Investment Pitches

Pitch Summary:
DraftKings is a digital sports entertainment and gaming firm designed to ignite the passion of sports enthusiasts through a diverse offering that spans daily fantasy, regulated gaming, and digital media. We believe the company's expertise in product development and customer acquisition, which established it as the market leader in daily fantasy sports (DFS), positions DraftKings to be a key driver in advancing the U.S. sports betting market's growth. The company reported strong fiscal first quarter results, with revenues beating analyst estimates due to broad-based momentum in customer engagement and acquisition. However, on May 28th, the Illinois Senate passed a new state budget that includes a tiered progressive tax on sportsbook operators, effective July 1, 2024. This new tax ranges from 20% to 40% on gross revenues, a significant increase from the current 15% tax rate. Despite management's belief that it can mitigate the tax impact by reducing promotions in Illinois, this development negatively affected the company's share price.

BSD Analysis:
Alger presents a bullish thesis on DraftKings centered on the company's market leadership and growth potential in U.S. sports betting, despite regulatory headwinds. The fund emphasizes DraftKings' competitive advantages in product development and customer acquisition, established through its dominance in daily fantasy sports. Strong Q1 results with revenue beats demonstrate broad-based momentum in customer engagement and acquisition, validating the company's market position. However, Illinois' new progressive tax structure (20-40% vs. 15% previously) represents a significant regulatory challenge that pressured shares. Management's strategy to mitigate tax impact through reduced promotions shows operational flexibility, though execution remains uncertain. The thesis relies on DraftKings' ability to drive U.S. sports betting market expansion while navigating evolving state-level regulations. The fund appears confident in the company's long-term positioning despite near-term tax pressures, viewing regulatory challenges as manageable given DraftKings' market leadership and operational expertise.

Pitch Summary:
Advanced Micro Devices (AMD) is a major global supplier of PC microprocessors and graphics processors to computing original equipment manufacturers (OEMs). The company's product range spans desktops, notebooks, servers, graphics, and embedded/semi-custom chips. AMD operates in a large addressable market, covering areas such as PCs, servers, high-end gaming, and deep learning. Additionally, AMD has introduced competitive AI technologies, including powerful accelerators poised to capture a share in a market worth several hundred billion dollars. During the quarter, the company reported fiscal first-quarter operating results that met analyst estimates, with strengths in data center GPUs and server CPUs offsetting weaknesses in their gaming and embedded businesses. Moreover, management raised their fiscal second-quarter revenue guidance, albeit slightly below consensus estimates, where they expected double digit growth in data center revenues, while projecting a decline in their gaming segment, driven by weaknesses in both desktop GPUs and Semi-Custom Systems-on-a-Chip (SoC). While weaker-than-expected near-term results weighed on shares during the quarter, we believe the company is positioning itself to potentially benefit from long-term growth in AI infrastructure spending. Specifically, the company continues to gain server CPU market share, which could potentially accelerate as traditional compute deployments begin to recover.

BSD Analysis:
Alger maintains a bullish long-term view on AMD despite near-term headwinds, focusing on the company's positioning for AI infrastructure growth. The fund acknowledges mixed Q1 results that met estimates, with data center GPU and server CPU strength offsetting gaming and embedded weaknesses. Management's raised Q2 guidance, though below consensus, projects double-digit data center revenue growth while gaming segment declines. The thesis centers on AMD's competitive AI technologies and accelerators targeting a multi-hundred billion dollar market opportunity. AMD's continued server CPU market share gains position the company to benefit from traditional compute recovery and AI infrastructure buildout. While gaming weakness and slightly disappointing guidance pressured shares, Alger views this as temporary noise against a compelling long-term AI infrastructure story. The fund believes AMD's diversified product portfolio across PCs, servers, and AI accelerators provides multiple avenues for growth as enterprise AI adoption accelerates.

