Investment Pitches

Pitch Summary:
Speaking of which, I think it could make sense to revisit Nu Holdings, as the stock has more than tripled from our initial purchase price and we haven't sold a share. In our first write-up, Nu was around a $16 billion valuation and now it's around $54 billion. Even still, I think the future is bright. The company could do over $2 billion in earnings for 2024, leaving us at 27x forward earnings for plenty of future growth. That's not necessarily a demanding valuation for 60% growth. The company is now the third largest financial institution in Brazil, with about 88 million Brazilian users. In Mexico, Nubank is already the 6th largest bank with about 8% market share. And the company recently was approved for its final banking license in Colombia. These are the three geographies that Nu is focused on right now but they likely aren't the only ones over the next decade. Nu has a culture of moving very slowly because underwriting risk takes time to deeply understand customer behavior. This unique approach to underwriting means that the company focuses on only a few geographies and a few products, expanding over time. For nearly the first five years, the company only had a credit card product in Brazil. Now that's patience! Only now is Nu really expanding into adjacent areas like payroll lending and investment products. Phase one of customer acquisition in Brazil is shifting into phase two of increasing the average revenue per customer. And the company will now replicate that strategy in Mexico and Colombia. It will take time but the low cost structure combined with deep risk management has enabled the company to grow fantastically. In Q4 of 2022, when we started buying the stock, the company did $125 million in quarterly EBIT. When annualized, the valuation was about 32x forward earnings. Now, the company is doing $500 million in quarterly EBIT, implying a 27x forward multiple. This is the exact type of situation we look for! The stock has more than tripled but the multiple has decreased by almost 20%. That is amazing! And that's what happens when we carefully stick to our mandate of buying the world's fastest-growing, highest-quality businesses for low multiples. Here's to many more decades of finding companies similar to Nu Holdings.

BSD Analysis:
The manager presents a compelling bull case for Nu Holdings, highlighting exceptional execution and valuation compression despite significant stock appreciation. Nu has tripled in value from $16B to $54B while simultaneously reducing its forward P/E multiple from 32x to 27x, demonstrating robust earnings growth of 300% from $125M to $500M quarterly EBIT. The company has achieved dominant market positions across Latin America, ranking as Brazil's third-largest financial institution with 88 million users and Mexico's sixth-largest bank with 8% market share. Nu's disciplined geographic and product expansion strategy, taking five years to move beyond credit cards in Brazil, reflects strong risk management culture. The transition from customer acquisition to revenue per user optimization in Brazil, while replicating the playbook in Mexico and Colombia, provides a clear growth runway. At 27x forward earnings for 60% growth with $2B projected 2024 earnings, the valuation remains reasonable for a high-quality digital banking franchise. The manager views this as a textbook example of their investment philosophy: buying world-class businesses at attractive multiples.

