Investment Pitches

Pitch Summary:
Another new position is TruBridge (Ticker: TBRG), formerly known as Computer Programs and Systems (Ticker: CPSI). The company provides Electronic Health Record (EHR) and Revenue Cycle Management (RCM) services to small, rural hospitals under 400 beds. The EHR business has been shrinking for years as hospitals close and consolidate (replacing TBRG's EHR). However, the business is very sticky and generates significant cash flow. The cash flow generated is being put into the growing RCM business. Approximately 80% of hospitals still do their billing in-house and there is a huge push for these hospitals to start outsourcing billing to help improve their cash flow and expenses. TBRG is leveraging its current EHR customers as well as selling into new customers to grow their RCM business. TBRG is also on its own mission to outsource manual work to some of the usual international suspects to reduce its own service costs. The company's stock has had a very unpleasant journey the last few years ($40 per share to $9) creating a massive opportunity for even modest stability and/or improvement.

BSD Analysis:
Cove Street established a new position in TruBridge, a healthcare IT company serving small rural hospitals. The investment represents a classic turnaround opportunity following a dramatic 77% stock decline from $40 to $9 per share. While the legacy EHR business faces secular headwinds from hospital consolidation, it generates sticky cash flows being reinvested into the higher-growth RCM segment. The manager identifies a significant market opportunity, with 80% of hospitals still handling billing in-house despite strong incentives to outsource. TruBridge's existing EHR customer relationships provide a natural pathway for RCM cross-selling. Additionally, the company is implementing cost reduction initiatives through international outsourcing. The valuation appears compelling given the potential for business stabilization and modest improvement in a large addressable market.

Pitch Summary:
Park Aerospace (Ticker: PKE) is a new position in the quarter; this company develops and manufactures composite materials and structures primarily for airplane engines. PKE's largest customer is GE Aviation's engine program, and based on future build rates of the A320neo (airbus), PP20 (Bombardier) and other engines, there is a clear pathway to double revenue and triple EBITDA in the medium term. PKE does not need to add much capacity to its manufacturing footprint in order to deliver on a sharp increase in revenue, resulting in significant earnings expansion. These are solid building blocks to fuel a higher multiple on higher cashflow.

BSD Analysis:
Cove Street initiated a new position in Park Aerospace, a composite materials manufacturer serving the aerospace industry. The investment thesis centers on significant operating leverage driven by increasing aircraft engine production rates. With GE Aviation as their largest customer, PKE is positioned to benefit from strong build rates for the A320neo, PP20, and other engine programs. The manager highlights PKE's ability to double revenue and triple EBITDA without substantial capital investment, creating exceptional earnings expansion potential. This asset-light growth model should drive multiple expansion as higher cash flows materialize. The timing appears strategic, entering during a period of aerospace recovery with clear visibility into future demand catalysts.

Pitch Summary:
Crown Holdings is the second largest manufacturer of aluminum beverage cans globally. We own its larger competitor, Ball Corp., in our Large Cap portfolio. Our investment case for the two companies is broadly similar. The beverage can industry is a consolidated and rational industry with high barriers to entry. The industry structure, scale, and long-term contracts with inflationary pass-throughs result in solid and stable margins, high returns on capital, and robust free cash flow. In addition, aluminum cans are taking share from other substrates, most notably plastic, as aluminum is considered a more sustainable product. This transition to aluminum is driving volume growth for Crown. Recently, demand for its products has been weak due to current macro factors. We expect growth to normalize over time.

BSD Analysis:
Vulcan's investment in Crown Holdings leverages the attractive structural characteristics of the aluminum beverage can industry, mirroring their successful investment in larger competitor Ball Corp. The manager emphasizes the industry's consolidated and rational competitive structure with high barriers to entry, creating pricing discipline and stable profitability. Key financial attributes include solid margins, high returns on capital, and robust free cash flow generation, supported by long-term contracts with inflationary pass-through mechanisms that protect against cost inflation. The investment thesis benefits from a significant secular tailwind: aluminum cans gaining market share from plastic substrates due to superior sustainability credentials, driving structural volume growth. While acknowledging current demand weakness from macro headwinds, Vulcan maintains confidence in normalized growth resumption over time. The manager's parallel ownership of both Crown and Ball suggests conviction in the industry's attractive economics and their ability to generate superior returns through this duopoly-like market structure.

