Investment Pitches

Pitch Summary:
UnitedHealth Group (UNH) was down nearly 6% this quarter. One of their subsidiaries, Change Healthcare, was hit by a cyber attack placing sensitive customer data at risk. Another possible explanation for the underperformance is the more defensive nature of UNH. When the market is going up and looking for growth names, the steady low-beta names tend to underperform. UnitedHealth shares have very low correlation to high growth tech names. We added to UNH throughout the quarter.

BSD Analysis:
Torre Financial increased its position in UnitedHealth Group throughout Q1 2024 despite the stock's 6% decline, viewing the weakness as an opportunity. The manager attributes the underperformance to two factors: a cybersecurity incident at subsidiary Change Healthcare and the stock's defensive characteristics during a growth-oriented market rally. Torre emphasizes UnitedHealth's low correlation to high-growth technology stocks, positioning it as a defensive holding with steady, low-beta characteristics. The decision to add to the position during weakness demonstrates the manager's conviction in the company's long-term fundamentals and defensive qualities. Torre appears to value UnitedHealth's stability and predictable cash flows, particularly during periods of market volatility. The manager's contrarian approach of buying during temporary setbacks reflects confidence in the healthcare giant's ability to navigate operational challenges. The emphasis on low correlation suggests Torre views UNH as an important portfolio diversifier that can provide stability during market turbulence.

Pitch Summary:
Agree Realty (ADC), a triple-net REIT, has appeared on the detractors list a few times now. Real estate broadly continues to feel the impact of higher rates. ADC is one of the highest quality REITs in the world. They have a strong focus on risk-adjusted returns; a strong base of investment-grade tenants including Walmart, Tractor Supply Co, Home Depot, and many more; and a strong balance sheet, which has allowed them to take advantage of market weakness. Insiders continue to purchase shares. In 2023, insiders purchased nearly $12 million worth of shares. In 2024 to date, they have purchased nearly $4.2 million worth. A rotation into REITs is likely to come this year. We have no issue collecting the monthly distributions as we wait for the market to turn.

BSD Analysis:
Torre Financial maintains conviction in Agree Realty despite repeated appearances on the detractors list, viewing the REIT as one of the highest quality in the world. The manager acknowledges that higher interest rates continue to pressure the broader real estate sector but emphasizes ADC's superior fundamental characteristics. Torre highlights the company's focus on risk-adjusted returns and its tenant base of investment-grade credits including major retailers like Walmart, Tractor Supply, and Home Depot. The investment thesis is strengthened by ADC's strong balance sheet, which enables opportunistic acquisitions during market weakness. Significant insider buying activity ($12 million in 2023 and $4.2 million year-to-date in 2024) provides additional confidence in management's conviction. Torre expects a rotation into REITs during 2024 and is comfortable collecting monthly distributions while waiting for the market to recognize the company's value. The manager's patience with the position reflects confidence in the long-term quality of the underlying business and real estate portfolio.

Pitch Summary:
Zscaler (ZS) was down 13% this quarter. Aside from Palo Alto Network's commentary about softening billings, there weren't many significant influences. Cybersecurity continues to be a compelling space. Zscaler operates at the core, protecting networks with zero trust solutions. We had trimmed cybersecurity exposure on valuation concerns. We see this pullback in Zscaler as an opportunity to slowly build exposure.

BSD Analysis:
Torre Financial views Zscaler's 13% quarterly decline as an attractive buying opportunity after previously trimming cybersecurity exposure due to valuation concerns. The manager acknowledges that the weakness was primarily driven by broader sector concerns following Palo Alto Networks' commentary about softening billings rather than company-specific issues. Torre emphasizes Zscaler's core positioning in network security through zero trust solutions, highlighting the company's strategic importance in the cybersecurity ecosystem. The investment thesis is built on the manager's conviction that cybersecurity remains a compelling long-term investment space with secular growth drivers. Torre's plan to "slowly build exposure" suggests a measured approach to increasing the position size as valuation becomes more attractive. The manager appears confident in Zscaler's competitive position and technology platform despite near-term sector headwinds. The emphasis on zero trust solutions indicates Torre recognizes the strategic value of Zscaler's approach to modern network security.

