Investment Pitches

Pitch Summary:
Tesla (TSLA) is our top pick here as the company transitions from a cyclical EV play to full autonomy and robo-taxis. We believe that regulatory support in addition to step-change improvement in the safety of the technology will result is significant scale and upside for the stock.

BSD Analysis:
Spear Advisors positions Tesla as their top pick in AI Applications, viewing the company's transformation from a traditional electric vehicle manufacturer to an autonomous driving and robotaxi platform as a compelling investment thesis. The fund believes Tesla is transitioning away from being a cyclical EV play toward becoming a technology company focused on full autonomy. The managers cite two key catalysts driving their bullish stance: anticipated regulatory support for autonomous vehicles and significant technological improvements in safety systems. They expect these factors to create substantial scale advantages and meaningful stock appreciation. This positioning reflects the fund's broader strategy of investing in AI applications that solve previously unsolvable problems through accelerated computing. The pitch aligns with their view that problems unsolvable for 10+ years are now becoming feasible with advanced AI technology. Tesla represents their conviction in the autonomous driving space as a transformational AI application with significant commercial potential.

Pitch Summary:
Our second largest common stock holding was Cracker Barrel. We originally purchased 4,737,794 shares of Cracker Barrel for $241.1 million from May 2011 through December 2012, with a dollar-weighted purchase date of December 2011. Between 2018 and 2019, we reduced our holding in Cracker Barrel to 2,000,000 shares, but have purchased an additional 69,141 shares since. All in all, we now control 9.3% of Cracker Barrel's outstanding stock at an average cost per share of $51.32. From 2011 through year-end 2024, we received proceeds of $471.1 million from the sale of Cracker Barrel stock, $255.2 million in dividends and derivative gains, plus we held a remaining stake of $109.4 million in market value. In sum, over a thirteen-year period, our investment in Cracker Barrel of $246.7 million turned into $835.7 million in value.

BSD Analysis:
Biglari Holdings demonstrates exceptional investment performance in Cracker Barrel, generating a 239% total return over thirteen years from an initial $246.7 million investment. The fund's strategic approach involved building a significant 9.3% ownership stake at an average cost of $51.32 per share, establishing meaningful influence in the company. The investment strategy included active portfolio management, with partial profit-taking between 2018-2019 while maintaining a substantial core position. The total value creation of $835.7 million includes $471.1 million in sale proceeds, $255.2 million in dividends and derivative gains, plus a remaining $109.4 million market value stake. This represents a compound annual return of approximately 9.4% over the holding period, demonstrating the fund's ability to generate substantial cash flows while maintaining equity exposure. The manager's continued ownership and recent additional purchases of 69,141 shares suggest ongoing confidence in Cracker Barrel's business model and cash generation capabilities. The investment exemplifies successful long-term value creation through patient capital deployment and strategic position management.

Pitch Summary:
Our largest common stock holding at year-end was Ferrari. We purchased 440,000 shares of Ferrari for $102.2 million. Over a two-year period, our investment in Ferrari turned into $189.4 million in value, including dividends. The automotive industry on the whole is characterized by tough economics, yet Ferrari, as a luxury brand in the high-performance segment, has a durable competitive advantage. The widening of that advantage over the years has made Ferrari one of the most valuable brands in the world.

BSD Analysis:
Biglari Holdings presents a compelling bull case for Ferrari based on the company's exceptional brand positioning and competitive moat. The fund manager emphasizes Ferrari's durable competitive advantage as a luxury brand in the high-performance automotive segment, distinguishing it from the broader automotive industry's challenging economics. The investment has generated substantial returns, with a $102.2 million position appreciating to $189.4 million over two years, representing an 85% gain including dividends. The manager highlights Ferrari's brand value expansion over time, positioning it as one of the world's most valuable brands. This thesis centers on Ferrari's pricing power and exclusivity in the luxury automotive market, which provides insulation from typical automotive industry pressures. The investment reflects confidence in Ferrari's ability to maintain premium positioning and generate superior returns through brand strength rather than volume growth. The manager's emphasis on Ferrari's widening competitive advantage suggests belief in the company's ability to further differentiate itself in the luxury segment.

Pitch Summary:
Contrast this with Cogent, our second-largest position. Cogent is complex. It is in a notoriously terrible industry for equity value creation. It is idiosyncratically fascinating and has a lot of moving parts. The stock has done okay since we launched (+14% annualized total return, including dividends), but it's not (yet) up a lot. There have been lots of takers on Cogent. Since we started publishing content on our Insights page, I've fielded more than 40 inbound calls from other investment firms to discuss it. Major effort is required to understand why Cogent will not fall victim to the same poor outcomes as all other wireline telecom companies. Nonetheless, many investors are more interested in the harder path for various reasons that seem irrational. Nothing against Cogent, of course – it goes without saying that we believe it's an amazing opportunity and will be a great investment for many years to come. So, what makes investors double-click on Cogent but run away from Carvana? I suspect it's a principal/agent problem. Many analysts and investors managing capital are incentivized to stay in their seats. This means not looking stupid, not upsetting their portfolio manager, and not being too controversial. Cogent is a small cap company that is relatively unknown by most in the markets, so it feels like an uncovered gem. It has complexity which allows analysts to sound smart and diligent as they navigate the details. It is run by Dave Schaeffer, a founder/CEO/owner/operator that is the smartest guy in any room. In choosing to work on Cogent over ideas like Carvana, there is a large element of reputation management and, of course, a whiff of idiosyncratic/uncovered alpha. This combination of factors is preferable compared to their perception of Carvana, which most investors assume is a highly leveraged, high-beta bet on the interest rate environment. As much as I believe in Cogent being an amazing current and future investment, worthy of >20% of our capital, Carvana has significantly more runway to create more value for longer, and it will have a far easier time doing so as it disrupts a larger, more valuable, and more fragmented industry with terrible sub-scale competitors that deliver a dated and universally hated customer experience.

