Investment Pitches

Pitch Summary:
One of the "spicier" names in the portfolio (about a 5% position), Red Cat (RCAT) is a leading supplier of drones, primarily for military applications. The stock surged in 2024 following a major $500mm contract with the U.S. Army to provide field reconnaissance drones. Based on current orders, RCAT trades on a price-to-earnings multiple of 100x next year's earnings. However, the company's recent transformative Army contract opens the door to additional opportunities with other military branches and NATO countries. We expect the momentum of the drone theme/narrative to drive the stock's growth as the incoming Trump administration is highly supportive and weary of alternative (primarily Chinese) suppliers.

BSD Analysis:
The manager acknowledges Red Cat as a high-risk, high-reward position with significant momentum potential. The $500 million Army contract represents a transformative win that validates the company's technology and creates a platform for expansion. While the 100x P/E appears expensive, the manager focuses on the optionality this contract creates with other military branches and NATO allies. The geopolitical backdrop favors domestic drone suppliers as concerns about Chinese alternatives intensify under the Trump administration. The 'drone theme' provides narrative momentum that could drive continued multiple expansion despite rich valuation. This appears to be a momentum play betting on continued government contract wins and thematic investor interest. The manager seems comfortable with the risk given the 5% position size and transformative contract potential.

Pitch Summary:
Osaka Soda is a 3% position in the Deep Value Fund. Superficially, the company appears to be an unexciting chemicals company. A closer look, however, finds its healthcare (HC) segment, while only representing 12.5% of sales, accounted for 54% of operating profit in 2024. This success is driven by the company's market-dominant position in supplying silica gel beads, a key ingredient in the production of peptide drugs, including the blockbuster weight loss drugs, Ozempic and Wegovy. While struggling to add capacity to keep up with demand, we believe sales in the HC division will grow 20-30% for the next several years. With a P/E of 14x forward earnings, we see more than 100% upside.

BSD Analysis:
The manager has identified a hidden gem within Osaka Soda's seemingly mundane chemicals business. The healthcare segment represents a classic 'sum of the parts' opportunity, generating 54% of profits from just 12.5% of sales, indicating exceptional margins and profitability. The company's dominant position in silica gel beads for peptide drug production directly benefits from the GLP-1 weight loss drug boom, creating a compelling secular growth tailwind. Capacity constraints suggest strong pricing power and demand visibility, while 20-30% healthcare division growth should drive significant earnings expansion. At 14x forward P/E for a company with such high-quality, high-growth exposure to a massive pharmaceutical trend, the valuation appears deeply discounted. The manager's 100% upside target reflects the potential for multiple expansion as investors recognize the quality of this healthcare exposure.

Pitch Summary:
This 4.5% position is an under-the-radar Korean electrical equipment company. High-margin export sales of transformers are expected to drive a more than 50% increase in earnings for 2025. Trading at just 12x earnings, with orders booked through the end of the decade, we anticipate robust growth and a potential re-rating, which should propel the stock much higher.

BSD Analysis:
The manager identifies Iljin Electric as an overlooked Korean electrical equipment manufacturer with compelling growth prospects. The 50% earnings growth expectation for 2025 driven by high-margin transformer exports suggests strong operational leverage. At 12x earnings, the valuation appears reasonable for a company with such robust growth visibility. The key differentiator is the order book extending through the decade, providing exceptional revenue visibility and reducing execution risk. This long-term contract coverage should support both earnings growth and multiple expansion as investors recognize the quality of the business model. The combination of strong growth, reasonable valuation, and exceptional visibility makes this an attractive risk-adjusted opportunity in the Korean market.

Pitch Summary:
Hallador is just over a 4% position in our Deep Value Fund. The company owns a coal mine and an electric power plant in Indiana, where it is poised to benefit from a dramatic increase in average power prices in 2026 when current contracts expire. We believe Hallador could potentially earn twice as much as the Street is estimating for 2026. Trading at just over 4x P/E for 2026, the stock is valued at less than half of its peers. We think the timing is favorable as Indiana is a key hub of data center activity, which could further drive power demand and prices upwards. We anticipate that growing sentiment driven by this theme, along with announcements of lucrative power contracts, should result in both upward revisions to earnings estimates and increased investor attention.

BSD Analysis:
The manager presents a compelling value thesis on Hallador Energy, highlighting a significant catalyst in 2026 contract expirations that should drive power price increases. The fund believes earnings could double Street estimates, creating substantial upside potential. At 4x 2026 P/E, the valuation appears deeply discounted versus peers, suggesting meaningful multiple expansion opportunity. The Indiana data center theme provides additional demand tailwinds that could accelerate power price appreciation. The combination of contract repricing, data center growth, and extreme valuation discount creates multiple paths to value realization. The manager expects both earnings revisions and increased investor attention as catalysts materialize. This appears to be a classic deep value play with clear fundamental catalysts and asymmetric risk-reward.

Pitch Summary:
Las Vegas Sands is well on its way to recovering from the COVID-related travel moratoriums that persisted in China long past much of the rest of the world. LVS's properties in Macao are also benefiting from increasing visitation and the company's leading market share in "premium mass" gamblers, although the recovery has been slowed by China's broader economic weakness and renovations at a significant property in Macao. Despite this economic malaise in their largest market, shares appreciated by 36% in the month following China's announcement of a substantial stimulus package to aid their ailing economy. We chose to exit the position at a valuation that better reflects the company's risk/reward.