Pitch Summary:
Adobe (ADBE) was down 15% this quarter. They had previously agreed to acquire Figma, an up-and-comer in the collaborative design space, for $20 billion. While it was a very steep price, it would have further cemented Adobe's stronghold on the market. Adobe ended up terminating the deal, unable to overcome the anti-competitive concerns of European regulators. Adobe had to pay a $1 billion break up fee. Notwithstanding, Adobe has come out very strong in the rise of AI. Their professional tools are quickly incorporating many new generative-AI technologies. Our conviction is strong, and we'll be looking to increase our position over time.

BSD Analysis:
Torre Financial maintains strong conviction in Adobe despite the 15% quarterly decline and the failed $20 billion Figma acquisition. The manager acknowledges the significant $1 billion breakup fee but views the terminated deal as a regulatory setback rather than a fundamental issue with Adobe's strategy. Torre highlights Adobe's strong positioning in the artificial intelligence revolution, noting the rapid integration of generative AI technologies across Adobe's professional software suite. The investment thesis centers on Adobe's market-leading position in creative software and its ability to leverage AI to enhance product capabilities and maintain competitive advantages. The manager's plan to increase the position over time suggests confidence in Adobe's long-term prospects despite near-term headwinds. Torre appears to view the current weakness as an opportunity to build a larger stake in a high-quality franchise. The emphasis on AI integration indicates the manager believes Adobe can successfully monetize emerging technologies to drive future growth.

Pitch Summary:
Atlassian (TEAM) joined our portfolio this quarter. We initiated our position this March. While it was the worst performer for the quarter, down nearly 18%, that is in part why it appears! Atlassian started as a software for filing and tracking bugs in software. Jira, their main offering today, is used by many development teams across the world. They have continued to roll out many new products including Confluence which is an enterprise wiki offering, Jira Workflows for ticket management, Bitbucket for code hosting, OpsGenie for on call alerting, and many more. As an enterprise SaaS company, they have strong recurring revenue. Coupled with low churn, ongoing innovation, and strong financials, Atlassian is a very attractive company.

BSD Analysis:
Torre Financial initiated a new position in Atlassian during Q1 2024, viewing the 18% quarterly decline as an attractive entry opportunity. The manager highlights Atlassian's evolution from a simple bug-tracking tool to a comprehensive enterprise software suite, with Jira as the flagship product used globally by development teams. The investment thesis centers on the company's strong SaaS fundamentals including recurring revenue streams, low customer churn rates, and continuous product innovation across multiple enterprise tools. Torre emphasizes Atlassian's expanding product ecosystem including Confluence, Bitbucket, and OpsGenie, which creates cross-selling opportunities and increases customer stickiness. The manager views the company's strong financial profile and ongoing innovation as key drivers for long-term value creation. Despite the poor quarterly performance, Torre maintains conviction in Atlassian as an attractive investment opportunity. The timing of the position initiation suggests the manager is comfortable with near-term volatility in exchange for long-term growth potential.

Pitch Summary:
Long Bitcoin and short MSTR, which is trading at 2.5x the spot price of Bitcoin; no justification for excessive premium;

BSD Analysis:
MicroStrategy began as an enterprise analytics software firm but is now effectively a leveraged Bitcoin proxy. The short thesis emphasizes outsized balance sheet exposure to Bitcoin, reliance on debt-financed purchases, and lack of meaningful diversification. Software operations are stagnant, leaving valuation almost entirely tied to Bitcoin prices. Bears argue the capital structure introduces asymmetric downside: if Bitcoin declines materially, MicroStrategy faces margin calls or refinancing pressure. With Michael Saylor driving an aggressive strategy, governance risk is elevated. The company trades at a premium to its underlying assets, making it vulnerable to sharp drawdowns in crypto markets.

Pitch Summary:
PAR Technology Corporation is poised for significant growth due to expected margin expansion and revenue acceleration driven by strategic acquisitions and a large addressable market. The company is transitioning into a pure-play software entity with a focus on enterprise-level restaurant chains, positioning it for premium valuation multiples.