Pitch Summary:
Biosolutions use natural processes to solve environmental, health and agricultural problems. Enzymes and cultures are naturally occurring: we have around 75,000 enzymes in our bodies alone. They are therefore biodegradable, unlike their petrochemical alternatives. Biosolutions allow the world to cut emissions and cause far less ecological damage. For nearly 20 years the world's two leading biosolutions companies have been on our Focus List. These are Novozymes and Chr. Hansen, both based in Denmark. In December 2022, the two companies announced their plan to merge, with the deal closing earlier this year. Sustainability is Novonesis's raison d'être. The company enables customers to produce more, and better, with less. More than 80% of its revenues contribute in some way to the UN Sustainable Development Goals. The use cases for biosolutions are manifold. They can replace chemical surfactants in laundry detergents with enzymes, enabling clothes washing at lower temperatures; treat farmland with natural solutions rather than chemical pesticides; increase the taste, texture and shelf life of yoghurt while enhancing the product with probiotics for improved gut health; replace chemical additives in baked goods; and improve animal feed without the use of antibiotics. Many other applications are yet to be discovered and, among those that have been, only a handful have been industrially commercialised. However, not all use cases of biosolutions are equal. As an example, we have an open dialogue with Novonesis on the role of enzymes in the biofuels industry. Our analysis suggests that whilst biofuels can be less carbon-intensive than traditional fossil fuels, there are other issues to consider that may make it a second-best solution. These include water usage and the risk of creating monocultures. Despite these more complex use-case assessments, we firmly believe that Novonesis makes a substantial positive contribution to a sustainable world. We perceive the Management Quality of Novonesis to be high. In Ester Baiget, the company has a CEO with an excellent track record and a deep commitment to sustainability. We have also assessed the company to have strong Business Quality. Novonesis is the global leader in the production of enzymes and cultures, with more than 45% market share in both sectors. Three factors about the business stand out to us. First, its R&D capabilities are unmatched. It has the largest and most diverse proprietary library of enzymes and cultures, considerably more patents than peers and excellent access to talent. It also has a highly supportive controlling shareholder in Novo Holding. Novonesis has a long history of discovering and seeding new applications, with accumulated knowhow vital in enabling growth persistence. Second, we recognise the complexity of optimising the strains and then bringing production from the laboratory to commercial scale. Decades of improvements to process engineering allow the company to maximise quality and efficacy. This, in turn, helps to build a deep moat. Third, the R&D function at Novonesis works closely with customers in most of its applications and end markets. This ensures that switching costs remain relatively high. Our view is that Chr. Hansen was historically more commercially-minded, working in even closer proximity with its customers to build their innovation pipelines than Novozymes had done and boasting more sophisticated pricing practices. And what of the merger? Many of you will know that big mergers can be difficult to execute. However, we think it will enhance each of the three aspects of Business Quality outlined above. It is also likely to bring synergies in costs and revenues. Ultimately, we believe, the merger will turn Novonesis into a higher-returns business. It will also strengthen their market positioning and R&D toolkit, allowing them to address nascent but exciting sectors that are appearing across human and plant health. The merger could have wider effects on the world. A larger player, and therefore a louder voice, in biosolutions could help reduce some of the regulatory hurdles standing in the way of their wider use. A major challenge in some jurisdictions is that they are classified as 'chemicals', putting them incorrectly on a level playing field with petro-based alternatives. We look forward to partnering with Novonesis as it drives the world to a sustainable future.

BSD Analysis:
Generation presents a compelling bull case for Novonesis, the newly merged entity combining Novozymes and Chr. Hansen, two Danish biosolutions leaders they've tracked for nearly two decades. The investment thesis centers on Novonesis's dominant market position with over 45% share in both enzymes and cultures, supported by unmatched R&D capabilities including the largest proprietary library of enzymes and cultures. The company's sustainability focus is core to its value proposition, with over 80% of revenues contributing to UN Sustainable Development Goals through applications ranging from low-temperature laundry detergents to antibiotic-free animal feed. Generation highlights three key competitive advantages: superior R&D capabilities backed by extensive patents and talent access, complex process engineering expertise that creates switching costs, and close customer collaboration that builds innovation pipelines. The merger is expected to enhance these strengths while delivering cost and revenue synergies, ultimately creating a higher-returns business. Management quality is rated highly under CEO Ester Baiget, with strong backing from controlling shareholder Novo Holding. The combined entity should have greater regulatory influence to address classification challenges that currently limit biosolutions adoption versus petrochemical alternatives.

Pitch Summary:
Distressed business; declining sales hidden by aggressive revenue recognition; key operational metrics are manipulated; declining customer ROI; an engagement with the company's platform is falling; chief executives are leaving in the same year;

BSD Analysis:
Online physician review and scheduling platform. The short thesis highlights slowing growth post-pandemic, customer concentration, and questions about the durability of its advertising model. As competition in digital health intensifies, maintaining pricing power may prove difficult. Valuation remains elevated relative to peers.

Pitch Summary:
Centene is a large health insurer specializing in three major government-sponsored programs: Medicaid, Marketplace and Medicare Advantage. Each of these programs benefits from long-term secular tailwinds. In Medicaid, states are steadily outsourcing their programs to managed care companies like Centene to help reduce costs and improve care quality. Managed Medicaid penetration has increased meaningfully over the past two decades, and we expect further gains over time. In Marketplace, growth is driven by the trend toward more individuals buying health insurance. Centene holds the top market share in both of these programs and is well-positioned to capitalize on their continued growth. Finally, in Centene's Medicare Advantage business, past missteps will result in losses next year, but we believe Centene can turn its Medicare Advantage segment around and generate positive earnings in the next few years. Centene currently trades for about 9x our estimate of normal earnings power, which we believe is a compelling value for a business that generates healthy returns on capital and is capable of growing EPS at a low double-digit rate.