BSD Analysis:
The manager adopted a neutral stance and exited Las Vegas Sands after the stock appreciated 36% following China's stimulus announcement, suggesting disciplined profit-taking. The investment thesis was based on COVID recovery in Macao with the company benefiting from leading market share in premium mass gambling. However, the recovery has been hampered by China's broader economic weakness and property renovations. The manager's decision to exit reflects a risk/reward assessment where the stock price had reached levels that no longer offered attractive upside relative to the risks. This demonstrates tactical portfolio management where the manager capitalizes on sentiment-driven rallies to exit positions at favorable valuations. The neutral stance likely reflects the inherent volatility and China dependency of the Macao gaming market, where stimulus-driven rallies may not reflect sustainable fundamental improvements.

Pitch Summary:
Thermo Fisher Scientific is a leading purveyor of life science tools, supplies, and services to global pharmaceutical, biotechnology, academic, government, health care, and industrial customers. The business has evolved from being a distributor of lab supplies to an engine driving innovation for customers' R&D efforts, a dynamic that has helped revenues and EPS grow at a 13% and 15% annualized rate over the past decade, respectively. The industry typically grows at a rate equal to or greater than global GDP growth and with less cyclicality than the broader economy. Shares came under pressure during the quarter on rising tensions with U.S. trading partners, particularly China, and fears of domestic policy changes that may put a chill on drug development, particularly regarding vaccines. Our view is that demand for new therapies will persist despite the potential impact of such policies – which may or may not come to pass – driving demand for Thermo's tools, consumables, and services.

BSD Analysis:
The manager's bullish thesis on Thermo Fisher centers on the company's transformation from a lab supply distributor to an innovation enabler with strong historical growth (13% revenue, 15% EPS annually). The life sciences tools industry offers attractive characteristics including GDP-plus growth rates and lower cyclicality than the broader economy. Despite near-term headwinds from China trade tensions and potential policy changes affecting vaccine development, the manager believes underlying demand for new therapies will persist. The investment reflects confidence in the secular growth of pharmaceutical and biotech R&D spending regardless of short-term political uncertainties. Thermo Fisher's diversified customer base across pharma, biotech, academic, and government sectors provides stability. The manager appears to be taking advantage of temporary weakness to invest in a high-quality compounder with defensive growth characteristics. This represents a classic healthcare tools play where innovation-driven demand should drive long-term outperformance.

Pitch Summary:
Shares of Applied Materials continued to experience volatility after we used that very same volatility to initiate a position in September. The near-term sentiment is largely being driven by concerns around trading tensions and the general weakening of demand in China, which accounted for 37% of sales in fiscal 2024, up from 30% in recent years. However, we continue to have confidence in the long-term drivers of demand for Applied's equipment used to manufacture semiconductors. These include increasingly complex chip architectures that require more steps in the manufacturing process at each successive node, increasing chip content across industrial, communications, automotive, power, and sensor end markets, global initiatives to re-shore/onshore semiconductor manufacturing, AI-related demand for leading-edge logic and memory chips, and increasing demand for Applied Global Services, which maintains the ever-growing installed base of equipment at customer sites.

BSD Analysis:
The manager maintains a bullish long-term view on Applied Materials despite near-term headwinds from China exposure (37% of sales) and trade tensions. The investment thesis is built on multiple secular growth drivers that should sustain equipment demand over time. Increasingly complex chip architectures require more manufacturing steps, directly benefiting Applied's equipment portfolio. The manager identifies broad-based chip content growth across industrial, automotive, and sensor markets beyond traditional computing applications. Geopolitical reshoring initiatives and AI-driven demand for advanced logic and memory chips provide additional tailwinds. The growing installed base creates recurring revenue opportunities through Applied Global Services. This represents a contrarian value play where the manager is using short-term volatility to establish a position in a company with strong long-term fundamentals. The bullish stance reflects confidence that secular semiconductor trends will outweigh cyclical and geopolitical headwinds over the investment horizon.

Pitch Summary:
AMD is a new name for the portfolio with the thesis predicated on the idea that AMD will succeed in gaining market share in the general-purpose GPU market over the next several years. In the third quarter, AMD announced the commercialization of its second-generation general-purpose GPU, the Instinct™ MI325X, and announced that its third-generation Instinct chip would be commercialized in the second half of 2025. It also announced its fifth generation AMD EPYC™ server CPU chip. These commercialization milestones and the company's third-quarter results were in line with expectations. We suspect the weak stock performance in the quarter may have been attributable to the absence of new, hyperscale cloud-provider partnership announcements. We continue to have a favorable view of AMD's potential to experience strong revenue growth in the data center AI accelerator market over the medium term. AMD is a top five global fabless semiconductor design company with key positions in data centers, PCs and laptops, gaming consoles, and embedded chips in various consumer and industrial products. Importantly, the management team at AMD, led by CEO Lisa Su, is first-rate. Throughout the 2010s, they focused on AMD's core competencies in high-performance computing, leading to AMD gaining more than 30% market share in the data center CPU market, including the achievement of a share greater than 50% with hyperscale customers. We think there's more share for AMD to gain with the company's promising start in the general-purpose GPU market. Nvidia dominates that market today, but customers are looking for a solid second source to reduce this reliance. AMD's commercial GPUs are known to have a strong total-cost-of-ownership value proposition due to their good energy efficiency and high memory capacity. We believe many semiconductor investors focus on what will happen over the next 1-2 quarters; in contrast, we are looking at what looks probable over the next several years. We assess that AMD has great assets, a sound strategic roadmap, and the potential to drive meaningful share gains over a multi-year time horizon. While only a small weight, AMD joins other holdings in our portfolio, such as Arista Networks, Analog Devices, and Applied Materials, to form a compilation of leading companies exposed to the burgeoning AI infrastructure market.