BSD Analysis:
PAR Technology is at a pivotal moment, with several catalysts expected to drive growth and profitability. The company is simplifying its operations by divesting its Government business, which will allow it to focus on its core restaurant software platform. The recent acquisitions of Stuzo and Task are strategic moves to expand its total addressable market and enhance its product offerings. The competitive landscape is favorable, with key competitors like Toast and Oracle facing challenges, providing PAR with an opportunity to capture market share. The upcoming rollout with Burger King and potential new contracts with other major chains like Popeye's and Wendy's could significantly boost ARR. Management's focus on cost discipline and operational efficiency is expected to lead to substantial margin expansion, aligning PAR with high-growth, high-margin software peers.

Pitch Summary:
PAR Technology Corporation is poised for significant growth and margin expansion, driven by strategic acquisitions, a strong pipeline of new contracts, and operational simplification. The company is expected to benefit from the rollout of its solutions to Burger King and other large restaurant chains, positioning it as a leader in the enterprise restaurant software market.

BSD Analysis:
PAR Technology is at a critical juncture where its strategic initiatives are expected to yield tangible results. The divestiture of its Government business will streamline operations, allowing the company to focus on its core restaurant software solutions. The recent acquisitions of Stuzo and Task are set to expand PAR's total addressable market and enhance its product offerings, particularly in international markets. The competitive landscape is favorable, with key competitors facing challenges, providing PAR an opportunity to capture market share. The company's disciplined cost management and focus on high-margin software sales are expected to drive profitability. As PAR transitions to a pure-play software company, it is likely to achieve valuation multiples similar to its peers, reflecting its growth potential and market leadership.

Pitch Summary:
Plus Alpha Consulting (PAC) is a promising investment opportunity due to its strong growth in annual recurring revenue (ARR) and its leadership in the nascent field of human resource management software. Despite its high valuation at IPO and small market cap, PAC has demonstrated a 30%+ annual growth in ARR over the past four years. The company is highly profitable with a return on invested capital (ROIC) exceeding 150%, driven by high margins and low capital expenditure requirements. PAC's human capital management software, Talent Palette, has become a significant revenue driver, accounting for 68% of total revenue. With a target price of Y4,200 by the end of 2026, the stock offers a potential 75% upside, translating to an annualized return of approximately 22% over the next 2.8 years.

BSD Analysis:
PAC's competitive advantage lies in its ability to analyze unstructured data through proprietary text mining techniques, which sets it apart from other human capital management software providers. The company's focus on large corporations, which make up 40% of its subscriber base, allows it to command a higher average revenue per user (ARPU). PAC's strategy of continuously upgrading its software based on customer feedback enhances user experience and attracts more clients. The potential risks include the development of AI technologies that could render text mining obsolete and the commoditization of basic human capital management functions. However, PAC's emphasis on deep insights and sophisticated solutions positions it well to maintain its growth trajectory.

Pitch Summary:
Uncovered hidden loan equal to 50% of the loan coming due; insufficient loan loss reserve against non-performing loans; potential loan losses equal to over 40% of the book value;

BSD Analysis:
The Bancorp provides specialty banking services, including prepaid cards, institutional banking, and lending to fintechs. The short thesis highlights concentration risk in a handful of fintech partners, regulatory scrutiny of compliance practices, and interest rate sensitivity. Growth in prepaid and sponsor banking has drawn greater oversight, and critics argue that earnings quality is overstated given fee dependence on a concentrated client base. Rising deposit costs could erode net interest margins, while its exposure to fintech credit cycles increases earnings volatility. The balance sheet is lean, but liquidity stress at partner fintechs could ripple through TBBK.

Pitch Summary:
Overvalued (trading at 86% premium to its peers); AFFO manipulated by at least 22% in 2023; accounting manipulations; CapEx accounting manipulation; operating margins are driven by financial engineering;

BSD Analysis:
Equinix is the largest global operator of data centers, benefiting from cloud migration and interconnection demand. The bear case emphasizes high valuation, capital intensity, and rising competition from hyperscalers building their own infrastructure. While Equinix boasts sticky customers and pricing power, capex requirements to maintain and expand facilities remain heavy, keeping leverage high. Bears argue that as AI workloads accelerate, hyperscalers may bypass colocation in favor of owning capacity, which could pressure growth. Additionally, higher interest rates challenge REIT multiples and raise refinancing costs.

