Investment Pitches

Pitch Summary:
Graham Corp. (GHM), a company we identified in 2023 at $13 per share, has been a top performer in investor portfolios. Historically, Graham has supplied industrial equipment like vacuum and heat transfer products for the global refining and petrochemical markets. With new management and an acquisition in 2021, Graham has diversified the business serving the defense, space, and new energy markets. The strategic focus has been on growing the defense business over the past 2 years. Graham sells critical propulsion equipment to the U.S. Navy for their nuclear submarines. They are the only supplier of the equipment they produce, giving them pricing power and margin enhancement as more subs are built. The U.S. has created the Pacific Deterrence Initiative (PDI) specifically aimed at deterring potential aggression from China in the Pacific Ocean, by bolstering U.S. military presence, and infrastructure. One of the ways the U.S. is accomplishing this is by growing and upgrading its fleet of Columbia and Virginia Class Nuclear Submarines. The U.S. has committed to building 11 more Columbia Class subs and 32 Virginia Class subs equating to $1.2-1.4 billion in projected revenue for Graham. These buildouts are expected to last through 2050. Graham carries a backlog of $385 million, of which 80% is for the defense industry. Their annual revenues are expected to be $200 million this year, giving them multi-year visibility. Graham has transformed from being highly cyclical to highly predictable over the last few years. We trimmed Graham stock in January and continue to hold a smaller weighting in investor portfolios.

BSD Analysis:
The manager identifies Graham as a successful transformation story from cyclical industrial supplier to predictable defense contractor with monopolistic positioning. The investment thesis hinges on Graham's exclusive supplier status for nuclear submarine propulsion equipment, creating significant pricing power and margin expansion opportunities. The Pacific Deterrence Initiative provides a compelling long-term growth catalyst with $1.2-1.4 billion in projected revenue visibility through 2050. The company's strategic pivot to defense (80% of $385 million backlog) has fundamentally altered the business model from cyclical to predictable cash flows. Management's acquisition strategy and business diversification have successfully repositioned the company for sustained growth. The substantial revenue opportunity from 43 new submarines represents multiple years of revenue growth from current $200 million annual run rate. The manager's position trimming after strong performance demonstrates prudent portfolio management while maintaining conviction in the long-term thesis.

Pitch Summary:
Argan Inc. (AGX) was a top performer throughout 2024. Argan operates in the industrial construction industry building natural gas powerplants. The retirement of coal-fired power plants is driving a multi-year cycle of new natural gas fired power plant construction. Tightening environmental regulation, favorable economics, and the rise of artificial intelligence (AI) have propelled Argan stock to all-time highs. Argan builds these power plants for utility companies like Vistra and Duke Energy. There are shortages of power across the country where companies like Microsoft and Meta are building new AI data centers. These data centers consume extreme amounts of power which the current grid capacity is not suited for. We estimate the company is on a path to reach $1 billion in revenue and $100 million in EBITDA as this buildout happens. The company has a current project backlog of $800 million with visibility of growth to $2 billion. Argan holds $430 million in cash, no debt and is highly profitable. Additionally, they recently increased their quarterly dividend to $0.375 for an annual dividend yield of 1.5%. We sold Argan for investor portfolios in January as the stock rallied to $175 per share and our long-term price target was achieved.

BSD Analysis:
The manager presents a compelling bull case for Argan based on the structural shift from coal to natural gas power generation and the emerging AI data center power demand. The thesis centers on a multi-year construction cycle driven by environmental regulations and AI infrastructure buildout. The company's strong financial position with $430 million cash, zero debt, and $800 million backlog provides excellent visibility into future revenue growth. Management's revenue projection of $1 billion and EBITDA target of $100 million suggests significant scaling potential from current levels. The monopolistic positioning as a specialized natural gas power plant constructor for major utilities creates pricing power. The dividend increase to 1.5% yield demonstrates management confidence in cash generation. The manager's decision to sell at $175 after achieving price targets shows disciplined profit-taking execution.

Pitch Summary:
The company is facing an existential crisis - broken business model; terrible accounting practices; persistent lack of profits; rising debt level; target price - zero;

BSD Analysis:
Sotera provides sterilization services, including EtO sterilization under litigation and regulatory scrutiny. Liability exposure is material, with potential multibillion-dollar settlements. While end-market demand is stable, the legal overhang caps valuation and leverage compounds risk.