BSD Analysis:
The manager's bullish thesis on AMD centers on the company's potential to gain significant market share in the general-purpose GPU market, challenging NVIDIA's dominance. The investment case is built on AMD's proven track record of gaining CPU market share (30%+ in data centers) under CEO Lisa Su's leadership and strong execution capabilities. The manager emphasizes AMD's competitive advantages including superior total cost of ownership, energy efficiency, and high memory capacity in their GPU offerings. Customer demand for a credible second source to reduce NVIDIA dependency creates a structural opportunity for AMD. The manager takes a contrarian long-term view, focusing on multi-year share gains rather than quarterly results, which differentiates from typical semiconductor investors. The product roadmap with Instinct MI325X and upcoming third-generation chips demonstrates technological competitiveness. This represents a classic market share gain story where the manager believes AMD's technical capabilities and customer relationships will drive sustained revenue growth in the high-growth AI accelerator market.

Pitch Summary:
Amentum provided a performance update in mid-December and reiterated the medium-term revenue and earnings guidance it had provided at its summer Capital Markets Day. While Amentum's outlook was in line with expectations, the stock sold off heavily during the quarter on news that the incoming Trump Administration would set up an advisory commission called the Department of Government Efficiency (DOGE) tasked with reducing government spending. Business leaders expected to be involved with the commission made comments about government civilian and defense agency spending and suggested severe cuts to government spending that led to negative sentiment in government contractor stocks like Amentum.

BSD Analysis:
The manager maintains a neutral stance on Amentum despite significant stock volatility driven by political uncertainty rather than fundamental deterioration. The company's operational performance remains on track with management reiterating medium-term guidance, suggesting underlying business stability. However, the Department of Government Efficiency (DOGE) initiative creates meaningful headwinds for government contractors through potential spending cuts. The manager appears to be weighing fundamental stability against political risk. This represents a classic government contractor investment where policy changes can significantly impact valuations regardless of operational execution. The neutral stance likely reflects uncertainty about the magnitude and timing of potential government spending reductions. The investment thesis may depend on the manager's assessment of whether current valuations adequately reflect political risks versus the company's long-term contract portfolio and market position.

Pitch Summary:
In its 3Q results, Google reported an acceleration in Cloud revenue growth with profitability significantly above expectations. The company continues to expand its use of AI overviews in Search with early results suggesting strong user engagement and satisfaction. In December, Google announced a breakthrough in quantum computing with its internally developed chip named Willow. Willow completed a benchmark computation in under 5 minutes that would have taken a supercomputer 10 septillion years, suggesting Alphabet remains at the forefront of innovation.

BSD Analysis:
The manager's bullish thesis on Alphabet centers on multiple growth drivers and technological leadership. Google Cloud's accelerating revenue growth with above-expected profitability demonstrates the company's success in the competitive cloud market. The integration of AI overviews in Search shows strong user engagement, protecting and enhancing the core search franchise. The quantum computing breakthrough with the Willow chip represents a significant technological moat and potential future revenue stream. The manager appears to value Alphabet's diversified technology portfolio and innovation capabilities. This investment reflects confidence in the company's ability to maintain search dominance while successfully expanding into high-growth areas like cloud computing and emerging technologies. The quantum computing development particularly highlights Alphabet's long-term competitive positioning in next-generation computing paradigms.

Pitch Summary:
Salesforce unveiled a new platform to deploy autonomous AI agents at its annual user conference in September, which appears to be driving strong customer interest. The company continues to demonstrate its focus on driving greater efficiency across the organization with substantial margin expansion. Recent topline results also suggest some potential stabilization in the headwinds that have faced enterprise software vendors over the last few years. We remain constructive on Salesforce's competitive position and are optimistic about the potential for its new AI agent platform to make contributions to Salesforce's business in the coming years.

BSD Analysis:
The manager's thesis focuses on Salesforce's successful integration of AI capabilities through autonomous AI agents, which is generating strong customer interest and differentiation. The investment case is strengthened by the company's operational discipline, evidenced by substantial margin expansion through efficiency initiatives. The manager notes potential stabilization in enterprise software demand headwinds, suggesting a cyclical recovery may be underway. Salesforce's competitive moat in CRM remains intact while the AI agent platform represents a significant growth catalyst. The bullish stance reflects confidence in both the company's market position and its ability to monetize AI innovations. This appears to be a quality growth play where the manager sees both defensive characteristics through market leadership and offensive opportunities through AI-driven product innovation.

Pitch Summary:
Amazon demonstrated strong progress in profitability in its most recently reported results, with margins across the AWS, North American retail, and International segments exceeding expectations. The AWS and Advertising businesses continue to exhibit strong growth, with the former seeing increasing contributions from customer usage of its AI infrastructure. As these two businesses grow to become a more significant part of Amazon's overall business, we expect improvements in profitability to continue.

BSD Analysis:
The manager highlights Amazon's strong operational execution with margin expansion across all key segments exceeding expectations. The thesis centers on the company's two highest-margin businesses - AWS and Advertising - driving overall profitability improvements as they scale. AWS is particularly benefiting from AI infrastructure demand, positioning Amazon well in the secular growth trend. The manager expects continued margin expansion as these higher-margin segments become a larger portion of total revenue. This represents a classic quality growth story where operational leverage drives earnings growth. The bullish stance reflects confidence in Amazon's ability to monetize its dominant market positions in cloud computing and digital advertising. The investment appears focused on the company's transition from a low-margin retailer to a diversified technology platform with improving unit economics.