Pitch Summary:
We are pleased to have purchased Starbucks in the first quarter. We have owned the company in the past, and it was a good investment for us. The company has strong brand recognition, global distribution, and outstanding retail real estate. The company generates robust free cash flow and has high returns on invested capital as well as a strong balance sheet. Starbucks has used its financial resources to strengthen its brand and enhance customer loyalty. Additionally, the company has continued to see attractive returns from opening new stores. Stock price volatility over the last year is likely due to management changes, disappointing short-term results, and general hesitancy about consumer spending. We believe that Starbucks' competitive position remains intact, and its value will continue to compound over our five-year plus time horizon.

BSD Analysis:
Vulcan's re-entry into Starbucks reflects confidence in the company's enduring competitive advantages despite recent volatility. The manager emphasizes Starbucks' core strengths: strong brand recognition, global distribution network, and premium retail real estate locations - assets that create sustainable competitive moats. The investment thesis highlights robust free cash flow generation and high returns on invested capital, indicating efficient capital deployment and strong underlying economics. Management's strategic use of financial resources to strengthen brand equity and customer loyalty demonstrates disciplined capital allocation focused on long-term value creation. The continued attractive returns from new store openings suggest the growth runway remains intact. Vulcan attributes recent stock price volatility to transitory factors including management changes, short-term operational challenges, and broader consumer spending concerns rather than fundamental deterioration. The manager's five-year investment horizon reflects confidence that Starbucks' competitive position will drive value compounding despite near-term headwinds.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the United States and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell, and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax extremely well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan's investment thesis for CarMax centers on the company's competitive advantages in a highly fragmented used car market and its strategic positioning for market share gains. The manager emphasizes CarMax's omnichannel approach as a key differentiator, enabling superior profit per vehicle and stable returns on capital compared to fragmented competitors. The investment case highlights structural advantages over two key competitor segments: small independent dealers lacking digital investment capacity, and digital-only retailers now prioritizing profitability over volume growth. CarMax's continued digital infrastructure investments have enhanced customer experience across buying, selling, and financing touchpoints. Critically, management's recent focus on balance sheet deleveraging and operational right-sizing has significantly de-risked the business model. Vulcan views the combination of a leaner cost structure and strengthened competitive moat as positioning CarMax exceptionally well for volume normalization, suggesting the company will emerge stronger from current market challenges.

Pitch Summary:
Live Nation is the world's largest live entertainment company. The live entertainment industry has grown in the high single-digits over the last two decades, and demand continues to exceed supply. Live Nation is a dominant player and offers a complimentary suite of services including concert promotion, venue operations, ticketing, and artist management businesses. Artists today make 90% of their revenue on tour as album sales and royalties become less important. Tours are increasingly global, and there are an increasing number of shows per tour. Live Nation's comprehensive offerings and scale enable its concert promoters to make better decisions on pricing and venue organization which benefits artists, venues, and fans. We expect Live Nation to continue to grow in the high single-digits over our long-term time horizon.

BSD Analysis:
Vulcan Value Partners presents a compelling bull case for Live Nation based on structural industry tailwinds and the company's dominant market position. The manager highlights that the live entertainment industry has demonstrated consistent high single-digit growth over two decades, with demand persistently exceeding supply - a favorable supply-demand dynamic. The investment thesis centers on Live Nation's comprehensive ecosystem of services spanning concert promotion, venue operations, ticketing, and artist management, creating multiple revenue streams and competitive advantages. The manager emphasizes a key secular shift where artists now derive 90% of revenue from touring versus traditional album sales, making Live Nation's platform increasingly critical. The company's scale advantages enable superior pricing decisions and venue optimization, benefiting all stakeholders in the ecosystem. Vulcan expects this growth trajectory to continue at high single-digit rates over their long-term investment horizon, suggesting confidence in the durability of these trends.