BSD Analysis:
The manager presents Cogent as a complex but compelling investment opportunity in the traditionally value-destructive wireline telecom industry. Despite operating in a notoriously difficult sector, the manager believes Cogent will avoid the poor outcomes that have plagued other telecom companies, though the specific differentiation factors require significant analytical effort to understand. The investment thesis is anchored by founder-CEO Dave Schaeffer, described as an exceptional owner-operator who provides strong leadership. The manager acknowledges Cogent's modest 14% annualized returns since launch but maintains long-term conviction, allocating over 20% of capital to the position. The complexity and relative obscurity of the small-cap company attracts significant institutional interest, with over 40 inbound calls from investment firms seeking discussion. While the manager views Cogent as an excellent long-term investment, they note that Carvana offers superior value creation potential due to its larger addressable market and clearer disruptive advantages. The position represents a contrarian bet on management's ability to execute in a challenging industry backdrop.

Pitch Summary:
When catching up with friends and contacts in the industry to compare notes on our research, I haven't been able to convince any of them to even look at Carvana – not even since it was clearly "de-risked" after its debt restructuring in the summer of 2023. I think I am facile with the facts and that I can explain why it deserves a look. Nonetheless, there have been no takers. The most common reasons why they won't spend time on the company? There are several flavors, but go something like this: "My PM was short this in 2022, I can't pitch it as a long." (One friend said this and then bought it in his personal account.) "I can't pitch something that's up this much/I can't pitch something that fell -99%. It's too much career risk." "They have to be over-earning. I can't tell you why and I haven't spent time on it, but they have to be." To me, the case for owning Carvana is now much easier to discern, and it is one of the best growth stories in the markets with no serious risk of competitive disruption on the horizon (quite the opposite – Carvana is the disruptor). It doesn't take a rocket scientist to study and appreciate the powerful flywheel effects of the business and the operating leverage generated from future growth, but the stock makes most professional investors uncomfortable. Even when they see Carvana disrupting the used auto industry in real time, they can't bring themselves to want to own or to put their capital or their name behind it professionally. They let all sorts of externalities cloud their judgment. We can find some interesting opportunities where others have behavioral biases, and it will always be a fruitful place to look for new ideas. Carvana isn't the easiest company to analyze due to the complexities of its vertical integration, but the workload required to build conviction in Cogent, done right, is multiples more than what's required to understand and build conviction in Carvana. As much as I believe in Cogent being an amazing current and future investment, worthy of >20% of our capital, Carvana has significantly more runway to create more value for longer, and it will have a far easier time doing so as it disrupts a larger, more valuable, and more fragmented industry with terrible sub-scale competitors that deliver a dated and universally hated customer experience. Perhaps one day investors will simplify Carvana down to one of the best long-term and disruptive growth stories in the market and spend some time on it. Thankfully, we get to capture the behavioral inefficiencies between here and there.

BSD Analysis:
The manager presents a compelling bull case for Carvana, emphasizing its position as a disruptor in the used auto industry with powerful flywheel effects and significant operating leverage potential. Despite the stock's remarkable 230% YTD performance and 45x increase from its lows, the manager maintains conviction that Carvana offers superior long-term value creation compared to other portfolio holdings. The thesis centers on Carvana's ability to disrupt a large, fragmented industry populated by sub-scale competitors delivering poor customer experiences. The manager highlights behavioral biases among institutional investors who avoid the stock due to career risk concerns and past negative experiences, creating ongoing opportunities for patient capital. The vertical integration complexity is acknowledged but viewed as manageable compared to other investments in the portfolio. The manager's confidence is reinforced by the company's debt restructuring in 2023, which significantly de-risked the investment profile while maintaining the disruptive growth trajectory.

Pitch Summary:
Although we had planned to discuss the idea of slow capital at Grant's conference for quite some time, it turns out that the lessons are very much applicable today. Tidewater, another of our top positions, has now fallen close to 50% from its May 2024 high. While the experience is still never fun, the lessons we have learned do make it easier to know what to do. Reflecting upon the reasons we own Tidewater, the fundamentals of both the business and Tidewater's position within the industry, our understanding of the company and the business strongly support our view that the direction of travel has not changed while the market overreaction provides an environment to be opportunistic.

BSD Analysis:
Robotti views Tidewater's recent 50% decline from May 2024 highs as a market overreaction that creates opportunistic entry points rather than fundamental deterioration. The firm's conviction remains anchored in their assessment of Tidewater's competitive position within the offshore service vessel industry and the underlying business fundamentals. Robotti applies their 'slow capital' philosophy, recognizing that offshore energy services is a cyclical industry prone to volatile sentiment swings that often disconnect from operational reality. Their bottom-up research and direct engagement with management provides confidence that the long-term direction of travel remains intact despite near-term market volatility. The current environment mirrors previous situations where Robotti successfully navigated drawdowns in cyclical businesses by maintaining conviction in their fundamental thesis. Tidewater's position as a leading offshore service vessel operator with one of the largest fleets globally provides defensive characteristics and potential for outsized returns when offshore activity recovers. The firm views current weakness as validation of their contrarian approach to investing in out-of-favor sectors where patient capital can be rewarded.