Pitch Summary:
Evolution is naturally a stock I've been paying close attention to lately. There's been a lot of noise, and both investors and analysts are growing concerned that the company's moat is weakening, with EBITDA margins and growth either slowing or stalling. Right now, I'm focusing on the fundamentals and the potential for growth in Asia. According to the CEO, growth could normalize by 2025 if the cyberattack issues are resolved. However, it will likely take a few quarters before the company's countermeasures start to show results. When asked by an analyst, "Does that still mean you expect improvements this year?" EVO responded: "Yes. The underlying market is intact and looking good. And I have no other flavor to give you. So 100% focus is the cyber attack, that someone is stealing our product." 2025 will be a defining year for value investors in Evolution, either they'll be very right or very wrong. My view is that the numbers are simply too attractive to ignore, and it feels like emotions are currently driving the narrative. I wouldn't be surprised if I ended up buying more in 2025.

BSD Analysis:
The manager takes a contrarian bullish stance on Evolution despite recent concerns about weakening competitive moats and slowing growth metrics. The investment thesis centers on the belief that current market pessimism is emotionally driven rather than fundamentally justified, creating an attractive valuation opportunity. The manager acknowledges near-term headwinds from cyberattack issues affecting the business but expects normalization by 2025 as countermeasures take effect. Management's confidence in the underlying market strength and focus on resolving operational challenges supports the bull case. The emphasis on Asian growth potential suggests significant expansion opportunities ahead. The manager views 2025 as a pivotal year that will validate or refute the value investment thesis, with current attractive metrics providing downside protection while offering substantial upside if operational issues resolve as expected.

Pitch Summary:
Another holding that is firing on all cylinders is the Canadian vertical market software acquirer Constellation Software. What I admire so much about this company and the best serial acquirers is that they do very complicated things so well, and they do it over time. Many people have written in long format about this firm and that's not something I'm going to do here. However, what I want to highlight are 3 things that hit the best serial acquire broadly: 1) Decentralization is a term often used and people say "they are decentralized" without actually explaining what it means in an operational setting. My understanding of this is that the company units are themselves responsible for creating objectives and key measurements based on what they believe they are capable of achieving. How they achieve this is up to them, but they have to report their progress and their achievements. This again is tracked by senior management to ensure that the business is moving in the right direction and that hiccups and best practices can be utilized efficiently. The opposite methodology here is that senior management decides which margin the unit should achieve and then just monitors performance periodically. The reason this way often fails is because of the single thing that Charlie Munger repeated over and over "Show me the incentive and I will show you the outcome". Without ownership and meaning, it's hard for large companies to ensure that units perform as they want. Accountability and ownership are the core of decentralization in my opinion. 2) The best serial acquirers are masters of post-merger integration. This means they don't just acquire a company and let it operate in isolation but rather integrate it in a way that ensures routines quickly take hold and the new company becomes more efficient. They understand that value from an acquisition comes not just from owning the company but from making sure it works smoothly within the existing structure and that they do so fast. What often happens in acquisitions is that a company is brought in, but the integration process is fragmented. Routine documents end up scattered across multiple SharePoint sites and often without clear owners. Employees are left unsure about what constitutes actual company policy, both at a high level and within their specific units. The outcome here is that without a clear structure, it becomes difficult to understand how the unit's objectives align with the broader goals of the company. When this happens, inefficiencies arise, and instead of benefiting from the acquisition, the company struggles with confusion, operational slowdowns, and a lack of "best practices". They are acquired and might share the same name, but they are not operating as "one company". The best acquirers avoid this by having a well-defined integration process that ensures new teams and systems are smoothly incorporated, making sure that routines, policies, and goals are clear from the start. Further, they are godlike in terms of operational efficiency and ensuring value realization post-integration. 3) Lastly, the best serial acquirers are masters of capital allocation, measured in terms of return on invested capital and they focus on the right things: Increasing the free cash flow to its owners over the long run.

BSD Analysis:
The manager expresses strong conviction in Constellation Software as a premier serial acquirer, highlighting three key competitive advantages that drive superior returns. First, the company's decentralized operating model creates accountability and ownership at the business unit level, aligning incentives for optimal performance rather than top-down mandates. Second, Constellation excels at post-merger integration, ensuring acquired companies are efficiently incorporated into the broader organization with clear processes and best practices. Third, the company demonstrates exceptional capital allocation discipline, focusing on ROIC and long-term free cash flow generation. The manager views these operational capabilities as sustainable competitive advantages that enable Constellation to consistently create value through acquisitions. The emphasis on decentralization and integration expertise suggests the company can continue scaling its acquisition strategy while maintaining operational excellence across its diverse software portfolio.

Pitch Summary:
Visa (29,1% weight) experienced for a while a storm due to regulatory noise and while I must admit that the prosecutors wrote a very solid piece of research, in the end, I didn't find many solutions in the paper as an alternative to Visa. That part was pretty weak and there was no chance that a major disruption could happen shortly. When one took the stock price fall into account and compared it to the size of a potential fine, it was pretty clear that the correction was overdone. In my opinion, Visa continues to be one of the best businesses in the world with extremely solid fundamentals along with solid growth. The case is pretty simple if you ask me: The firm is operating with ROCE at 31%, gross margins at 69%, and free cash flow margins at 27%, and is expected to grow its earnings per share over the long run at 13% annually. The driver? There's still way too much cash being used in the world and we are nowhere close to having reached maturity in the digital payment sphere.