Pitch Summary:
Tower companies own and operate telecommunication towers that they then lease to wireless service providers for the buildout and maintenance of their wireless networks. With long term (10+ year) contracts with blue chip customers supported by annual price escalators (3%), tower companies are among the highest quality businesses out there. The industry structure is attractive, with local politics making new builds difficult, and wireless service providers preferring to lease space on towers as opposed to owning towers themselves because sharing the fixed costs provides significant cost savings. Tower companies benefit from meaningful operating leverage manifested in the first tenant covering the tower build cost and the second tenant providing near complete revenue to margin conversion. With ten-year leases and annual price escalators, any equipment upgrades and incremental tenants directly adds to the earnings power. In the third quarter we invested in the tower companies at near historic low valuations. We believe that the reason for the compressed valuations; an inflation and interest rate spike coinciding with the cadence of the wireless carriers 5G buildout, is temporary. We see three main paths to value creation at the tower companies. One, the pullback in capital expenditures from the wireless carriers will reverse course and lead to high margin revenue growth for the tower companies. A perfect storm of an interest rate spike elevating financing costs, excess network capacity from the first phase of the 5G network rollout, and the lack of a "killer application" for 5G to act as a forcing function for subscriber and network competition gave the wireless carriers cover to pull back on their spending in favor of focusing on their balance sheets. Two years of curtailed capital expenditures are set to catch up to the wireless carriers as an accelerating treadmill of data consumption is set to force capital expenditures on the networks. This accelerating treadmill of data consumption is fed by both annual mobile data consumption growth of between twenty and thirty percent, and twelve million fixed wireless subscriber additions that use upwards of twenty times the bandwidth that typical wireless subscribers use. Coinciding with data usage growth acting as a forcing function on capital expenditure growth, wireless carriers have regulatory coverage requirements from past spectrum auctions. As wireless carriers are forced to add capacity through denser infrastructure build outs and expansion into rural areas not previously prioritized, tower companies benefit from high revenue to margin flow through from their ownership of the proverbial toll road on wireless network spending. Two, tower companies are set to accrue high margin revenue growth as the wireless service provider industry shifts from a four to three player transition to a three to four player transition. Following the TMobile- Sprint merger in April of 2020, duplicative tower footprints were rationalized, causing uncharacteristic tenant churn for the tower companies. Coinciding with the ending of T-Mobile-Sprint tower churn in early 2025, a September merger and restructuring of Dish and Echostar has created an increasingly positive industry structure. With Echostar as a newly viable fourth player with valuable high propagation spectrum, we see a base case for increasing tower co-tenancy, and the potential for this technologically enabled upstart to force real network competition with the big three wireless carriers. Three, the tower companies offer a free option on widespread adoption of artificial intelligence. Large technology companies are in the midst of an unprecedented amount of capital expenditures to enable artificial intelligence. While there has yet to be a "killer application" that causes widespread consumer and enterprise adoption of artificial intelligence, recent advancements have pushed the marginal cost of content creation near zero. As we have seen with past historical fact patterns from computing to the internet, when marginal costs go to zero, there is a creative explosion in use cases. Currently artificial intelligence is primarily expressed in text or photo mediums, which lack bandwidth intensity. As we have seen with social media, when applications shift from text or photo to real time video, data usage explodes upwards. We could theorize ad infinitum about artificial intelligence creating customized high quality real time video streams, runtime libraries of data built into every application at the consumer and enterprise level, and exploding data sets used to train models and inference in real time, but the common theme is that there is a step change in the amount of data that needs to be moved, stored, computed, and moved again. With the mobile phone (and possibly Apple Vision Pro or Meta Orion) acting as the avenue for expression of artificial intelligence given its role as the remote control for the physical world, it is hard to see how exploding data usage will not necessitate lower latency, higher bandwidth wireless infrastructure networks. With wireless service companies forced to compete based on their networks, the tower companies collect the toll from more equipment upgrades and increasing tower co-tenancies. Additionally, tower companies stand to benefit through their ability to use their secure, electrified, centralized land and space footprint to create their own latency sensitive artificial intelligence and cloud hubs for mobile edge computing. While this fact pattern remains firmly in our "free option" bucket, we are happy to own the tower companies for the two near term catalysts as we watch the third path to value creation unfold.

BSD Analysis:
Spree Capital presents a compelling bull case for tower companies, viewing them as high-quality infrastructure businesses with defensive characteristics and multiple growth catalysts. The manager emphasizes the attractive industry structure with long-term contracts (10+ years), annual price escalators (3%), and significant operating leverage where additional tenants provide near 100% revenue-to-margin conversion. The investment thesis centers on three key value drivers: a cyclical recovery in wireless carrier capex spending driven by accelerating data consumption (20-30% annual growth) and regulatory requirements, industry consolidation benefits as T-Mobile/Sprint churn ends and a fourth viable competitor emerges with Echostar, and a potential AI-driven data explosion requiring enhanced network infrastructure. The manager purchased these assets at historically low valuations during Q3 2024, attributing the discount to temporary headwinds from interest rate spikes and 5G buildout timing. The pitch demonstrates strong fundamental understanding of the tower business model and identifies both near-term catalysts and longer-term optionality from AI adoption.