Pitch Summary:
I have discussed the history of our investment in Builders FirstSource many times in these letters as well as in interviews and other presentations. In fact, we touched on this aspect in our Second Quarter 2014 Letter where we described one of Benjamin Graham's fundamental principles – Mr. Market. The recovery in the housing market and for Builders FirstSource took longer than we anticipated. Recall, as we noted earlier, the longer it takes for recovery, the more cathartic the rebuilding and the more discounted the valuation. The recovery was not only long but was also volatile. Volatility has gotten a bad rap in investing because it is often used as a synonym for risk. Maybe, but maybe not. Our experience highlights the value of understanding the company and the business through our bottom-up research. As we said back in 2014, 'when stock prices fall sharply, we often find opportunity - so long as our conviction in our long-term view remains solid.' We know that recoveries are frequently not linear. From the time that we first invested in Builders FirstSource, the stock fell by more than 40% on several occasions. The Second Quarter 2014 Letter marked one of those when BLDR fell from a high of $9.40 in early 2014 to $5.10 over just six months. Each time we experienced one of these unpleasant mark-to-market adjustments, we reviewed our thesis and each time nothing had changed other than the timing of our expected outcome. In fact, that slowdown in the recovery and the resulting market losses played a critical role in motivating the owners of 2 competitors to capitulate and actively pursue their exits. Longer recoveries and periods of setback regularly accelerate cathartic responses. While the time it takes for an investment thesis to manifest is an important variable, in the case of BLDR, it didn't change the direction of travel, but it did magnify the outcome, which further amplified the ultimate return. The important ingredient was patience. I can't tell you how often I read about an investor who boasts that they will immediately sell any holding that falls by 20% or 30%. Those are investors at risk of letting Mr. Market control their decisions instead of the other way around. As for the outcome? Builders FirstSource is still one of our top investments and the stock was at $171.40 at the end of Q3 2024 consistently generating profits through a downturn in its business, generating excess free cash flow and thoughtfully deploying that capital including substantially reducing the share count opportunistically. This exemplifies the essence of slow capital. By having the patience to endure volatility and setbacks while remaining focused on the long-term potential, not selling right as things were getting better, but continuing to be invested as it improved, and the thesis fully unfolded.

BSD Analysis:
Robotti's Builders FirstSource investment demonstrates their disciplined approach to cyclical recovery plays in consolidating industries. The firm maintained conviction through multiple 40%+ drawdowns, recognizing that housing market recovery would be protracted and volatile rather than linear. Their bottom-up research provided confidence to withstand mark-to-market volatility, viewing each setback as validation of their thesis rather than cause for exit. The extended downturn created additional catalysts as two competitors capitulated and pursued exits, accelerating industry consolidation that ultimately benefited BLDR's market position. Robotti correctly identified that longer recovery periods often produce more cathartic rebuilding and superior ultimate returns for patient investors. The stock's appreciation from $5.10 in 2014 to $171.40 by Q3 2024 represents exceptional performance driven by the company's ability to generate consistent profits and excess free cash flow even during business downturns. Management's opportunistic capital deployment, including substantial share count reduction, has compounded returns for remaining shareholders and validates Robotti's 'slow capital' investment philosophy.

Pitch Summary:
In the late 1990's one of our analysts became interested in NewMarket (which at the time was known as Ethyl Corp). What caught our interest was the fact that the company had bought back ~30% of their stock at roughly $46 per share. More interesting was the fact that the family that controlled the company and had a long, successful history of being both shrewd and thoughtful investors, did not tender any of their shares. Instead, they increased their stake in the business. A year later, the stock fell to $35 per share, which is when we began buying. NewMarket produced petroleum additives, including an additive for leaded gasoline which was obviously a declining business. Although the industry had consolidated down to four competitors, competition became fierce when supply was increased by a new capacity addition while customers consolidated and demand was hurt by the Asian financial crisis, all leading to margins compressing significantly. By 2002, the stock sold down to less than $4 per share. It generated $650-$700 million of revenue but had a market capitalization of less than $70 million with $300 million of debt (although down from over $700mm on the completion of the repurchase). By the spring of 2005 shares had recovered to $15, which is when the market leader, Lubrizol, acquired a company that made chemical additives for hair care products that was growing at 6% - 7% per year and decided to run its competitive petroleum additives business for cash. They shut down a plant, expanded margins, began to turn down unprofitable business, and increased prices. Initially, lock-step earnings improvement was illusive, as oil prices, a primary raw material, chose that moment to rise dramatically. That set off several rounds of price increases, but margins quickly evaporated with repeated cost increases. These successive rounds of price increases convinced us that industry consolidation had facilitated rational, disciplined pricing. We realized oil prices would eventually exhaust this leap-frog progression and when it did, margins would expand, and earnings would rise. Our slow capital investing process was about to be rewarded. We aggressively invested, substantially increasing our position, filed a 13D in the process, and even encouraged the company to buy back more shares. I will always remember my conversation then with the CFO, noting that I believed the company would earn $4 of cash per share imminently. Not bad compared to its $15 share price, but the market didn't care. Since the company had been facing headwinds for so long, the CFO's response to me was, 'from your lips to God's ears.' Our patience paid off as oil prices weakened, competitors remained disciplined, and margins widened. When the stock reached roughly $40 or 10x our estimate of free cash flow in the next year or so, we thought shares traded much closer to fair value and began selling our position. The result of our patient capital philosophy yielded a return of over 170% from when we showed the CFO our estimate. Still, there were more lessons to be learned. Since we sold much of our investment in March 2006 the stock has continued to rise. Today, shares trade for $535, or 1,275% higher, illustrating the value of having the patience required to invest with 'slow capital.'