Pitch Summary:
Grupo Herdez is a major player in the Mexican food industry, boasting a dominant position in several grocery categories and strong partnerships with American food giants like McCormick and Hormel. Despite its robust revenue growth and healthy profitability, the stock trades at a significant discount compared to its peers. The company's strategic focus on capital allocation and shareholder returns, including dividends and share repurchases, enhances its investment appeal. The potential for improvement in its Impulsos division offers additional upside. Given its strong market position and financial health, the current valuation presents a compelling opportunity for investors.

BSD Analysis:
Grupo Herdez's strong brand recognition and market leadership in Mexico provide a solid foundation for continued growth. The company's partnerships with established American brands like McCormick and Hormel enhance its earnings stability and offer potential for expansion in the US market. While the Impulsos division currently weighs on profitability, management's efforts to revitalize this segment could unlock significant value. The company's prudent financial management, including debt reduction and strategic acquisitions, further supports its long-term growth prospects. Despite risks such as currency fluctuations and political uncertainty, Grupo Herdez's attractive valuation and growth potential make it a promising investment in the emerging Mexican market.

Pitch Summary:
The main business matured in 2019 and now under pressure; failed new initiatives to diversify; significant business risk; legal challenges related to commission structure; aggressive revenue recognition; up to 60% downside;

BSD Analysis:
Zillow is now a pure marketplace after exiting iBuying, with the profit engine tied to Premier Agent leads, rentals, and adjacent attach products (mortgage, touring, closing). The bear angle: revenue is geared to existing-home transactions and lead conversion, both sensitive to mortgage rates and inventory. The Flex model smooths spend but concentrates risk in agent unit economics; any compression in buyer-agent commissions or lead conversion can ripple straight through to take rates. Competition is rising, particularly from CoStar’s Homes.com push, which threatens Zillow’s paid lead model. Mortgage attach is strategic but still small and volatile. Watch conversion in Flex cohorts, lead pricing vs. agent ROI, rental ARPU, and commission-rule changes.

Pitch Summary:
Take a company like Cameco Corporation ('CCO'), which is well known as the second largest uranium miner in the world. But, we are of the view that the nuclear fuel cycle aspect of their business is underappreciated and therefore, could drive further material share price appreciation from current levels. With their Westinghouse acquisition closing in November of 2023, CCO now has a dominant position in nuclear fuel conversion, with their Port Hope and Smithfield facilities. Through their Westinghouse business they are the OEM or technology provider for approximately half of global commercial nuclear power plants and provide services to two thirds of the world's operating fleet. In a world with rising energy demand, we believe CCO's exposure to this trend with their downstream investments in the nuclear fuel cycle is significantly underappreciated, which should drive further share price appreciation from current levels.

BSD Analysis:
The manager presents a compelling bull case for Cameco Corporation based on the underappreciated value of their nuclear fuel cycle operations beyond uranium mining. The November 2023 Westinghouse acquisition significantly enhanced CCO's strategic positioning, creating a dominant nuclear fuel conversion capability through their Port Hope and Smithfield facilities. This vertical integration provides exposure to approximately 50% of global commercial nuclear power plants as an OEM/technology provider, with services extending to two-thirds of the world's operating fleet. The investment thesis centers on rising global energy demand driving increased nuclear power adoption, particularly accelerated by AI-driven data center construction requiring substantial power infrastructure. The manager believes the market has not fully recognized the value creation potential from CCO's downstream nuclear fuel cycle investments. The Amazon-Talen Energy nuclear power deal exemplifies the premium pricing environment emerging for nuclear energy, supporting the broader uranium renaissance theme. This positions CCO to benefit from both uranium price appreciation and expanding nuclear fuel services demand.

Pitch Summary:
PotlatchDeltic Corp (PCH): PCH is one of three publicly traded timber REIT's. The company is vertically integrated allowing them to be one of the lowest cost providers of wood products and has the most leverage amongst peers to an improving overall lumber price environment. Lumber prices should benefit from an improving housing environment driven by peaking/lower interest rates, a lack of overall housing supply, a growing cohort of homebuyers, and an undersupplied timber market. The company pays a consistently growing dividend, maintains a strong balance sheet, has consistently generated FCF throughout economic cycles and opportunistically repurchases their stock.