BSD Analysis:
The manager maintains a strong bullish stance on Visa despite regulatory headwinds, viewing the recent correction as an overreaction. The investment thesis centers on Visa's exceptional financial metrics including 31% ROCE, 69% gross margins, and 27% free cash flow margins, demonstrating the company's dominant market position and pricing power. The manager expects 13% annual EPS growth driven by the ongoing global transition from cash to digital payments, suggesting significant runway for expansion. The regulatory concerns appear manageable given the lack of viable alternatives to Visa's network. At 29.1% portfolio weight, this represents the manager's highest conviction position, reflecting confidence in Visa's durable competitive moat and long-term growth prospects in the digital payments ecosystem.

Pitch Summary:
Taking advantage of the government tax schemes; both co-CEOs resigned due to possible regulatory actions against their involvement in a massive PPP loan fraud; the PPP partner Blue Acorn is already under criminal investigation;

BSD Analysis:
P10 aggregates private-market strategies but faces scale disadvantages, fee pressure, and reliance on acquisitions. Fundraising is slowing as LPs retrench. Performance fees are unpredictable, while acquisition debt limits flexibility. Critics view it as a fee aggregator without durable differentiation.

Pitch Summary:
Overvalued (trading at 23% premium to its peers); further dilution due to cash position barely covering one month of cash burn; declining retention rate of clinicians; shareholders filing a lawsuit for untrue financials; insiders are cashing out;

BSD Analysis:
LifeStance built a large mental health clinic network via acquisitions, but the model is fragile. Integration costs, clinician churn, and reimbursement constraints keep margins under pressure. Telehealth is competitive and capital intensity is high. Growth looks impressive, but cash flow is weak.

Pitch Summary:
Canadian National Railway operates an 18,600-mile transcontinental rail network spanning Canada and the U.S. Like other Class I railroads, CNI benefits from massive economies of scale, NIMBY restrictions, and a century of supply rationalization that make new competitive rail construction impossible. Deregulation and consolidation flipped pricing trends from decades of real declines to two decades of steady real increases. Railroads’ superior energy and labor efficiency versus trucking make them dominant on long-distance freight routes. CNI is favored over U.S. rails due to faster long-term volume potential, less coal exposure, and lower regulatory risk in Canada, where oligopolies are more accepted.

BSD Analysis:
Canadian National Railway is essentially the textbook example of what happens when a critical piece of national infrastructure becomes an entrenched oligopoly with no realistic threat of new entrants. Its 18,600-mile transcontinental network gives it scale advantages that trucking and regional rail simply cannot match, especially on long-haul freight where energy and labor efficiency tilt overwhelmingly in rail’s favor. The industry’s century-long consolidation and the political impossibility of laying new track mean CNI’s competitive moat is less a “moat” and more a fortified wall. Since deregulation, pricing power has steadily improved, reversing decades of real price declines and creating a multi-decade backdrop of rising yields and disciplined capacity management. CNI stands out among North American rails because it has better long-term volume potential, less dependence on shrinking coal freight, and a more predictable regulatory environment. Canada simply tolerates concentrated rail power in a way the U.S. does not, giving CNI more room to operate without headline risk. As supply chains grow more complex and shippers demand reliability over brute speed, CNI’s network strength and structural advantages keep it positioned as a long-duration compounder in an industry built for incumbents.

Pitch Summary:
Nextage presents an attractive investment opportunity due to its unique position in the Japanese used car market, which is characterized by repeat customer interactions due to mandatory safety checks. Despite recent negative media coverage and internal misconduct issues, the company's fundamentals remain strong. The return of the founder as CEO and the continued support from banks highlight confidence in Nextage's recovery and growth potential. The company's strategy of expanding large-size stores and focusing on lifetime customer transactions is expected to drive significant earnings growth. With a target price range of Y3,000 to Y3,540, the stock is poised for a 30-50% increase over the next twelve months, supported by a projected 20% annual earnings growth.

BSD Analysis:
Nextage's ability to differentiate itself from competitors like Big Motor and Idom lies in its strategic focus on large-format stores and direct consumer interactions. The company's decision to eliminate sales incentives and adopt a team-based approach aims to enhance customer experience and employee retention, potentially stabilizing add-on sales. The used car market in Japan is fragmented, but Nextage's strong capital position allows it to aggressively expand its store network, capturing market share. The company's historical commitment to its strategy and the founder's leadership provide a solid foundation for future growth. However, investors should monitor the stabilization of add-on sales and the company's ability to meet its revised EBIT targets.