BSD Analysis:
Robotti's NewMarket investment exemplifies their 'slow capital' philosophy and contrarian approach to distressed value situations. The firm identified an attractive entry point when insider ownership patterns diverged from market sentiment - the controlling family increased their stake while buying back 30% of shares at $46, yet refused to tender during the buyback. The petroleum additives business faced secular decline from leaded gasoline phase-out and cyclical pressures from Asian financial crisis, driving the stock from $35 to under $4 by 2002. At the trough, NewMarket traded at less than $70 million market cap on $650-700 million revenue, representing extreme valuation dislocation. Industry consolidation to four players eventually enabled rational pricing discipline, particularly after market leader Lubrizol shifted strategy to focus on higher-growth hair care additives. Robotti correctly anticipated that oil price volatility would eventually subside, allowing margin expansion from disciplined pricing to flow through to earnings. The investment generated over 170% returns when sold around $40, though the stock continued appreciating to $535, demonstrating both the power of patient capital and the challenge of optimal exit timing.

Pitch Summary:
In late 2023 we also purchased Okamoto Machine Tool Works. Okamoto epitomizes the niche-dominant strategy of many smaller Japanese companies. A mere 30b yen ($200m USD) market cap company, Okamoto has a 40% worldwide market share in grinding and polishing machines. Their machines, which range from a few hundred thousand to over 1m USD in price, are used to process anything that needs an ultra-flat surface, from robot gears to silicon wafers. Sales at Okamoto have grown from 18b yen in FY 2011 to 50b yen in FY 2024 and EBIT margins are around 10%. US customers we spoke to rave about their machines and customer service. An independent distributor we interviewed said that their products are the "Cadillac" of the industry and essentially sell themselves. But despite the quality of the company's brand and their track record of growth, the valuation is undemanding: just 3x EV to EBIT based on FY 2024 results. FY 2025 will be a down year, but the company also revealed a (we believe, achievable) medium-term goal of nearly doubling EBIT from FY 2024 levels. We made Okamoto a material position towards the end of Q4 of last year after visiting their main factory in Annaka and meeting with company executives.

BSD Analysis:
Bireme Capital identifies Okamoto Machine Tool Works as a quintessential Japanese niche market leader trading at an extraordinarily attractive valuation. The company commands a dominant 40% global market share in precision grinding and polishing machines, serving critical applications in semiconductors and robotics with high-value equipment priced up to $1 million. The investment case is strengthened by impressive historical growth, with sales nearly tripling from 18 billion yen in 2011 to 50 billion yen in 2024, while maintaining healthy 10% EBIT margins. Customer feedback validates the premium positioning, with products described as the "Cadillac" of the industry. The valuation disconnect is striking at just 3x EV/EBIT despite the quality franchise and growth trajectory. Management's medium-term goal to nearly double EBIT provides a clear catalyst for value realization. The combination of market leadership, secular growth exposure, and extreme valuation discount creates an asymmetric risk-reward profile typical of overlooked Japanese industrial champions.

Pitch Summary:
TBS Holdings is a conglomerate whose core business is TV broadcasting (hence the original name, Tokyo Broadcasting System). Today they also operate retail and ecommerce businesses, own valuable real estate, and manage a substantial portfolio of publicly traded securities. When we began buying, the securities portfolio was worth around 700b yen, nearly double the 450b yen market cap of the company. As of 3/31, their fiscal year end, that same portfolio was worth over 1 trillion Yen versus a market cap of 690b yen. Outside Japan, negative corporate values are reserved for money-losing businesses. But between 2019 and 2023, TBS's operating income never fell below 10b yen, and the company forecasts 16.5b yen this year. While the stock has appreciated, we think it is still too cheap, with a value of 6,800 yen and a price of around 4,000.

BSD Analysis:
Bireme Capital presents a compelling value play in TBS Holdings, highlighting a classic sum-of-the-parts opportunity where the company trades at a significant discount to its securities portfolio alone. The fund identifies that TBS's investment portfolio was worth over 1 trillion yen versus a market cap of only 690 billion yen, essentially creating negative enterprise value for the operating business. This represents an extreme valuation anomaly, particularly given the company's consistent profitability with operating income never falling below 10 billion yen from 2019-2023. The manager's target price of 6,800 yen versus the current price around 4,000 yen implies substantial upside potential of approximately 70%. The investment thesis benefits from Japan's broader corporate governance reforms and potential asset monetization. The combination of hidden asset value, consistent cash generation, and structural market inefficiencies creates a compelling risk-adjusted opportunity with significant margin of safety.