Pitch Summary:
Microsoft is a beneficiary of corporate America's transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago. Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft's clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure's growth are over. Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.

BSD Analysis:
Alger presents a strong bull case for Microsoft, positioning the company as a primary beneficiary of corporate digitization and AI adoption. The fund emphasizes Microsoft's diversified business model across productivity software, cloud services, and computing platforms. Strong Q3 results exceeded expectations across revenue, operating margins, and earnings, demonstrating operational excellence. Azure's 31% constant currency growth, with 7% attributed to AI (up from 3% two quarters prior), highlights accelerating AI monetization. The shift from AI training to inference revenue indicates mature, high-quality AI applications by enterprise clients. Management's commentary that corporate cost-cutting programs are complete suggests Azure growth headwinds are dissipating. Copilot's rapid enterprise adoption, with 60% of Fortune 500 companies using the tool and 50% quarterly growth in Teams integration, demonstrates Microsoft's AI leadership. The thesis centers on Microsoft's unique position to capture value from both cloud migration and AI transformation, with multiple revenue streams benefiting from secular digitization trends.

Pitch Summary:
Amazon.com is a renowned online retailer and leader in cloud computing. The company's Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America's digital transition. During the quarter, Amazon's shares contributed to performance as the company reported strong fiscal first-quarter results, with revenues and operating income beating analyst estimates. Notably, AWS revenue growth accelerated, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.

BSD Analysis:
Alger maintains a bullish stance on Amazon, emphasizing the company's dual leadership in e-commerce and cloud computing through AWS. The fund highlights Amazon's strong Q1 performance with revenues and operating income exceeding analyst expectations. Most notably, AWS revenue growth accelerated as cloud cost optimization headwinds eased and workload migrations resumed. The increasing contribution from AI workloads represents a significant growth catalyst, positioning AWS to benefit from the AI infrastructure buildout. Management's commitment to increased capital expenditures for technology infrastructure demonstrates Amazon's strategic focus on capturing AI-driven computing demand. The thesis centers on Amazon's role as a critical enabler of corporate America's digital transformation, with AWS serving as the backbone for enterprise cloud adoption and AI implementation. This positions Amazon to benefit from multiple secular growth trends including cloud migration and artificial intelligence adoption.

Pitch Summary:
Nvidia Corporation is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality, and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super-computing parallel processing techniques for solving complex computational problems. Simply put, Nvidia's computational power is a critical enabler of AI and therefore essential to AI adoption, in our view. During the quarter, the company reported better-than-expected fiscal first quarter results driven by strong demand from data centers. Additionally, management noted that large cloud service providers, contributing approximately 45% of data center sales, recognize the high return on investment offered by Nvidia's computing solutions, which are driving AI spending. The company also introduced its next-generation H200 chip, which nearly doubles the inference performance compared to the H100 chip, enhancing how trained AI models process new data. Lastly, management raised their fiscal second quarter guidance, noting that demand for their current H100 chips remains strong, and that demand for their next generation products is estimated to outstrip supply over the next year. We continue to believe the company is well positioned to potentially benefit from the growing AI data center workloads, which are driving demand for the increased interconnections and fully accelerated software stacks, thereby enabling leading application performance and fast result times.

BSD Analysis:
Alger presents a compelling bull case for NVIDIA, positioning the company as the essential enabler of AI adoption through its GPU technology. The fund highlights NVIDIA's dominant position across multiple secular growth categories in computing, particularly artificial intelligence and high-performance computing. Strong Q1 results were driven by robust data center demand, with cloud service providers representing 45% of data center sales and recognizing high ROI from NVIDIA's solutions. The introduction of the H200 chip, which nearly doubles inference performance versus the H100, demonstrates continued innovation leadership. Management's raised guidance and commentary about demand outstripping supply for next-generation products reinforces the company's pricing power and market position. The thesis centers on NVIDIA's critical role in AI infrastructure buildout, with growing data center workloads driving demand for advanced interconnections and accelerated computing stacks. This positions NVIDIA to capture significant value from the AI transformation across corporate America.