Pitch Summary:
A recent example would be Aritzia, which despite contributing positively in the fourth quarter was a material detractor over the year. In early 2023 we wrote about the importance of investing as an owner, and discussed the headwinds Aritzia was facing as it spent on infrastructure to support the significant growth it had seen the past few years. Unfortunately, there were additional setbacks that the business announced in May 2023. Aritzia had started to see market share losses due to a lack of innovation, which in combination with declining consumer confidence, led to the share price declining 40% in the year. Many of you would have heard us explain how we diligence the people separate from the business, and Aritzia is no exception. As investors with an ownership mindset, we spend a lot of time building relationships with management teams in both good times and bad in order to better inform our decision making. Aritzia’s management had been catching up on necessary investments following a period of exceptional growth, with its U.S. and eCommerce businesses more than tripling since the onset of the pandemic. For context, it took Aritzia 35 years to reach $1 billion in sales in North America, but less than 3 years to add an incremental $1 billion in sales! Aritzia historically has been disciplined in its growth journey and a very good steward of capital ($3.7B market capitalization and $1.6B of capital invested). Looking forward, we are confident that Aritzia is set to get back to doing more of the same. With the bulk of its investments approaching the rear-view mirror, profitability and cash flow is set to recover and inventory levels have recently normalized to healthier levels. As we discussed in early 2023, we invest like owners, and we view Aritzia’s investments constructively as they provide the business with a strong foundation to continue to build upon in the years to come. While Aritzia was a material detractor to performance, it is exactly the opportunity we seek to capitalize on as long-term investors.

BSD Analysis:
The company has spent heavily on distribution, systems and U.S. growth, depressing near-term earnings but positioning the brand for structurally higher sales and margins once investment normalizes. On current estimates the shares trade on a mid-20s forward P/E and high-teens EV/EBITDA for a business that consensus expects to grow revenue at a mid-teens pace over the medium term, with significant operating leverage as new stores ramp and e-commerce scales. Management and insiders retain meaningful equity exposure and have been disciplined historically on capital allocation, favouring organic growth over dilutive deals. We see catalysts from margin recovery as inventory normalizes, continued U.S. store openings, and potential multiple re-rating as execution improves and investors gain confidence that recent market share losses were transient. Overall we view Aritzia as a high-quality, vertically integrated apparel retailer with an attractive runway in the U.S. and a temporarily depressed earnings base.

Pitch Summary:
The store-wide health crisis is coming: the company is only focused on store growth at the expense of the health requirements at current stores (declining health standards, food safety issues, Update 2/6 - Follow-up report: Food illness outbreak is inevitable.

BSD Analysis:
CAVA is executing a fast-casual rollout with strong AUVs, digital mix, and four-wall margins, but the model is at a prove-it phase on national scale. Peak unit economics from early markets may step down as new geographies open with higher build costs, longer ramp, and tighter labor. Commodity exposure (produce, oils, proteins—especially lamb) can swing COGS, and traffic is sensitive to price after several rounds of menu increases. Throughput hinges on ops discipline and maintaining freshness at volume. Valuation assumes sustained high-teens unit growth and stable restaurant-level margins; any deterioration in comps or new-unit returns hits the DCF hard.

Pitch Summary:
Deceptive ads; 20% of the sales is spent on marketing; slowing market penetration; series of accounting problems; top holders are from HK and insiders are cashing out;

BSD Analysis:
Celsius is a high-growth energy drink brand riding distribution leverage from its PepsiCo partnership. The engine is velocity gains in convenience/grocery and rapid shelf expansion, but the setup is exposed to category normalization after a multi-year boom. Gross margins benefited from price/mix and scale, yet promo intensity is creeping up as Red Bull, Monster, and newer entrants defend space. International is early and cost-heavy; trial needs sustained repeat to justify slotting and media. Litigation/claims risk around “thermogenic” marketing is a lingering overhang, and the working-capital cycle tightens as inventory builds for new doors. Equity embeds years of double-digit share gains; any slowdown in scanner data or higher trade spend can knock the multiple hard.

Pitch Summary:
For-profit university with fast and loose admissions to take advantage of federal student loan disbursements; enrollment trends in multi-year decline; upcoming regulations; graduation rates are below average; $1.5 bil acquisition should be written off;

BSD Analysis:
Adtalem operates healthcare-focused universities. The bear case points to dependence on Title IV funding, aggressive recruiting, and high tuition. Enrollment growth is uneven, and regulatory scrutiny is a constant risk. Acquisitions add goodwill and integration concerns. Downside if enrollment dips or oversight tightens.