Pitch Summary:
Based in the U.K., Wise PLC is a disruptive leader in the rapidly growing international money-transfer market operating in more than 40 currencies and 170 countries. Through its innovative platform, Wise has made strong inroads into the cross-border payments markets by offering low fees, real-time exchange rates and unmatched transparency. The company processed $165 billion in payment volume and garnered 13 million active users in the most recent fiscal year. Despite these lofty figures, Wise accounts for less than 5% of the vast Personal Remittances market that has grown at 8.6% annually over the past 20 years. Still, 80% of Personal Remittance transfers still rely on traditional methods such as cash and banks (via SWIFT), which are expensive, slow and opaque. With prices that are up to 80% lower than banks or Western Union, 63% of transfers completed in under 20 seconds, and exceptional customer satisfaction scores, Wise enjoys a robust competitive moat. We anticipate Wise can achieve high-teens to low-20s growth in revenue and earnings per share over the next five years, leveraging strong secular tailwinds in global payments. This positions the company as a compelling long-term growth opportunity.

BSD Analysis:
Brown Capital Management initiated a position in Wise PLC as a new addition, presenting a compelling bull case for the disruptive fintech leader in international money transfers. The manager highlights Wise's impressive scale with $165 billion in payment volume and 13 million active users across 40+ currencies and 170 countries, yet emphasizes the massive opportunity ahead with less than 5% market share in Personal Remittances. The investment thesis centers on Wise's significant competitive advantages through pricing up to 80% lower than traditional banks or Western Union, with 63% of transfers completed in under 20 seconds and superior customer satisfaction. Brown Capital views the 80% of transfers still relying on expensive, slow traditional methods as a substantial addressable market given the Personal Remittances market's 8.6% annual growth over 20 years. The company's innovative platform offering low fees, real-time exchange rates, and transparency creates a robust competitive moat against incumbent players. Management projects high-teens to low-20s revenue and EPS growth over the next five years, supported by strong secular tailwinds in global payments digitization. The manager positions Wise as a compelling long-term growth opportunity benefiting from the ongoing disruption of cross-border payment infrastructure and the shift away from traditional banking methods.

Pitch Summary:
Novo Nordisk, a Danish pharmaceutical giant, dominates the global diabetes-care market and has recently become a leader in obesity treatment with its blockbuster GLP-1 drugs, Ozempic and Wegovy. While its diabetes franchise accounts for approximately 70% of sales, Novo has reshaped the weight-loss market, capturing 55% of global market share in this rapidly expanding industry and becoming Europe's most valuable company. The stock declined meaningfully during the quarter following disappointing clinical trial results from its highly anticipated REDEFINE study for its next-generation obesity drug, CagriSema. The trial reported 23% average weight loss over 68 weeks, falling short of Novo's 25%-plus target and aligning closely with the 20% weight loss over 72 weeks achieved by Eli Lilly's Zepbound, a key competitor that is rapidly gaining market share. Concerns over Zepbound's potentially easier manufacturing process have further raised investor apprehensions about Novo's competitive position. We think the sell-off appears excessive. CagriSema demonstrated superior efficacy to Zepbound in certain metrics which should position it to compete effectively once launched next year. Additionally, nuances in the REDEFINE study, such as flexible dosing protocols, may have negatively impacted the results. Further data on patient cohorts could provide a clearer picture. Novo remains a strong player in the burgeoning weight-loss-drug market, which is effectively a duopoly between itself and Lilly. With potential new competitors at least three years away and Novo and Lilly securing the majority of global protein manufacturing capacity for GLP-1 production, some barriers to entry exist. This competitive advantage, coupled with the vast market opportunity, reinforces our optimism about Novo's long-term prospects.

BSD Analysis:
Brown Capital Management views the recent Novo Nordisk sell-off as excessive following disappointing CagriSema trial results, maintaining a bull thesis based on the company's dominant market position and structural competitive advantages. While the REDEFINE study showed 23% weight loss versus the 25%+ target, falling short of expectations and matching Eli Lilly's Zepbound efficacy, the manager believes nuances like flexible dosing protocols may have impacted results negatively. The investment case centers on Novo's leadership in the rapidly expanding obesity market where it holds 55% global market share alongside its dominant diabetes franchise representing 70% of sales. Brown Capital emphasizes the effective duopoly structure between Novo and Lilly in GLP-1 drugs, with both companies controlling the majority of global protein manufacturing capacity and new competitors at least three years away. These barriers to entry create significant competitive moats in a vast addressable market opportunity. The manager expects CagriSema to compete effectively upon launch next year based on superior efficacy in certain metrics compared to Zepbound. Despite near-term competitive concerns, Brown Capital's optimism stems from Novo's entrenched market position, manufacturing advantages, and the secular growth opportunity in obesity treatment that positions the company for long-term outperformance.

Pitch Summary:
Givaudan is based in Switzerland and produces a broad array of embedded flavors and fragrances found in consumer goods such as food, beverages, personal care products and household items. With more than 130,000 formulations, Givaudan boasts a large customer base exceeding 4,000 companies. Givaudan's underperformance during the quarter is most likely due to high expectations coming into the quarter. (This contrasts with contributor Atlassian, which benefitted from low expectations.) Givaudan achieved year-to-date revenue growth of 13% on a like-for-like basis, more than double the company's historical growth rate. This growth was primarily the result of clients aggressively restocking after 2023, a year plagued by significant COVID-related customer destocking, making for easy compares. After another quarter of above-average revenue growth, management indicated that it expects sales growth to begin normalizing in the fourth quarter. Management also acknowledged the risk of potential destocking given low visibility into customer current inventory levels. The uncertainty and less sanguine tone adversely impacted Givaudan's stock price during the quarter. Givaudan remains a solid company fundamentally, selling essential ingredients that are difficult for its customers to replace. While we plan to closely monitor topline growth, our expectation is that it will exceed the overall industry, leading to solid future stock performance.