Pitch Summary:
Crown Holdings is the second largest manufacturer of aluminum beverage cans globally. We own its larger competitor, Ball Corp., in our Large Cap portfolio. Our investment case for the two companies is broadly similar. The beverage can industry is a consolidated and rational industry with high barriers to entry. The industry structure, scale, and long-term contracts with inflationary pass-throughs result in solid and stable margins, high returns on capital, and robust free cash flow. In addition, aluminum cans are taking share from other substrates, most notably plastic, as aluminum is considered a more sustainable product. This transition to aluminum is driving volume growth for Crown. Recently, demand for its products has been weak due to current macro factors. We expect growth to normalize over time.

BSD Analysis:
Vulcan's investment in Crown Holdings leverages the attractive industry dynamics of aluminum beverage can manufacturing, similar to their existing Ball Corp. position. The fund emphasizes the consolidated industry structure with high barriers to entry, creating rational competitive behavior and pricing discipline. Long-term contracts with inflationary pass-through provisions provide margin stability and protect against input cost volatility. Crown benefits from the secular shift toward aluminum packaging driven by sustainability concerns, particularly the transition away from plastic substrates. This trend supports volume growth despite current macro headwinds affecting near-term demand. The fund views recent weakness as cyclical rather than structural, expecting normalization as macro conditions improve. Crown's scale advantages, stable margin profile, high returns on capital, and robust free cash flow generation make it an attractive investment in a defensive industry with secular tailwinds.

Pitch Summary:
We are pleased to have purchased Starbucks in the first quarter. We have owned the company in the past, and it was a good investment for us. The company has strong brand recognition, global distribution, and outstanding retail real estate. The company generates robust free cash flow and has high returns on invested capital as well as a strong balance sheet. Starbucks has used its financial resources to strengthen its brand and enhance customer loyalty. Additionally, the company has continued to see attractive returns from opening new stores. Stock price volatility over the last year is likely due to management changes, disappointing short-term results, and general hesitancy about consumer spending. We believe that Starbucks' competitive position remains intact, and its value will continue to compound over our five-year plus time horizon.

BSD Analysis:
Vulcan's repurchase of Starbucks reflects confidence in the company's enduring competitive advantages despite recent volatility. The fund emphasizes Starbucks' strong brand recognition, global distribution network, and prime retail real estate as durable moats that support long-term value creation. Management's track record of generating robust free cash flows and high returns on invested capital demonstrates operational excellence and capital allocation discipline. Vulcan views recent stock price weakness as temporary, attributing volatility to management transitions, short-term operational challenges, and broader consumer spending concerns rather than fundamental deterioration. The fund highlights continued attractive returns from new store openings, indicating the business model's scalability and growth potential. Vulcan's five-year investment horizon allows them to look through near-term headwinds and focus on the company's ability to compound value through brand strength and global expansion.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the United States and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell, and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax extremely well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan's investment thesis for CarMax centers on the company's competitive advantages in a fragmented used car market and its improved financial positioning. The fund emphasizes CarMax's omnichannel strategy as a key differentiator against both traditional independent dealers lacking digital capabilities and digital-only competitors now prioritizing profitability over growth. Management's digital infrastructure investments have enhanced customer experience across buying, selling, and financing touchpoints, driving higher profit per vehicle and superior capital returns. Vulcan highlights significant balance sheet improvements over the past two years, including deleveraging and operational rightsizing that have substantially reduced business risk. The fund views CarMax as well-positioned for volume normalization with a leaner cost structure and strengthened competitive moat. The investment case relies on continued market share gains in the highly fragmented used car retail market through superior customer experience and operational efficiency.

Pitch Summary:
Live Nation is the world's largest live entertainment company. The live entertainment industry has grown in the high single-digits over the last two decades, and demand continues to exceed supply. Live Nation is a dominant player and offers a complimentary suite of services including concert promotion, venue operations, ticketing, and artist management businesses. Artists today make 90% of their revenue on tour as album sales and royalties become less important. Tours are increasingly global, and there are an increasing number of shows per tour. Live Nation's comprehensive offerings and scale enable its concert promoters to make better decisions on pricing and venue organization which benefits artists, venues, and fans. We expect Live Nation to continue to grow in the high single-digits over our long-term time horizon.

