustain momentum. Cash burn and funding dependence became the defining features of the equity. Investors learned, again, that platform narratives don’t substitute for decisive data. Residual value depends on IP disposition rather than pipeline progression. This is not a recovery story. It’s a post-mortem example of how early science risk and capital markets intersect. Lessons here are worth more than the equity.

Pitch Summary:
One year ago, we wrote that ENDI was the best near-term risk/reward opportunity since launching Arquitos Capital. Shares began 2025 trading at $11.43, at less than 5x EBITDA net of cash and investments, with $3.4 billion in AUM and an $8 million annual EBITDA run rate. By year-end, shares rose to $16.75, EBITDA run rate increased to $12.5 million, and AUM reached $4.1 billion. Despite this growth, ENDI continues to trade around 5x EBITDA, well below comparable specialized asset managers. A major overhang had been outstanding warrants with a $8 strike price, which distorted financial statements. These were resolved through an early cashless exercise prior to year-end, simplifying the capital structure and improving transparency. We believe the cleaner structure and growing scale will attract new investors over time.

BSD Analysis:
ENDI is a microcap where balance-sheet survival matters more than any top-line narrative. The company’s value is driven by restructuring outcomes, capital access, and asset monetization rather than operating momentum. Liquidity constraints dominate the risk profile and cap institutional relevance. Investors should assume dilution or recapitalization is part of the path if the business is to persist. Any upside is asymmetric but entirely conditional on execution credibility improving. This is not a compounder or a cyclical rebound story. It trades on optionality, not fundamentals. Position sizing, not optimism, is the only edge here.