BSD Analysis:
Brown Capital Management takes a measured view on Givaudan following Q4 underperformance that appears driven by elevated expectations rather than fundamental deterioration. The manager acknowledges that Givaudan delivered exceptional 13% like-for-like revenue growth year-to-date, more than double its historical growth rate, primarily driven by customer restocking after significant COVID-related destocking in 2023. However, management's guidance for normalizing growth in Q4 and acknowledgment of potential destocking risks due to low inventory visibility created uncertainty that pressured the stock. The investment thesis remains intact based on Givaudan's fundamental strengths as a market leader with over 130,000 formulations serving 4,000+ customers across essential consumer goods categories. Brown Capital emphasizes the company's competitive moat through difficult-to-replace specialty ingredients that create customer stickiness in food, beverage, and personal care applications. While the manager plans to closely monitor topline trends as growth normalizes from elevated levels, they expect Givaudan to continue outperforming industry growth rates. The neutral stance reflects near-term uncertainty around inventory dynamics while maintaining confidence in the company's long-term market position and ability to deliver solid performance as conditions stabilize.

Pitch Summary:
Shopify, a Canada-based global leader in e-commerce platform solutions, provides turnkey services that enable merchants to seamlessly manage their online stores. Offering a comprehensive suite of features—including web design, inventory management, payment processing, analytics and reporting—Shopify simplifies business operations for merchants. By continuously innovating with user-friendly tools and unique offerings like the Shop Pay button, Shopify removes friction and empowers merchants to grow and thrive. Its all-in-one platform delivers extensive capabilities that create significant switching costs, as many merchants depend on its robust ecosystem to build and sustain their businesses. Shopify delivered outstanding results this quarter, achieving 26% year-over-year revenue growth alongside meaningful margin expansion. Gross Merchandise Value (GMV), or the total dollar value of orders processed through Shopify's platform, accelerated to 24% year-over-year growth, marking the fifth consecutive quarter with greater than 20% growth and the fastest quarterly growth in the past 11 quarters. The company also provided solid guidance for next quarter, projecting year-over-year revenue growth in the mid-to-high 20s. Regarding profitability, Shopify has demonstrated a disciplined approach to balancing future growth investment with operational efficiency. Free-cash-flow margin expanded significantly to 19%, an improvement of more than 300 basis points from the previous quarter, and guidance for next quarter's margin exceeded consensus expectations. Supported by the secular growth of e-commerce, Shopify is well positioned to deliver sustainable and profitable growth thanks to the strength of its cutting-edge capabilities and differentiated platform.

BSD Analysis:
Brown Capital Management maintains a strong bull thesis on Shopify based on the company's exceptional Q4 performance that demonstrated both accelerating growth and expanding profitability. The manager highlights Shopify's impressive 26% revenue growth coupled with 24% GMV growth, marking the fifth consecutive quarter above 20% and the fastest growth in 11 quarters. This acceleration validates the secular e-commerce trend and Shopify's market-leading position in enabling merchant success. The investment case is strengthened by significant margin expansion, with free cash flow margins improving 300+ basis points to 19% while management provided upbeat guidance for mid-to-high 20s revenue growth. Brown Capital emphasizes Shopify's competitive moat through its comprehensive all-in-one platform that creates substantial switching costs for merchants dependent on the ecosystem. The company's continuous innovation, including tools like Shop Pay, removes friction and drives merchant adoption. Management's disciplined approach to balancing growth investment with operational efficiency positions Shopify to capitalize on the long-term e-commerce opportunity while delivering sustainable profitability. The manager views the combination of secular tailwinds, platform differentiation, and operational excellence as supporting continued outperformance.

Pitch Summary:
Atlassian, an Australian enterprise software company, is renowned for its team collaboration tools, led by its flagship product, Jira. Jira is a robust workflow-management platform that streamlines project coordination for development, design and marketing teams. Serving more than 300,000 customers through cloud-based and on-premise solutions, the company is strategically prioritizing cloud migration. Atlassian's growth strategy targets three progressively larger market segments: its core software developer base (23 million potential users), broader technology teams (100 million), and eventually, the global population of knowledge workers (1 billion). The past few years have been challenging, with revenue growth slowing from more than 30% to the low 20% range due to macroeconomic pressures that dampened customer acquisitions and seat expansion. Higher R&D and sales expenses during Atlassian's cloud migration has further weighed on margins, leading to significant multiple compression amid a broader tech sector selloff. However, Atlassian's recent quarterly results signal a potential turnaround. This quarter, the company reported 21% revenue growth, with its cloud segment—66% of total revenue—surging by 31%. That outperformed consensus growth of 27%, marking its largest beat since introducing cloud-specific guidance. Non-GAAP operating margins reached 23%, surpassing the 19% estimate, while management raised fiscal year 2025 revenue guidance modestly. Stable paid-user expansion among existing enterprise customers for the second consecutive quarter may also suggest a bottoming in this segment. Atlassian's share price increased about 60% during the fourth quarter of 2024, ending a difficult year on a strong note. We remain focused on the company's compelling long-term opportunity. Atlassian's low-cost, open-architecture and user-friendly collaboration tools deliver measurable cost savings and productivity gains for clients. With a strong market position and a serviceable addressable market of nearly $70 billion—compared to current sales of approximately $4.4 billion—Atlassian has the potential for sustained double-digit growth.