Pitch Summary:
Sprout Social offers online tools for social media management, catering to enterprises, agencies, small businesses, and areas including customer service, marketing, and employee advocacy. The firm provides communication tools, contact management, lead generation, and analytics services. During the quarter, shares detracted from performance after the company reported weaker-than-expected fiscal first quarter revenues and reduced its full-year revenue forecast by about 5%. Management noted the revenue shortfall was partly due to temporary disruptions following adjustments within their go-to-market team, along with a broader slowdown in enterprise software spending and longer sales cycles influenced by macroeconomic factors.

BSD Analysis:
The manager takes a bearish stance on Sprout Social due to execution challenges and broader market headwinds affecting enterprise software demand. The company's social media management platform serves a diverse customer base across enterprises, agencies, and small businesses, but recent performance has disappointed. First quarter revenues came in below expectations, prompting management to reduce full-year revenue guidance by approximately 5%. The revenue shortfall appears to stem from both company-specific issues and macro factors. Internal go-to-market team adjustments created temporary disruptions, suggesting execution challenges. More concerning is management's commentary about broader enterprise software spending slowdown and extended sales cycles driven by macroeconomic uncertainty. This indicates the company is facing headwinds beyond its control. The combination of internal execution issues and challenging market conditions for enterprise software creates a difficult operating environment for Sprout Social.

Pitch Summary:
SiteOne Landscape Supply is a wholesale distributor of landscaping products operating in the United States and Canada. The company offers a wide array of approximately 120,000 stock keeping units (SKUs), featuring irrigation supplies, fertilizers, control products, landscape accessories, nursery goods, and outdoor lighting. They also supply hardscape materials like pavers, natural stones, and blocks, as well as ice melt products. Despite revenues exceeding analyst estimates during the fiscal first quarter, earnings fell short of consensus, with management citing margin pressures particularly in more price-sensitive, commodity-like products. Additionally, ahead of their June investor conference, management released a statement indicating that May volumes were below expectations, which put further pressure on the company's share price.

BSD Analysis:
The manager expresses a bearish view on SiteOne Landscape Supply due to deteriorating profitability and weakening demand trends. While the company's extensive product portfolio of 120,000 SKUs demonstrates scale and breadth in landscape distribution, operational execution has disappointed. First quarter results showed a concerning divergence with revenues beating estimates but earnings falling short of consensus expectations. Management attributed margin pressure to commodity-like products, suggesting pricing power challenges in key product categories. The pre-announcement of below-expectation May volumes ahead of the investor conference signals continued demand weakness. This combination of margin compression and volume deterioration indicates fundamental challenges in the business. The company appears to be facing headwinds from both competitive pricing pressures and softening end-market demand in the landscaping sector.

Pitch Summary:
Progyny is a leading benefit management company that specializes in fertility and family building benefits solutions. The company caters to an underserved, yet significant and specialized, market with unique plan design and coordinated clinical delivery. Its carefully selected provider network leads to improved patient satisfaction, cost savings, and other benefits to all constituents. The prevalence of infertility in the U.S. is high, affecting one in eight couples in the U.S. per the Centers for Disease Control and Prevention (CDC). While the company reported strong fiscal first quarter results, where revenues grew 37% year-over-year, this was below consensus estimates. Additionally, management expressed concerns about the uncertain macroeconomic environment, particularly influenced by state supreme court decisions related to in vitro fertilization (IVF), which negatively impacted the company's share price during the quarter.