BSD Analysis:
Vulcan Value Partners presents a compelling bull case for Live Nation based on structural industry tailwinds and the company's dominant market position. The fund highlights a fundamental shift in the music industry where artists now derive 90% of revenue from touring versus traditional album sales, creating sustained demand for Live Nation's services. The manager emphasizes the company's integrated business model spanning concert promotion, venue operations, ticketing, and artist management, which creates operational synergies and pricing power. Vulcan notes that demand consistently exceeds supply in live entertainment, supporting pricing discipline and capacity utilization. The fund expects high single-digit growth driven by increasing tour globalization and more shows per tour. Live Nation's scale advantages enable better pricing decisions and venue optimization, benefiting all stakeholders in the ecosystem. The investment thesis centers on the company's ability to capitalize on the structural shift toward live entertainment monetization.

Pitch Summary:
Crown Holdings is the second largest manufacturer of aluminum beverage cans globally. We own its larger competitor, Ball Corp., in our Large Cap portfolio. Our investment case for the two companies is broadly similar. The beverage can industry is a consolidated and rational industry with high barriers to entry. The industry structure, scale, and long-term contracts with inflationary pass-throughs result in solid and stable margins, high returns on capital, and robust free cash flow. In addition, aluminum cans are taking share from other substrates, most notably plastic, as aluminum is considered a more sustainable product. This transition to aluminum is driving volume growth for Crown. Recently, demand for its products has been weak due to current macro factors. We expect growth to normalize over time.

BSD Analysis:
Vulcan Value Partners presents a compelling investment thesis for Crown Holdings based on favorable industry dynamics and secular growth trends. The manager emphasizes the beverage can industry's attractive structural characteristics, including high consolidation, rational competitive behavior, and significant barriers to entry. The investment case highlights Crown's position as the second-largest global aluminum beverage can manufacturer, benefiting from industry scale advantages and long-term contracts with inflationary pass-through provisions that ensure stable margins and robust free cash flow generation. A key secular tailwind is the ongoing substrate transition from plastic to aluminum packaging driven by sustainability considerations, creating volume growth opportunities for Crown. The manager acknowledges current demand weakness attributed to macroeconomic headwinds but expects normalization over time. Vulcan's confidence in the thesis is reinforced by their ownership of industry leader Ball Corporation in their Large Cap portfolio, suggesting deep sector expertise and conviction in the industry's long-term prospects. The combination of defensive industry structure and growth from market share gains creates an attractive risk-adjusted investment opportunity.

Pitch Summary:
We are pleased to have purchased Starbucks in the first quarter. We have owned the company in the past, and it was a good investment for us. The company has strong brand recognition, global distribution, and outstanding retail real estate. The company generates robust free cash flow and has high returns on invested capital as well as a strong balance sheet. Starbucks has used its financial resources to strengthen its brand and enhance customer loyalty. Additionally, the company has continued to see attractive returns from opening new stores. Stock price volatility over the last year is likely due to management changes, disappointing short-term results, and general hesitancy about consumer spending. We believe that Starbucks' competitive position remains intact, and its value will continue to compound over our five-year plus time horizon.