BSD Analysis:
Bernzott Capital initiated a position in PotlatchDeltic, viewing it as a compelling play on the timber and lumber recovery cycle. The manager highlights PCH's competitive advantage through vertical integration, positioning it as one of the lowest-cost wood product providers with maximum operational leverage to rising lumber prices. The investment thesis centers on multiple housing market catalysts including peaking interest rates, constrained housing supply, demographic tailwinds from growing homebuyer cohorts, and an undersupplied timber market. The company's financial profile appears attractive with consistent free cash flow generation across economic cycles, a growing dividend policy, and opportunistic share repurchases. PCH's status as one of only three publicly traded timber REITs provides scarcity value in accessing this asset class. The timing appears strategic as the manager anticipates an improving housing environment that should drive lumber price appreciation.

Pitch Summary:
During 1HFY24, MWY finally delivered its long-awaited grain strategy, announcing that it had agreed to sell 5.15 hectares of its Geelong port site to CHS Broadbent, who will build and operate an 80,000 tonne grain storage and export terminal. The sale price of $15.5m for ~5 hectares (~25% of the total site area) compares favourably to the current book value of $16.5 million for the entire 19 hectare site. In addition to monetising excess land at well above book value, the agreement with CHS Broadbent also helps mitigate the significant cost of the take-or pay agreement for the shiploader owned by Geelong Port. Soon after the grain strategy news, MWY refinanced its banking facilities to be more focused on working capital rather than core debt, which better suits the needs of the business today post the sale of the plantation assets. Whilst the pace of change at MWY has been slower than we would like, significant improvements have taken place at the company over the past two years. Non-core assets have been sold, loss making businesses have been closed and the grain strategy helps defray a punitive take-or-pay contract. The asset backing of the company today (net tangible assets of $1.64 per share) is largely made up of current assets such as cash, inventory and receivables. A significant amount of the inventory balance has been converted to cash in the early part of 2HFY24 due to solid demand for woodchips from customers. This places MWY in a strong position to conduct further capital management initiatives (dividends and/or buybacks) to create value for shareholders using their balance sheet. We also look forward to further updates on the company's nascent carbon management business.

BSD Analysis:
Sandon Capital presents Midway as an asset-rich company executing a successful value realization strategy following significant restructuring. The key development is MWY's grain strategy, selling 5.15 hectares (25% of total site) of its Geelong port for $15.5 million, nearly matching the $16.5 million book value of the entire 19-hectare site. This transaction not only monetizes excess land above book value but also mitigates costs from a punitive take-or-pay shiploader agreement. The company has undergone substantial transformation over two years, including asset sales, closure of loss-making businesses, and refinancing to working capital-focused facilities. With net tangible assets of $1.64 per share consisting largely of current assets (cash, inventory, receivables), MWY has significant balance sheet flexibility. Strong woodchip demand has enabled inventory conversion to cash in early 2HFY24, positioning the company for capital management initiatives including dividends and buybacks. Sandon Capital also sees potential in MWY's emerging carbon management business. The investment thesis centers on the substantial asset backing, successful restructuring, and the company's ability to return capital to shareholders while developing new growth opportunities in carbon management.

Pitch Summary:
Following a period of uncertainty, BCI has now completed the financing for the salt first component of the Mardi salt and potash project. Credit approvals for the $981 million of project finance required for the Mardie salt project were received from all key debt providers in December 2023. This was followed by a $315m equity raise which should form the final component of equity funding. In addition, the 2023 convertible notes issued to Wroxby, Australian Super and Ryder Capital (all major shareholders of the company) were converted to equity. As at 31 December 2023, the Mardi project was approximately one third complete. Now that sufficient funding is in place, and offtake contracts are being executed, we look forward to project construction proceeding and the first shipment of salt in 2H 2026, coinciding with an expected shortage in the global salt market. The economics of the Mardi project remain very attractive with annual free cash flow of $225m expected to be generated when the project achieves steady state salt and potash production.

BSD Analysis:
Sandon Capital presents BCI Minerals as a compelling development story with the Mardie salt and potash project now fully funded and progressing toward production. After a period of financing uncertainty, the company secured $981 million in project finance from key debt providers and completed a $315 million equity raise, providing the final funding component. The conversion of convertible notes from major shareholders including Wroxby, Australian Super, and Ryder Capital to equity demonstrates strong institutional support. With the project approximately one-third complete as of December 2023 and offtake contracts being executed, BCI is well-positioned for construction completion and first salt shipment in 2H 2026. The timing aligns favorably with an expected global salt market shortage, providing strong pricing tailwinds. The project economics are highly attractive, with Sandon Capital highlighting expected annual free cash flow of $225 million at steady-state production combining both salt and potash. The investment thesis centers on the successful project financing, favorable market timing, and the substantial cash generation potential once the Mardie project reaches full production capacity.