BSD Analysis:
The manager acknowledges Progyny's strong market position in fertility benefits management but expresses concern about near-term headwinds. Despite the company's leadership in an underserved market with significant growth potential, execution fell short of expectations. First quarter revenue growth of 37% year-over-year, while robust in absolute terms, disappointed relative to consensus estimates. Management's cautious commentary regarding macroeconomic uncertainty and regulatory challenges presents additional concerns. State supreme court decisions affecting IVF treatments create regulatory overhang that could impact demand for fertility benefits. The combination of execution shortfall and regulatory uncertainty appears to have weighed on investor sentiment. While the long-term opportunity remains compelling given high infertility prevalence, near-term challenges suggest a more cautious outlook is warranted.

Pitch Summary:
Glaukos is an ophthalmic medical technology and pharmaceutical company targeting the large glaucoma market. As an early pioneer in minimally invasive glaucoma surgery (MIGS) with its iStent devices, Glaukos recently launched the innovative iDose technology. This device delivers medication directly to the eye over an extended period of up to three years, offering a significant advance in glaucoma treatment. During the quarter, shares contributed to performance after the company reported better-than-expected fiscal first quarter earnings. Management also raised their full-year revenue guidance, fueled by the growing adoption of the iStent products and iDose by physicians. In our view, iDose could be a transformational product in the glaucoma treatment landscape, potentially reducing the need for topical eye drops and delaying or avoiding more invasive surgeries due to its safety and effectiveness.

BSD Analysis:
The manager expresses strong conviction in Glaukos as a transformational player in the glaucoma treatment market. The company's pioneering position in minimally invasive glaucoma surgery (MIGS) with iStent devices provides a solid foundation, while the recently launched iDose technology represents a potential paradigm shift. The iDose device's ability to deliver medication directly to the eye for up to three years addresses a significant unmet need in glaucoma care. First quarter earnings exceeded expectations, prompting management to raise full-year revenue guidance based on accelerating physician adoption of both iStent and iDose products. The manager views iDose as potentially transformational, offering the prospect of reducing reliance on topical eye drops and delaying more invasive surgical interventions. This positions Glaukos to capture significant market share in the large and growing glaucoma treatment market.

Pitch Summary:
Natera is a specialty lab providing genetic testing services in the reproductive health, oncology and transplant markets. Reproductive health tests are run to screen for common genetic disorders such as trisomy 13, 18, and 21 in pregnant women - these tests are also known as non-invasive prenatal testing (NIPT). The company's oncology franchise is led by Signatera, a test used to detect minimal residual disease (MRD) - the applications of this test are primarily to monitor therapy response and detect cancer recurrence. Lastly, Natera's transplant franchise is led by Prospera, a test used to monitor transplant organ rejection. Natera's tests are all based on the company's proprietary liquid biopsy platform to detect cell-free DNA. During the quarter, shares contributed to performance as the company reported strong fiscal first quarter results, where revenues and profit margins came in above analyst estimates. Better-than-expected revenues stemmed from higher test volumes and reimbursement rates, especially for the company's Signature test which is used to monitor cancer recurrence. Additionally, management raised its 2024 revenue and profit margin guidance.

BSD Analysis:
The manager maintains a bullish stance on Natera based on strong operational execution across multiple genetic testing franchises. The company's diversified portfolio spans reproductive health (NIPT), oncology (Signatera for MRD detection), and transplant monitoring (Prospera), all leveraging a proprietary liquid biopsy platform. First quarter results exceeded expectations with revenue and margin beats driven by higher test volumes and improved reimbursement rates. The Signatera oncology franchise appears particularly strong, benefiting from increased adoption for cancer recurrence monitoring. Management's decision to raise 2024 revenue and profit margin guidance signals confidence in sustained momentum. The liquid biopsy platform provides a competitive moat and scalable foundation for expanding applications across multiple therapeutic areas.

Pitch Summary:
StepStone Group is a private markets investment firm that focuses on providing customized investment solutions and advisory and data services to clients. The company serves public and private defined benefit and defined contribution pension funds, sovereign wealth funds, insurance companies, prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. During the quarter, shares contributed to performance following strong fiscal fourth-quarter results, with revenues and earnings beating analyst estimates. Better-than-expected revenues were attributed to higher realized carried interest and increased fees from co-mingled funds, particularly due to a favorable mix and strong growth in their high-margin Evergreen Funds. The quarter also featured robust fundraising activity, with management providing a positive forward outlook.