BSD Analysis:
Vulcan Value Partners presents a compelling re-entry thesis for Starbucks, leveraging their previous successful investment experience with the company. The manager emphasizes Starbucks' enduring competitive advantages including strong brand recognition, global distribution network, and premium retail real estate portfolio. The investment case centers on the company's robust financial profile, generating strong free cash flow with high returns on invested capital supported by a solid balance sheet. Vulcan highlights management's effective capital allocation, using financial resources to strengthen brand equity and enhance customer loyalty programs. The manager notes continued attractive returns from new store openings, indicating ongoing growth opportunities. Recent stock price volatility is attributed to temporary factors including management transitions, short-term operational challenges, and broader consumer spending concerns rather than fundamental competitive deterioration. The firm believes these near-term headwinds create an attractive entry point for a high-quality franchise with intact competitive positioning and strong long-term value creation potential over their five-year investment horizon.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the United States and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell, and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax extremely well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan Value Partners articulates a strong bull thesis for CarMax based on the company's competitive positioning in a fragmented used car market and recent operational improvements. The manager emphasizes CarMax's omnichannel strategy as a key differentiator, enabling market share gains against both under-resourced independent dealers and digital-only competitors now prioritizing profitability over growth. The investment case highlights CarMax's integrated business model spanning retail, wholesale, and financing, which generates superior profit margins and stable returns on capital. Vulcan notes significant recent improvements in the company's financial position, including balance sheet deleveraging and operational right-sizing over the past two years. The manager views these actions as substantially de-risking the business while positioning CarMax advantageously for volume normalization. The thesis emphasizes ongoing digital infrastructure investments that enhance customer experience across buying, selling, and financing touchpoints. The combination of improved cost structure and strengthened competitive moat creates an attractive risk-adjusted opportunity in the manager's view.

Pitch Summary:
Live Nation is the world's largest live entertainment company. The live entertainment industry has grown in the high single-digits over the last two decades, and demand continues to exceed supply. Live Nation is a dominant player and offers a complimentary suite of services including concert promotion, venue operations, ticketing, and artist management businesses. Artists today make 90% of their revenue on tour as album sales and royalties become less important. Tours are increasingly global, and there are an increasing number of shows per tour. Live Nation's comprehensive offerings and scale enable its concert promoters to make better decisions on pricing and venue organization which benefits artists, venues, and fans. We expect Live Nation to continue to grow in the high single-digits over our long-term time horizon.

BSD Analysis:
Vulcan Value Partners presents a compelling bull case for Live Nation Entertainment, emphasizing the company's dominant market position and structural industry tailwinds. The manager highlights that the live entertainment industry has demonstrated consistent high single-digit growth over two decades, with demand persistently exceeding supply. The investment thesis centers on Live Nation's comprehensive ecosystem of services spanning concert promotion, venue operations, ticketing, and artist management, creating significant competitive advantages through scale and integration. The manager notes a fundamental shift in the music industry where artists now derive 90% of their revenue from touring rather than album sales, driving increased tour frequency and global expansion. This structural change benefits Live Nation's integrated platform, enabling superior pricing decisions and venue optimization that creates value for all stakeholders. The firm expects this growth trajectory to continue at high single-digit rates over their long-term investment horizon.

Pitch Summary:
The valuations during the quarter provided us with the opportunity to add a new name in Roche Holdings (ROG SW) which is trading near valuations not seen since the Global Financial Crisis. Roche boasts a strong product pipeline, reasonable debt load, robust insider ownership, and diagnostic comps from the COVID pandemic that will soon be in the rearview mirror. We believe the current discount is overly punitive and see Roche's return on equity continuing to maintain and compound over time.

BSD Analysis:
Smead Capital Management initiated a position in Roche Holdings during Q1 2024, viewing the Swiss pharmaceutical giant as significantly undervalued at levels not seen since the Global Financial Crisis. The fund managers highlight several compelling fundamental factors supporting their bullish thesis: a robust product pipeline that should drive future growth, a manageable debt structure that provides financial flexibility, and strong insider ownership alignment. They specifically note that diagnostic comparisons from the COVID pandemic will soon normalize, removing a headwind that has likely pressured valuation. The investment case centers on Roche's ability to sustain and compound its return on equity over time, suggesting the managers see durable competitive advantages in the company's pharmaceutical and diagnostics franchises. The characterization of the current discount as "overly punitive" indicates they believe the market has overcorrected, creating an attractive entry point for long-term value creation.