Pitch Summary:
Donnelley Financial Solutions (DFIN) Donnelley Financial Solutions (DFIN) is a market leader providing compliance, regulatory, and transaction-related solutions to corporations and investment companies. It operates two main segments: Capital Markets (68% of TTM revenue) - Services include IPO filings, M&A support, and ongoing compliance solutions. Investment Companies (32% of TTM revenue) – Aids investment management firms (mutual funds, ETFs, and alternative investments) with ongoing regulatory filing requirements. Unlike competitors offering only partial services, DFIN stands out as an end-to-end provider with solutions encompassing a business's lifecycle. Thesis 1. Recurring Revenue Growth - Software solutions account for $322m in TTM revenue and are experiencing rapid growth with high incremental margins. Management projects mid-teens growth for this segment, supported by improvements in retention (Gross Retention Rate increased from 89% in Q1 2024 to 93% in Q3 2024). 2. Event-Driven Business Recovery - Transactional revenue tied to M&A and IPOs (~25% of TTM revenue) will benefit from improving activity levels. 3. First-Mover Advantage in Regulatory Solutions - DFIN's Tailored Shareholder Reports (TSR) platform is expected to generate $11m-$12m in annual recurring revenue, capitalizing on new SEC mandates. 4. Strong Competitive Position - Leading SEC filing agent for funds and corporations. Despite industry headwinds, growing market share in the Virtual Data Room (Venue) segment. 5. Management Alignment - Executive incentives are tied to software sales growth and EBITDA margins, aligning with shareholder interests. Why the Opportunity Exists 1. Stock Overhang - Director Jeffrey Jacobowitz, previously a 7.7% shareholder, has significantly reduced his stake, creating near-term selling pressure and suppressing the stock price. 2. Transition Challenges - The shift from transactional to subscription models has temporarily increased churn and subdued growth metrics. 3. Market Skepticism - Weak IPO and M&A activity has overshadowed the company's transition to higher-margin recurring revenue streams. Valuation The current valuation reflects skepticism about DFIN's ability to achieve software growth targets. The stock is undervalued as margins expand and revenue growth accelerates. A successful strategy execution could result in $7+ EPS by 2027, supporting a $140+ stock price at a 20x multiple. Catalysts 1. Completion of the share overhang from Jacobowitz's sell-down. 2. Recovery in M&A and IPO activity. 3. Continued improvement in key metrics such as ARR and retention rates. 4. Enhanced investor confidence through earnings outperformance. Risks 1. Execution Risk—Failure to achieve software sales growth. The new administration's reduced regulatory burden could result in less filing activity. 2. Market Dependency - Prolonged weakness in IPO and M&A volumes could delay transactional revenue recovery. 3. Insider Selling - Jacobowitz's continued sell-down may suggest internal concerns or limit near-term stock appreciation.

BSD Analysis:
The manager presents a compelling transformation story for Donnelley Financial Solutions, highlighting the company's transition from transactional to recurring revenue streams with software solutions growing at mid-teens rates. The investment thesis centers on DFIN's market-leading position as an end-to-end provider of compliance and regulatory solutions, with improving retention rates (89% to 93% gross retention) and $322M in software revenue showing strong momentum. The manager identifies a significant opportunity in the company's first-mover advantage with Tailored Shareholder Reports, expected to generate $11-12M in annual recurring revenue from new SEC mandates. Current weakness is attributed to temporary selling pressure from director Jeffrey Jacobowitz reducing his 7.7% stake, creating an attractive entry point. The valuation case projects $7+ EPS by 2027 supporting a $140+ stock price at 20x multiple, representing substantial upside from current levels. Key catalysts include completion of the share overhang, M&A/IPO market recovery, and continued improvement in software metrics, while the business benefits from aligned management incentives tied to software growth and margin expansion.