BSD Analysis:
The manager presents Centene as an attractive value play in government-sponsored healthcare with multiple secular growth drivers. The investment thesis centers on Centene's leadership positions in Medicaid and Marketplace programs, both benefiting from long-term tailwinds including continued state outsourcing and individual insurance adoption. The company's dominant market share in these growing segments provides competitive advantages and pricing power. While acknowledging near-term Medicare Advantage challenges, the manager expects a turnaround within a few years. At approximately 9x normalized earnings, the valuation appears compelling for a business generating healthy capital returns and low double-digit EPS growth potential. The combination of defensive government-sponsored revenue streams and attractive valuation metrics creates a compelling risk-reward profile. Centene's scale advantages in managing complex government programs should drive continued market share gains. The temporary Medicare Advantage headwinds appear manageable relative to the broader growth opportunity.

Pitch Summary:
Fears about biotech funding and the sell-off in the broader life sciences area created an opportunity for us to invest in IQVIA, which we view as a high-quality business, at an attractive valuation. We believe that IQVIA is positioned to benefit from the trends of advanced therapeutics and personalized medicine given its ability to perform decentralized clinical trials that require digital capabilities. In our view, IQVIA can grow even further due to its data and software capabilities that enable the company to deliver real-world evidence so that biopharma companies and other health care providers can satisfy their regulatory and reimbursement mandates. We also appreciate CEO Ari Bousbib's strong track record on operations and capital allocation, and we are impressed by his large equity holdings in the company, which give him significant skin in the game. We were pleased to purchase shares of IQVIA at a discount to our estimate of its intrinsic value.

BSD Analysis:
The manager capitalized on biotech sector weakness to acquire IQVIA at an attractive valuation, viewing it as a high-quality business with strong secular tailwinds. The investment thesis focuses on IQVIA's positioning to benefit from advanced therapeutics and personalized medicine trends through its decentralized clinical trial capabilities and digital infrastructure. The company's data and software assets provide competitive advantages in delivering real-world evidence, which is increasingly critical for regulatory and reimbursement requirements. CEO Ari Bousbib's operational track record and significant personal equity stake provide additional confidence in management alignment. The purchase represents opportunistic value investing, taking advantage of sector-wide concerns to acquire a fundamentally strong business. IQVIA's technology-enabled services model should benefit from ongoing pharmaceutical innovation and regulatory complexity. The combination of secular growth drivers and temporary valuation discount creates an attractive risk-reward profile.

Pitch Summary:
Reckitt Benckiser Group is a global consumer products company with leading brands in consumer health, infant nutrition, home care and hygiene. We like that more than half of the company's sales are generated from consumer health products, which is a category with meaningful barriers to entry, high margins and attractive growth. Additionally, we believe the company's improved execution, particularly in sales and supply chain management, along with its investments in growth reacceleration, provide potential for future margin expansion. However, Reckitt's stock is trading meaningfully off its highs following an adverse verdict in a product liability lawsuit over its infant formula product. Although there is a legal liability risk for Reckitt, we believe that the rare nature of the alleged disease in question limits the scope of this liability, well below the share price movement to date. This has afforded us the opportunity to purchase shares of Reckitt at a discount to our estimate of its intrinsic value.

BSD Analysis:
The manager presents a compelling value opportunity in Reckitt Benckiser following a significant stock decline due to infant formula litigation concerns. The investment thesis centers on the company's dominant position in consumer health products, which represent over half of sales and offer attractive defensive characteristics with high barriers to entry and margins. Management execution improvements in sales and supply chain operations, combined with growth investments, should drive margin expansion over time. The manager views the legal liability from the infant formula lawsuit as limited in scope relative to the stock's decline, creating an attractive entry point. This represents a classic value play where temporary negative sentiment has created a discount to intrinsic value. The consumer health focus provides defensive growth characteristics while the operational improvements offer upside potential. The purchase timing appears opportunistic given the litigation-driven selloff.