Pitch Summary:
The stabilisation that has taken place at MFG over the past 6-9 months has been encouraging, both at the corporate level and within the funds management business. The Board has been strengthened with the addition of a number of new directors with requisite funds management experience, costs have been removed from the business, a new Managing Director has been appointed to the Funds Management business and after a long period of decline, funds under management have stabilised and even grown marginally (aided by strong equity markets rather than inflows). Furthermore, concerns related to the liability on options over closed class units in Magellan Global Fund (ASX: MGF) have now been resolved through the buyback of 750 million MGF options. This coincided with the responsible entity (RE) of MGF deciding to proceed with a conversion of the closed class units to open class units. The new board, led by MFG Executive Chairman, Andrew Formica, has moved expeditiously to address a number of legacy issues. With most of these now in the rear-view mirror, we look forward MFG turning its attention to the last of the low-hanging fruit, capital management. We believe it can easily deliver on both growth opportunities and capital management, or in other words, "walk and chew gum."

BSD Analysis:
Sandon Capital presents Magellan Financial Group as a stabilization and recovery story following a period of significant challenges. The manager highlights encouraging developments over the past 6-9 months, including board strengthening with experienced funds management directors, cost reduction initiatives, and the appointment of a new Managing Director for the funds management business. Critically, funds under management have stabilized and begun growing marginally after a prolonged decline period. A major overhang has been resolved through the buyback of 750 million MGF options, eliminating concerns about the liability on closed class units, with the responsible entity proceeding to convert these to open class units. Under Executive Chairman Andrew Formica's leadership, the new board has expeditiously addressed legacy issues. Sandon Capital believes most problems are now resolved and expects management to focus on capital management initiatives, which they view as "low-hanging fruit." The fund is optimistic that MFG can simultaneously pursue growth opportunities while implementing capital management strategies. The investment thesis centers on the successful stabilization of the business and the potential for both operational improvements and shareholder-friendly capital allocation.

Pitch Summary:
A2B Shareholders approved the scheme of arrangement to sell the company to Singapore's ComfortDelGro for $1.45 per share. The scheme consideration comes on top of a $0.60 per share fully franked special dividend that was paid in January 2024 following the sale of A2B's remaining properties. When we first invested in A2B, its market capitalisation was approximately $110 million and the company was committed to a strategy that we believed was eroding the value of the business. Our campaign to change the Board, including the appointment of Mark Bayliss as Executive Chairman, has led to a significant change in fortunes for A2B and its shareholders. Mark and his team have executed one of the most successful corporate resurrections we have witnessed – non-core property assets have been sold, the core taxi despatch and payments businesses have been successfully turned around, and these efforts have been capped off with the announcements of the large special dividend and the scheme implementation agreement with ComfortDelGro. The company today has a market capitalisation of more than $260 million (prior to the payment of the special dividend). In less than three years, more than $150 million of shareholder value has been created.

BSD Analysis:
Sandon Capital presents A2B as a highly successful activist investment and corporate turnaround story. The fund initiated their position when A2B had a market capitalization of approximately $110 million and was pursuing a value-destructive strategy. Through an activist campaign, Sandon Capital successfully changed the board composition, including the appointment of Mark Bayliss as Executive Chairman. Under new leadership, A2B executed a comprehensive value creation strategy including the sale of non-core property assets, successful turnaround of core taxi dispatch and payments businesses, and ultimately a $0.60 per share special dividend and $1.45 per share takeover by Singapore's ComfortDelGro. The total return to shareholders represents over $150 million in value creation within three years, with the market capitalization growing to over $260 million before the special dividend payment. Sandon Capital views this as one of the most successful corporate resurrections they have witnessed. The investment demonstrates the fund's activist approach and ability to drive significant value creation through board changes and strategic repositioning. This represents a completed successful activist campaign with substantial returns for shareholders.