Pitch Summary:
Beyond Inc (BYON) Beyond operates as an asset-light e-commerce company, owning and managing a portfolio of retail brands such as Overstock, Bed Bath & Beyond, Baby & Beyond, and Zulily. With a high EBITDA-to-free-cash-flow (FCF) conversion and low capital requirements, it is positioned to scale efficiently. Recent acquisitions, including Bed Bath & Beyond (2023) and Zulily (2024), have expanded their reach while revealing management missteps and growing pains related to brand integration and operational execution. Thesis 1. Leadership and Vision - Chairman Marcus Lemonis employs a hands-on, performance-driven leadership style. His compensation is equity-based, with options linked to significant stock price appreciation ($45, $50, and $60 strike prices). 2. Asset-Light Model - Beyond's capital-light approach minimizes fixed costs and facilitates high FCF conversion, with incremental return on invested capital (ROIC) near 100%. This positions the business for profitable growth as revenue scales. 3. Valuation Opportunity - Beyond trades at distressed levels, with a market cap of $234m and a price-to-sales ratio significantly below peers. Analyst FY25 revenue estimates of $1.49B are overly pessimistic and extrapolate recent trends, which are likely to reverse. Market share gains and a stabilizing furniture market should drive revenue above estimates, bolstered by improving customer acquisition metrics and app usage trends. 4. Strategic Partnerships - A recent $25m investment in Kirkland's offers multiple synergies: A brick-and-mortar presence for Bed Bath & Beyond through "shop-in-shops" and standalone stores (both operated by Kirkland's, as Beyond will maintain an asset-light model with no retail footprint or inventory ownership). Reduced e-commerce return costs by utilizing Kirkland's locations. Enhanced brand visibility to address consumer misconceptions regarding Bed Bath & Beyond's bankruptcy. 5. Optionality in Private Equity Investments - Beyond's investments in Tzero (blockchain-enabled securities trading) and GrainChain (digital agriculture solutions) provide mispriced optionality. Both assets are valued conservatively on the balance sheet despite positive developments such as Tzero's regulatory approvals and GrainChain's growing traction in the industry. Catalysts 1. The sale of headquarters to Salt Lake City leaves the company debt-free. 2. Continued stabilization in the furniture market alongside improved market share metrics. Why the Opportunity Exists 1. Execution Missteps - Previous leadership committed a critical error in shutting down the Overstock brand. Current leadership set overly ambitious revenue growth forecasts, reducing credibility. These issues have negatively affected investor sentiment. 2. Cash Burn Concerns - High marketing expenses and the relaunch of acquired brands have temporarily strained cash flow, raising fears of insolvency. 3. Tax Loss Selling - Beyond's stock declined ~82% in 2024 and 21.5% in December alone. Tax-loss harvesting likely resulted in excessive selling pressure as the year closed. Risks 1. Cash Burn and Profitability - The business remains unprofitable, and prolonged cash burn may force Beyond to monetize its private equity investments at less favorable valuations. Failure to achieve cost discipline or revenue growth could worsen these concerns. 2. Execution Risks - Management has a history of missteps, including poorly timed website launches and nearly investing in distressed companies like The Container Store. Ineffective marketing spending could impede customer acquisition and retention efforts. 3. Industry Dynamics - A reversal in the recent stabilization of furniture sales could adversely affect revenue growth. Competitors like Wayfair maintain a substantial lead in market share (~9%) compared to Beyond (~1%). 4. Index Removal Risk - Falling below the market cap threshold for the Russell 2000 index could heighten selling pressure, further depressing the stock price.

BSD Analysis:
The manager presents a compelling turnaround thesis for Beyond Inc, emphasizing the company's asset-light e-commerce model with high free cash flow conversion and near 100% incremental ROIC. The investment case centers on new leadership under Marcus Lemonis, whose equity-based compensation aligns with shareholder interests through options at $45-60 strike prices. The manager identifies a significant valuation opportunity with the stock trading at distressed levels despite owning valuable brands like Bed Bath & Beyond and Zulily. Strategic partnerships, particularly the $25M Kirkland's investment providing brick-and-mortar presence, offer multiple operational synergies and reduced return costs. The thesis includes mispriced optionality through investments in Tzero and GrainChain, which are conservatively valued despite positive developments. Key catalysts include debt-free status from headquarters sale and furniture market stabilization, while the manager attributes current weakness to tax-loss selling and temporary execution issues rather than fundamental deterioration.

Pitch Summary:
We sold shares of KBR, Marvell Technologies, and Schlumberger in Q4. We are still bullish on KBR and Marvell, but sized down due to portfolio constraints. SLB is a company we’ve liked for a long time and continue to believe it is the strongest player in oil field services. However, we believe the outlook for oil prices is not supportive of higher prices for the stock in the near term, given: • OPEC+’s call for cuts of an additional million barrels a day are voluntary. • U.S. Energy Information Administration reported that U.S. crude and condensate production increased to 13.24 million barrels a day in September.

BSD Analysis:
SLB, formerly Schlumberger, enters 2026 as a redefined technology-driven energy solutions company following the successful integration of ChampionX. The firm has guided for 2026 revenue between $36.9 billion and $37.7 billion, with adjusted EBITDA expected to hit a range of $8.6 billion to $9.1 billion. Management is prioritizing the recovery of international markets, specifically predicting a rebound in Middle Eastern rig counts and a surge in Latin American offshore activity. A standout catalyst for 2026 is the company’s digital segment, which is targeting a $1 billion annual revenue run rate for its data center and AI business by year-end. SLB is currently leveraging its "One Subsea" venture to target cumulative bookings exceeding $9 billion over the next two years as deepwater activity inflects. The board has approved a 3.5% increase in the quarterly dividend to $0.295 per share, supported by a plan to return over $4 billion to shareholders in total. Despite range-bound oil prices, SLB’s shift away from capital-intensive drilling toward high-margin production services and carbon management solutions is providing significant margin stability. This "capital-light" strategy is expected to yield over $2.4 billion in share buybacks this year, reinforcing SLB's position as a premier global energy compounder.