Pitch Summary:
Like Tosei, the Fund's position in Nomura Real Estate Holdings ("Nomura Real Estate") is also actively engaged in shareholder value creation. Nomura Real Estate is regarded as already having one of the best corporate governance profiles among the Japanese REOCs, which is a factor that has helped the company create a track record of cash flow and book value growth since its 2006 initial public offering. Despite this, shares at Nomura Real Estate also trade at an undemanding valuation of 11x earnings and attractive upside potential if the shares were to trade at Fund Management's estimate of NAV. Importantly, Nomura Real Estate's management is committed to returning roughly half of the annual cash flow to shareholders through a combination of dividends and share buybacks. Something to also consider is that the Japanese financial services group Nomura Holdings has a 36% controlling stake in Nomura Real Estate. With increased pressure in corporate Japan to simplify, reduce cross-shareholdings, and increase shareholder returns, subsidiary shareholdings could be divested. If Nomura Holdings were to sell its stake in Nomura Real Estate Holdings, seeing interest from a private equity buyer would not be inconceivable.

BSD Analysis:
Third Avenue maintains a bullish stance on Nomura Real Estate Holdings, highlighting the company's superior corporate governance profile among Japanese REOCs and consistent track record of cash flow and book value growth since its 2006 IPO. The investment case centers on attractive valuation metrics, with shares trading at 11x earnings despite the company's quality profile and significant upside potential to management's NAV estimate. The manager emphasizes strong shareholder-friendly capital allocation, with management committed to returning approximately 50% of annual cash flow through dividends and buybacks. A compelling catalyst exists through Nomura Holdings' 36% controlling stake, which could potentially be divested amid broader corporate Japan initiatives to simplify structures and enhance shareholder returns. The manager suggests this ownership structure could attract private equity interest, providing additional upside optionality beyond the company's fundamental value creation capabilities.

Pitch Summary:
The Fund's investment in Tosei Corp. ("Tosei") exemplifies Fund Management's preference for highly active real estate managers that can create shareholder value over time. Tosei has several business lines focused on the Tokyo real estate market. This includes the 'revitalization' business focusing on value creation by buying, revitalizing, and selling smaller office, logistics, and residential rental buildings. Often, these revitalizations include a dramatic improvement in environmental standards. With greater Tokyo's large inventory of older small buildings, combined with increased tenant demand and regulation of sustainability requirements, Tosei is in an excellent position to continue to create significant value over time, in Fund Management's view. In addition, Tosei is Japan's largest independent property manager, with US$16 billion of real estate assets under management, about half of which are managed for Western investors such as Blackstone and Allianz. Impressively, assets under management have grown at 28% per year since 2020, and with increasing international interest in Japanese real estate, we believe Tosei is well-positioned to continue this growth. Since initiating a position in Tosei in 4Q of 2021, Tosei has generated the Fund a 25% annualized total return per year in US dollars. Despite this impressive performance, Tosei continues to trade at substantially discounted valuation levels, with a price-to-earnings multiple of only ten times this year's expected earnings and an estimated 80% upside if shares were to trade at the company's net asset value ("NAV") estimate. Fund Management feels aligned with Tosei's management, given that the CEO's ownership stake is 26% of the outstanding shares.

BSD Analysis:
Third Avenue presents a compelling bull case for Tosei Corp, emphasizing the company's multi-faceted real estate platform and value creation capabilities in Tokyo. The manager highlights Tosei's revitalization business model, which involves acquiring, improving, and selling smaller buildings while enhancing environmental standards - a strategy well-positioned to benefit from Tokyo's aging building stock and increasing sustainability regulations. The company's property management division has demonstrated exceptional growth with assets under management expanding 28% annually since 2020 to $16 billion, serving prestigious Western investors like Blackstone and Allianz. Despite generating a 25% annualized return since the fund's 4Q 2021 initiation, Tosei trades at an attractive 10x P/E multiple with an estimated 80% upside to NAV. The investment thesis is strengthened by strong management alignment, with the CEO owning 26% of outstanding shares, and the company's dominant position as Japan's largest independent property manager in a market experiencing growing international interest.