Pitch Summary:
Smith & Nephew (U.K.) is a global medical device manufacturer operating in attractive end markets. The company currently generates the majority of its earnings through its sports medicine and advanced wound management businesses, which command strong market share positions and offer favorable growth prospects. The company's orthopedics business has historically underperformed its peers, but we are pleased by the decisive actions taken by new CEO Deepak Nath, which we expect will improve growth, margins and return on invested capital for the orthopedics segment. We believe the company is in the early stages of its margin improvement journey and an upgrade of the product portfolio in recent years will drive sustainably higher revenue growth than in the past. We were able to purchase Smith & Nephew shares at a discount to our estimate of intrinsic value, despite the company's improving fundamental outlook.

BSD Analysis:
The managers initiated a position in Smith & Nephew, a global medical device manufacturer with strong positions in attractive healthcare markets. The company generates most earnings from sports medicine and advanced wound management divisions, both commanding strong market positions with favorable growth prospects. While the orthopedics business has historically lagged peers, new CEO Deepak Nath's decisive actions are expected to drive meaningful improvements in growth, margins, and return on invested capital. The managers believe the company is in early stages of a margin improvement cycle, supported by recent product portfolio upgrades that should enable sustainably higher revenue growth. The investment thesis centers on operational turnaround potential under new leadership combined with structural advantages in growing healthcare markets. Despite improving fundamental outlook, they were able to purchase shares at a discount to intrinsic value, suggesting attractive risk-adjusted return potential. The combination of market-leading positions, new management execution, and attractive valuation creates a compelling investment opportunity.

Pitch Summary:
Smurfit Kappa Group (Ireland) is Europe's leading containerboard and corrugated box producer. The company's share price has been under pressure due to a unique downturn in industry volumes caused by supply chain reverberations from the Covid-19 pandemic, which we believe is beginning to unwind. In addition, in September 2023, Smurfit Kappa announced an agreement to acquire WestRock, the second-largest producer of containerboard and corrugated boxes in North America. WestRock has historically underperformed its competitors, and we believe the company's asset base stands to benefit from strategic investments and operational improvements under its experienced management team. As a part of the acquisition, Smurfit Kappa plans to list the combined entity in the U.S., which offers upside optionality as U.S. producers have historically traded at a premium to European peers. The improving industry outlook and the opportunity to drive improvements at WestRock provided the opportunity to purchase shares at a discount to our estimate of the intrinsic value of the anticipated combined company.

BSD Analysis:
The managers initiated a position in Smurfit Kappa, Europe's leading containerboard and corrugated box producer, viewing current weakness as a compelling entry opportunity. The stock has been pressured by pandemic-related supply chain disruptions causing industry volume declines, which they believe are beginning to normalize. The transformative WestRock acquisition announced in September 2023 represents a significant value creation opportunity, as WestRock has historically underperformed competitors and offers substantial improvement potential under Smurfit Kappa's experienced management. The planned U.S. listing of the combined entity provides additional upside optionality, given U.S. packaging companies typically trade at premiums to European peers. The managers believe they can drive meaningful operational improvements at WestRock's asset base through strategic investments and enhanced management practices. The combination of improving industry fundamentals, acquisition synergies, and attractive valuation relative to the anticipated combined entity's intrinsic value creates a compelling investment thesis.

Pitch Summary:
Brambles (Australia) is the world's largest provider of pooled pallets, crates and containers. The company's pallet-pooling model delivers an attractive value proposition to its customers by enabling standardization and seamlessly connecting supply chain participants to ensure the efficient flow of goods across the world. Much of the market still uses non-pooled pallets, which translates to attractive long-term growth opportunities for the pooling model. As the market share leader, Brambles benefits from economies of scale, which have provided cost advantages and led to attractive returns on capital. In addition, we like that digital initiatives at the company are starting to yield results in the form of lower pallet loss rates, lower capital costs, lower operating expenses, and better returns. Since we sold our position in Brambles in 2022, its share price has lagged the market despite fundamental performance exceeding our estimates. This has provided us the opportunity to reestablish our position at a discount to our estimate of intrinsic value.