Pitch Summary:
For as long as Netflix has been around, the company was still able to grow quarterly operating income by 25% year-over-year, reaching 1.92 billion in the latest earnings filing from $1.5 billion to $1.8 billion (in Q3 2023) • Free cash flow in 2023 is estimated to be $6.5 billion, which was generated in spite of writer’s strikes and blew past company projections for $5 billion • Operating margins of ~20% put Netflix well ahead of peers in entertainment and communications services, and is also higher than the Magnificent Seven’s average • Increased share buyback authorization of $10 billion should return equity to shareholders in 2024 • Netflix added 13.1 million new subscribers in the December quarter, well surpassing estimates of 8.97 million

BSD Analysis:
Netflix has officially entered a transformative era in 2026 following the announcement of its $82.7 billion acquisition of Warner Bros. Discovery’s studio and streaming assets. The company enters the year with over 325 million paid memberships, having successfully transitioned to a hybrid model that prioritizes advertising revenue alongside subscriptions. Management forecasts 2026 revenue to range between $50.7 billion and $51.7 billion, representing healthy organic growth of 12% to 14%. A primary narrative for the year is the expected doubling of advertising sales, which has become a "margin savior" as mature markets face subscriber saturation. Strategic initiatives for 2026 include a deeper push into live events, such as the World Baseball Classic, and the scaling of a cloud-first gaming strategy. While the Warner acquisition introduces a slight drag on margins, the company is still targeting a robust 31.5% operating margin for the fiscal year. Share repurchases have been temporarily suspended to preserve liquidity for the deal, signaling a more conservative approach to capital allocation during the integration phase. Content production has fully recovered from previous industry strikes, allowing for a strong slate of branded originals to drive healthy engagement levels throughout the year.

Pitch Summary:
Nu Holdings is a company we initiated a small position in during 2024. Known as "Nubank," it is a Brazil-based Latin American neobank operating entirely online without physical branches. Nubank has transformed banking in the region through its technology-driven, customer-centric approach. Its value proposition lies in eliminating traditional banking fees, simplifying financial services, and providing greater accessibility to underserved yet tech-savvy customers across Brazil, Mexico, and Colombia. By prioritizing transparency, low costs, and seamless user experiences, Nubank has become the largest and most profitable neobank in the world outside of China. From a capital efficiency perspective, it is hard to find a better business anywhere in the world than Nubank. It costs Nubank ~$10 to acquire a new customer, which is not only best-in-class relative to all other global neobanks, but also many multiples lower than that of their direct competitors. These ultra-low acquisition costs are achieved primarily because 80-90% of Nubank's new customers come through word-of-mouth. Furthermore, it costs only $0.90 per month to serve a customer, while the average monthly revenue per active customer (ARPAC) is $11. Re-read that sentence, because it is incredible. This efficiency has driven significant operating leverage as ARPAC has climbed while costs remained flat. Over the last two years, net income margins have increased to 19% from 4%, and ROE has risen from 5% to 30%. Despite already having nearly 110 million customers, Nubank's growth runway remains long and profitable. The company's more mature customer cohorts generate $24 of ARPAC, suggesting the average ARPAC of $11 has considerable upside potential at minimal incremental cost. Additionally, while about 50% of the Brazilian population holds a Nubank account, the penetration of services like personal loans, savings accounts, investments, insurance, and business banking remains low. Nubank is also rapidly scaling in Mexico and Colombia, two markets where it has operated for only a few years but is scaling quickly within. At approximately 20x NTM earnings, Nubank is valued below the S&P 500 yet is growing its earnings 5-6x faster, supported by exceptionally high ROIICs. While I am highly optimistic about Nubank's prospects and consider it among the best businesses in the portfolio, it remains a small position today due to certain risks. The company operates in an emerging market that is particularly vulnerable to economic slowdowns, and its interest-rate sensitivity adds an additional layer of uncertainty. Furthermore, while its expansion into Mexico holds significant potential, success is not guaranteed, especially given competition from Mercado Pago – a highly capable player that I greatly respect.

BSD Analysis:
The manager highlights Nubank's exceptional unit economics and capital efficiency as key investment drivers. Customer acquisition costs of $10 versus $11 monthly ARPAC create compelling economics, enhanced by 80-90% word-of-mouth growth reducing marketing spend. The $0.90 monthly servicing cost demonstrates remarkable operational leverage, contributing to margin expansion from 4% to 19% and ROE growth from 5% to 30%. With 110 million customers representing 50% Brazilian penetration, significant cross-selling opportunities remain in loans, investments, and business banking. Mature cohorts generating $24 ARPAC suggest substantial revenue upside as customer relationships deepen. International expansion in Mexico and Colombia provides additional growth vectors. At 20x NTM earnings, valuation appears reasonable for 5-6x faster earnings growth than the S&P 500. However, the manager maintains a small position due to emerging market risks, interest rate sensitivity, and competitive threats from Mercado Pago in Mexico expansion.