Pitch Summary:
Tower companies own and operate telecommunication towers that they then lease to wireless service providers for the buildout and maintenance of their wireless networks. With long term (10+ year) contracts with blue chip customers supported by annual price escalators (3%), tower companies are among the highest quality businesses out there. The industry structure is attractive, with local politics making new builds difficult, and wireless service providers preferring to lease space on towers as opposed to owning towers themselves because sharing the fixed costs provides significant cost savings. Tower companies benefit from meaningful operating leverage manifested in the first tenant covering the tower build cost and the second tenant providing near complete revenue to margin conversion. With ten-year leases and annual price escalators, any equipment upgrades and incremental tenants directly adds to the earnings power. In the third quarter we invested in the tower companies at near historic low valuations. We believe that the reason for the compressed valuations; an inflation and interest rate spike coinciding with the cadence of the wireless carriers 5G buildout, is temporary. We see three main paths to value creation at the tower companies. One, the pullback in capital expenditures from the wireless carriers will reverse course and lead to high margin revenue growth for the tower companies. A perfect storm of an interest rate spike elevating financing costs, excess network capacity from the first phase of the 5G network rollout, and the lack of a "killer application" for 5G to act as a forcing function for subscriber and network competition gave the wireless carriers cover to pull back on their spending in favor of focusing on their balance sheets. Two years of curtailed capital expenditures are set to catch up to the wireless carriers as an accelerating treadmill of data consumption is set to force capital expenditures on the networks. This accelerating treadmill of data consumption is fed by both annual mobile data consumption growth of between twenty and thirty percent, and twelve million fixed wireless subscriber additions that use upwards of twenty times the bandwidth that typical wireless subscribers use. Coinciding with data usage growth acting as a forcing function on capital expenditure growth, wireless carriers have regulatory coverage requirements from past spectrum auctions. As wireless carriers are forced to add capacity through denser infrastructure build outs and expansion into rural areas not previously prioritized, tower companies benefit from high revenue to margin flow through from their ownership of the proverbial toll road on wireless network spending. Two, tower companies are set to accrue high margin revenue growth as the wireless service provider industry shifts from a four to three player transition to a three to four player transition. Following the TMobile- Sprint merger in April of 2020, duplicative tower footprints were rationalized, causing uncharacteristic tenant churn for the tower companies. Coinciding with the ending of T-Mobile-Sprint tower churn in early 2025, a September merger and restructuring of Dish and Echostar has created an increasingly positive industry structure. With Echostar as a newly viable fourth player with valuable high propagation spectrum, we see a base case for increasing tower co-tenancy, and the potential for this technologically enabled upstart to force real network competition with the big three wireless carriers. Three, the tower companies offer a free option on widespread adoption of artificial intelligence. Large technology companies are in the midst of an unprecedented amount of capital expenditures to enable artificial intelligence. While there has yet to be a "killer application" that causes widespread consumer and enterprise adoption of artificial intelligence, recent advancements have pushed the marginal cost of content creation near zero. As we have seen with past historical fact patterns from computing to the internet, when marginal costs go to zero, there is a creative explosion in use cases. Currently artificial intelligence is primarily expressed in text or photo mediums, which lack bandwidth intensity. As we have seen with social media, when applications shift from text or photo to real time video, data usage explodes upwards. We could theorize ad infinitum about artificial intelligence creating customized high quality real time video streams, runtime libraries of data built into every application at the consumer and enterprise level, and exploding data sets used to train models and inference in real time, but the common theme is that there is a step change in the amount of data that needs to be moved, stored, computed, and moved again. With the mobile phone (and possibly Apple Vision Pro or Meta Orion) acting as the avenue for expression of artificial intelligence given its role as the remote control for the physical world, it is hard to see how exploding data usage will not necessitate lower latency, higher bandwidth wireless infrastructure networks. With wireless service companies forced to compete based on their networks, the tower companies collect the toll from more equipment upgrades and increasing tower co-tenancies. Additionally, tower companies stand to benefit through their ability to use their secure, electrified, centralized land and space footprint to create their own latency sensitive artificial intelligence and cloud hubs for mobile edge computing. While this fact pattern remains firmly in our "free option" bucket, we are happy to own the tower companies for the two near term catalysts as we watch the third path to value creation unfold.

BSD Analysis:
Spree Capital presents a compelling bull case for tower companies, viewing them as high-quality infrastructure businesses with defensive characteristics and multiple growth catalysts. The manager emphasizes the attractive industry structure with long-term contracts (10+ years), annual price escalators (3%), and significant operating leverage where additional tenants provide near 100% revenue-to-margin conversion. The investment thesis centers on three key value drivers: a cyclical recovery in wireless carrier capex spending driven by accelerating data consumption (20-30% annual growth) and regulatory requirements, industry consolidation benefits as T-Mobile/Sprint churn ends and a fourth viable competitor emerges with Echostar, and a potential AI-driven data explosion requiring enhanced network infrastructure. The manager purchased these assets at historically low valuations during Q3 2024, attributing the discount to temporary headwinds from interest rate spikes and 5G buildout timing. The pitch demonstrates strong fundamental understanding of the tower business model and identifies both near-term catalysts and longer-term optionality from AI adoption.