Pitch Summary:
During the quarter ending March 31st, 2024, the Fund initiated a new position in Harbour Energy plc ("Harbour"). Harbour is an independent oil and gas exploration and production company listed on the London Stock Exchange, with significant operational exposure to the U.K. North Sea. Founded by private equity firm EIG Global Partners in 2014, Harbour set out with a contrarian strategy to acquire conventional, producing assets outside of North America, ultimately acquiring offshore assets in the U.K. North Sea from motivated sellers, including Shell and Conoco. In 2021, the company was publicly listed through a reverse merger with Premier Oil. More recently, during 2023, the U.K. offshore oil and gas industry suffered a major setback at the hands of its own government, which implemented the U.K. Energy Profits Levy, rightly described as a windfall tax. Subsequently, European gas prices declined significantly providing additional headwinds to the business and cause for shareholder dejectedness. In December 2023, however, Harbour announced a transformational deal to acquire most of the upstream assets of Wintershall Dea AG in a complex transaction that we believe is likely to create substantial value for Harbour shareholders. Importantly, the motivating factor in the sale of Wintershall Dea's assets is that its parent company, German chemicals giant BASF, has publicly committed to exit the business of gas production. However, BASF is faced with a very limited set of potential buyers. Expected to close in the fourth quarter of 2024, the pending deal will result in Harbour's diversification away from the U.K. North Sea, in favor of Norway. In addition to offering geographic diversification, the transaction will also result in improvements in the company's scale, production base, reserve life, cost structure, capital intensity, and credit profile. Moreover, as demonstrated by the pending deal, Harbour is led by an opportunistic management team with a proven ability to source value accretive acquisition opportunities, while maintaining a strong financial position. Insiders retain a significant equity stake in the company, creating alignment with outside shareholders. Several forms of confusion surrounding the Wintershall Dea transaction continue to provide an additional impediment to stock price performance, albeit an impediment we expect to be temporary. As a result, the Fund was able to acquire shares at a modest multiple of our estimate of proforma cash flow and a significant discount to our estimated net asset value.

BSD Analysis:
Third Avenue's Harbour Energy investment represents a classic contrarian value play in the beaten-down UK oil and gas sector. The company faced significant headwinds in 2023 from the UK Energy Profits Levy windfall tax and declining European gas prices, creating shareholder pessimism and depressed valuations. However, the transformational Wintershall Dea acquisition announced in December 2023 serves as a major catalyst for value creation. This deal, driven by BASF's strategic exit from gas production with limited buyer options, will significantly enhance Harbour's scale, diversify operations from the UK North Sea to Norway, and improve multiple operational metrics including reserve life and cost structure. The fund acquired shares at attractive valuations - a modest multiple of estimated pro forma cash flow and significant discount to net asset value. Management's proven acquisition track record, insider ownership alignment, and the temporary market confusion around the complex transaction provide additional confidence in the investment thesis.