Pitch Summary:
We initiated a new investment in Vistry Group in December and have since increased our position in early January, with a current cost basis below £6.00. Vistry is a UK-based homebuilder that is nearing the completion of a transformation from a traditional – buy, build, sell – homebuilding model to a capital-light partnerships model. By partnering with local housing authorities, housing associations, and institutional investors, Vistry is eliminating the need for costly land acquisition and speculative development, focusing instead on building pre-sold, affordable homes. This structure is inherently capital efficient and dramatically accelerates the cash conversion cycles compared to traditional housebuilders. With up to 50% of homes pre-sold and additional units targeted at institutional buyers, Vistry achieves rapid turnover on its deployed capital. As the transition progresses, the company projects ROIC to exceed 40%, compared to the 15-20% that is typical of traditional homebuilders. Moreover, Vistry's partnerships model benefits from strong structural tailwinds. The UK faces an estimated shortfall of over four million homes, with demand concentrated in affordable housing – a market segment that is less sensitive to economic cycles and interest rates. Vistry is uniquely positioned to meet this demand, leveraging its scale, relationships with over 60 local housing authorities, and modular construction capabilities. These factors not only enhance its ability to execute efficiently but also create durable competitive advantages, giving Vistry higher win rates for incremental new projects. Importantly, Vistry's margins are built into the contracts of its agreements, ensuring that Vistry can meet its ROIC target. Finally, by repurposing resources from its legacy homebuilding business into partnerships, the company is in the process of freeing up over £1 billion which it plans to return to shareholders via share buybacks by the end of 2026, an incredible sum considering that Vistry's current market capitalization is only £2 billion. Vistry is led by Greg Fitzgerald, a seasoned leader in UK homebuilding who has successfully orchestrated turnarounds and acquisitions at Galliford Try and Bovis Homes. Fitzgerald is largely responsible for the deal-making that occurred to create Vistry and he now owns 10% of the company. He is known for his hands-on approach and intense work ethic and has made it clear that Vistry is committed to excellence. Additionally, I find that he has been highly transparent in his communications with shareholders to-date. I consider us very fortunate to have been able to acquire shares at our current cost basis. Vistry's shares are down 57% from its 52-week high in September after the company reported multiple profit warnings during the second-half of 2024. These profit warnings were primarily due to an understatement of build costs in Vistry's South Division, totaling £105 million for 2024 and then reducing to £50 million in 2025 and to be fully resolved by 2026. Additionally, there were delays in expected year-end transactions and completions which have further impacted profits. Instead of the anticipated £430 million in profits, Vistry is now expected to produce only £250 million in 2024. While delays in project completions are an ongoing risk to this business model, the understated build costs are a product of the traditional home-building model which is soon to be extinct. Furthermore, while the management team's credibility has certainly been damaged, I consider this to be further evidence for why the partnerships model is attractive. Vistry still expects to achieve £800 million of operating profits in the "medium term" – presumably 3-5 years – and despite the profit warnings, I believe that they can achieve this. Project delays that hurt Vistry in 2024 could likely be a boon for profits in 2025, but regardless of that, normalized earnings power are appreciating considerably. Trading at less than tangible book value today, Vistry is objectively cheap. Moreover, if operating profits achieve anywhere in the ballpark of £800 million and trade between the 12-20x range of profits that I believe to be reasonable, Vistry's market capitalization could reach between £10-16 billion or £30-48 per share before accounting for the ongoing £1 billion in share repurchases. All of this to say; shares reflect deep pessimism in Vistry's prospects and trade with significant margin of safety. Vistry is just the sort of asymmetric return profile that we look for.

BSD Analysis:
The manager presents Vistry as a compelling turnaround story trading at distressed valuations following profit warnings. The transformation from traditional homebuilding to a capital-light partnerships model promises superior returns, with projected ROIC exceeding 40% versus industry norms of 15-20%. The partnerships approach eliminates speculative development risk through pre-sold homes and institutional buyers, while benefiting from UK's structural housing shortage of four million units. Management's £1 billion share buyback program represents 50% of current market cap, providing significant capital return catalyst. The 57% share price decline creates an asymmetric opportunity, with shares trading below tangible book value despite medium-term operating profit targets of £800 million. At 12-20x normalized earnings, this implies £30-48 per share upside from current £6 cost basis. While profit warnings damaged credibility, the manager views these as legacy issues from the traditional model being phased out. CEO Greg Fitzgerald's 10% ownership and track record provide confidence in execution.