Pitch Summary:
Tower companies own and operate telecommunication towers that they then lease to wireless service providers for the buildout and maintenance of their wireless networks. With long term (10+ year) contracts with blue chip customers supported by annual price escalators (3%), tower companies are among the highest quality businesses out there. The industry structure is attractive, with local politics making new builds difficult, and wireless service providers preferring to lease space on towers as opposed to owning towers themselves because sharing the fixed costs provides significant cost savings. Tower companies benefit from meaningful operating leverage manifested in the first tenant covering the tower build cost and the second tenant providing near complete revenue to margin conversion. With ten-year leases and annual price escalators, any equipment upgrades and incremental tenants directly adds to the earnings power. In the third quarter we invested in the tower companies at near historic low valuations. We believe that the reason for the compressed valuations; an inflation and interest rate spike coinciding with the cadence of the wireless carriers 5G buildout, is temporary. We see three main paths to value creation at the tower companies. One, the pullback in capital expenditures from the wireless carriers will reverse course and lead to high margin revenue growth for the tower companies. A perfect storm of an interest rate spike elevating financing costs, excess network capacity from the first phase of the 5G network rollout, and the lack of a "killer application" for 5G to act as a forcing function for subscriber and network competition gave the wireless carriers cover to pull back on their spending in favor of focusing on their balance sheets. Two years of curtailed capital expenditures are set to catch up to the wireless carriers as an accelerating treadmill of data consumption is set to force capital expenditures on the networks. This accelerating treadmill of data consumption is fed by both annual mobile data consumption growth of between twenty and thirty percent, and twelve million fixed wireless subscriber additions that use upwards of twenty times the bandwidth that typical wireless subscribers use. Coinciding with data usage growth acting as a forcing function on capital expenditure growth, wireless carriers have regulatory coverage requirements from past spectrum auctions. As wireless carriers are forced to add capacity through denser infrastructure build outs and expansion into rural areas not previously prioritized, tower companies benefit from high revenue to margin flow through from their ownership of the proverbial toll road on wireless network spending. Two, tower companies are set to accrue high margin revenue growth as the wireless service provider industry shifts from a four to three player transition to a three to four player transition. Following the TMobile- Sprint merger in April of 2020, duplicative tower footprints were rationalized, causing uncharacteristic tenant churn for the tower companies. Coinciding with the ending of T-Mobile-Sprint tower churn in early 2025, a September merger and restructuring of Dish and Echostar has created an increasingly positive industry structure. With Echostar as a newly viable fourth player with valuable high propagation spectrum, we see a base case for increasing tower co-tenancy, and the potential for this technologically enabled upstart to force real network competition with the big three wireless carriers. Three, the tower companies offer a free option on widespread adoption of artificial intelligence. Large technology companies are in the midst of an unprecedented amount of capital expenditures to enable artificial intelligence. While there has yet to be a "killer application" that causes widespread consumer and enterprise adoption of artificial intelligence, recent advancements have pushed the marginal cost of content creation near zero. As we have seen with past historical fact patterns from computing to the internet, when marginal costs go to zero, there is a creative explosion in use cases. Currently artificial intelligence is primarily expressed in text or photo mediums, which lack bandwidth intensity. As we have seen with social media, when applications shift from text or photo to real time video, data usage explodes upwards. We could theorize ad infinitum about artificial intelligence creating customized high quality real time video streams, runtime libraries of data built into every application at the consumer and enterprise level, and exploding data sets used to train models and inference in real time, but the common theme is that there is a step change in the amount of data that needs to be moved, stored, computed, and moved again. With the mobile phone (and possibly Apple Vision Pro or Meta Orion) acting as the avenue for expression of artificial intelligence given its role as the remote control for the physical world, it is hard to see how exploding data usage will not necessitate lower latency, higher bandwidth wireless infrastructure networks. With wireless service companies forced to compete based on their networks, the tower companies collect the toll from more equipment upgrades and increasing tower co-tenancies. Additionally, tower companies stand to benefit through their ability to use their secure, electrified, centralized land and space footprint to create their own latency sensitive artificial intelligence and cloud hubs for mobile edge computing. While this fact pattern remains firmly in our "free option" bucket, we are happy to own the tower companies for the two near term catalysts as we watch the third path to value creation unfold.

BSD Analysis:
Spree Capital presents a compelling bull case for tower companies, viewing them as high-quality infrastructure businesses with defensive characteristics and multiple growth catalysts. The manager emphasizes the attractive industry structure with long-term contracts (10+ years), annual price escalators (3%), and significant operating leverage where additional tenants provide near 100% revenue-to-margin conversion. The investment thesis centers on three key value drivers: a cyclical recovery in wireless carrier capex spending driven by accelerating data consumption (20-30% annual growth) and regulatory requirements, industry consolidation benefits as T-Mobile/Sprint churn ends and a fourth viable competitor emerges with Echostar, and a potential AI-driven data explosion requiring enhanced network infrastructure. The manager purchased these assets at historically low valuations during Q3 2024, attributing the discount to temporary headwinds from interest rate spikes and 5G buildout timing. The pitch demonstrates strong fundamental understanding of the tower business model and identifies both near-term catalysts and longer-term optionality from AI adoption.

Pitch Summary:
Hallador Energy is a legacy coal mining company in Indiana that is transitioning to a vertically integrated independent power producer (IPP). During the ESG craze a few years ago, Hallador acquired the grid interconnection rights from its customer Hoosier Energy to build a solar plant on the location of Hoosier's soon-to-be-closed coal plant. The idea was that coal was dead, and Hallador would reimagine itself as a more ESG-friendly solar company. However, when the power market tightened in 2022, the grid operator requested the plant remain in operation. Hoosier was forced to sell the plant at a discount to the only logical buyer – Hallador – who owned the grid interconnection rights. The plant is 40 years old and will be fully depreciated over the next 10 years, but management believes it can operate for at least another 15 years. Today, the power generation segment accounts for only about 45% of Hallador's revenue yet nearly all of its profit. Hallador's power plant sits in the MISO region which, according to the North American Electric Reliability Corporation's 2023 Long-Term Reliability Assessment, is one of the two regions designated as high risk for power shortages in the coming years. MISO has many old coal plants like Hallador's that are slated to be retired, and the replacement capacity is solely coming from intermittent power generation like wind and solar. Even with this backdrop, hyperscalers such as Amazon and Google continue to announce new data center projects in the area, in part drawn by the region's lower power prices compared to neighboring regions like PJM. While generation prices have yet to rise, the capacity market is already responding, as seen by the growth in Hallador's capacity revenue, which is expected to be approximately $65mm this year vs $10mm last year and $1.5mm just a few years ago. Hallador currently has an RFP out to data center operators and management and has said that it is in discussions over a 10-year PPA to contract for the majority of its capacity. It expects an announcement later this year or early next. While time will tell what the pricing from the data center PPA will be, simply using MISO forward pricing as a proxy, we believe that Hallador could generate over $2.50 in FCF per share in 2026. This would price Hallador shares at less than 4x P/FCF, compared to IPP peers that are all trading above 10x. As seen by Talen's Amazon deal, there is a good chance that the data center PPA will likely be priced significantly above forward prices.