Pitch Summary:
Bank of Ireland – When we purchased Bank of Ireland in mid-2019, the bank was producing a return on tangible book value of roughly 7.5%, a pretty poor level of profitability resulting from a remarkably low interest rate environment and a decade of increasing regulatory capital requirements following the Global Financial Crisis. Even then, we believed the bank had reached the point of being arguably over-capitalized, and we were excited by the opportunity to buy shares at 60% of tangible book value. To this last point, the math of paying 60% of tangible book value for a company producing a 7.5% return on tangible equity implies an earnings yield, relative to our initial cost, of about 12.5%. It is important to note that if the company continued to earn a 7.5% return on equity in perpetuity, management illogically opted to retain all earnings within the company, and the company continued to be valued at 60% of tangible book value forever, Bank of Ireland would have produced a pretty modest return for us. This possibility compels our team's emphasis on the strength of financial position, which permits the company to choose how it allocates capital, as well as an appraisal of the management team and its incentives. As time went by, two of Ireland's five largest banks decided to throw in the towel, exiting the Irish market completely. Customers and performing loan portfolios of those two banks were largely subsumed by Bank of Ireland and its largest peer. Industry attrition of this type is one of the ways that industries cyclically rebalance, as mentioned above. Furthermore, during downturns, there are frequently opportunities for an industry's best-capitalized competitors to build long-term business value through counter-cyclical acquisitions or investments. The consolidation of the Irish market into three banks provided enhanced scale and an improved competitive landscape for the remaining banks, which then enjoyed improved returns. Similarly, the unrivaled balance sheets of both Bank of Ireland and its largest competitor, put these two companies in a unique position to each purchase one of Ireland's two largest wealth management and capital markets firms during the downturn. In doing so, they each added large, capital-light lines of business into their respective banks, producing upward step-changes in returns on equity. And then interest rates began to normalize, producing a tailwind for returns, rather than a headwind, for the first time in years. Bank of Ireland recently reported a return on tangible equity slightly above 17% for calendar year 2023, though it anticipates a figure closer to 15% prospectively. Bank of Ireland's price to tangible book ratio has improved to 106%, from 60% in 2019. Yet, its earnings multiple has compressed over that time, to roughly 7.2x, and its earnings yield has, therefore, increased to roughly 14%, even after strong share price appreciation. Because the company is already overcapitalized, and its shares offer an earnings yield similar to what it is earning on capital internally, it creates an incentive for the company to return a large portion of earnings, rather than retaining them and becoming ever-more overcapitalized, which would also likely serve to depress returns on tangible book value. While a willingness to distribute capital may exist, as a practical matter, a bank's ability to distribute capital is often a result of its ability to obtain regulatory approval, which is a direct result of its balance sheet strength. If Bank of Ireland was poorly capitalized, it would be compelled by regulators - or just common sense - to retain its earnings and add them to its capital base, but that is clearly not the situation here. In announcing 2023 operating results, Bank of Ireland announced a new capital distribution plan that effectively targets a return of 72% of 2023 earnings, as a combination of dividends and a sizeable share buyback program. Those returns of capital sum to a shareholder capital return, as a percentage of today's share price, well into the double-digits. The company arrived at the 72% distribution figure by estimating the level of capital it anticipates needing in order to support continued growth in lending activity at a rate in line with growth of the Irish economy. Mind you, Ireland is one the fastest growing economies in Western Europe. All of this is to say that the bank anticipates that it can continue to grow earnings, book value, and business value, while retaining only about 28% of earnings.

BSD Analysis:
Third Avenue's Bank of Ireland thesis centers on a compelling value creation story driven by industry consolidation and capital allocation efficiency. The fund initially purchased shares at 60% of tangible book value in 2019 when the bank was generating modest 7.5% returns on tangible equity, creating an attractive 12.5% earnings yield on cost. The investment thesis has materialized as two major Irish banks exited the market, allowing Bank of Ireland to absorb customers and loan portfolios while acquiring wealth management firms that enhanced returns on equity. Rising interest rates provided additional tailwinds, driving return on tangible equity to over 17% in 2023. With the bank now overcapitalized and trading at 106% of tangible book value, management announced plans to return 72% of 2023 earnings through dividends and buybacks, creating double-digit shareholder yields. The combination of strong capital position, market consolidation benefits, and aggressive capital returns makes this a compelling value investment with multiple return drivers.

Pitch Summary:
HashiCorp (HCP) delivers software solutions that help large enterprises migrate their software applications and infrastructure from their own premises and networks to the public cloud. Hashi's tools help automate and streamline the process and, once in the public cloud, manage their assets' full lifecycle. We like Hashi's strong competitive positioning, coupled with their recent pivot to more durable rates of growth and profitability. We estimate PMV at $40.

BSD Analysis:
The managers initiated a new position in HashiCorp, attracted by the company's strong competitive position in cloud migration and infrastructure automation software. HCP's solutions address the critical enterprise need to migrate from on-premises infrastructure to public cloud environments, providing tools for both the migration process and ongoing lifecycle management. The investment thesis is supported by the secular trend toward cloud adoption and the complexity enterprises face in managing multi-cloud environments. The managers highlight HashiCorp's recent strategic pivot toward more sustainable growth and improved profitability metrics, suggesting operational discipline alongside market opportunity. With a $40 price target, the managers see significant upside potential in this cloud infrastructure play.