BSD Analysis:
The manager presents a bullish view on StepStone Group based on strong fundamental execution and positive momentum. The company delivered fiscal fourth-quarter results that exceeded analyst expectations on both revenue and earnings metrics. Revenue outperformance was driven by higher realized carried interest and increased fees from co-mingled funds, particularly benefiting from strong growth in high-margin Evergreen Funds. The favorable product mix suggests improving profitability dynamics. Robust fundraising activity during the quarter indicates strong client demand and asset gathering momentum. Management's positive forward outlook reinforces confidence in the business trajectory. The private markets investment firm appears well-positioned to capitalize on continued institutional investor appetite for alternative investments.

Pitch Summary:
ICICI Bank is India's second-largest private sector bank by assets and is one of the leaders in lending to retail and corporate clients in the country. It is a high-quality bank and one of the best positioned to gain from India's structural growth in financial services due to its strong brand and its technological capabilities that complement its wide network of more than 6,500 branches. The firm has also gone through a major cultural transformation over the last five years, reducing the hierarchy within its top management, and implementing new parameters for bonus payouts that focus on better asset quality and profitability for the bank. In addition, the bank has made changes in the last few years to improve risk management, such as reducing client concentration in its corporate banking business, reducing asset exposure to riskier corporates, and limiting exposure to its riskier overseas businesses.

BSD Analysis:
Harding Loevner added ICICI Bank as a new position, capitalizing on attractive valuations in the Indian financial sector. The manager's investment thesis highlights ICICI's market-leading position as India's second-largest private bank with strong competitive advantages in both retail and corporate lending. The bank's extensive branch network of over 6,500 locations, combined with advanced technological capabilities and strong brand recognition, positions it well to capture India's structural financial services growth. Management has implemented significant operational improvements over the past five years, including flattening organizational hierarchy and aligning compensation with asset quality and profitability metrics. The bank has also strengthened its risk management framework by reducing corporate client concentration, limiting exposure to higher-risk corporates, and curtailing overseas business risks. These operational enhancements, combined with India's favorable demographic and economic trends, should drive sustainable growth and improved returns on capital for ICICI Bank.

Pitch Summary:
The sharp sell-off in Brazilian equities this year provided us the chance to purchase Brazil's largest pharmacy chain, Raia Drogasil, at attractive valuations. The retailer's key competitive advantage is its scale of operations, allowing the company to negotiate better purchasing terms with its suppliers and operate its business with lower cost structures. Industry dynamics in Brazil are also favorable as medicines can be sold only through pharmacies, and license requirements for new entrants further limit competition. The earnings growth outlook for the company is attractive, as Brazil's rapidly aging population is fueling demand for medicines. We also think Raia Drogasil should continue taking market share from its smaller and financially weaker competitors in Brazil, potentially increasing its 16% current market share to more than 25% as this fragmented market consolidates over the next decade. The potential risk for this business is the threat of disruption from online retail. However, Raia Drogasil has been investing in its own online retail business to get ahead of the curve. It is working on speeding up deliveries to online customers, leveraging the advantage of its 3,000 pharmacy stores spread across a country where logistics is challenging. As of last quarter, close to 61% of the delivery mix for its online orders were through Click & Collect from physical stores and 92% of orders were delivered or collected within one hour of order. Its online business grew 46% in the first quarter from a year ago, now contributing close to 17% of overall revenue.