BSD Analysis:
The managers initiated a new position in Brambles, viewing it as an attractive re-entry opportunity after selling in 2022. As the world's largest pallet pooling provider, Brambles benefits from significant economies of scale and market leadership advantages that drive superior returns on capital. The pooling model offers compelling customer value through standardization and supply chain efficiency, with substantial runway for growth as much of the market still uses non-pooled alternatives. Digital transformation initiatives are delivering tangible benefits including reduced pallet loss rates, lower capital and operating costs, and improved returns. Despite fundamental performance exceeding expectations since their 2022 exit, the stock has underperformed the broader market, creating an attractive entry point. The managers believe they can purchase shares at a meaningful discount to intrinsic value. The combination of structural growth opportunities, operational improvements, and attractive valuation provides a compelling investment case.

Pitch Summary:
Bayer (Germany) was a top detractor during the quarter. In January, Bayer had a larger than average adverse jury verdict in its long-running RoundUp litigation. We continue to believe that these headline verdicts will be reduced substantially on appeal and note that Bayer has since won two cases in a row. Then, in March, the company held its long-awaited capital markets day. The event contained limited material strategy updates as Bayer is no longer pre-communicating its litigation strategy, is erring conservatively by not issuing mid-term targets, and is deferring a break-up until its balance sheet is in better shape. This didn't bring the quick wins some investors had hoped for, but we support the strategy and appreciate management's sharp focus on improving profitability and cash generation while starting to cut away at the company's bureaucracy. The full-year 2023 results and 2024 guidance were both in line with our expectations.

BSD Analysis:
Despite being a top detractor during the quarter, the managers maintain a constructive view on Bayer amid ongoing RoundUp litigation challenges. They believe adverse jury verdicts will be substantially reduced on appeal, noting the company has won two consecutive cases recently. The capital markets day in March disappointed some investors seeking immediate strategic changes, but the managers support management's conservative approach of not issuing mid-term targets and deferring potential break-up plans until balance sheet improvement. They appreciate management's focus on profitability enhancement, cash generation improvement, and bureaucracy reduction. The 2023 results and 2024 guidance aligned with expectations, suggesting operational stability despite litigation overhang. The managers appear to view current challenges as temporary headwinds rather than fundamental issues. Their continued holding suggests confidence in the underlying business quality and management's strategic direction.

Pitch Summary:
Daimler Truck Holding (Germany) was a top contributor during the quarter. In March, the truck and bus manufacturer released strong fourth-quarter results, accompanied by 2024 margin guidance that significantly exceeded consensus expectations. The expected margin resilience is in spite of a weaker global truck market and is a result of management's decisive actions to improve pricing, drive higher service penetration and increase the flexibility of the cost base. This is most evident in the Mercedes-Benz segment, primarily serving the European and Latin American markets, which increased its adjusted EBIT margin from sub-1% in 2019 to over 10% last year. We are impressed by management's execution following the 2021 spin-off from the former Daimler Group and believe the company is positioned to earn structurally higher through-cycle margins than in the past. We met with CEO Martin Daum following the release and continue to see an attractive upside for this investment.

BSD Analysis:
The fund managers are bullish on Daimler Truck based on exceptional margin expansion and operational improvements. The company has demonstrated remarkable margin resilience despite a weakening global truck market, with the Mercedes-Benz segment achieving a dramatic turnaround from sub-1% EBIT margins in 2019 to over 10% in 2023. Management's strategic focus on pricing optimization, service penetration, and cost base flexibility has driven this transformation. The 2024 margin guidance significantly exceeded consensus expectations, validating the sustainability of these improvements. The managers believe the company has achieved a structural shift toward higher through-cycle margins compared to its historical performance. Direct engagement with CEO Martin Daum reinforced their conviction in the investment thesis. The position contributed positively to portfolio performance during the quarter.

Pitch Summary:
Centene (U.S.) is a large health insurer specializing in three major government-sponsored programs: Medicaid, Marketplace and Medicare Advantage. Each of these programs benefits from long-term secular tailwinds. In Medicaid, states are steadily outsourcing their programs to managed care companies like Centene to help reduce costs and improve care quality. Managed Medicaid penetration has increased meaningfully over the past two decades, and we expect further gains over time. In Marketplace, growth is driven by the trend toward more individuals buying health insurance. Centene holds the top market share in both of these programs and is well-positioned to capitalize on their continued growth. Finally, in Centene's Medicare Advantage business, past missteps will result in losses next year, but we believe Centene can turn its Medicare Advantage segment around and generate positive earnings in the next few years. Centene currently trades for about 9x our estimate of normal earnings power, which we believe is a compelling value for a business that generates healthy returns on capital and is capable of growing EPS at a low double-digit rate.