BSD Analysis:
The manager identifies Hallador Energy as an opportunistic play on the coal-to-data center power transition, benefiting from unique circumstances that created an undervalued asset. The company's acquisition of grid interconnection rights during the ESG movement positioned it perfectly when power market dynamics shifted, allowing Hallador to purchase the coal plant at a discount when reliability concerns emerged. The MISO region's designation as high-risk for power shortages creates a favorable supply-demand imbalance, with coal plant retirements being replaced only by intermittent renewables while hyperscalers continue building data centers attracted by lower regional power costs. Capacity revenue growth from $1.5mm to an expected $65mm demonstrates the market's recognition of scarcity value. At less than 4x projected 2026 free cash flow versus 10x+ for IPP peers, Hallador offers compelling relative value with significant re-rating potential upon securing a data center power purchase agreement. The fully depreciated 40-year-old plant provides a low-cost baseload generation asset with 15+ years of remaining operational life. Management's active pursuit of a 10-year PPA with data center operators could unlock substantial value given the premium pricing precedent set by similar deals.

Pitch Summary:
Talen is an independent power producer (IPP) that serves the Pennsylvania-Jersey-Maryland (PJM) market. It owns 10.7 GW of generation capacity, with the Susquehanna nuclear plant accounting for 2.2 GW, while the remaining assets are various natural gas "peaking" plants that operate at 25-65% utilization. The company went public in 2015 as a combination of Pennsylvania Power & Light's unregulated energy business and the power generation portfolio of a PE shop, Riverstone Holdings. Riverstone took the business private in 2016. Overleveraged following the take-private and poor hedges eventually forced Talen to file for bankruptcy in 2022, and it reemerged as a public company in 2023 on the OTC market with a new board, management, and cleaned-up balance sheet. In July, shares were uplisted to the Nasdaq and will likely be added to several indexes over the coming months. The Susquehanna plant is Talen's prize asset. It is the 6th largest nuclear plant in the country, and while it accounts for only 20% of Talen's overall capacity, it is responsible for nearly 50% of Talen's annual power generation. The IRA legislation passed in 2022 made nuclear plants particularly attractive assets by introducing a production tax credit (PTC) mechanism that effectively sets an approximate $40/MWh floor on power prices generated from nuclear. Compare this to Susquehanna's operating costs of about $23/MWh, and you get a floor of around $300mm in operating cash flow to Talen from Susquehanna alone. Talen is already a beneficiary of the ballooning demand from data centers. As previously mentioned, Talen signed a PPA with Amazon in March to deliver power to its new data center campus, which will continue to be built over the next decade. The pricing implied in the PPA is over $70/MWH, a 50% premium to current PJM prices. There is no contribution from this to the financials currently, but it should help drive double-digit EBITDA growth for Talen over the next decade. We also don't believe Talen is done signing data center PPAs, and it has about 1.2GW of uncontracted capacity from Susquehanna that could be made available for a similar deal. Talen's stock doesn't appear cheap on current year multiples, but at the midpoint of its recently announced 2026 targets, it is trading at 8x EV/EBITDA and 12x FCF, and we believe there is upside to these targets. Constellation Energy (CEG), Talen's closest peer by asset mix and growth profile, trades at 22x EV/EBITDA and 30x P/FCF. Given Talen's superior growth runway, it should arguably deserve a premium. On the downside, we believe that the replacement cost of the Susquehanna plant alone supports a floor valuation much higher than the stock price today. Recent estimates suggest that it costs north of $8,000/KW to construct a new nuclear power plant in the U.S., which, if applied to Susquehanna, would support a value 80% higher than the current market. Even still, this might be too conservative. The last nuclear plant built in the U.S. was the twin 1.25 GW units in Vogtle, Georgia. The project took 14 years to complete, cost $34bn, and bankrupted Westinghouse Electric. Management recognizes the valuation gap and has been buying back shares as aggressively as it can. Since October 2023, Talen has repurchased 14% of its shares, with another $1.25bn remaining on its authorization that would account for another 15% of shares at current prices. If Talen completed this authorization tomorrow, it would still be under its leverage target and could repurchase even more shares with the free cash flow it is set to generate.

BSD Analysis:
The manager presents a compelling bull case for Talen Energy, positioning it as a prime beneficiary of surging AI data center power demand. The investment thesis centers on Talen's crown jewel Susquehanna nuclear plant, which provides baseload power with significant regulatory tailwinds from the Inflation Reduction Act's production tax credits that establish a $40/MWh floor versus $23/MWh operating costs. The Amazon power purchase agreement at $70/MWh represents a 50% premium to current PJM prices and validates the premium pricing power for reliable nuclear generation. At 8x EV/EBITDA on 2026 targets, Talen trades at a significant discount to peer Constellation Energy's 22x multiple despite superior growth prospects from additional data center contracts. The replacement value argument is particularly compelling, with new nuclear construction costs exceeding $8,000/KW suggesting 80% upside to current valuations. Management's aggressive 14% share repurchase program with $1.25bn remaining authorization demonstrates capital allocation discipline and confidence in the undervaluation. The combination of structural demand growth, regulatory support, and attractive valuation creates a multi-year compounding opportunity in the energy transition.