BSD Analysis:
Harding Loevner initiated a position in Raia Drogasil during the Brazilian equity sell-off, viewing the market weakness as a buying opportunity for this high-quality retailer. The manager's thesis centers on the company's scale advantages that enable superior supplier negotiations and cost structures relative to competitors. Brazil's regulatory environment creates a protective moat, as medicines can only be sold through licensed pharmacies with high barriers to entry for new competitors. The demographic tailwind of Brazil's aging population should drive sustained demand growth for pharmaceutical products. The manager sees significant market share expansion potential, projecting Raia Drogasil could grow from its current 16% market share to over 25% as industry consolidation accelerates. The company has proactively addressed e-commerce disruption risks by building a robust omnichannel platform that leverages its 3,000 physical stores for rapid delivery fulfillment. With 92% of online orders delivered within one hour and 46% online growth in Q1, the digital transformation appears successful and should support long-term competitive positioning.

Pitch Summary:
Daktronics designs and manufactures electronic scoreboards and large-screen video boards for commercial purposes. The company has a leading market share of 50% in LED displays in the United States. Its ability to provide full-service design, manufacturing and installation solutions later translates into recurring maintenance revenue and long-term customer relationships. Sales of newer optic technologies and back-end enhancements as older signage is replaced every 7-10 years are driving organic growth. Demand for its products is also supported by a strong investment cycle in live entertainment and sports as well as the transportation market and shift to electronic billboards. The business profitability has improved to a new baseline in FY 2024 and is expected to continue to increase from current levels, driven by improved manufacturing efficiencies and strong on-time delivery to customer sites resulting in higher gross and operating margins.

BSD Analysis:
THB presents a compelling bull case for Daktronics based on its dominant market position and improving fundamentals. The company's 50% market share in U.S. LED displays provides significant competitive advantages and pricing power. The full-service model creates sticky customer relationships and generates recurring maintenance revenue streams, enhancing business quality and predictability. The 7-10 year replacement cycle for signage provides a natural growth driver as older installations are upgraded with newer optical technologies. Strong secular tailwinds from increased investment in live entertainment, sports venues, and the shift to electronic billboards support demand visibility. Most importantly, the company has established a new profitability baseline in FY 2024, with management expecting continued margin expansion driven by operational improvements and manufacturing efficiencies. The combination of market leadership, recurring revenue characteristics, and margin expansion creates an attractive investment opportunity in the electronic display market.

Pitch Summary:
Brookfield Renewable Corp. operates one of the world's largest renewable power platforms with a global portfolio featuring hydroelectric, solar, and wind projects along with other assets. We became Brookfield Renewable shareholders in 2020 when the company bought a holding of ours, TerraForm Power, and the acquisition generated significant returns for the Fund. We remained shareholders post-merger because we believed Brookfield Renewable was a well-managed company with excellent assets and strong growth prospects trading at a reasonable valuation. The stock performed well during the quarter when the company signed a large, multi-year deal to provide electricity generation to Microsoft's AI-focused data centers, highlighting a long-term growth opportunity that we believe has been unappreciated by the market. We increased our position during the period as we believe the stock continues to offer attractive value.

BSD Analysis:
The manager's thesis on Brookfield Renewable evolved from an initial acquisition-driven entry through TerraForm Power to a conviction holding based on the company's operational excellence and growth prospects. The investment rationale emphasizes Brookfield's position as one of the world's largest renewable power platforms with a diversified global portfolio of high-quality assets. The recent Microsoft deal for AI data center power supply represents a significant validation of the long-term growth opportunity in renewable energy, particularly as technology companies seek clean power sources for energy-intensive operations. This contract highlights an underappreciated growth driver that the market has not fully recognized, providing upside potential beyond traditional renewable energy demand. The decision to increase the position reflects confidence in the company's attractive valuation relative to its growth prospects and asset quality. Brookfield Renewable benefits from secular trends toward decarbonization, corporate renewable energy procurement, and the growing power demands of AI and data center infrastructure. The company's experienced management team and global platform provide competitive advantages in developing and operating renewable energy projects.