BSD Analysis:
The manager presents a compelling value proposition for Centene based on secular growth trends in government-sponsored healthcare programs. The company benefits from three distinct tailwinds: increasing Medicaid outsourcing by states seeking cost reduction, growing Marketplace participation as more individuals purchase health insurance, and long-term Medicare Advantage expansion. Centene's market-leading positions in Medicaid and Marketplace provide competitive advantages to capitalize on these trends. While Medicare Advantage faces near-term challenges from past operational missteps, the manager expects a turnaround within the next few years. At approximately 9x normal earnings power, the valuation appears attractive for a business generating healthy returns on capital with low double-digit EPS growth potential. The combination of secular tailwinds, market leadership, and compelling valuation creates an attractive risk-adjusted return opportunity in the healthcare services sector.

Pitch Summary:
St. James's Place was a top detractor during the quarter. In January, the wealth manager reported net inflows for 2023 that were £4.6 billion lower than in 2022. The disappointing update came on the heels of the company's announcement of a large overhaul of its fee structure. In February, the company reported full-year 2023 results. Underlying cash results fell below our expectations primarily due to the margin from new business and other revenues and expenses. The big miss, in our view, was the large provision charge that St. James's Place took to account for potential client reimbursements. There were increasing complaints from clients that the company was charging them without actually dispensing any advice. St. James's Place conducted an internal investigation, which cited service gaps that existed before the company implemented Salesforce in 2021. The provision charge covers the appointment of an investigative assessment, the anticipated cost of refunding service fees, the administration costs to operate the refund program, and an interest expense to compensate for the time value of money. We met with management following the release of results and continue to believe in the long-term prospects of St. James's Place.

BSD Analysis:
Despite significant near-term headwinds, the manager maintains conviction in St. James's Place's long-term prospects. The company faced substantial challenges in 2023, including £4.6 billion lower net inflows and disappointing underlying cash results. A major provision charge for client reimbursements reflects service gaps and fee structure issues that preceded the 2021 Salesforce implementation. The internal investigation revealed clients were being charged without receiving adequate advice, necessitating a comprehensive refund program. While these operational and reputational issues create near-term pressure, the manager's continued engagement with management and maintained position suggests confidence in the company's ability to resolve these challenges. The fee structure overhaul may position the company for more sustainable growth once implementation issues are resolved. This appears to be a contrarian bet on operational recovery in the wealth management sector.

Pitch Summary:
Daimler Truck Holding was a top contributor during the quarter. In March, the truck and bus manufacturer released strong fourth-quarter results, accompanied by 2024 margin guidance that significantly exceeded consensus expectations. The expected margin resilience is in spite of a weaker global truck market and is a result of management's decisive actions to improve pricing, drive higher service penetration and increase the flexibility of the cost base. This is most evident in the Mercedes-Benz segment, primarily serving the European and Latin American markets, which increased its adjusted EBIT margin from less than 1% in 2019 to over 10% last year. We are impressed by management's execution following the 2021 spin-off from the former Daimler Group and believe the company is positioned to earn structurally higher through-cycle margins than in the past. We met with CEO Martin Daum following the release and continue to see an attractive upside for this investment.

BSD Analysis:
The manager presents a compelling bull case for Daimler Truck based on exceptional operational improvements and margin expansion. The company has demonstrated remarkable margin resilience despite challenging market conditions, with the Mercedes-Benz segment achieving a dramatic EBIT margin improvement from under 1% to over 10% since 2019. Management's strategic focus on pricing optimization, service penetration, and cost base flexibility has positioned the company for structurally higher through-cycle margins. The 2024 margin guidance significantly exceeded consensus expectations, indicating continued operational excellence. The manager's direct engagement with CEO Martin Daum reinforces confidence in the investment thesis. The transformation following the 2021 spin-off from Daimler Group appears to have unlocked significant value creation potential. This represents a classic turnaround story with strong execution driving sustainable competitive advantages.