BSD Analysis:
Brown Capital Management presents a compelling bull case for Atlassian following a strong turnaround quarter that demonstrated the company's resilience after a challenging period. The manager highlights Atlassian's impressive Q4 results, with 21% revenue growth and cloud segment growth of 31% that beat consensus expectations by 400 basis points. The company's cloud migration strategy is paying dividends, with cloud now representing 66% of total revenue and operating margins expanding to 23% versus 19% estimates. Management's ability to stabilize enterprise customer expansion for two consecutive quarters suggests the business has found its footing after macro headwinds. The investment thesis centers on Atlassian's massive addressable market opportunity of $70 billion compared to current sales of $4.4 billion, providing substantial runway for sustained double-digit growth. The manager emphasizes the company's competitive advantages through low-cost, user-friendly collaboration tools that create meaningful switching costs and deliver measurable productivity gains for clients. With the stock up 60% in Q4 after significant multiple compression, Brown Capital views this as validation of their long-term conviction in the company's market position and growth potential.

Pitch Summary:
UnitedHealth is the largest player in Medicare Advantage and, accordingly, had a disappointing year. Fortunately, the company's diverse business mix mitigated the headwinds. By contrast, the second-largest provider, Humana, is a pure play and has suffered greatly. Two years ago, consensus earnings expectations for 2026 were more than $40. Today, consensus EPS has declined to below $15. Humana is a problematic stock for many investors to own. Earnings may decline from 2025 to 2026 due to mechanical lags in Medicare reimbursement and poor Star Ratings results. Despite this subdued near term, it may be one of the most attractive stocks in the market. Based on our forecast, it has a 10-year forward earnings yield of 30-45%. Eagle established a position last year.

BSD Analysis:
Eagle Capital views Humana as a contrarian opportunity despite significant near-term challenges in the Medicare Advantage market. The company's pure-play exposure to Medicare Advantage has created severe earnings pressure, with consensus 2026 EPS estimates falling from over $40 to below $15 in just two years. Mechanical lags in Medicare reimbursement and poor Star Ratings results will likely cause earnings to decline from 2025 to 2026, making it unattractive to many investors. However, Eagle sees this pessimism as creating exceptional long-term value, with their analysis suggesting a 30-45% 10-year forward earnings yield. The dramatic earnings reset and market abandonment have created what Eagle believes may be one of the market's most attractive opportunities. Eagle's willingness to establish a position during maximum pessimism demonstrates their conviction in the long-term recovery potential. The investment thesis relies on Medicare Advantage market normalization and Humana's ability to navigate regulatory challenges while maintaining its market position.

Pitch Summary:
UnitedHealth is the firm's longest-standing position. We have continuously held it since 1999. It is up more than a hundredfold. This year, we expect it to generate more than five dollars of earnings for every dollar of Eagle's initial purchase price—a truly long-term P/E of less than 0.2x. Investments like this are rare. Three conditions typically need to be in place. First, it must be a great business. Second, it must participate in a large market and continue to capture new growth opportunities. Finally, there must be enough enduring controversies and concerns that the valuation never becomes overpriced. The last couple of years illustrate the occasional difficulties the managed care industry faces. A combination of cyclical pressures, regulatory change, and headline risk has caused significant earnings pressure and multiple compression. The most dramatic downturn has been in Medicare Advantage, a historically fast-growing and attractive market. UnitedHealth is the largest player in Medicare Advantage and, accordingly, had a disappointing year. Fortunately, the company's diverse business mix mitigated the headwinds.

BSD Analysis:
Eagle Capital's 25-year investment in UnitedHealth represents one of their most successful long-term holdings, delivering over 100x returns since 1999. The company exemplifies Eagle's ideal investment criteria: exceptional business quality, participation in large addressable markets, and persistent valuation discounts due to ongoing controversies. UnitedHealth's current earnings power generates over $5 for every dollar of Eagle's original investment, creating an effective P/E ratio below 0.2x on the initial cost basis. The company's diversified business model across UnitedHealthcare and Optum segments provides resilience during cyclical downturns in specific areas like Medicare Advantage. Recent headwinds from regulatory changes and cyclical pressures in Medicare Advantage have created temporary earnings pressure but haven't undermined the long-term thesis. Eagle views these periodic challenges as features rather than bugs, keeping valuations reasonable and preventing overpricing. The managed care industry's structural growth drivers and UnitedHealth's market leadership position support continued long-term value creation despite near-term volatility.

Pitch Summary:
Amazon and ConocoPhillips can coexist in a concentrated portfolio because we are agnostic in building our collection of long-term absolute return streams. ConocoPhillips offers a current earnings yield that is approaching double digits. It meets our return goals with modest growth, which we believe it will deliver. The first category reflects companies with high starting free cash flow yields and modest growth. Partnering with good capital allocators is crucial because the management team will allocate so much of the company's market cap over our investment horizon. Investments like AerCap, Comcast, ConocoPhillips, and Shell fit here.