Pitch Summary:
American Superconductor Corp. designs and manufactures power electronics and control systems for electricity transmission, distribution, and infrastructure. End markets include electric grids, wind power, industrial and naval. Our strategy's screening process identified the company when its largest customer at the time, a Chinese wind turbine manufacturer, stole its IP resulting in a 75% revenue decline. Our investment thesis was that the rebuilt company, following an IP litigation victory, was in a good position to resume earnings growth with significant upside potential driven by demand for electric grid upgrades, growth of wind power, and naval program wins. The stock performed well during the period on continued strong earnings and revenue growth that beat expectations. We trimmed our holdings during the quarter following strong performance as part of our normal risk management process, but maintain a position given the company's strong performance and potential upside.

BSD Analysis:
The manager's thesis on American Superconductor represents a classic turnaround opportunity following a severe business disruption caused by intellectual property theft. The investment was initiated when the company was rebuilding after a Chinese customer's IP theft caused a 75% revenue decline, creating an attractive entry point for a fundamentally sound business. The thesis centered on AMSC's recovery potential following successful IP litigation and the company's positioning in high-growth end markets including electric grid modernization, renewable energy, and naval applications. Strong recent earnings and revenue growth that exceeded expectations validate the turnaround story and demonstrate the company's successful business reconstruction. The decision to trim holdings reflects disciplined risk management following strong performance, while maintaining exposure acknowledges continued upside potential. AMSC benefits from secular tailwinds in grid infrastructure investment, renewable energy adoption, and defense spending, providing multiple growth drivers. The company's specialized power electronics and control systems technology positions it well to capitalize on the ongoing energy transition and grid modernization requirements.

Pitch Summary:
Tenet Healthcare Corp. is a top-ten U.S. operator of hospitals, outpatient surgery centers, and healthcare business process services. We initiated our position in late 2022 on the belief that the market's short-term focus on COVID-caused staffing and admissions challenges overshadowed the value of Tenet's long-term strategy of growing outpatient surgery centers. Tenet accelerated the transition of its business this year toward high-margin and higher return-on-capital surgery centers by divesting hospitals. The market rewarded the shift with a 26% return in the period. Tenet remains a top five holding with growth driven by surgery centers and a continued attractive valuation.

BSD Analysis:
The manager's thesis on Tenet Healthcare focuses on a strategic transformation from traditional hospital operations to higher-margin outpatient surgery centers. The investment was initiated when COVID-related challenges masked the underlying value of Tenet's long-term strategic pivot. The manager recognized that market concerns about staffing and admissions were temporary headwinds that obscured the company's structural shift toward more profitable business lines. Tenet's acceleration of hospital divestitures and surgery center expansion has validated this thesis, with the market recognizing the improved business mix through strong stock performance. The 26% quarterly return reflects investor appreciation for the higher-margin, higher-return-on-capital profile of surgery centers compared to traditional hospital operations. As a top five holding, Tenet represents a core conviction position benefiting from secular trends toward outpatient care and the company's successful execution of its transformation strategy. The continued attractive valuation suggests further upside potential as the surgery center growth strategy progresses and generates improved financial metrics.

Pitch Summary:
Perrigo Company plc. is the leading in-store brand for consumer wellness and self-care products. The company endured several years of declining earnings due to what we believe was poor capital allocation by its previous management team, which chased growth through acquisitions outside of Perrigo's core business. Our investment in Perrigo was inspired by a new management team that committed to pursuing realistic, steady growth rates within the core business, and delivering improved profitability and returns on capital. Despite reporting inline earnings results and maintaining annual guidance during the quarter, Perrigo stock has been weak. Market data and drug store company results have indicated a lower-than-average cough, cold, and allergy season that might be impacting short-term results. We increased our position as we believe the risk vs. reward is in our favor. In our view, Perrigo is well positioned for significant earnings growth in 2025 and beyond while trading at a current valuation of 10x current year earnings per share.