Pitch Summary:
Kenvue became the largest standalone consumer health company following its split-off from Johnson & Johnson in May 2023. The company's highly recognizable brands, such as Neutrogena, Listerine, Tylenol and Band-Aid, have been market share leaders in their respective categories for generations. However, Kenvue's first year as a public company was clouded by litigation and market share losses in certain categories. As a result, Kenvue now trades for just 16.5x trailing earnings, a substantial discount to the market and other consumer health and packaged goods companies. We see an opportunity for the company to improve efficiency and re-invest the cost savings into increased product development and marketing, which should help improve its growth and brand equity.

BSD Analysis:
Oakmark initiated a position in Kenvue, the consumer health spinoff from Johnson & Johnson that became the largest standalone company in its sector. The investment thesis centers on the enduring value of iconic brands like Neutrogena, Listerine, Tylenol, and Band-Aid, which have maintained market leadership positions across generations. Despite these brand strengths, the company's first year as an independent entity was challenged by litigation issues and market share erosion in certain categories, creating investor skepticism. This has resulted in an attractive valuation of just 16.5x trailing earnings, representing a significant discount to both the broader market and peer consumer health companies. Oakmark sees a turnaround opportunity as management focuses on operational efficiency improvements and reinvests cost savings into product development and marketing initiatives. The fund believes this strategic approach will restore growth momentum and strengthen brand equity over time. The combination of world-class consumer brands trading at a discount due to temporary execution challenges presents a classic value opportunity with multiple paths to value realization.

Pitch Summary:
Delta Air Lines is a leading global airline. Of the big three U.S.-based airlines (Delta, United and American), we see Delta as the most competitively advantaged. We believe the company's years of industry-leading operational performance and investments in the customer experience have established Delta as the premium brand in the industry. We also think its geographically optimal hubs, high local market share, robust loyalty program and unique corporate culture all support healthy returns on capital. Delta currently trades at 6x our estimate of normalized earnings per share. We believe this is an attractive valuation for a competitively advantaged and growing business in an out-of-favor industry.

BSD Analysis:
Oakmark initiated a position in Delta Air Lines, identifying it as the most competitively advantaged among the three major U.S. carriers. The investment thesis is built on Delta's operational excellence and premium brand positioning, developed through years of superior performance and customer experience investments. Key competitive advantages include strategically located hub airports, strong local market share in key routes, a robust frequent flyer loyalty program, and distinctive corporate culture that drives employee engagement and operational reliability. The fund views Delta's ability to generate healthy returns on capital as sustainable due to these structural advantages. At 6x normalized earnings per share, Oakmark believes the valuation presents compelling value for a growing, competitively advantaged business. The attractive entry multiple reflects broader airline industry skepticism, creating an opportunity to acquire a premium operator at a discount. This represents a contrarian value play in an out-of-favor sector where Delta's competitive moats should drive superior long-term performance.

Pitch Summary:
Deere & Company is a leading manufacturer of agricultural equipment with dominant market share in North America and Brazil. Despite its brand strength, technological capabilities and distribution advantages, the company's stock price has recently fallen due to fears about a downturn in the agriculture business cycle. Longer term, world population and food demand are expected to increase annually yet land and labor devoted to agriculture are expected to decline. Deere seems well-positioned to benefit from this dynamic as farms will have to become more productive. We were pleased to purchase shares in Deere at a low double-digit multiple of our estimate of normal earnings power.

BSD Analysis:
Oakmark initiated a position in Deere & Company, viewing the recent stock price decline as an attractive entry point for a market-leading agricultural equipment manufacturer. The fund's thesis centers on long-term demographic trends driving agricultural productivity needs, with global population growth increasing food demand while agricultural land and labor resources decline. Deere's competitive advantages include dominant market share in North America and Brazil, strong brand recognition, advanced technological capabilities, and extensive distribution network. The manager believes these moats position the company to benefit from the inevitable need for increased farm productivity through mechanization and technology adoption. The fund was able to purchase shares at what they consider an attractive low double-digit multiple of normalized earnings power, suggesting the market has overreacted to near-term agricultural cycle concerns. This represents a classic value opportunity where temporary sector headwinds have created a discount to intrinsic value for a competitively advantaged business with favorable long-term tailwinds.