BSD Analysis:
Eagle Capital views ConocoPhillips as an attractive value investment offering near double-digit current earnings yields with modest but reliable growth prospects. The company fits into Eagle's high free cash flow yield category, where strong current returns compensate for lower growth expectations. Management's capital allocation capabilities are particularly important given the significant cash flows the company generates relative to its market capitalization. ConocoPhillips represents a contrasting investment approach to Amazon within the same portfolio, demonstrating Eagle's agnostic stance toward building absolute return streams. The energy company's ability to meet Eagle's return objectives through current yield rather than growth makes it an attractive complement to higher-growth positions. The investment thesis relies on management's proven ability to allocate capital effectively in a cyclical industry. Eagle's confidence in modest growth delivery suggests the company has sustainable competitive advantages in oil and gas exploration and production.

Pitch Summary:
Amazon was a new position for the firm in 2014. At the time, it was the most expensive stock in Eagle's portfolio based on current earnings. In hindsight, it was our cheapest stock on long-term earnings power, trading at a 10-year forward yield of 40%. Using the current year multiple that is widely available to anyone does not predict whether a stock offers value. Instead, it is critical to form a differentiated view of the long-term earnings power of the business. Amazon and ConocoPhillips can coexist in a concentrated portfolio because we are agnostic in building our collection of long-term absolute return streams. Amazon begins at a much lower yield, but we have confidence in its ability to drive high earnings growth over the next decade.

BSD Analysis:
Eagle Capital maintains a bullish stance on Amazon based on its exceptional long-term earnings power despite appearing expensive on current metrics. The fund's 2014 investment thesis proved prescient, as Amazon delivered a 40% 10-year forward earnings yield despite being the portfolio's most expensive stock at the time. Eagle emphasizes that traditional valuation metrics fail to capture Amazon's true value proposition, requiring a differentiated view of long-term earnings potential. The company fits into Eagle's framework as a growth compounder with significant runway for earnings expansion over the next decade. Amazon's ability to reinvest capital at high returns and expand into new markets supports the fund's confidence in sustained high earnings growth. The position demonstrates Eagle's willingness to pay higher current multiples for businesses with exceptional long-term compounding potential. This investment exemplifies the fund's philosophy of focusing on absolute return streams rather than traditional value metrics.

Pitch Summary:
Zegona Communications ("Zegona") is a U.K.-based holding company specializing in acquiring stakes in telecommunications companies. Established in 2015 by former Virgin Media executives, Zegona was designed to invest in inefficient European telecom companies with significant opportunity for operational enhancement. That year, the company invested in TeleCable and in 2017 in Euskaltel, exchanging its stake in TeleCable and approximately €185 million in cash. Zegona ultimately sold its stake in Euskaltel to MasMovil in 2021, returning most of the capital to shareholders and achieving high returns on these deals. Two years later, in 2023, Zegona made another major move in the sector, acquiring Vodafone Spain for an enterprise value of €5 billion (reflecting a valuation multiple below the industry average at the time of the transaction). The deal was structured through the issuance of €900 million in preferred shares to Vodafone (via a NewCo), a €300 million capital raise, and €3.9 billion in debt. After some stock compensation adjustments to the management team, Vodafone controls approximately 69% of Zegona's shares, while the management team holds around 7.5%. However, the investment thesis in Zegona is not based on the potential restructuring of Vodafone's business in Spain, but on two other critical factors. The first is the value of the two fixed-network infrastructure entities that Zegona announced it would establish with Telefónica and MasOrange in July 2024. These partnerships were finalized in November 2024 and January 2025, respectively. The goal of these entities is to attract financial partners to monetize a substantial portion of their value early on while allowing the two major telecom operators to retain control of these networks. The second key factor is how Vodafone's stake in Zegona is structured. Vodafone's shares are redeemable preferred shares that Zegona can repurchase and cancel at any time (via a dividend paid to all shareholders) at the original valuation paid by Vodafone (€900 million plus accrued interest). The incentive for this to occur is high, as these preferred shares carry a steeply increasing punitive interest rate (reaching double digits starting in the fourth year). All of this, combined with a lucrative future compensation package for the management team tied to the stock performance, leads us to believe that Zegona will use the expected proceeds from financial partners joining the shared network entities with Telefónica and MasOrange to redeem Vodafone's preferred shares, unlocking significant value for the remaining shareholders. In our view, at the time of our investment, the market was barely recognizing any of these potential developments. In fact, the stock has already risen considerably since our entry, following the formalization of the two network partnerships. Despite this, we still believe that, at current prices, the risk-reward profile of this investment is among the most attractive in our portfolio, and we therefore maintain a substantial allocation to it.

BSD Analysis:
Horos Asset Management presents a compelling value creation thesis for Zegona Communications, a UK telecom holding company with a proven track record of operational improvements and strategic exits. The managers highlight Zegona's successful history with TeleCable and Euskaltel investments, which generated high returns through operational enhancements and strategic sales. The current investment centers on Zegona's 2023 acquisition of Vodafone Spain for €5 billion, structured with preferred shares that create a powerful catalyst for value unlocking. The key value drivers include two fixed-network infrastructure partnerships with Telefónica and MasOrange, designed to attract financial partners and monetize network assets while maintaining operational control. The preferred share structure creates a compelling forced catalyst, as Vodafone's shares carry escalating interest rates reaching double digits in year four, incentivizing early redemption. Management expects proceeds from the infrastructure partnerships will fund the preferred share redemption, unlocking significant value for common shareholders. The investment demonstrates classic special situation characteristics with multiple catalysts, asymmetric risk-reward profile, and management incentives aligned with shareholder value creation.