Pitch Summary:
In the Half Year Letter, I wrote about Caesars (CZR)'s long-term growth opportunity in digital gaming and near-term opportunity to buy back its own stock at a single-digit multiple of 2025 free cash flow. Although CZR trades just above our cost basis of $41 per share and the investment has been a drag on performance so far this year, there have been several recent bullish developments that led us to add to the position. Beneficiary of lower interest rates. Caesars is an example of a smaller US business primed to be an outsized beneficiary of lower US interest rates. Lower rates reduce the interest expense on Caesars debt and boosts cash flow used for buybacks. Declining interest rates also stimulates consumer demand for travel, hotel, gaming, restaurant. Additionally, the "bazooka" Chinese stimulus package mentioned should help jumpstart pan-Asian travel to Vegas for business and pleasure. Rapidly growing online gaming US market value. The recent Flutter Entertainment investor day presentation (parent company of market leading online sports betting app FanDuel) was bullish for the US online gaming market. Although we do not own Flutter, the presentation is confirmation of the broader opportunity for large players like Caesars. On page 58 of the Flutter presentation the company revised its 2022 estimate of the US online gaming market from $40 billion $70 billion by 2023. What percent of the pie will Caesars get as the largest US land casino footprint and rewards program? My guess is that the market value estimate will continue to go higher with online revenue ultimately surpassing brick-and-mortar as states continue rolling out legalization. In our opinion Caesars's online growth is not taken seriously by investors and is not priced in the stock today despite CEO Tom Reeg reconfirming $400 to $500 million EBITDA run rate from online by 2024 yearend. Surprise early new buyback program. On October 2, 2024 CZR surprised the market with a quiet SEC filing disclosing it had just bought $150 million of stock at $36.38 per share and authorized a new $500 million buyback (5% to 6% of outstanding shares). In the same disclosure the company said it had completed the sale of the World Series of Poker IP rights for $250 million in upfront cash and $250 million in future consideration. As an example of what I like about CEO Tom Reeg is, the ink is barely dry on this transaction, and he is allocating nearly every penny to buy up as much stock as possible at fire sale prices. We still expect a larger buyback once new hotel construction spend winds down late this year and/or larger asset sales are announced.

BSD Analysis:
The manager presents a compelling turnaround thesis for Caesars Entertainment, trading near his $41 cost basis but with multiple catalysts emerging. The company benefits significantly from declining interest rates through reduced debt service costs and increased consumer discretionary spending on travel and gaming. Caesars dominates the US land-based casino market with the largest footprint and rewards program, positioning it to capture substantial market share in the rapidly expanding online gaming sector. The US online gaming market has been revised upward from $40 billion to $70 billion, with CEO Tom Reeg targeting $400-500 million EBITDA from online operations by year-end 2024. Recent aggressive capital allocation includes a surprise $500 million buyback program (5-6% of shares) funded by asset sales, demonstrating management's confidence in the stock's undervaluation at single-digit free cash flow multiples.

Pitch Summary:
The most noteworthy development in the last quarter has been the rally in Chinese equities sparked by a major government economic stimulus package to help the country pull out of its financial crisis. We did not invest with the expectation of government stimulus, or any catalyst other than the most important businesses in the Chinese economy were selling for distressed valuations. Until last month the basket had been a drag on our performance. After the recent rally our China basket has become over 15% of assets and is comprised of Tencent, Alibaba and Ping An Insurance. Each company dominates large and important consumer-facing segments of the Chinese economy, is growing key areas at double the rate of Chinese GDP and was purchased for single digit multiples of after-tax earnings. Each also has enormous amounts of cash and liquid investments including stock portfolios worth tens of billions of dollars, and large stock buyback programs. Even after the recent rally, Chinese equities are still down by about 77% compared to the S&P 500 over the last 10 years.

BSD Analysis:
The manager's Ping An Insurance position forms part of a strategic China basket representing over 15% of assets, purchased during distressed market conditions. Ping An dominates consumer-facing financial services segments in China while growing key business areas at double the rate of Chinese GDP, acquired at single-digit earnings multiples. The insurance giant maintains substantial cash reserves and liquid investment portfolios worth tens of billions, supported by active share repurchase programs. Despite recent government stimulus-driven rallies, Chinese equities including Ping An remain 77% below S&P 500 performance over the past decade. The manager views this as a compelling value opportunity with significant recovery potential as China's financial sector benefits from economic stabilization measures.

Pitch Summary:
The most noteworthy development in the last quarter has been the rally in Chinese equities sparked by a major government economic stimulus package to help the country pull out of its financial crisis. We did not invest with the expectation of government stimulus, or any catalyst other than the most important businesses in the Chinese economy were selling for distressed valuations. Until last month the basket had been a drag on our performance. After the recent rally our China basket has become over 15% of assets and is comprised of Tencent, Alibaba and Ping An Insurance. Each company dominates large and important consumer-facing segments of the Chinese economy, is growing key areas at double the rate of Chinese GDP and was purchased for single digit multiples of after-tax earnings. Each also has enormous amounts of cash and liquid investments including stock portfolios worth tens of billions of dollars, and large stock buyback programs. Even after the recent rally, Chinese equities are still down by about 77% compared to the S&P 500 over the last 10 years.

BSD Analysis:
The manager's Alibaba position represents part of a concentrated China recovery play, purchased at distressed valuations without relying on government stimulus expectations. Alibaba dominates critical consumer-facing segments of the Chinese economy while achieving growth rates double that of Chinese GDP, acquired at single-digit earnings multiples. The company maintains massive cash reserves and liquid investment portfolios worth tens of billions, complemented by aggressive share buyback programs. Despite recent government stimulus-driven rallies, Chinese equities including Alibaba remain 77% below S&P 500 performance over the past decade. The manager positions this as a long-term value opportunity with significant upside potential as Chinese markets recover from their extended downturn.