BSD Analysis:
The manager's thesis on Perrigo centers on a classic turnaround story driven by new management's strategic refocus on core operations. The previous management's value-destructive acquisition strategy outside the core consumer wellness business created the opportunity for improvement under new leadership. The investment rationale emphasizes management's commitment to disciplined capital allocation, realistic growth targets, and improved returns on invested capital. Despite recent stock weakness attributed to seasonal headwinds in the cough, cold, and allergy category, the manager views this as a temporary factor rather than a structural issue. The decision to increase the position reflects confidence in the risk-reward profile at current levels. Trading at 10x current year earnings provides an attractive entry point for anticipated earnings growth acceleration in 2025 and beyond. The consumer wellness and self-care market offers stable demand characteristics, and Perrigo's leading position in store brands provides defensive qualities with upside potential as operational improvements take hold.

Pitch Summary:
Cerence, Inc. develops human-automotive interface software that provides drivers and passengers with applications ranging from infotainment to safety and, eventually, autonomous driving. We became shareholders when the company was spun off from a previous holding and the market assigned little value to the new company. The stock performed strongly for us initially and we were able to harvest significant profits. We maintained a position despite weak results over the past two years due to our belief that Cerence's large market share, with software in over 50% of cars globally, should lead to significant growth opportunities. During the quarter the stock pulled back on missed earnings and reduced full-year and long-term forecasts. This continued poor fundamental performance convinced us that we might be wrong about the market opportunity, and we sold our entire position.

BSD Analysis:
The manager's original thesis on Cerence was built around the company's dominant market position in automotive interface software, with presence in over 50% of cars globally providing a strong foundation for growth. The investment began as a spinoff opportunity where the market initially undervalued the standalone entity. Despite early success and profit-taking, the manager maintained exposure based on the belief that Cerence's market leadership would translate into significant growth as automotive technology advanced. However, persistent weak fundamentals over two years, culminating in missed earnings and reduced guidance, forced a reassessment of the investment thesis. The complete exit reflects the manager's conclusion that the anticipated market opportunity may not materialize as expected, possibly due to competitive pressures or slower adoption of advanced automotive technologies. The automotive software market faces challenges from tech giants and changing OEM strategies, which may have undermined Cerence's competitive moat despite its historical market share.

Pitch Summary:
National Vision Holdings, Inc. is the second-largest optical retailer in the U.S. and a leader in the low-cost space with its America's Best and Eyeglass World brands. Our interest in the company began after earnings declined due to (1) tough pandemic comps (stimulus checks boosted sales and pulled ahead glasses demand) and (2) eye exam capacity constraints resulting from a challenging optometrist hiring environment. We invested based on our belief that by implementing technology to improve optometrist utilization, the company could return to its historical pattern of steady revenue and earnings growth. National Vision beat earnings during the quarter but missed sales expectations, calling into question its ability to meet expectations for annual results. We reduced our position due to evidence that the company continues to underperform the overall industry, raising suspicion that there could be problems with the business that we did not foresee. We maintain a small position as we believe it is reasonable that their improvement efforts could pay off later this year.

BSD Analysis:
The manager's thesis on National Vision was based on a turnaround story following pandemic-related headwinds and optometrist staffing challenges. The investment rationale centered on technology implementation to improve optometrist utilization and restore historical growth patterns. However, the company's recent performance has undermined this thesis, with sales misses despite earnings beats indicating potential structural issues. The manager's decision to reduce the position reflects growing concerns about the company's ability to regain market share and execute its improvement strategy. While maintaining a small position suggests some residual optimism, the overall stance has shifted bearish due to continued underperformance relative to industry peers. The optical retail sector faces ongoing challenges from online competition and changing consumer behavior post-pandemic. National Vision's struggles to meet sales expectations despite cost management efforts suggest deeper operational or competitive issues that may require more time to resolve than initially anticipated.