Pitch Summary:
Deere & Company is a leading manufacturer of agricultural equipment with dominant market share in North America and Brazil. Despite its brand strength, technological capabilities and distribution advantages, the company's stock price has recently fallen due to fears about a downturn in the agriculture business cycle. Longer term, world population and food demand are expected to increase annually yet land and labor devoted to agriculture are expected to decline. Deere seems well-positioned to benefit from this dynamic as farms will have to become more productive. We were pleased to purchase shares in Deere at a low double-digit multiple of our estimate of normal earnings power.

BSD Analysis:
Oakmark initiated a position in Deere & Company, viewing the recent stock price decline as an attractive entry point for a quality agricultural equipment manufacturer. The fund managers highlight Deere's competitive advantages including dominant market share in North America and Brazil, strong brand recognition, technological capabilities, and distribution network. The investment thesis centers on long-term demographic trends where increasing global population and food demand will drive agricultural productivity needs, while available farmland and agricultural labor continue to decline. This dynamic should benefit Deere as farms require more sophisticated and productive equipment. The managers were able to purchase shares at what they consider an attractive valuation of a low double-digit multiple of normalized earnings power. The position represents a contrarian value play on cyclical concerns while positioning for secular growth drivers in agricultural technology and productivity enhancement.

Pitch Summary:
I find a lot of value in European defense, these companies trade at reasonable multiples and have a potential tailwind (regardless of who wins the White House) on the awakening of the EU defense budgets. Dassault Aviation, for example, is a French company that produces the Rafale fighter. This is the only Fifth (Fourth and a half maybe) Generation aircraft that is not produced by Lockheed Martin or the Russians. The order book is growing, and I don't see how there's a new piece of aircraft that can compete with the Rafale as the Eurofighter is not to be expected soon. If we take out the holding Dassault has on Thales (another decent aerospace and defense company) and we normalize earnings we see it trades at around x16 times distributable FCF while the company keeps buying back stock (not massive amounts but sharecount may go down 3% this year).

BSD Analysis:
Benedetti presents a compelling thesis on Dassault Aviation centered on European defense spending acceleration and the company's unique market position. The manager highlights Dassault's monopolistic advantage as the only non-US/Russian producer of fifth-generation fighter aircraft with the Rafale, creating significant competitive moats. The growing order book and limited competition from delayed Eurofighter development support revenue visibility. At 16x normalized distributable FCF (excluding Thales holdings), the valuation appears reasonable for a defense contractor with structural tailwinds. The ongoing share buyback program, though modest at 3% annually, demonstrates disciplined capital allocation. Benedetti's thesis benefits from geopolitical tensions driving EU defense budget increases regardless of US political outcomes. The investment combines defensive characteristics with growth potential in a consolidating industry.

Pitch Summary:
Just before the end of the quarter, we were able to build a position in Red Violet (Ticker: RDVT). RDVT is a software company that specializes in providing detailed background checks and identity verification to banks, insurance companies, private investigators, collection agencies, etc. Previously this management team built two other highly identity/background check solution companies. This is their third iteration focused on building a background check software from the ground up, but this time solely constructed on a cloud infrastructure. The previous versions are now owned by LexisNexis and TransUnion (Ticker: TRU) and are Red Violet's current top competitors along with a company owned by Thomson Reuters (Ticker TRI). Together these companies control the majority of the identity verification market. Red Violet has a clear pathway to grow 10%+ organically with a history of adding incremental revenue at 30%+ EBITDA margins. This is a secularly growing "Buffett", that we believe will be acquired by one of the aforementioned bigger players in 3 to 5 years. We were able to buy the shares directly from a top shareholder, a charity, who received the shares as a donation and was looking to monetize the position.

BSD Analysis:
Cove Street initiated a position in Red Violet, a cloud-based identity verification software company with exceptional management credentials. The team previously built and sold two similar companies to LexisNexis and TransUnion, demonstrating proven execution capability in this market. Red Violet's cloud-native architecture provides competitive advantages over legacy systems in the identity verification space dominated by LexisNexis, TransUnion, and Thomson Reuters. The company exhibits attractive unit economics with 30%+ EBITDA margins on incremental revenue and sustainable 10%+ organic growth in a secularly expanding market. The manager views this as a high-quality "Buffett-style" compounder with strong acquisition potential from larger industry players within 3-5 years. The investment was opportunistically sourced through a direct purchase from a charitable shareholder seeking liquidity, potentially providing favorable entry pricing.